Complete GST Book PDF
Complete GST Book PDF
VOLUME I
Chapter 1: Concept of Indirect Taxation 1-3
VOLUME II
Chapter 13: Reverse Charge 157-174
Rule 1 Wherever ‘Section Number’ is quoted without its source, then it E.g.: Sec. 15 determines the value of supply.
should be taken as Section of CGST Act, 2017 Student may note that no reference of Act is
Kindly note that you have CGST Act, 2017 and IGST Act, 2017 in given, so it should be read as Sec. 15 of
your syllabus. If section belongs to IGST Act then we have mentioned CGST Act, 2017.
specifically.
Rule 2 Wherever ‘Rule Number’ is quoted without its source, then it should E.g.: As per Rule 5, Casual taxable person
be taken as Rule of CGST Rules, 2017. cannot opt composition Scheme.
Student may note that reference of Source
of Rule is not given, so it should be read as
Rule 5 of CGST Rules, 2017.
Rule 3 How to read notifications? E.g.:
N/N 7/2017- CT-Dated 19-06-2017 N/N 34/2017-IT, dated 13-10-2017
Means it is 34TH Notification issued on 13th
Oct. 2017 under IGST Act.
Date on which it is issued
* Students are not in need to remember the
CT = Central Tax (CGST) notification number etc. for exams.
IT = Integrated Tax (IGST)
Notification Number
How to prepare for GST Exams?
Basic Guidelines
(1) Try to link the topics, as if you are supplying, and in series of activities your business crosses the border line of aggregate
turnover of Rs. 10 Lakhs/20 Lakhs, then you will have to apply for registration within 30 days, you will have to issue the tax
invoice on next taxable supply, you might be getting taxable inward supply then you will have to think for input tax credit, then
you will have to pay the tax and to file returns post the end of tax period (month / quarter, as per the case) within due date.
(2) Though quoting the section umber does not carry the marks at CA Inter/IPCC stage, still in the views of authors, it is guided to
remember the sections and related rules. It will indirectly make the subject in your control. Nevertheless, do not try to quote the
section number in a situation where you are not sure about its correctness.
Types of Questions
Types of Questions Probable Areas/ topics (Illustrative List)
1 Definitions Goods / Services
Related Person
Agriculturist
2 Short Note Reverse Charge Mechanism
E-Commerce Operator
Benefits of Composition Scheme
2 Distinguish between Goods and Services
Composite supply and Mixed Supply
Taxable Supply and Non-taxable supply
Taxable Person and Registered Person
3 Numerical questions Valuation
Input Tax Credit
Computation of Aggregate Turnover for registration
5 GST Treatment for few Sales return
Transactions Gift
How to write the answer?
.
Rule 1 Avoid abbreviation unless well accepted (like CGST / SGST etc.)
Rule 2 Don’t quote section and rule number unless you are absolutely sure.
Rule 3 Keep quality of answer as main focus, not the content/ matter.
CGST
Section Section Title of CGST Act Rule Rule Title or Schedule Title
or Sch.
2 Various Definition
7 Scope of supply Sch I Activities to be treated as Supply even if made without consideration
Sch II Activities to be treated as Supply of Goods or Supply of Services
IGST
Section Section Title of CGST Act Rule Rule Title or Schedule Title
or Sch.
2 Various Definition
7 Inter-State Supply
8 Intra-State Supply
9 Supplies in territorial waters
16 Zero-rated supply
Concept of INDIRECT TAXES
A tax (from the Latin taxo) is a mandatory financial charge / levy imposed upon a taxpayer (an individual or
a legal entity) by Government in order to fund various public expenditures.
.
Constitution of India
Article 265 :Taxes not to be imposed saved by Authority of Law
No TAX shall be levied or collected except by authority of law.
Considering above constitutional provision, tax can be defined as ‘compulsory exaction (recovery) of money
under force of an enactment (act) ’
Constitution of India
Article 245 : Extent of Laws made by Parliament and by the Legislature of States
(1) Parliament may make laws for the whole or any part of the territory of INDIA, and
Legislature of State may make laws for the whole or any part of the STATE.
(2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial
operation.
List of STATES
(1) Andhra Pradesh (2) Arunachal Pradesh (3) Assam (4) Bihar (5) Chhattisgarh
(6) Goa (7) Gujarat (8) Haryana (9) Himachal (10) Jammu and Kashmir
Pradesh
(11) Jharkhand (12) Karnataka (13) Kerala (14) Madhya Pradesh (15) Maharashtra
(16) Manipur (17) Meghalaya (18) Mizoram (19) Nagaland (20) Odessa
(21) Punjab (22) Rajasthan (23) Sikkim (24) Tamil Nadu (25) Telangana
(26) Tripura (27) Uttar Pradesh (28) Uttarakhand (29) West Bengal
Constitution of India
Article 246 : Subject-matter of laws made by Parliament and by the Legislature of States
.
4) Types of taxes:
.
DT = Tax collected directly from final IDT = Tax collected indirectly from final
taxpayer taxpayer
Nature of tax Direct tax is progressive by nature. Indirect tax is regressive by nature.
These are linked to the paying capacity. These are not linked to the paying
Rich person is taxed more compared to poor capacity.
person. Since the indirect tax is uniform, the tax
payable on goods/service is same,
whether it is purchased by a poor man or
a rich person. So the poor or rich are
equally impacted by this and hence
considered regressive.
e.g., Income Tax e.g., Tax on petrol/ diesel
[Income tax is higher for persons belonging to higher [Diesel consumed from Audi car owners to
income groups and lower for persons belonging to Tractors/motor pumps by farmers – Tax is equally
lower income groups] applicable without considering the fiscal capability
of the consumer.]
Psychology with indirect taxes: Since the price of goods or service is already inclusive of indirect taxes, the customer
i.e. the ultimate tax payer does not feel a direct pinch while paying indirect taxes and hence, resistance to indirect taxes
is much less compared to resistance to direct taxes.
Manufacturer’s/ Dealer’s Psychology favours indirect taxes- The manufacturer/ trader who collects the taxes in
his Invoice and pays it to Government, has a psychological feeling that he is only collecting the taxes and is not paying
out of his own pocket.
Goods:
o Production: Excise Duty
o Sales: Sales tax
Services
o Service tax
Genesis of GST
Global Perspective:
France was the first country to implement GST in 1954.
.
Indian Perspective:
Kelkar Task Force in 2004 16-07-2004 Dr. Kelkar Task Force recommended the need of a National GST
GST proposed in 2007-08 28-02-2006 Budget Speech 2007-08: Union FM moots the idea of GST from April,
2010
GST Revival in 2014- 19-12-2014 Constitutional (122nd Amendment) Bill, 2014 introduced in Lok
Constitution Amendment Sabha
Bill
Constitution Amendment 06-05-2014 Constitutional (122nd Amendment) Bill, 2014 passed in Lok Sabha
Act
03-08-2016 Constitutional (122nd Amendment) Bill, 2014 passed in Rajya
Sabha
08-09-2016 Subsequent to ratification of bill by more than 50% of the states,
Constitutional (122nd Amendment) Bill, 2014 received the assent of
President of India.
- It became Constitutional (101st Amendment) Act, 2016 which
paved the way of GST in India
Central GST Act 27-03-2016 Central GST Legislations introduced in Lok-Sabha - CGST Bill,
2017, IGST Bill,2017, UTGST Bill,2017, GST (Compensation to states)
Bill, 2017 introduced
29-03-2016 Central GST Legislations passed in Lok-Sabha - CGST Bill, 2017,
IGST Bill, 2017, UTGST Bill,2017, GST (Compensation to states) Bill,
2017 passed
12-04-2017 Central GST Legislations received assent of president and Bills
enacted - CGST Act, 2017, IGST Act, 2017, UTGST Act, 2017, GST
(Compensation to States) Act, 2017
State GST Act Diff dates Enactment of the Central Act was followed by the enactment of
the State GST laws by various State legislature.
Roll out from 1st July, 2017 01-07-2017 GST has been implemented across India w.e.f. 1st July, 2017.
08-07-2017 GST in the State of Jammu & Kashmir came into force w.e.f. 8 th July,
2017.
* On 8th July, 217, CGST (Extension to J&K) Ordinance, 2017 and
IGST (Extension to J&K) Ordinance, 2017 were promulgated
making necessary changes in CGST Act and IGST Act and declaring
that the said Acts shall be applicable to the State of J&K also.
2. Why India needed GST?
.
Earlier system of taxation of goods and services was not efficient and leading to distortions and cascading
effect.
o This was adversely impacting GDP growth.
o It also inhibits voluntary compliance.
GST has been introduced with the intent and expectation of overcoming the demerits and limitations of earlier taxation
system.
o It is expected that GDP will grow by 2% due to GST.
o It is expected that compliance level will increase in GST.
.
.
Pre-GST Post-GST
Event Tax Event Tax
Goods Manufacture: Excise Duty (Central Levy) Supply GST
(Central + State Levy)
Sale: VAT (local sales) (State Levy)
.
Earlier Taxation System – demerits thereof
.
Taxation of Goods:
VAT payable to SG was computed on (basic value + ED charged by manufacturer).
Trade liable to pay VAT was not allowed to take credit of ED paid on goods purchased from manufacturer.
Double taxation – due to same subject matter being treated as ‘goods’ and ‘service’
Over the years, distinction between goods and services has become haze, due to which there is overlapping of State
VAT and CST on transactions like catering services (restaurant services and outdoor catering services).
Same transaction was getting taxed both by the CG and SG which is creating double taxation and resultant litigation.
Under GST regime, any supply transaction is taxed either as supply of goods or as supply of service and thus,
there is no double taxation.
Supply involving both supply of goods and services element is handled either as supply of goods or as supply of
services.
Relevant provisions have been made in this regard under GST law.
GST has subsumed major indirect taxes and thereby resolving the problem of high compliances costs too.
Principles kept in mind while deciding about category of taxes to be subsumed into GST
1) Taxes subsumed shall be in nature of indirect tax;
2) Taxes subsumed shall be part of the transaction chain which commences with manufacture/production of goods or
provision of services at one end and consumption of goods and services at the other;
3) The subsumation shall result in free flow of credit at all levels – whether intra-state supplies or inter-state supplies;
Benefits of GST:
1. Benefits to Central/ State Government
: GST aims to make India a common market with common tax rates and
procedures and remove the economic barriers thus paving the way for an integrated economy at the national
level.
: GST will give a major boost to the ‘Make in India' initiative of the Government
of India by making goods and services produced in India competitive in the national as well as international
market
: GST is expected to bring buoyancy to the Government Revenue by widening the tax base
and improving the taxpayer compliance.
2. Benefits to Trade
: GST will subsume majority of existing indirect tax levies both at Central and
State level into one tax i.e., GST which will be leviable uniformly on goods and services.
: By subsuming most of the Central and State taxes into a single tax and by
allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill
effects of cascading, improve competitiveness and improve liquidity of the businesses.
:
o Fewer rates
o Fewer exemptions
3. Benefits to Consumer
:
:
2. What are the basic features of GST?
Answer
Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with
almost no overlap between the respective domains.
The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption,
opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State
sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by
the States.
As for services, it is the Centre alone that is empowered to levy service tax.
.
Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre
and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (101 st
amendment) Act, 2016 for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy
and collect the GST.
Constitution of India
Article 246-A : Special provision with respect to Goods And Services Tax
(1) Notwithstanding anything contained in articles 246 and 254,
Parliament, and,
subject to clause (2), the Legislature of every State**,
.
have power to make laws with respect to GST imposed by the Union or by such State.
.
Author: Overriding effect: Article 246-A overrides article 246 and 254. Article 246 deals with distribution of power and Article 254
deals with the effect of inconsistency between the law of Parliament and law of State Legislature. This has been done so as to provide
a concurrent power to both Centre and States to levy GST without any issue of repugnancy or inconsistency, etc.
.
(2) Parliament has exclusive power to make laws with respect to GST where the supply of goods, or of
services, or both takes place in the course of inter-State trade or commerce.
.
.
Author: Supply taking place in course of inter-state trade or commerce shall be legislated exclusively by Parliament.
No State can legislate on such supply.
.
Explanation: The provisions of this article, shall, in respect of GST on following products, take effect from the date
recommended by the GST Council:
petroleum crude, high speed diesel, natural gas and
motor spirit (commonly known as petrol), aviation turbine fuel
.
Constitution of India
Article 286 : Restriction as to imposition of tax on supply of goods or services or both
(1) No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or of services
or both,
where such supply takes place -
(a) outside the State; or
(b) in the course of the import of the goods or services or both into, or export of the goods
or services or both out of, the territory of India..
.
The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and
services.
Further, both would be levied on the same price or value.
Thus, GST in India = Dual GST
Illustration I: (Intra-state supply of goods on which the rate of CGST is 10% and that of SGST is 10%.)
A wholesale dealer of steel in UP has made intra-state supply of steel bars and rods to a construction company.
Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services.
The inter-State seller/supplier will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on
his purchases.
Supplier will do Central Agency will do Supplier will do Central Agency will do
following following following following
IGST (ITC) set-off against Nothing to be done IGST (ITC) set-off against Nothing to be done
IGST (output liability) IGST (output liability)
CGST (ITC) set-off against CGST (ITC) so set off shall be IGST (ITC) set-off against IGST (ITC) so set off shall be
IGST (output liability) transferred from Central tax CGST (output liability) transferred from Integrated tax
[Sec 53 of CGST Act] account to Integrated Tax [Sec 19 of IGST Act] account to Central Tax Account
Account maintained by it maintained by it.
SGST (ITC) set-off against SGST (ITC) so set off shall be IGST (ITC) set-off against IGST (ITC) so set off shall be
IGST (output liability) transferred from State tax SGST (output liability) transferred from Integrated tax
[Sec 53 of SGST Act] account to Integrated Tax [Sec 19 of IGST Act] account to State Tax Account
Account maintained by it. maintained by it.
GST Common Portal:
Under GST, taxpayer interface with the Government (CG or SG) is through a common portal.
This portal is, therefore, referred as common portal. It is www.gst.gov.in.
This portal has been developed by GSTN (Goods and Service Tax Network).
o GSTN is a company incorporated under provisions of Sec 8 of the
Companies Act, 2013 (i.e., a not for profit company)
o It is a non-government, private limited company. (but still in view of
the sensitivity of the information that would be available with the agency
which will put in place the IT Infrastructure, the Government has
maintained strategic control over the agency)
o GTSN has been set up to provide IT infrastructure and services to the Central and State Governments, tax payers and other
stakeholders for implementation of the GST.
The functions of the GSTN include:
• Facilitating registration;
• forwarding the returns to Central and State
authorities;
• computation and settlement of IGST;
• matching of tax payment details with banking
network;
• providing various MIS reports to the Central
and the State Governments based on the
taxpayer return information;
• providing analysis of taxpayers' profile; .
The GST Common Portal will be the single interface for all taxpayers from any part of the country. For all cases like tax payment,
return filing, refund claim filing, appeals filing etc ), the GST Common Portal will be the only interface for the taxpayer. Only
in cases where a taxpayer is picked up for scrutiny or audit, will the taxpayer be required to interface with the respective tax authority.
Distribution of powers as per Article 246: Amendment to Union List and State List post insertion of Article 246-A
.
84 Duties of excise on tobacco and other goods 51 Duties of excise on the following goods
manufactured or produced in India manufactured or produced in the State
Except (a) alcoholic liquor for human consumption
(a) alcoholic liquor for human consumption (b) opium, Indian hemp and other narcotic
(b) opium, Indian hemp and other narcotic drugs and narcotics
drugs and narcotics but excluding
but including - Medicinal and toilet preparations containing
- Medicinal and toilet preparations containing alcohol, opium Indian hemp and other narcotic
alcohol, opium Indian hemp and other narcotic drugs and narcotics
drugs and narcotics
92-A Taxes on sale or purchase of goods*, where 54 Taxes on sale or purchase of goods, subject to
such sale or purchase takes place in course provisions of Entry 92-A of List 1
of the inter-state trade or commerce
Taxes on sale of
(a) Petroleum crude;
(b) High Speed Diesel;
(c) Motor spirit (commonly known as petrol);
(d) Natural gas;
(e) Aviation Turbine fuel;
*1: Amendment to Entry No. 84 of Constitution + Amendment made in Central Excise Act, 1944 (by Taxation Law Amendment Act, 2017)
*2: Amendment made in Central Sales Tax Act, 1956 (by Taxation Law Amendment Act, 2017)
Illustration
Company Activity Treatment under GST Law
Supply GST Rate Value
Pioneer Manufacture and sale of Non-taxable Supply ---- ----- -----
Distilleries A/L for Human
consumption
Delhi Aviation Manufacture and sale of Non-taxable Supply ---- ----- -----
Pvt. Ltd. ATF (Aviation Turbine Fuel)
Godfrey Phillips Manufacture and sale of Taxable Supply 28% Transaction Value
India Ltd. Tobacco products (As notified by (generally)
GST Council)
Constitution of India
Article 279-A: GST Council
Author: IGST Act has been made by Parliament has these purposes.
Principles for determination of place of supply
.
.
.
Types of Supply: INTRA-STATE SUPPLY & INTER-STATE SUPPLY
IGST Act, 2017: Chapter IV: Determination Of Nature Of Supply
Section 9 : Supplies in TERRITORIAL WATERS.
Notwithstanding anything contained in this Act:
.
(a) where the location of the supplier is the location of such
shall, for the purposes of this Act,
in the territorial waters, supplier; or
be deemed to be in the coastal State or
Union territory where the nearest point of
(b) where the place of supply is in the the place of supply, the appropriate baseline is located.
territorial waters,
Author :
Territorial Waters of India (TWI) = 12 Nautical Miles
Status of such person/ supply for purposes of GST Law
Supplier located in TWI Location of supplier shall be treated to be in Coastal State or Union Territory where the nearest
point of appropriate baseline is located.
.
Place of supply = TWI Place of Supply shall be treated to be in Coastal State or Union Territory where the nearest point
of appropriate baseline is located
.
.
States and Union Territories
\\\
Constitution of India
Article 366 (26-B):
‘State’, with reference to articles 246-A, 269-A and 279-A, includes ‘a Union Territory with State Legislature’
.
.
States and Union Territories
“India” means “State” includes a Union “Union territory” means the territory
the territory of India as referred to territory with Legislature. of—
in article 1 of the Constitution, (a) the Andaman and Nicobar
its territorial waters, seabed and sub- Islands;
soil underlying such waters, (b) Lakshadweep;
continental shelf, exclusive Author (c) Dadra and Nagar Haveli;
1. State includes Union (d) Daman and Diu
economic zone or any other Territories with Legislature.
maritime zone as referred to in the 2. Delhi and Puducherry are (e) Chandigarh; and
Territorial Waters, Continental two such states. These (f) other territory*.
Shelf, Exclusive Economic Zone and shall have SGST Act.
Explanation.—For the purposes of
other Maritime Zones Act, 1976, and this Act, each of the territories
the air space above its territory and specified in sub-clauses (a) to (f) shall
territorial waters; be considered to be a separate Union
territory;
.
\\\
.
.
.
.
.
Exports = Zero-rated under GST (considering DBT - Destination Based Taxation)
IGST Act, 2017: Chapter VII: Zero-rated supply
.
.
Section 16 : Zero-rated supply.
Zero-rated Supply: (a) Export (b) Supply to SEZ Developer/unit
(1) “Zero rated supply” means any of the following supplies of goods or services or both, namely:—
(a) Export of goods or services or both; or
(b) Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
2 options to supplier:
(1) Supply without tax and claim refund of ITC (2) Pay IGST (using credit or otherwise) and claim refund of IGST paid
.
(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options,
namely:—
(a) he may supply goods or services or both under bond or Letter and claim refund of unutilized input tax
of Undertaking, subject to such conditions, credit; or
safeguards and procedure as may be prescribed,
without payment of integrated tax
(b) he may supply goods or services or both, subject to such and claim refund of such tax paid on
conditions, safeguards and procedure as may be goods or services or both supplied;
prescribed, on payment of integrated tax
Author :
1. Tax treatment of zero-rated supply
The tax component of any zero-rated supply has to be completely removed from total value chain of such supply.
Towards this objective, following 2 options have been provided to supplier of such supplies
Output tax ITC
16(3)(a) IGST = 0 ITC still Use ITC towards payment of
Supply under Bond / Letter of admissible output tax on others supplies
Undertaking If not utilizable, then refund of
Compliance with prescribed conditions, ITC admissible
safeguards and procedures
16(3)(b) IGST payable (as applicable) ITC Claim refund/ rebate of IGST
Compliance with prescribed conditions, admissible paid (total output tax)
safeguards and procedures (in normal For claiming refund, provisions
course) of Sec 54 of CGST Act shall be
complied with.
Constitution of India
Article 271: SURCHARGE on certain duties and taxes for purposes of the Union
Notwithstanding anything in article 270,
Parliament may at any time
increase any of the duties or taxes referred to in those articles except the GST under article 246A
by a surcharge for purposes of the Union
.
and the whole proceeds of any such surcharge shall form part of the Consolidated Fund of India.
.
Author: Article 271 provides that Centre may levy surcharge on various duties/taxes which will not be shared. It is provided that said
Article 271 cannot be used to levy surcharge/cess on GST under Article 246-A.
\\\
Act CGST Act, 2017 SGST Act, UTGST Act, 2017 IGST Act, 2017
[Act = Legislation] 2017 5 UT + OT (other
31 Acts (29 States territory of India) –
+ 2 Deemed Single Act covering all
States) (as legislative body is
same – Parliament)
Rules CGST Rules, SGST Rules, UTGST Rules, IGST Rules, 2017
[Rules = Delegated 2017 2017 2017 Sec 22 of IGST Act
Legislation] empowers CG (upon
Sec 164 of CGST Sec 22 of UTGST
recommendation of GST
Act empowers CG Act empowers CG Council) to make rules for
(upon recommendation (upon recommendation
carrying out provisions of
of GST Council) to of GST Council) to
IGST Act.
make rules for carrying make rules for carrying
out provisions of out provisions of
CGST Act. UTGST Act.
Rules are to be Rules are to be Rules are to be notified
notified (i.e., published notified (i.e., (i.e., published in Official
in Official Gazette published in Official Gazette) [N/N 4/2017]
[N/N 3/2017] Gazette) [N/N 5/2017]
Rules may provide for Rules may provide for Rules may provide for
penalty upto Rs 10,000 penalty upto Rs 10,000 penalty upto Rs 10,000 in
in case of contravention in case of contravention case of contravention of its
of its provisions. of its provisions. provisions.
Regulation ……………… ……………… ……………… ……………………
s Sec 165 of CGST Sec 23 of UTGST Sec 23 of IGST Act
[Regulations = Act empowers Board Act empowers Board empowers Board (CBEC) to
Delegated (CBEC) to make (CBEC) to make make regulations for carrying
Legislation] regulations for carrying regulations for carrying out provisions of IGST Act.
out provisions of out provisions of
CGST Act. UTGST Act.
Regulations are to be Regulations are to be Regulations are to be
notified (i.e., notified (i.e., published notified (i.e., published in
published in Official in Official Gazette) Official Gazette)
Gazette)
Sec 166 of CGST ……………… Sec 24 of UTGST Sec 24 of IGST Act
Act requires every Act requires every requires every rule/
rule/ regulation, after it
…… rule/ regulation, after it regulation, after it is made, to
is made, to be laid is made, to be laid be laid before each House of
before each House of before each House of Parliament. Both Houses can
Parliament. Both Parliament. Both agree to annul it or modify it
Houses can agree to Houses can agree to with prospective effect.
annul it or modify it annul it or modify it
with prospective effect. with prospective effect.
ACT:
Intra-State Supply Inter-State Supply
CGST SGST UTGST IGST
Title CGST Act, 2017 SGST Act, UTGST Act, 2017 IGST Act, 2017
2017
Definition Sec 2: Sec 2 (1) to Sec 2: Sec 2(1) to Sec 1: Sec 2(1) to 2(25)
s 2(121) 2(10)
2(120): Residuary words/ 2(10): Residuary words/ 2(24): Residuary words/
expressions expressions expressions
2(121): Reference to any 2(25): Reference to any act
act which is not which is not applicable to
applicable to J&K = J&K = Corresponding law,
Corresponding law, if if any, in force in J&K
any, in force in J&K
Borrowed Provisions
Borrowed Sec 2(120): Residuary Sec 2(10): Residuary Sec 2(24): Residuary words/
Definitions words/ expressions = words/ expressions = expressions = Meaning as
Meaning as assigned under Meaning as assigned assigned under other GST
other GST Act under other GST Act Act
Borrowed ----- Sec 21: Application of Sec 20: Application of
Sections Certain provisions of Certain provisions of
CGST Act CGST Act
[Many provisions borrowed [Many provisions borrowed
(list specified) and made (list specified) and made
applicable, mutatis applicable, mutatis mutandis]
mutandis]
Charging Sec 9: Charge of Sec 7: Charge of Sec 5: Charge of IGST
Section CGST UTGST
Levy Supply = Intra State Supply = Intra State Supply = Inter State
Supply Supply Supply
Compositi Sec 10: Composition Sec 21 read with Sec Not Available
on levy Levy 10 of CGST Act: IGST has neither created
[Flat Rate Composition Scheme nor
Low notified rates Composition Levy
taxation borrowed this from CGST Act.
No credit benefits
Scheme]
RULES:
Intra-State Supply Inter-State Supply
CGST SGST UTGST IGST
Title CGST Rules, SGST Rules, UTGST Rules, IGST Rules, 2017
2017 2017 2017
Borrowed Provisions
Borrowed ----- Rule 2: Adaptation of Rule 2: Application of
Rules CGST Rules, 2017 CGST Rules
The CGST Rules, 2017 for
carrying out provisions
specified in Sec 20 of IGST
Act, 2017 shall, so far as may
be, apply in relation to
integrated tax as they apply in
relation to central tax.
ADMINISTRATIVE ASPECT: OFFICERS:
.
OID (often referred as Circulars) are issued to ensure uniformity in implementation. of GST provisions.
The need to issue such instructions arises when there is a doubt/ambiguity in relation to those matters. The possibility of
varying views being taken by different Central Tax Officers while administering the Act may bring about uncertainty and
confusion. In order to avoid this situation, Sec 168 has been made.
.
.
* In year 2018, it has been renamed as CBIC (Central Board of Indirect taxes and Customs).
GST: A quick overview
.
* Threshold = It refers to a level of turnover below which supplier is relieve of requirement to register and to collect and remit GST on the supplies.
.
First time registration as : Regular/Normal Supplier vs Composition Supplier
Composition .
Scheme
Normal
provisions
[All other cases] (Monthly) (Detailed (Tax (Monthly basis)
- by 20 records) Invoice) - by 20 [GSTR-3]
.
[Sec 35] [Sec 39(1)]
[Sec 31(1)]
Registration: (Applied for within 30 days of person becoming liable to registration)
.
Entire chain:
.
Outward
Supplies GSTR-1
GSTR-1 -----
Inward
Supplies GSTR-2
GSTR-2 -----
Consolidated
Return GSTR-3
GSTR-3
GSTR-4
GSTR-4 -----
Annual
Return GSTR-9
GSTR-9
GSTR-
9A GSTR-
9A
-----
GSTR-1 Invoice-wise details in 10th of succeeding TP having ATO in excess of 1.5 Crore
(Statement) regular GSTR-1 of month Month Extended Date Notification
outward supplies has to July - 10th Jan, 2018 72/2017-CT
be filed for the month Nov, 2017
of July, 2017 onwards, Dec, 2017 10 Feb, 2018 -- same --
in addition to GSTR- Jan, 2018 10 March, 2018 -- same --
3B. Feb, 2018 10 April, 2018 -- same --
Mar, 2018 10 may, 2018 -- same --
TP having ATO upto 1.5 Crore
Month Extended Date Notification
July - Sep, 10th Jan, 2018 71/2017-CT
2017
Oct- Dec, 15 Feb, 2018 -- same --
2017
Jan- Mar, 30 April, 2018 -- same --
2018
.
GSTR-2 This statement is not 15th of succeeding
(Statement) yet operational. month
GSTR-3 This return is not yet 20th of succeeding
(Return) operational. month
.
Composition GSTR-4 It contains summary 18th of succeeding
Month Extended Date Notification
Supplier (Return) details of outward and quarter July-Sep, 24 Dec, 2017 41/2017-CT
inward supplies. 2017
(1) 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;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
ABC Manufacturers Ltd. and Raghav & Sons shall, jointly and severally, be liable to pay GST payable on such goods.
.
[Author: To agent, it is advisable that he shall collect tax and pay it to the Government before forwarding the proceeds/goods to the principal. He
shall also not solely rely on representations of principal as any misclassification of supply or undervaluation of supply will land him in
as much trouble as to the principal]
.
.
3 Sec 2 (93) Recipient
.
.
Supply without consideration Goods Recipient = Person to whom goods are delivered or made
[Section 7 read with Schedule I (4 available
Activities)] Services Recipient = Person to whom services are rendered
.
Illustration
.
Definitions Not Defined as such Section 2(78) of CGST Act Section 2(108) of CGST Act
Legal Sec 7(2) of CGST Law (definition) (definition)
Provisions Schedule III activities
Notified Activities of CG/SG/ LA
GST Liability No GST Levy attracted No GST Levy attracted GST levy attracted
.
“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;
.
Author :
AGGREGATE TURNOVER:
1. Aggregate all supplies - supply of goods and supply of services
2. Aggregate all supplies - Intra-state supply and Inter-state supply (including exports*)
3. Aggregate all supplies - taxable – nil rated, exempted, others and non-taxable*)
4. Aggregate all supplies – tax payable on forward charge basis (by the supplier) and tax payable on reverse charge basis (by
the recipient)
5. Aggregate all supplies – multiple place of businesses within same State / UT (may or may not be separately registered under
GST law) and multiple place of businesses in different State / UT (must be separately registered under GST law) –
.
6. Aggregate all supplies – supplies made to outsider (which are normal supply u/Sec 7(1)(a) of CGST Act) and supplies made
to self, i.e., other units of same person which are differently registered and hence considered as deemed distinct persons
under GST law (these are also considered supply u/Sec 7(1)(c) read with Schedule I of CGST Act)
Illustration
.
Illustration 1:
Compute ATO of Mr A who is making following intra-state supplies from his Shop in Maharashtra:
Product dealt into Status under GST Sales during FY (exclusive of taxes)
Wheat/Rice Nil rated 2,00,000
Beauty products 28% 4,00,000
Tobacco & Tobacco Products 28% + Cess 6,00,000
Alcoholic Liqour Non-taxable 9,00,000
.
Illustration 2:
Compute ATO of Mr A who is making following supplies from his Shop in Delhi:
Details of inward Supplies
Product dealt into Status under GST Sales during FY (exclusive of taxes) FCM or RCM
Product X Nil rated Intra-State (Rs 55,00,000) FCM
Product Y 18% Inter-State (Rs 65,00,000) FCM
Product Z 12% Intra-State (Rs 75,00,000) RCM
Details of inward Supplies
Product dealt into Status under GST Sales during FY (exclusive of taxes) FCM or RCM
Product X Nil rated Intra-State (Rs 45,00,000) FCM
Product Y 18% Inter-State (Rs 55,00,000) FCM
Product Z 12% Intra-State (Rs 65,00,000) RCM
What shall be the treatment of supplies under RCM while computing ATO for any person?
1. Outward supplies under RCM (i.e., person whose ATO is being computed, his supplies to other person is under RCM)
o These are taxable supplies and shall be included in ATO.
.
2. Inward supplies under RCM (i.e., person whose ATO is being computed, his procurement from other person is under RCM)
o These are taxable supplies. But being inward supplies shall not be included in ATO (definition
specifically provides for exclusion of these) .
.
.
but excludes central tax, State tax, Union territory tax, integrated tax and cess;
Author :
1. Turnover is same as ‘aggregate turnover’, but only state wise: The expression ‘turnover in a State (or UT) is a replica of the
expression ‘aggregate turnover’, but for the fact that ‘turnover in State’ is restricted to the turnover of a taxable person, as
opposed to aggregate turnover which is PAN based (i.e., aggregate of turnover of all persons registered with same PAN). –
refer discussion with Sec 2(6) of CGST Act
“Person” includes—
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm [*Firm = Partnership Firm] ;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside
India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government
company as defined in Section 2 (45) of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;
.
Illustration
Whether following can be held to be liable to pay GST:
1. Indian Railway (Central Government) undertaking transportation of passengers:
2. XYZ Plc., a company incorporated in USA, providing technical consultancy services to ONGC India:
5. M/s M Ltd. being a garment manufacturer appoints Mr. Ram as an agent, who stores garments manufactured by M
Ltd. and sends to dealers whenever M Ltd. asks Mr. Ram to do so.
.
6. Godrej India Ltd. (Maharashtra) has opened up its branch office in Delhi. Godrej India Ltd. manufactured goods in
Maharashtra and then stock-transfers same to Delhi Branch Office?
.
.
7. BooksIndia Ltd. (Delhi) has its head office in Delhi. Additionally, it has 4 branches – Delhi, Maharashtra, West
Bengal, Madras. Head Office buys books from publisher which are then stock transferred to all branches for making
sales in there respective states.
.
.
.
8. Citybank, USA, has established its branch office in Delhi. CityBank USA provides technical support services to its
Delhi Branch.
.
.
.
11. Sec 2 (107) Taxable Person
“Taxable Person” means a person who is registered or liable to be registered under section 22 or section 24;
.
Author :
1. Person liable to pay GST = Taxable person (TP)
.
Such person still qualifies as ‘taxable person’ and thus, shall be liable to pay tax.
However, such person is ‘unregistered person’ and thus,
, he shall not be entitled to collect GST from the recipient. [Sec 32 of CGST Act]
.
Such person becomes ‘taxable person’ and thus, becomes liable to pay tax.
However, at same point of time, he becomes entitled to avail ITC on his inward supplies.
Illustration:
Trade Fair is organized in Delhi: Sellers from different states participate therein, they set up their stall therein and make
sales therefrom.
All these participants who are not having fixed place of business in Delhi are casual taxable persons.
Registration: Take registration atleast 5 days prior to commencement of business in the State for which he is seeking
registration as ‘casual taxable person’. A casual taxable person has to make an advance deposit of tax in an amount
equivalent to his estimated tax liability for the period for which the registration is sought. Registration Certificate granted
only after said deposits appears in the e-cash ledger. Post registration, he can affect his taxable supplies. Registration
granted to him is valid for a period of 90 days (subject to extension for 90 days)
Returns: Like any normal supplier, he also submits GSTR-1, GSTR-2 and GSTR-3 (monthly returns). But he is not
required to file ANNUAL RETURN.
.
Illustration:
International Trade Fair is organized in Delhi. Sellers from Delhi, other states as well as from other countries participate therein,
they set up their stall therein and make sales therefrom.
Category of Sellers Category of Supplier – Registration
(suppliers of goods) CTP, NRTP, Others
Suppliers from Delhi Having fixed place of business in Other GST registration - either
Delhi (India) (normal taxable person) u/Sec 22 or u/Sec 24
.
Suppliers from Other Having no fixed place of business Casual Taxable Person GST registration - either u/
States / UT in Delhi State from where they are (Spl taxable person) Sec 24 (*no threshold
affecting the supply (India) exemption)
.
Suppliers from Other Having no fixed place of business NR Taxable Person GST registration - either u/
Countries (say, Mr John in entire INDIA (Spl taxable person) Sec 24 (*no threshold
from USA) exemption)
.
Casual Taxable Person (CTP) – Sec 2 (20) Non-Resident Taxable Person (NRTP) – Sec 2 (77)
Supplier who does not have any fixed place of business in that Supplier who does not have any fixed place of business or
taxable territory in which it undertakes taxable supply. residence in India.
Registration before commencement of business and with Registration before commencement of business and with
advance payment of tax advance payment of tax
Normal Registration Application: GST REG-01 Separate Simplified Registration Application: GST REG-
09
PAN based GST Registration granted GST Registration granted without PAN
“Invoice” Or “Tax Invoice” means the tax invoice referred to in section 31;
.
Author :
1. Tax invoice is a document which contains specified items of information needed for effective operation of the GST System.
.
2. Tax invoice can be issued only by a registered person. – Sec 31(1) of CGST Act
3. It is a statutory requirement that every registered person who makes taxable supply must issue a tax invoice.
There are certain exceptions to this, like
Supplier making taxable supply of low value item (item of value below Rs 200) may not issue tax invoice, -
[Sec 31(3)(b) of CGST Act]
supplier making exempted supply shall not issue tax invoice [Sec 31(3)(c) of CGST Act]
Supplier opting for composition levy scheme shall not issue tax invoice - [Sec 31(3)(c) of CGST Act]
.
Author:
Author:
For example,
Return prescribed under GST Act/ Rules = GSTR-3
.
Author:
Valid Return = Furnished u/Sec 39(1) (monthly return furnished by due date) – on which self-assessed tax has been paid in full
.
Thus, a return is ‘valid return’ only when self-assessed tax (as shown in the return) has been paid.
Tax Period Due date of filling return Due date of GST payment
th
Normal Supplier April, 2018 20 May 20th May
.
Out of Scope Supply [Schedule III Activities + Notified activities of Govt / Local Authorities as public authorities]
(2) Notwithstanding anything contained in sub-section (1),—
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities, as may be notified by the Government* on the
recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
Author:
Exclusions from supply: [Disregarded Supply / Out of Scope Supply]
7(2) Excluded Supplies
.
.
NOTE:
7(2) Transactions/Activities don't qualify as ‘supply’ at all – No GST liability thereon.
But, these shall not be referred as ‘Non-Taxable Supply’
.
Supply Transaction: Govt empowered to deemed any supply as ‘supply of goods’ or ‘supply of service’
(* i.e., Transaction qualifying as supply u/Sec 7(1) and not disregarded u/Sec 7(2))
(3) Subject to the provisions of sub-sections (1) and (2) ,
the Government* may, on the recommendations of the Council, specify, by notification, the transactions that are
to be treated as—
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
.
Sec 7(1): Scope of Supply
7(1)(a): All forms of Supply – made/ agreed to be made – for consideration – for business
Analysis
All forms of supply will be covered (
Illustration
An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST
Act? Give reasons for the answer?
(Press release)
No, because the sale of old and used car by an individual is not in the course or furtherance of business (as selling old used car is not
the business of the said individual) and hence does not constitute supply.
.
.
Supply made as well as agreed to be made is covered.
Mr X, a manufacturer has Supply Consideration received is advance. [Receipt Voucher shall be issued
agreed to sell goods to Mr Z. - Sec 31(3) read with Rule 50 of CGST Rules]
Advance has been received.
Supply of goods is made later on. [Now, tax invoice shall be issued
- Sec 31(1) read with Rule 46 of CGST Rules]
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment
made for such supply unless the supplier applies such deposit as consideration for the said supply;
Mr X, a utensil trader, has bartered new pressure cooker with Supply (goods) Consideration = Old Utensils = payment otherwise
many old utensils of a household lady. than in money (in respect of supply of goods)
.
A football player is offered a branded car as an inducement for Consideration = Car = payment otherwise than in
him to join the club and play for the club. money (for the inducement of supply of services
by football player)
.
Mr X, is sugar manufacturer in UP. State Government made Consideration = 50,000 = payment in money (in
compulsory acquisition of his sugar/production at a price of Rs respect of supply of goods)
50,000, which was determined/fixed by State Government. .
ABC Academy has admitted students into CA Final Batch This payment is not in nature of deposit, as ABC
pending results of IPCC. Payment of Rs 15,000 has been Academy must be accounted this payment as
received. Admission is subject to mutual understanding that if ‘advance’.
any student fails, then full amount shall be refunded to the [Note:
student. 1. Receipt of Payment (advance): Receipt
Voucher shall be issued - - Sec 31(3) read
with Rule 50 of CGST Rules
2. If situation of refund arises and money
is refunded: Refund Voucher shall be
issued - - - Sec 31(3) read with Rule 51 of
CGST Rules
3. If situation of refund does not arise and
student attended the batch: Tax Invoice
shall be issued - - - Sec 31(1) read with Rule
46 of CGST Rules
FORBEARANCE
A Ltd. has entered into contract with Mr B to pay him Rs Consideration = 2,00,000/- , the monetary value of
2,00,000 in lieu of Mr B agreeing not to sell his goods to B Ltd. forbearance on part of Mr B (i.e., not to sell his
goods to B Ltd. and thus, foregoing his profits)
[Forbearance is foregoing one’s legal right or claim]
.
In this case, the subsidy is not from the Government but is from a philanthropic association. Further, the subsidy is directly l inked to the price
of supply. Therefore, the subsidy is to be added back to the price to arrive at the taxable value, which comes t o Rs. 5 lakh a year.
.
* Presumed that fee of Rs 3 lakhs is exclusive of GST.
.
Are subsidies received from Private Enterprises on procurement of eco-friendly capital goods required to be included in the transaction value?
(IDTC FAQ)
As provided in section 15 of CGST Act, subsidies directly linked to the price of the supply are to be included in the transaction value,
where such subsidies are not provided by the Central/ State Governments. Where it can be established that the price of the supply is not
directly linked to the subsidy given on capital goods, the same is not required to be included.
.
Note: Non-Government subsidy is includible only if it is directly linked to the price of supply.
.
C Ltd. owns a coaching institute in Puri. the institute charges Rs. 18,000 per student for giving training in digital marketing.
However, this training programme is subsidized by different institutions as follows – State Government of Orissa : Rs. 500 per student, PQ
Charitable Trust : Rs. 200 per student and Government of Japan : Rs. 100 per student. Consequently, C Ltd. charges Rs. 17,200 + GST per
student.
Compute the total amount (tax inclusive) collectible from student.
.
In this case, subsidies given by different institutions are directly linked to the price charged by C Ltd. State Government subsidy can be excluded
but subsidy paid by others will be included in taxable value. Consequently, value of taxable supply and GST will be calculate d as follows —
Rs.
Transaction value 17,200
Subsidy paid by PQ Charitable Trust 200
Subsidy paid by Japan Government 100
Value of taxable supply 17,500
CGST @9% of Rs. 17,500 1,575
SGST @9% of Rs. 17,500 1,575
Total 20,650
Note: Amount to be collected from students will be as follows : Rs. 17,200 (transaction value) + CGST : Rs. 1,575 + SGST : Rs. 1,575..
Miscellaneous
Every receipt cannot be said to be consideration.
.
Business Consideration
Classroom Coaching to CA students (for a
consideration of Rs 80,00,000)
Sale of Educational pen drives (for a
consideration of Rs 30,00,000)
Sale of books (for a consideration of Rs
3,00,000)
Sale of flowers (for a consideration of Rs
20,00,000)
Sale of shares/ debentures (for a
consideration of Rs 12,00,000)
Renting of first floor of his commercial
building (for a consideration of Rs 24,00,000)
Sale of first floor of his commercial
building (for a consideration of Rs 200,00,000)
Lending of money to Mr A, a friend (for
interest @12% p.a.)
Money deposited with Bank (FD earns
interest @6% p.a.)
Sale of household used sofa-set (for a
consideration of Rs 10,000)
Sale of used business furniture (for a
consideration of Rs 30,000)
.
“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;
.
2. Supply of Money or Securities
Money or securities are excluded from scope of ‘goods’. Thus, supply of money or securities shall not constitute supply of goods.
o
o
o
By A Ltd. Interest
(manufacturing company)
By Mr A Interest
(a salaried employee)
By Credit Card Company Card issuance charges + Interest
.
.
.
[Transactions effected for commencement of business, though actual commencement of business takes place later on, shall also
be treated as ‘business’.
Similarly, the transaction of sale of goods such as stock or fixed assets after the closure of business shall also be considered within
the scope 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;
.
Club/ association / society / other such body operates on principles of mutuality – they provide facilities / benefits to its own
members. Such transactions shall still be regarded as business.
- some of the facilities / benefits provided by club etc. are 1) Sports facilities like swimming pool, table tennis, cricket etc.
2) Restaurant facility; 3) Banquet Hall or open ground; 4) Accommodation facility (rooms); 5) Library; etc.
.
[e.g., Admission into premise is normally granted to the person who generally purchases ticket or receives donor passes.
Sale of ticket for providing admission to any premise (like cinema hall, exhibition etc) will be considered as ‘business’]
.
(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; and\
(i) any activity or transaction undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities;
.
Business – extended meaning
Associations / Club are carrying out business even if dealing with members only
Service by an unicorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of
reimbursement of charges or share of contribution —
a) as a trade union;
b) for the provision of carrying out any activity which is exempt from the levy of GST; or
c) up to an amount of Rs 5,000/- per month per member Rs 7,500/- per month per member for sourcing of goods or services
from a third person for the common use of its members in a housing society or a residential complex.
[amended by N/N 2/2018-CT (Rate)]
Sec 7(1): Scope of Supply
7(1)(b): Import of service – for consideration – whether or not in course of or furtherance of business
.
Illustration
Import of Service for consideration
Discuss the applicability of GST in each case:
1) Import of management consultancy service by X Ltd. (Delhi) from MN Ltd (USA) for consideration of $10,000.
.
This is import of service in course of or furtherance of business and thus, falls within scope of supply as per Sec 7(1)(b).
Service provider being located in non-taxable territory (outside India), RCM shall be applicable.
X Ltd., delhi based business entity, shall be liable to GST.
2) Mr. X (a Student) plans to pursue his higher education in US. He receives career consultancy services from a US based consultant for $500.
.
This import of service is not in course of or furtherance of business but still falls within scope of supply as per Sec 7(1)(b).
Service provider is located in non-taxable territory (outside India) and recipient is non-business entity, therefore GST is exempt on such
supply transaction.
3) Ramesh Apparels in Chennai, Tamil Nadu, avails fashion designing services from Suresh Designs in Singapore. (for $10,000)
4) Ramaiyaa, a proprietor, has received the architect services for his residential house from an architect located in New York a t an agreed
consideration of $ 5,000.
.
Import of OIDAR Service for consideration
OIDAR Service (Online Information & database access or retrieval service): Sec 2(17) of IGST Act
OIDAR Service means Any service
delivery of which is mediated by Information technology (IT)
supply of which has been automated
supply of which requires minimum human intervention
and supply of which is impossible without IT.
Illustrations:
Subscriptions of online tax sites like taxmann.com.
Supply of classes stored in server like caclubindia.com
Supply of digital contents like e-books, wallpapers, music, videos stored in server by supplier
This is import of service in course of or furtherance of business and thus, falls within scope of supply as per Sec 7(1)(b).
Supplier of OIDAR services is located outside India. The recipient is a business entity in India. RCM is applicable.
Avinash, Maharashtra based business entity, shall be liable to GST.
2) Raman, a class 10th Student has downloaded a game application (pokemon) from google play store of Google Inc., USA. He h as paid
$10 for the game.
.
This import of service is not in course of or furtherance of business but still falls within scope of supply as per Sec 7(1)(b).
Supplier of OIDAR services is located outside India. The recipient is non-business entity in India (which is referred as NTOR – non-
taxable online recipient). RCM is applicable.
Google Inc is liable to pay IGST. (for discharge of this liability, Google Inc shall take GST registration). Special simplifi ed registration
scheme has been made for them under Sec 14 of IGST Act.
Sec 7(1): Scope of Supply
7(1)(c): Import of service – without consideration
.
Illustrations
Import of Service without consideration
Examine whether the following activities would amount to supply under section 7 of the CGST Act:
1. ABC Associates received legal consultancy services from its head office located in Malaysia. The head office has rendered such services
free of cost to its branch office.
(ICAI Study Material)
Foreign Head Office has provided legal consultancy service to its Indian branch office. Under GST law, foreign head office (e stablishment
of a person outside India) and Indian branch office (establishment of same person in India) shall be treated as ‘deemed distinct persons
(establishment of distinct persons)’ [Explanation to Sec 8 of IGST Act]
Presuming that ABC Associates is a taxable person (either registered under GST or liable to be registered), the import of ser vice* by
ABC Associate from his other establishment outside India (which is deemed distinct entity) will constitute supp ly, even if no consideration
has been charged for such supply [Sec 7(1)(c) read with Schedule I (Entry No. 4)]
.
2. Raman is an Electronic Commerce Operator in Chennai. His son* who is settled in London is a well -known lawyer. Raman has taken legal
advice from him free of cost with regard to his family dispute.
(ICAI Study Material)
Section 7(1)(c) of CGST Act read with Schedule I of CGST Act, inter alia, stipulates that import of services by a taxable person from a
related person located outside India, without consideration is treated as supply if it is provided in the course or furtheran ce of business. In
the given case, Raman being ECO is a taxable person (registered or liable to be registered under GST). It has received legal services from
his son (the related person) free of cost. Such receipt (import of service) being in a personal matter and not in course or f urtherance of
business, will not fall within the scope of supply under section 7 of the CGST Act.
3. Would your answer be different if in the case-2, Raman has taken advice in respect of his business unit in Chennai?
.
In the above case, if Raman (taxable person under GST) has taken advice with regard to his business unit, services provided b y Raman’s
son to him would be treated as supply under section 7 of the CGST Act as the same are provided in course or furtherance o f business
though without consideration.
.
.
Import of goods – Treatment under GST
.
.
Value Value as per Customs provisions Value as per Sec 15 of CGST Act
Point of time of As per customs provisions Time of Supply as determined as per Sec 13 of
GST liability CGST Act
[generally, it is either collected at time of clearance [in some special cases, ToS shall be determined as per Sec
from customs station or from customs warehouse] 14 of CGST Act]
Manner of Cash (though Challan as required under Customs Cash (though e-cash ledger)
discharge of provisions)
liability
.
SCHEDULE I [to CGST Act]
Activities To Be Treated As Supply Even If Made Without Consideration
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
Author :
1. Applicability of Entry 1: 2 conditions
Illustrations
Transfer/ disposal of Business Asset – on which ITC was availed
Examine whether the following activities would amount to supply under section 7 of the CGST Act:
(ICAI Study Material)
.
1. A cloth retailer gives clothes from his business stock to his friend free of cost.
.
In this case, cloth retailer (trader) has gifted cloth to his friend (unrelated person). Since the goods supplied (cloth) is his business
stock, he must have availed ITC thereon. In terms of Sec 7(1)(c) of CGST Act read with Entry No. 1 of Schedule I of CGST Act,
such transfer of business stock would amount to ‘supply’.
2. A dealer of air-conditioners permanently transfers an air conditioner from his stock in trade, for personal use at his residence.
In this case, dealer of air-conditioners (sole proprietor) has transfer one unit of his trading stock to himself for his personal use at
his residence. Since the goods transferred (AC) is his business asset, he must have availed ITC thereon. In terms of Sec 7(1)(c)
of CGST Act read with Entry No. 1 of Schedule I of CGST Act, such transfer of business asset would amount to ‘supply’.
3. ABC Academy purchases some laptops for business purpose. ITC on these laptops have been availed. After 3 years it have been
donated to the trust.
In this case, ABC Academy has transferred/donated his ITC availed laptop (business asset) to a trust. Since the goods transfe rred
(laptop) is his business asset, he must have availed ITC thereon. In terms of Sec 7(1)(c) of CGST Act read with Entry No. 1 of
Schedule I of CGST Act, such transfer of business asset would amount to ‘supply’.
4. Damodar Charitable Trust, a trust who gets the eye treatment of needy people done free of cost, donates clothes and toys to
children living in slum area.
Damodar Charitable Trust is providing eye treatment services free of cost to the needy people (unrelated persons). Its activity
does not fall within the scope of supply (as supply made for without consideration* and not getting covered by Sec 7(1)(c) re ad
with Schedule I of CGST Act).
In view of above, it is not GST registered entity*. Being an unregistered entity, it must not have availed any ITC of the tax
paid clothes and toys purchased by it. Thus, free supply of such goods will not be covered by Sec 7(1)(c) read with Schedule I of
CGST Act. Thus, even such supply will not attract any GST in hands of Damodar Charitable trust.
.
Author :
Supply to related persons (made in the course or furtherance of business):
.
Note:
RELATED PERSON FREE SUPPLIES (Goods or Services) Deemed Supply (liable to GST or not)
Employee Gifts of value upto Rs 50,000 in a FY Not deemed supply – No GST
Gifts of value exceeding Rs 50,000 in a FY Deemed Supply - GST
Illustrations
Supply of Goods / Services to related persons: without consideration
Examine whether the following activities would amount to supply under section 7 of the CGST Act:
(ICAI Study Material)
.
1. MNC Ltd. is trading in furniture. MNC Ltd. gives gift to its employees on Diwali. Following gifts have been provided by it du ring the
FY 2017-18:
(a) Bed Sheet (worth Rs 5,000) given as gift to lower level management staff.
.
MNC ltd. and employee are related persons under GST law. Thus, any gifts to employee (supply without consideration) falls
within the scope of supply within the meaning of Sec 7(1)(c) read with Schedule I (Entry 2). However, since the value of gif t is
not exceeding Rs 50,000 in a year, it shall not be treated as supply.
(b) I-phone 10 (worth Rs 90,000) given as gift to middle level management staff.
.
MNC ltd. and employee are related persons under GST law. Thus, any gifts to employee (supply without consideration) falls
within the scope of supply within the meaning of Sec 7(1)(c) read with Schedule I (Entry 2). Further, since the value of gift is
exceeding Rs 50,000 in a year, gifts will attract GST liability.
(c) Company shares (Stock) are gifted to top level management staff.
* Presumed that Sundar is not opting for benefit of threshold benefit as available u/Sec 22 of CGST Act.
Press Release dated 10th July, 2017
Gifts of value not exceeding 50,000 in a FY excluded from scope of Entry 1 (not deemed supply).
.
What is GIFT? - The question arises as to what constitutes a gift. Gift has not been defined in the GST law. In common parlance,
gift is made without consideration, is voluntary in nature and is made occasionally. It cannot be deman ded as a matter of right by
the employee and the employee cannot move a court of law for obtaining a gift.
.
Perquisites to employees provided under terms of employment contract are not gift: Perquisites being part and
parcel of salary package shall not be subject to GST - The services by an employee to the employer in the course of or in
relation to his employment is outside the scope of GST (neither supply of goods or supply of services). It follows therefrom that
supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee,
will not be subjected to GST.
e.g., Rent-Free Accommodation to employee as part and parcel of employment contract- free housing to the employees,
when the same is provided in terms of the contract between the employer and employee and is part and parcel of the cost -to-
company (C2C).
.
Author :
Supply to distinct persons as specified u/Sec 25 (made in the course or furtherance of business):
.
Registration required in each state/UT from where taxable supply is made/effected. [Sec 25(1)]
Same entity having business premises in different states/UT, needs separate registration in each such state/UT.
Each such business premise/unit shall be treated as ‘deemed distinct persons’. [Sec 25(4) & (5)].
.
Supply of goods and/or services between these 2 distinct persons shall be deemed supply and liable to GST.
Illustrations
Supply of Goods / Services to deemed distinct persons (branch transfer): without consideration
Examine whether the following activities would amount to supply under section 7 of the CGST Act:
.
(a) Sulekha Manufacturers have a factory in Delhi and a depot in Mumbai. Both these establishments are registered in respective States.
Finished goods are sent from factory in Delhi to the Mumbai depot without consideration so that the same can be sold.
In view of the same, factory and depot of Sulekha Manufacturers are establishments of two distinct persons in terms of Sec 25 of
CGST Act. Therefore, supply of goods from Delhi factory of Sulekha Manufacturers to Mumbai Depot without consideration, but in
course/furtherance of business, falls within the scope of supply as per Sec 7(1)(c) read with Schedule I (Entry 2)
(b) P (the principal) has transferred some goods to the premise of A (Agent) to sell goods on behalf of him.
Sec 7(1)(c) of CGST Act read with Schedule I (entry 3), inter alia, stipulates that supply of goods by a principal to his agent where
the agent undertakes to supply such goods on behalf of the principal.
In the given goods have been transferred to A for selling it on behalf of P and thus would be t reated as supply under section 7
of CGST Act.
3. Supply of GOODS—
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
Author :
ILLUSTRATIONS
Supply by principal to his agent:
Supply of goods by a principal to his agent, where the agent undertakes to supply such goods on behalf of the principal:
E.g. A company is located in the suburbs and employs an agent in the city to undertake sales on behalf of the company. Goods transferred
by the company to the premises of the agent in the city would be qualify as a ‘supply’.
.
ABC Inc (USA) & A Ltd. (Indian Subsidiary Company): Consultancy services received by A Ltd. from its Holding Company ABC Inc.
Holding and Subsidiary are 2 different persons, but related person Explanation to Sec 15 of CGST Act
Supply of service between them = Import of Service (inter-state supply) Sec 7 of IGST Act
.
SCHEDULE II [to CGST Act]
Activities To Be Treated As Supply Of Goods Or Supply Of Services
1. TRANSFER
(a) any transfer of the title in goods is a supply of GOODS;
(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply
of SERVICES;
1. Undivided share in goods refers to goods that are owned by more than one person.
Mr X and Mr Y are joint-owner / co-owner of GOODS.
Mr X sells his share in goods to another person.
.
This is ‘transfer of undivided share in goods (for consideration). This supply shall be treated as ‘Supply of Service’
.
When one owner of the goods decides to sell his share in goods, it is a supply of services.
When all owners of the goods sell the property, it is a supply of goods.
CRUX: Transaction of supply of goods which does not involved transfer of title in goods (whether in present or in
future) shall be treated as SUPPLY OF SERVICE.
(c) any transfer of the title in goods under an agreement which stipulates that property in goods shall pass at a
future date upon payment of full consideration as agreed, is a supply of GOODS.
Author :
ILLUSTRATIONS
Activity Supply Status of supply
Trader – sale of TV for consideration Yes Supply of GOODS
[cash sale or credit sale] [Sec 7(1)(a)] [Sch II (para 1(a))]
[transfer of possession and title in goods]
Trader – HP sales of TV for consideration Yes Supply of GOODS
(Installment purchase transactions) [Sec 7(1)(a)] [Sch II (para 1(c))]
[Possession handed over immediately, title will pass in
future at the time of payment of last installment]
Mr A – giving goods on hire or lease, say, renting Yes Supply of SERVICES
DVD players for rent [Sec 7(1)(a)] [Sch II]
.
.
Author :
3. TREATMENT or PROCESS
Any treatment or process which is applied to another person’s goods is a supply of SERVICES.
Author :
ILLUSTRATIONS
Activity Supply Status of supply
XYZ Ltd. sent their tools to M Ltd. for heat treatment to Heat treatment = Supply Supply of SERVICES
harden them. [Sec 7(1)(a)] [Sch II (para 3)]
.
New Glass Ltd. sent their glass to B Ltd. for heat treatment Heat treatment = Supply Supply of SERVICES
to produce tempered glass. [Sec 7(1)(a)] [Sch II (para 3)]
.
D ltd. sent their wrought iron gates to C Ltd. for chemical Chemical treatment = Supply of SERVICES
treatment to produce rust- resistant gates. Supply [Sch II (para 3)]
[Sec 7(1)(a)]
MR Furniture Ltd. sent their semi-finished dining sets to D Ltd. Varnishing = Supply Supply of SERVICES
for the process of varnishing. [Sec 7(1)(a)] [Sch II (para 3)]
.
A ltd. sent fabric to Mr D for manufacture of garments Manufacture = Supply Supply of SERVICES
(shirts). [Sec 7(1)(a)] [Sch II (para 3)]
4. TRANSFER of BUSINESS ASSETS
(a) where goods forming part of the assets of a business
are transferred or disposed of by or under the directions of the person carrying on the business
so as no longer to form part of those assets,
whether or not for a consideration,
such transfer or disposal is a supply of GOODS by the person;
Author :
ILLUSTRATIONS
Activity Supply Status of supply
AC installed in factory (ITC availed) Transfer of goods forming part of business Supply of GOODS
- Sale for Rs 5,000 assets (for consideration) [Sch II (para 4(a))]
[Sec 7(1)(a)]
Disposal of AC installed (ITC availed) Transfer of goods forming part of business Supply of GOODS
- Disposal to some charitable organization for assets (without consideration) [Sch II (para 4(a))]
free [Sec 7(1)(c)]
Author :
Generally, there is no supply when goods acquired by a person are used for his own business purposes.
However, if the goods are:
(i) put to private or personal use; or
(ii) used for the purpose other than business; or
(iii) made available for another person’s use but not done in the course or furtherance of the business of the owner of the goods.
it is a supply of services.
ILLUSTRATIONS
Activity Supply Status of supply
Mr A = Shamiana Contractor Goods made available to any person (here, Supply of SERVICES
In birthday function of manager’s son, he supplied employee- related person) for non-business [Sch II (para 4(b))]
tables, chairs and carpets for use without any purposes (without consideration)
charges. [Sec 7(1)(c)]
E Ltd. bought a bulldozer to be used in its own Goods (lorry) made available to any person Supply of SERVICES
construction business. However, it made the bulldozer (here, related person) for non-business [Sch II (para 4(b))]
available to be used in the construction business of its purposes (without consideration)
sister company, F ltd. [Sec 7(1)(c)]
Author :
Illustrations
Supply of Goods / Services to deemed distinct persons (branch transfer): without consideration
Anil (GST registered trader) is in the business of selling electronic goods. He closes down his business on March 31, 2018. V alue
of unsold stock of electronic goods on that date is Rs. 18 lakh. Discuss the applicability of GST on this unsold stock.
In terms of Schedule II of CGST Act (para 4(c)), a person ceasing to be a taxable person (i.e., getting de -registered) is deemed
to have made supply of goods lying with him as closing stock.
Anil is registered under GST. He closes his business on March 31, 2018. At the time of transfer, he has closing stock Rs. 18
lakh. Anil shall be deemed to have supplied such unsold stock immediately before he ceases to be a taxable person.
Author’s Note:
1. Person ceasing to be taxable person: applying for de-registration
o Registration is cancelled subject to condition of payment by the applicant as per Sec 29(5) of CGST Act.
Exception to ‘cessation’
1) Transfer of Going Concern (TOGC)
A transfer of business as a going concern (TOGC) means a transfer or sale of a business either wholly or partly, together
with the assets of the business, from one taxable person (transferor) to another person (transferee) who is a taxable
person or becomes a taxable person as a result of that transfer.
In case of TOGC, no GST charged and payable on such transfer.
5. SUPPLY OF SERVICES
The following shall be treated as supply of SERVICES, namely:—
(a) renting of immovable property;
Author :
1. There is some overlapping between Para 2(a)/(b) and Para 5(a).
Activity Treatment under GST Treatment under GST
(a) Renting of Land / Building Supply of Service Supply of Service
[Sec 7(1)(d) read with Schedule [Sec 7(1)(d) read with Schedule
II (Para 2(a) / (b)] II (Para 5(a)]
(c) Renting of others immovable --------- Supply of Service
structure [Sec 7(1)(d) read with Schedule
(say, telecom towers) II (Para 5(a)]
(b) construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly or partly, except where the entire
consideration has been received after issuance of completion certificate, where required, by the
competent authority or after its first occupation, whichever is earlier.
Explanation.—For the purposes of this clause—
(1) the expression “competent authority” means the Government or any authority authorised to issue completion
certificate under any law for the time being in force and in case of non-requirement of such certificate from such
authority, from any of the following, namely:—
(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;
(2) the expression “construction” includes additions, alterations, replacements or remodelling of any existing civil structure;
Author :
ABC Builders (P) Ltd. entered into contract for construction of Commercial Complex for M Ltd.
Taxability of transactions
Situation Whether supply Status of supply
Construction contract is pure labour contract Supply Supply of Service
(i.e., all materials will be provided by M Ltd.) [Sec 7(1)(d) read with Schedule
II (Para 5(b)]
Construction contract is labour-cum- material Supply Supply of Service
contract (Such supply is [Sec 7(1)(d) read with Schedule
(i.e., both labour as well as material will be provided by M composite supply of II (Para 6(a)]
Ltd.) goods and/or services)
[Note: Such Contract = Works Contract (as defined in
Sec 2(119) of CGST Act]
XYZ Builders (P) Ltd. is undertaking construction of Commercial Complex. He intends to sells units of this complex.
Taxability of transactions
Situation Whether supply Status of supply
Entire consideration is received after Not a supply at all Such supply shall be considered as
-- issuance of completion certificate, where require neither as supply of goods nor as
by competent authority, supply of services
-- after its first occupation, [Sec 7(2) read with Schedule III
whichever is earlier (Entry 5)]
Entire consideration or any part of consideration is Supply Supply of Service
received before [Sec 7(1)(d) read with Schedule
-- issuance of completion certificate, where require II (Para 5(b))]
by competent authority,
-- after its first occupation,
whichever is earlier
(c) temporary transfer or permitting the use or enjoyment of any Intellectual Property Right (IPR);
Author :
1. IPR = Copyrights, patents, trademarks, designs or other similar right
2. IPR = Property (valuable thing)
3. IPR= Movable Property (as it is not immovable property as per General Clauses Act)
4. IPR = property = movable property = Goods as per Sec 2(52) of CGST Act, 2017
Author : E.g., Supply of GST related software to businesses for smooth processing of returns and accounts = Supply of Services
(e) agreeing
to the obligation to refrain from an act, or
to tolerate an act or a situation, or
to do an act; and
Author :
Illustrations
[A] Agreeing to the obligation to REFRAIN FROM AN ACT (i.e., a promise not to do a particular act)
R, an architect, has prepared building Activity of agreeing not to supply
plan of a new hotel for Oberoi Hotels similar design to others = Supply of Service
Ltd. He has charged Rs 10,00,000 [Sec 7(1)(d) read with Schedule II (Para 5(e))]
(GST extra) for his supply of architect
Thus, receipt of Rs 3,00,000 is also subject to GST.
service. Further, R agrees not to
provide similar drawings to any other
company in hospitability industry in
India or abroad. On this promise,
Oberoi Hotels Ltd pays Rs 3,00,000
additionally to R.
Non-competence agreement entered Activity of agreeing not to carry
into by a businessman/ professional Competitive business = Supply of Service
with other businessman / professional [Sec 7(1)(d) read with Schedule II (Para 5(e))]
(f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred
payment or other valuable consideration.
.
6. COMPOSITE SUPPLY
The following composite supplies shall be treated as a supply of SERVICES, namely:—
(a) works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any
other article for human consumption or any drink (other than alcoholic liquor for human consumption),
where such supply or service is for cash, deferred payment or other valuable consideration.
Author :
CRUX
.
Supply of food/drinks by way of, or as a part of any service = Composite Supply of goods and services (as goods and services
are naturally bundled in ordinary course of business).
However, Para 6(b) of Schedule II to the CGST Act specifically provides that such composite supply shall be treated as
supply of service. Hence, the entire value of invoice shall be treated as value of service and leviable to GST.
.
.
Restaurant shall ensure that alcoholic liquor is charged/billed separately. Appropriate VAT/CST shall be payable on
such supply of alcoholic liquor.
.
7. SUPPLY OF GOODS
The following shall be treated as supply of GOODS, namely:—
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration.
.
Author :
1. An AOP/ BOI, whether incorporated or note, in India or outside India is a ‘person’ under GST- [Sec 2 (84) (f) of CGST Act]
.
Also, provision by club, association, society or any such body (for a subscription or any other consideration) of the facilities
or benefits to its members have been specifically covered in the definition of ‘business’ in Sec 2(17)(e) of CGST Act.
SCHEDULE III [to CGST Act]
Activities Or Transactions Which Shall Be Treated
Neither As A Supply Of Goods Nor A Supply Of Services
1. Services by an employee to the employer in the course of or in relation to his employment.
2. Services by any court or Tribunal established under any law for the time being in force.
.
Explanation: For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court.
.
Author : Fees paid to Court or Tribunal shall not constitute ‘supply’ and thus, shall not attract GST.
3.
(a) the functions performed by the
Members of Parliament, Members of State Legislative,
Members of Panchayats, Members of Municipalities and
Members of other local authorities
(b) the duties performed by any person who holds any post in in that capacity;
pursuance of the provisions of the Constitution
(c) the duties performed by any person as a Chairperson or a Member and who is not deemed as an
or a Director in a body established by the CG or State Governments employee
or local authority
Author :
1. Officials Functions performed by MP/ MLA: No GST
2. Officials Functions performed by members of Panchayat / Municipality/ Other Local Authority for that: No GST
3. Duties performed by person holding constitutional posts and receipt of consideration for that: No GST
E.g., C&AG of India is a constitutional post. Individual holding post of C&AG of India shall not be liable to pay any GST on
remuneration received by him.
4. Duties performed by Chairman/ Member / Director (who are not employees) in a Body Established by Govt (CG/SG) or
Local Authority** and receipt of consideration for that: No GST
E.g., Telecom Regulatory Authority of India (TRAI) is also a body established by CG. Chairman/Member/ Directors (who are not
employees) of these bodies shall be out of GST.
4. Services of
Funeral (vafre laLdkj @ vaR;sf"B lsok,¡),
Burial (nQukus dh lsok,¡),
Crematorium ('ke'kku ?kkV dh lsok,¡)
Mortuary (eqnkZ ?kj dh lsok,¡)
.
Author :
1. Supply of Immovable property = Supply of Service
Treatment of supply of immovable property
Immovable property = Not goods as defined in Sec 2(52)
Immovable property = Service as defined in Sec 2 (102)
Author :
1. Actionable Claim has been defined under Transfer of Property Act, 1882
TPA, 1882: [Sec 3]
‘Actionable claim’ mean
claim to or
.
Supply of actionable claim being lottery, betting or gambling: GST liability will arise
.
Concept
A taxable event under GST is supply of goods or services or both.
GST will be payable on every supply of goods or services or both.
The rate at which GST is payable for individual goods or services or both is also separately notified. Classification of supply
(whether as goods or services, the category of goods and services) is essential to determine charge applicable rate of GST on the
particular supply).
Supply consists of Combination of goods The supply is of which particular category of goods?
multiple components The supply is of which particular category of services?
Combination of service
Combination of goods and services Whether supply is of goods or service?
GST law providing for deemed treatment of a particular supply. Follow that deemed treatment.
[Schedule II (Deemed Treatment) or Sec 7(3) (Deemed treatment)]
GST law not providing for deemed treatment of a particular supply. Sec 8 is applicable.
Apply principles laid down in Sec 8.
.
.
Section 8 : Tax Liability On COMPOSITE AND MIXED SUPPLIES.
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 shall be treated as a supply of such
which is a principal supply, 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.
Illustration: 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;
Author: Ancillary supply becomes necessary only because of acceptance of pre-dominant supply.
Illustration : 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* (the definition does not suggest this) . It shall not be a mixed supply if these items are supplied separately;
.
Author: When two(or more) goods, or two (or more) services, or a combination of goods and services, that have individual identity are
deliberately supplied conjointly for a single consolidate price, the supply would be treated as mixed supply.
Most importantly, such supply shall not qualify as ‘composite supply’, for it to be treated as ‘mixed supply’.
Thus, supply where bundling is unnatural or principle supply is not identifiable- may be treated as ‘mixed supply’ if supplied for a
single/combined price.
--- If bundled supply is neither a composite supply nor supplied for a single price, then two (or more) supplies shall be treated as
‘individual suppies’ and not as a ‘mixed supply’.
Illustration
Goods+ Service+ Goods + Naturally Whether any1
Goods Service Service Bundled supply is principal
supply?
Supply Composite
Supply
Installed Goods
Delivered Goods
Supply Composite
Supply
Author’s Note:
The definition of ‘composite supply’ does not say that supplies comprised in a composite supply must be made under a single price, though
the definition of ‘mixed supply’ states this expressly. As long as supplies can be said to be naturally bundled and supplied in conjunction
with each other in the ordinary course of business, the supplies will be treated as ‘composite supply’ even if the parties specify separate
prices for the component supplies.
Thus, in a contract where goods are to be delivered at customer’s place but the supplier charges price of goods and transportation
separately, even than such supply is composite supply and by application of principles provided in Sec 8, this supply shall be treated
as ‘supply of goods’ and GST as applicable on goods shall be chargeable on full value.
Charge of GST (Charging Section)
Value: (Value refers to measure of levy. Sec 15 of CGST Act has laid down valuation provisions)
(b) Person liable to pay tax
Person liable to pay: Whether Supplier (making supply) or Receiver (receiving supply) ?
It is settled principle that even though the taxable event is ‘supply of goods and/or services’, a
legislature can impose liability to pay the tax on any person based on administrative convenience.
The tax can be collected from person triggering taxable event (supply) – i.e., supplier.
But it is not necessary that tax shall be collected from supplier always.
In exceptional cases, RECIPIENT: (this concept is called RCM – Reverse Charge Mechanism)
Whether a person other than supplier or recipient can also be made liable to pay GST?
Yes, if collection of tax from him gives administrative convenience to Government.
.
Third Party
[ECO- E-commerce Operator (like OLA Cabs)]
Every tax law must provide for ‘time of assessment of tax’. Lack of clarity in ‘time of assessment’
of tax’ provisions can create confusion and unwarranted/unnecessary disputes.
.
CGST law has made provision for determination of ‘time of supply (ToS)’.
Goods Sec 12 of CGST Act, 2017
.
1. ToS vary in case of ‘goods’ and ‘services’ (as tracking TOS for supply of goods is
easy in comparison to services)
2. Also, ToS vary in case of ‘FCM’ and ‘RCM’
.
.
.
Levy of GST
Supply CGST SGST UTGST IGST
Intra-State Supply CGST SGST (supply within State) UTGST (supply within UT) -----
Sec 9 of CGST Act Corresponding section may vary Sec 7 of UTGST Act
in different SGST Act
Inter-State Supply --- ----- ---- IGST
(Including imports) Sec 5 of IGST Act
.
and COLLECTED in such manner as may be prescribed* (Rule 85 to 88 of CGST Rules, 2017)
.
Author :
COLLECTION
Prescribed Manner: Rule 85 to 88 of CGST Rules, 2017
Author: Levy on certain products [Petroleum Products (Crude, HSD and Petrol), Natural Gas and ATF] will be made effective from later date.
Petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel
Future These will be made subject to GST in future.
Present Manufacturer Central Excise Duty + VAT (intra-state sales)/ CST (Inter-state sales)
Taxation VAT (intra-state sales)/ CST (Inter-state sales)
Trader
.
Reverse Charge Mechanism (RCM) .
(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.
Notified Goods N/N 4/2017-CT (Rate) dated 28th June, 2017 [RCM applicable on – 7 categories]
Notified Services N/N 13/2017-CT (Rate)– dated 28th June, 2017[RCM applicable on – 10 categories]
(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.
shall be exempt from the whole of the central tax leviable thereon under Section 9(4) of the CGST Act, 2017 .
Provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods
or service or both received by a registered person from any or all the suppliers, who is or are not registered,
exceeds five thousand rupees in a day.
.
The exemption contained in the notification shall apply to all registered persons till the 31 day of March, 2018*1.
.
1
This Notification has been amended to extend the Exemption till 30th June 2018.
Illustration
The registered person 'B' receives small portions of software code from individuals which he then integrates and supply as a package to
clients. These individuals are having small turnover of Rs 5 to 10 lakh, and therefore are not registered in GST. Whether there is any
liability on 'B' in respect of services provided by such individuals?
(Press release)
Presuming that supply by the individual suppliers are intra-state supply, supplier of such services are entitled to benefit of threshold
exemption limit of 20 lakhs as specified u/Section 22 of CGST Act. thus, such individual suppliers are not liable to GS T registration and
thus, are unregistered.
Supply of services by such unregistered supplier to the GST registered recipient shall attract ‘reverse charge’ as provided b y section
9(4) of the CGST Act, 2017. Therefore, in this case 'B', the GST registered recipient is liable to pay GST on services provided by these
individuals. However, presently all supplies attracting reverse charge u/Section 9(4) of CGST Act have been exempted from payment of
GST*. Thus, such supply shall be exempt from payment of GST.
E-Commerce: Supplier making supply through other’s online platform
[What is E-commerce: Refer Annexure-I]
Analysis
OLA Cab = Deemed Supplier = Liable for registration = Taxable person = Liable to pay GST
.
Taxi/ Cab owner = Not treated as Supplier = Not Liable for registration = Not Taxable person = Not Liable to pay GST
.
.
(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.
Notified Services N/N 17/2017 – CT (Rate) – 28th June, 2017 [amended on 22nd August, 2017]
CG, on the recommendations of the Council, hereby notifies that in case of the following categories of services, GST
shall be paid by the ECO –
(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and
motor cycle;
(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs,
campsites or other commercial places meant for residential or lodging purposes, except
where the person supplying such service through ECO is liable for registration u/Sec 22(1)
of the CGST Act.
*(iii) services by way of house-keeping, such as plumbing, carpentering etc, , except where the
person supplying such service through ECO is liable for registration u/Sec 22(1) of the CGST
Act.
(b) “maxicab”, “motorcab” and “motor cycle” shall have the same meanings as assigned to them respectively in
clauses (22), (25) and (26) of section 2 of the Motor Vehicles Act, 1988 .
Author:
Sec 2(25) Motor Cab MV constructed for carrying not more than 6 passengers (excluding driver)
Sec 2(22) Maxi Cab MV constructed for carrying more than 6 passengers but not more than 12 passengers (excluding driver)
Sec 2(26) Motor Cycle 2-Wheeled motor vehicle
Summary
Illustration
A hotel owner provided accommodation in Haryana, through an electronic commerce operator – Cool Trips. The hotel owner is not liable to get
registered as per the provisions of section 22(1) of the CGST Act.
Who is the person liable to pay GST in this case?
Would your answer be different if the Electronic Commerce Operator Cool Trips does not have a physical presence in India?
Note: Hotel owner is running budget hotel with ATO below threshold exemption limit of 20 lakhs*.
(Study Material)
As per section 9(5) of CGST Act*, Government may notify [on the recommendations of the GST Council] specific 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. Services by way of providing
accommodation in hotels through electronic commerce operator is a specified service for said purpose.
Thus, person liable to pay GST in this case is the Electronic Commerce Operator Cool Trips. All the provisions of the GST law 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 servic es.
If Cool Trips does not have a physical presence in India, person liable to pay tax is the person representing the Electronic Commerce Operator -
Cool Trips for any purpose in India.
Note:
1. Accommodation services provided by Hotel: PoS of such service = Location of immovable property
2. Such supply will be intra-state supply (as location of hotel and PoS falls in same state / Haryana)
.
3. Such hotel an intra-state supplier may be one whose ATO is within threshold exemption of 20 lakhs or may be one whose ATO is more
than threshold exemption limit of 20 lakhs. (for Haryana, threshold exemption is 20 lakhs).
Hotel with ATO upto 20 lakhs: Such hotel is not required to take GST registration u/Sec 22(1) of CGST Act. In respect of supply
of accommodation services by such hotel through ECO, ECO shall be liable to pay GST.
.
Hotel with ATO more than 20 lakhs: Such hotel is required to take GST registration u/Sec 22(1) of CGST Act. In respect of supply
.
of accommodation services by such hotel through ECO, hotel will remain liable to pay GST.
.
A hotel owner is providing following services:
a) Room renting for lodging purposes;
b) Banquet renting for holding functions;
c) Restaurant services;
His ATO from all the above services is 40 lakhs. His ATO being more than threshold exemption fo 20 lakhs, he is liable to take registration
u/Sec 22(1) of CGST Act.
Such hotel owner has now started providing above services through ohoroom.com (USA based website).
Whether in such case in respect of any of service provided through ECO, ECO shall be liable to pay GST in terms of Sec 9(5) of CGST Act?
As per section 9(5) of CGST Act*, ECO is liable to pay GST only in respect of notified services supplied through ECO.
One of the notified service is service by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial
places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is
liable for registration u/Sec 22(1) of the CGST Act.
.
3. Presently, TCS provisions has also been kept in abeyance. Anyway, TCS provisions are out of scope of Inter Level.
Discuss under following situations, who is liable to pay GST and take GST registration:
ECO Representative of ECO in
India
1 X owns a radio taxi. He provides his service in Mumbai through Taxiwala, Mumbai. Taxiwala, Mumbai ……….
2 X owns a radio taxi. He provides his service in Haryana and Delhi through UNI UNI Taxicab USA. C & Co., Haryana
Taxicab USA.
3 Y Ltd. is running hotel in Bengaluru and providing boarding and lodging services Cooltrip Inc., USA B & Co., Mumbai
through Cooltrip.com (a USA based website).
ATO of Y Ltd. is not more than threshold limit and thus, it is not liable to take
registration u/Sec 22(1).
4 Z is a plumber providing house-keeping service in Delhi. It is providing service Housekeeping Ltd., C, an individual in
through housekeeping.com (Dubai based website). ATO of Z is not more than Dubai Rajasthan
threshold limit of 20 lakhs.
5 D is supplying beauty treatment services within Mumbai through ECO. It is providing Glory Ltd., Mumbai ……….
service through gloryface.com (Mumbai based website). ATO of D is not more than
threshold limit of 20 lakhs.
Ans.
ECO Representative of Person liable to pay GST
ECO in India
1 X owns a radio taxi. He provides his service Taxiwala Ltd., Mumbai ………. Taxiwala Ltd., Mumbai
in Mumbai through Taxiwala, Mumbai.
2 X owns a radio taxi. He provides his service UNI Taxicab Ltd USA. C & Co., Haryana C & Co, the Indian representative
in Haryana and Delhi through UNI Taxicab of UNI Taxicab Ltd., USA) shall be
(USA based website). liable to pay GST.
3 Y Ltd. is running hotel in Bengaluru and Cooltrip Inc., USA B & Co., Mumbai B & Co, the Indian representative
providing boarding and lodging services of Cooltrip Inc., USA) shall be liable
through Cooltrip.com (a USA based website). to pay GST.
ATO of Y Ltd. is not more than threshold limit
and thus, it is not liable to take registration
u/Sec 22(1).
4 Z is a plumber providing house-keeping Housekeeping Ltd., C, an individual in C, the Indian representative of UNI
service in Delhi. It is providing service Dubai Rajasthan Housekeeping Ltd., Dubai) shall be
through housekeeping.com (Dubai based liable to pay GST.
website). ATO of Z is not more than
threshold limit of 20 lakhs.
5 D is supplying beauty treatment services Glory Ltd., Mumbai ………. D, the supplier of beauty treatment
within Mumbai through ECO. It is providing services, shall be liable to pay GST.
service through gloryface.com (Mumbai .
based website). ATO of D is not more than * Glory Ltd., the ECO, shall be liable
threshold limit of 20 lakhs. to comply with TCS provisions.
.
Annexure-I:
.
E-COMMERCE .
E-commerce .
Digital Goods/products is a general phrase used to describe any goods that are stored, delivered and used in its
electronic format. Digital goods are shipped electronically to the consumer through email or download from the
Internet.
Physical stores that supply goods and/or services with the help of digital network facilitated by third party will also fall
within scope of this definition. e.g., Sale of perfumes over Flipkart,
ECO
(Electronic Sec 2 (45) of CGST Act: E-COMMERCE OPERATOR
Commerce “Electronic Commerce Operator” means any person who owns, operates or manages digital or electronic
Operator) facility or platform for electronic commerce;
.
.
.
.
.
Annexure-II:
.
IGST leviable on IMPORT OF GOODS: Levy & Collection goverened by Customs Tariff Act, 29175
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.
Author :
LEVY & COLLECTION OF IGST in case of GOODS IMPORTED INTO INDIA
LEVY As per provisions of Sec 3 of CTA, 1975
.
Time It shall be levied and collected at the point when ‘basic customs duty’ is levied and collected on the said goods.
.
(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.
Notified Goods N/N 10/2017-IT (Rate) dated 28th June, 2017 [RCM applicable on – 7 categories]
Notified Services N/N 4/2017-IT (Rate)– dated 28th June, 2017[RCM applicable on – 12 categories]
(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.
shall be exempt from the whole of the central tax leviable thereon under Section 5(4) of the IGST Act, 2017 .
.
The exemption contained in this shall apply to all registered persons till the 31 day of March, 2018.
.
E-Commerce: Supplier making supply through other’s online platform
Notified Services* through E-commerce: ECO (E-commerce operator) to pay CGST
ECO not having physical presence in India (TT): His representative or appointed person shall be liable to pay GST
.
(5) The Government may, 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
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.
Notified Services N/N 14/2017 – IT (Rate) – 28th June, 2017 [amended on 22nd August, 2017]
CG, on the recommendations of the Council, hereby notifies that in case of the following categories of services, GST
shall be paid by the ECO –
(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and
motor cycle;
(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs,
campsites or other commercial places meant for residential or lodging purposes, except
where the person supplying such service through ECO is liable for registration u/Sec 22(1)
of the CGST Act.
*(iii) services by way of house-keeping, such as plumbing, carpentering etc, except where the
person supplying such service through ECO is liable for registration u/Sec 22(1) of the CGST
Act.
(b) “maxicab”, “motorcab” and “motor cycle” shall have the same meanings as assigned to them respectively in
clauses (22), (25) and (26) of section 2 of the Motor Vehicles Act, 1988 .
.
Author:
Sec 2(25) Motor Cab MV constructed for carrying not more than 6 passengers (excluding driver)
Sec 2(22) Maxi Cab MV constructed for carrying more than 6 passengers but not more than 12 passengers (excluding driver)
Sec 2(26) Motor Cycle 2-Wheeled motor vehicle
.
Summary
COMPOSITION SCHEME
.
Such scheme is optional. (Assessee may opt out of this scheme if he does not feel it is beneficial for him)
Scheme is available only when it is opted.
Benefit of this scheme cannot be claimed unless the option is exercised as per prescribed procedure. [Rule 3 of CGST Rules]
Option may be exercised at time of registration or post-registration.
Scheme has no lock-in period. (Supplier may opt out of this scheme at any point of time).
Intimation of withdrawal shall be given over the portal.
Upon withdrawal, such supplier becomes regular supplier (entitled to work with ITC).
Supplier can also claim ITC of goods in stock. He shall submit that in GST ITC-01. [Sec 16 read with Rule 40 of CGST Rules]
1 2 3 4 5 6 7 8 9 10 11 12
April May June July Aug Sep Oct Nov Dec Jan Feb Mar
10(1) Registered person with ATO (PY) of Rule 3 Intimation of Composition Levy
1 Crore / 75 Lakhs: Has option to
pay Composition tax Rule 4 Effective date of Composition levy
.
.
COMPOSITION SCHEME
a registered person,
whose aggregate turnover in the preceding financial year ,
may opt to pay,
,
an amount calculated at such rate , (Rule 7 of CGST Rules)
but not exceeding,—
(a) 1% of the turnover in State or turnover in Union in case of a manufacturer,
territory (i.e., manufacturer of goods)
(b) 2.5% of the turnover in State or turnover in Union in case of persons engaged in making
territory supplies referred to in clause (b) of
paragraph 6 of Schedule II (i.e,
Restaurant and Caterers)
(i.e., Supplier of service)
(c) 0.5% of the turnover in State or turnover in Union in case of other suppliers,
territory (i.e., trader of goods)
.
Provided that
the Government may, , increase the said limit of fifty lakh rupees to such higher amount, not
exceeding one crore rupees, as may be recommended by the Council.
(N/N 8/2017-CT : Limit increased to 1 crore / 75 lakhs)
Analysis:
Eligible Person Registered person ATO (PY) =< 50 lakhs (Notification may extend it to 1 crore)
.
Rule 5: : Conditions and restrictions for composition levy
(1) The person exercising the option to pay tax under section 10 shall comply with the following conditions, namely:-
.
b) ………(not relevant)…………..
c) the goods held in stock by him have not been purchased from an unregistered supplier and where
purchased, he pays the tax under section 9(4); (Sec 9(4) provisions have been kept in abeyance till 31 st
March, 2018. Thus, this condition not applicable presently)
Obligation to pay normal GST on inward supplies under RCM:
d) he shall pay tax under section 9 (3) or (4) on inward supply of goods or services or both;
He was not engaged in ‘manufacture of excluded category of goods – i.e., ice-cream, pan-masala and tobacco in PY)::
e) he was not engaged in the manufacture of goods as notified under Section 10(2)(e), during the preceding
financial year;
Title of Invoice:
f) He shall mention the words ‘COMPOSITION TAXABLE PERSON- not eligible to collect tax on supplies’ at
the top of ‘bill of supply’ issued by him
Display at business premises:
g) He shall mention the words ‘COMPOSITION TAXABLE PERSON’ on every notice or signboard at his principal
place of business and at every additional place or places of business.
.
.
Illustration:
Mr A is GST registered manufacturer – registered in Delhi and Maharashtra.
He is eligible for composition scheme and has opted for composition scheme.
Details of supplies effected by him during FY 2018-19
Place of Business Business Applicable Sch rates Nature of supply TO
Delhi Supply of X 9% + 9% Intra-state 30 lakhs
Maharashtra Supply of Y 5% + 5% Intra-State 20 lakhs
Compute his GST liability under composition Scheme.
FY 2018-19
PY (2017-18): ATO = 0 - hence, supplier is eligible for Composition Scheme
CY (2018-19): ATO = 110 lakhs [ATO includes all outward supplies – whether under FCM or RCM]
.
Tax Liability Person liable to pay GST liability under composition scheme
Product A FCM Supplier 80 Lakhs * 1%.
Product B RCM Recipient -------------
FY 2019-20
PY (2018-19): ATO = 110 lakhs [ATO includes all outward supplies – whether under FCM or RCM]
CY (2019-20): Supplier not eligible to opt for composition as ATO exceeding 1 crore.
During the same year, he has received inward supplies of Product B (GST Rate = 12%)Rs 30 lakhs which are under RCM.
Discuss whether Mr A can opt for composition scheme
(c) In FY 2018-19
(d) In FY 2019-20
FY 2018-19
PY (2017-18): ATO = 0 - hence, supplier is eligible for Composition Scheme
CY (2018-19): ATO = 80 lakhs [ATO includes only outward supplies – inward supplies not includible even if it is under RCM]
.
Tax Liability GST liability under composition scheme GST liability under RCM
Product A FCM 80 Lakhs * 1%. -------------
Product B RCM ------------- 30 Lakhs * 12%.
FY 2019-20
PY (2018-19): ATO = 80 lakhs [ATO includes only outward supplies – inward supplies not includible even if it is under RCM]
CY (2019-20): Supplier not eligible to opt for composition as ATO exceeding 1 crore
Ineligible Suppliers
(2) The registered person shall be eligible to opt under sub-section (1), if—
(a) he is not engaged in the supply of services (i.e,
Restaurant and Caterers);
Note:
In general, supplier of services not eligible for composition.
Exception Restaurant and caterers are only eligible for composition (Rate= 5%)
:
.
2) Mr A (GST registered in Delhi) providing consultancy services and sale of electronic items;
(d) he is not engaged in making any supply of goods through an electronic commerce operator who is required to
collect tax at source under section 52; and
2) Mr A (GST registered in Delhi) – selling dry fruits in e-commerce through Flipkart (third party ECO who is required to collect TCS);
(e) he is not a manufacturer* of such goods as may be notified by the Government* on the recommendations of the
Council:
N/N 8/2017-CT
Sl Tariff Item Description
No.
1 21 05 00 00 Ice cream and other edible ice, whether or not containing cocoa
2 21 06 90 20 Pan Masala
3 24 All Goods, i.e., Tobacco and Manufactured tobacco substitutes
Discuss the eligibility for composition scheme:
1) Mr A (GST registered in Delhi) – manufacture and supply of ice-cream (intra-state);
Separately registered different business premises of person with same PAN: Any unit eligible if all other units
are also opting for composition
Provided that
,
the registered person shall not be eligible to opt for the scheme under sub-section (1) all such
registered persons opt to pay tax under that sub-section.
Illustrations:
Mohan Enterprises has two registered business verticals in Delhi. Its aggregate turnover for the preceding year for both the business verticals
was Rs. 70 lakh. It wishes to pay tax under composition levy for one of the vertical in the current year while under normal levy for other vertical.
You are required to advice Mohan Enterprises whether he can do so?
(Study Material)
A registered person with an aggregate turnover in a preceding financial year up to Rs. 1 crore is eligible for composition levy in Delhi. Since the
aggregate turnover of Mohan Enterprises does not exceed Rs. 1 crore, it is eligible for composition levy in the current year.
However, all registered persons having the same Permanent Account Number (PAN) have to opt for composition scheme. If one such
registered person opts for normal scheme, others become ineligible for composition scheme. Thus, Mohan Enterprises either have to opt for
composition levy for both the verticals or under normal levy for both the verticals.
2. X is in the business of manufacture of ice-cream. He sells through its own retail outlet in Delhi. His ATO is in FY is likely to be Rs 40 Lakhs. He
wishes to avail composition levy.
X manufactures ice-cream. A manufacturer of ice-cream, pan masala and tobacco products, cannot opt for Composition Scheme.
.
3. Y is trader of ice-cream manufactured by KWALITY LTD. His ATO is in FY is likely to be Rs 50 Lakhs. He wishes to avail composition levy.
X is trader of ice-cream. A trader of ice-cream, pan masala and tobacco products, can opt for Composition Scheme.
4. Y is in the business of manufacture of hand bags (made of synthetic leather). He turnover is is likely to be Rs 70 lakhs. 98% of his sales will be
directly to departmental store and 2% of his sales shall be through Amazon, an ECO. All his supplies going to be intra-state supplies. He wishes
to avail composition levy.
Y cannot opt for Composition Scheme. Section 10(2) debars a person who is engaged in making any supply of goods through an electronic
commerce operator to opt for Composition Scheme.
.
5. Y, resident of Delhi, is in the business of manufacture of toys. He turnover is is likely to be Rs 40 lakhs within Delhi only. He has his own
website through which only orders are booked. He wishes to avail composition levy.
Y can opt for Composition Scheme. Section 10(2) debars a person who is engaged in making any supply of goods through a third party ECO
who is liable to collect tax at source.
6. X is in the business of manufacture of garments. His annual turnover shall be consisting of following : Rs 50 lakhs from sales of garments and
Rs 2,00,000 from rental of his commercial property. ATO being total 52,00,000 he wishes to opt for composition levy.
.
Since he is engaged in supply of services also, he is not eligible for Composition Scheme.
7. X is running a restaurant. His annual turnover from restaurant is likely to be Rs 30 lakhs. Besides that he will be earning Rs 1,00,000 interest
from money deposited into bank (saving bank account). He wishes to opt for composition levy.
Whether exempted interest income (exempted supply of service) will make X ineligible for composition?
Whereas, certain difficulties have arisen in giving effect to the provisions of the CGST Act, 2017, hereinafter in this order
referred to as the said Act, in so far as it relates to the provisions of section 10 of the said Act;
Now, therefore, in exercise of the powers conferred by section 172 of the said Act, the Central Government, on
recommendations of the Council, hereby makes the following Order, namely:-
.
1. This Order may be called the GST (Removal of Difficulties) Order, 2017.
2. For the removal of difficulties,-
(i) it is hereby clarified that if a person
supplies goods and/or services referred to in Para 6(b) of Schedule II of the said Act and
.
also supplies any Exempt Services including services by way of extending deposits, loans or advances in
so far as the consideration is represented by way of interest or discount,
.
the said person shall not be ineligible for the composition scheme under section 10 subject to the fulfilment of
all other conditions specified therein.
.
(ii) It is further clarified that in computing his aggregate turnover in order to determine his eligibility for
composition scheme, value of supply of any exempt services including services by way of extending deposits,
loans or advances in so far as the consideration is represented by way of interest or discount, shall not be
taken into account.
8. X is running a restaurant. His annual turnover from restaurant is likely to be Rs 30 lakhs. Besides that he will be earning Rs 2,00,000 from
rental of his house which has been rented to a family for residential use. He wishes to opt for composition levy.
.
Whether exempted rental income (exempted supply of service) will make X ineligible for composition?
9. X is running a general stores. His annual turnover from general stores is likely to be Rs 30 lakhs. Besides that he will be earning Rs 1,00,000
interest from money deposited into bank (saving bank account). He wishes to opt for composition levy.
.
Whether exempted interest income (exempted supply of service) will make X ineligible for composition?
Composition Levy will lapse once ATO exceeds the specified limits of 75 lakhs / 50 lakhs
(3) The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his
aggregate turnover during a financial year exceeds the limit specified under sub-section (1).
ITC availment Supplier now entitled to avail ITC on his inward supplies. .
Further, he is also entitled to ITC on stock of goods on day immediately preceding the
date he becomes liable to pay GST at normal rates. [Sec 18 of CGST Act]
For this ITC, he shall submit a statement in Form GST ITC-01. [Rule 40 of CGST Rules]
Author :
1. Supplier availing composition scheme (taxable person) shall not charge the tax amount from the recipient and shall
pay the composition tax from the consideration received.
Bill of supply issued by him shall only show total amount receivable for supply.
Composition tax shall not appear separately in bill of supply.
His bill of supply shall clearly mention ‘COMPOSITION TAXABLE PERSON- not eligible to collect tax on supplies’
.
2. Supplier availing composition scheme (taxable person) shall not be eligible for any ITC.
No ITC (neither of goods nor of services) shall be admissible.
.
Supplier opted for composition levy: ITC
Such supplier is statutorily prohibited from collected ‘composition levy’ from the recipient. – Sec 10(4) of CGST Act
Such supplier is statutorily prohibited from issuing ‘tax invoice’ to the recipient. Rather, he shall issue ‘bill of supply’ for
supply made by him – Sec 31(3)(c) of CGST Act
o Bill of supply is not an eligible supporting document for booking ITC.
.
Ineligible person found availing composition: Penalty leviable (in addition to differential tax and interest)
(5) If the proper officer* has reasons to believe that a taxable person has paid tax under sub-section (1) despite not being
eligible,
such person shall, in addition to any tax that may be payable by him under any other provisions of this Act,
be liable to a penalty
and for determination of tax and penalty.
Author:
Person not eligible for composition scheme, still paying tax under this scheme shall be liable be pay tax and penalty as determined
under section 73 and 74.
Sec 73 (short payment in bona-fide cases: SCN + Order)
Sec 74 (short payment in mala-fide cases: SCN + Order)
Illustrations for Self-Practice
Illustration 1
Person Business Place of Business Annual Value of Supply Nature of Supply
Mr A Manufacture Single 75,00,000 (PY) (Intra-State Supply)
(Delhi) (Supplier of goods) (Delhi) 95,00,000 (CY)
Solution 1
Composition
Eligibility Eligible
10(1): ATO within eligibility limit of 1 crore in the PY
.
10(2): All eligibility conditions fulfilled presuming goods manufactured are not ice-cream, pan-masala or tobacco
GST Liability 1% of TO in Delhi State [0.5% CGST + 0.5% Del-GST]
Illustration 2
Person Business Place of Business Annual Value of Supply Nature of Supply
Mr A Manufacture Single 90,00,000 (PY) (Intra-State Supply)
(Delhi) (Supplier of goods) (Delhi) 105,00,000 (CY)
Solution 2
Composition
Eligibility Eligible
10(1): ATO within eligibility limit of 1 crore in the PY
10(2): All eligibility conditions fulfilled presuming goods manufactured are not ice-cream, pan-masala or tobacco
GST Liability TO of 100,00,000: 1% of TO in Delhi State [0.5% CGST + 0.5% Del-GST]
TO in excess of 100,00,000: GST chargeable at normal GST Rate.
Illustration 3
Person Business Place of Business Annual Value of Supply Nature of Supply
Mr A Manufacture Single 105,00,000 (PY) (Intra-State Supply)
(Jammu) (Supplier of goods) (Delhi) 90,00,000 (CY)
Solution 3
Composition
Eligibility Not eligible
10(1): ATO exceeding eligibility limit of 1 crore in the PY
GST Liability Total TO of 90,000,000 of CY: GST chargeable at normal GST Rate.
Illustration 4
Person Business Place of Business Annual Value of Supply Nature of Supply
Mr A Trading in Ice-cream Single 45,00,000 (PY) (Intra-State Supply)
(UP) (Supplier of goods) (Delhi) 50,00,000 (CY)
Solution 4
Composition
Eligibility Eligible
10(1): ATO within eligibility limit of 1 crore in the PY
.
10(2): All eligibility conditions fulfilled. (it shall be noted that traders of ice-cream does not attract ineligibility)
.
GST Liability Total TO of 50,000,000 of CY: 1% of TO in Delhi State [0.5% CGST + 0.5% Del-GST]
.
EXEMPTION FROM LEVY
.
Further, power to exempt includes power to withdraw exemption. What was given in public interest can also be curtailed in
public interest.
.
Burden of proof An assessee claiming exemption has to establish that he is eligible for the exemption.
A person, claiming exemption, to relieve him of tax liability must establish clearly that he is covered
by exemption and, in case of benefit of doubt or ambiguity, the benefit of it must go to the Government.
Stage of claiming Exemption can be availed at any time – not only at stage of self-assessment.
exemption if exemption is not claimed at the initial stage, he is not debarred or prohibited or estopped from
claiming such benefit at a later stage.
Exemption can be claimed later by filing refund application also.
.
Multiple If supply is covered by 2 exemption notifications, the assessee is entitled to the benefit of that exemption
exemptions notification which gives him greater relief.
.
Section 11 : Power to grant exemption from tax.
Power to exempt supplies – generally
(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the
recommendations of the Council,
by notification,
exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or
services or both of any specified description
from the whole or any part of the tax leviable thereon
with effect from such date as may be specified in such notification.
Author :
1. Exemption results into lowering of tax liability.
2. Exemption shall be issued in public interest by Central Government, on recommendation of GST Council.
3.
Full/whole exemption vs partial exemption:
Absolute/ unconditional exemption vs conditional exemption:
Author :
1. An exemption notification cannot be amended with retrospective effect. However, sometimes it is found that there is
some drafting mistake or ambiguity in (a) the general exemption notification or (b) special exemption order issued.
Sometimes taxable person gets unintended benefit while in some cases even intended benefit cannot be obtained
due to drafting error in the E/N or E/O.
2. To overcome this problem, Section 11 (3) has been inserted. It permits CG to insert of clarification in this regard with
retrospective effect, by way of insertion of an explanation in the notification/order
Such explanation can be inserted only within 1 year and not thereafter.
Author :
1. Exemption: Mandatory or discretionary
1) Absolute Exemption (full or partial): Mandatory – Supplier shall collect only effective rate of tax;
.
2) Conditional Exemption (full or partial): Optional – Whatever supplier collects, he shall pay that
REGISTRATION
.
Registered in one state Mandatory separate registration in other state (take this separate registration
Now, intends to set-up a temporary as CTP- Casual Taxable person in the other state)
business premise in other State (say, UP) This business premises in other state is treated as ‘deemed distinct person’
under GST law.
Reg Unit - 1 Monthly (GSTR-1 / 2 / 3) + Annual (GSTR-9)
Reg Unit - 2 Monthly (GSTR-1 / 2 / 3) + Annual (GSTR-9)
.
TAX DEDUCTOR / TAX COLLECTOR Such tax deductor shall be liable to take registration and
1) Tax Deductor = Recipient of supply who is liable to discharge his obligation of tax deductor.
deduct certain % of value of supply from the tax
invoice raised upon him – He deducts that % towards
GST liability of supplier and deposits that component
with the Government – He remits only balance amount
to the supplier [Sec 51 of CGST Act]
2) Tax Collector = ECO who is connecting supplier
with recipient – Supplier raising his tax invoice on Such tax collector shall be liable to take registration and
recipient but recipient handing over money to ECO – discharge his obligation of tax collector.
ECO is liable to deduct certain % of value of supply in
the tax invoice – He deducts that % towards GST
liability of supplier and deposits that component with
Obviously, NO
the Government – He remits only balance amount to the
supplier [Sec 52 of CGST Act]
INPUT SERVICE DISTRIBUTOR ISD shall take registration in order to enable himself to
ISD = Office of supplier having multiple registered units distribute credits among multiple registered units.
with same PAN
.
If a business entity is playing different roles (say, taxpayer as well as tax deductor), then it shall need separate registration
for each role.
.
.
REGISTRATION – certain benefits which are only to registered person
Registration entitles supplier to collect tax from his purchasers. [A person who is not
registered person shall not collect in respect of any supply of goods and/or services any amount by way of tax – Sec 32 of CGST Act]
Registration entitled a person to claim ITC. Unregistered person is not entitled to claim ITC [Sec 16 of CGST Act]
Sec 22 Person liable for registration Sec 23 Person not liable for registration
22(1) Supplier of taxable supply with ‘ATO (FY) > 23(1) Supplier exclusively engaged in supply that
20 lakhs (10 lakhs) are
- Not liable to tax; or
- Wholly exempt
under CGST Act or IGST Act
22(2) Person already registered under existing law
Mandatory migration under GST Law an AGRICULTURIST, to the extent of supply
of produce out of cultivation of land.
Notes Notes
If such person failed to take mandatory registration, then he Such person may opt for voluntarily registration. If so opted for,
shall be liable to penalty in terms of Sec 122(1)(xi) of CGST Act. then all provisions as applicable to registered person shall be
Further, PO is empowered to proceed to register such person (in applicable. [Sec 25(3)]
prescribed manner) – [Sec 25(8)]
.
VOLUNTARILY REGISTRATION:
It refers to registration by a person who as per law is not liable to take registration.
Person carrying on or intends to carry on business of supply of goods and/or services may apply for voluntarily
business.
Voluntarily Registered Supplier = Taxable Person = Liable to pay GST
He also becomes liable to submit returns.
Being registered person, he can also claim ITC (subject to fulfillment of all conditions related to ITC)
In case of inverted tax structure, its beneficial to get
registered and pay tax liability and avail ITC.
Customers may prefer, or even insist on, dealing only with other registered business. This is
particularly when customer is GST registered as such customer will fall under reverse charge if his vendor/supplier is
unregistered. – Sec 9(4) of CGST Act]
Some business such as contractors may decide to register to avoid an
embarrassment caused by revealing that their annual taxable supply is below the threshold (Threshold limit is 20 lakhs
generally).
Upto 22 Jan, 2018, there is lock-in period of 1 year from the effective date of registration (i.e., such person cannot apply for
cancellation of his registration before expiry of 1 year) – proviso to Rule 20 of CGST Rules
W.e.f. 23 Jan, 2018, that lock-in-period has been removed. (proviso has been deleted)
.
Relevant Definitions
.
Provided that
where such person makes taxable supplies of goods or services or both from any of the SPECIAL
CATEGORY STATES (* defined in explanation), he shall be liable to be registered
if his aggregate turnover in a financial year exceeds ten lakh rupees.
.
Analysis:
Illustration 1:
Mr A intends to do trading of ‘X goods’ (GST rate-18%).
He has set up his shop (business establishment) in Delhi.
He will be purchasing his goods from Haryana.
All his supplies will be to X Ltd. (a company) in Delhi.
.
Discuss the registration requirements keeping in mind registration provisions as contained in Section 22:
Person liable to be registered Supplier (Mr A)
Recipient (A Ltd)
Multiple place of Case-1) Shop-1 in Delhi (TO= 15 lakhs) and Shop-2 in UP (TO= 10 lakhs)
business Case-2) Shop-1 in Himachal Pradesh (TO= 5 lakhs) and Shop-2 in Uttrakhand (TO= 10 lakhs)
Case-2) Shop-1 in Delhi (TO= 5 lakhs) and Shop-2 in Uttrakhand (TO= 10 lakhs)
Author
1. All places of business in Non-SCS (Non-Special Category States): Applicable threshold = 20 lakhs of ATO.
2. All places of business in SCS (Non-Special Category States): Applicable threshold = 10 lakhs of ATO.
3. Some places of business in Non-SCS and some in SCS: Applicable threshold = 10 lakhs of ATO
Person liable for registration u/Sec 22(1): NEW SUPPLIER UNDER GST LAW
Date from which he becomes As and when his ‘aggregate turnover in a FY’ exceeds 20 Lakhs [10 Lakhs Sec 22 (1)
liable for registration in case of SCS]*
Time frame within which he Within 30 days from the date he becomes liable for registration Sec 25 (1)
shall submit his registration
application
Time frame within which If application and accompanying documents are found in order, then RC shall Rule 8 of CGST
registration certification shall be granted within 3 working days of submission of registration application. Rules, 2017
be granted
What would be the change in yours answer under following situations: (consider each situation as independent)
Nature of goods Case-1) Goods B – GST Rate is Nil
Case-2) Goods C – GST Rate is 18%, but presently wholly exempt
Liability to pay Supply are covered under RCM. [Sec 9(3) of CGST Act]
Illustration 2:
Mr A intends to do trading of ‘X goods’ (GST rate-18%). He has set up his shop (business establishment) in Delhi.
He will be purchasing his goods from Haryana. All his supplies will be to X Ltd. (a company) in Delhi.
.
Discuss the registration requirements keeping in mind registration provisions as contained in Section 22:
FY 2017-18 (Business started in Dec, 2017)
Intra-state supplies = 12 lakhs
.
FY 2018-19
Intra-state supplies = 13 lakhs
Further in this year, he has acted as ‘commission agent’ for D ltd., Delhi based GST registered Company.
The details of transactions carried out in capacity of selling agent of D Ltd. are as follows:
Materialize sales of goods between D Ltd. and different buyers [goods worth Rs 15 lakhs (plus 12% GST extra)]
Earned commission in the transaction = Rs 3 lakhs
.
FY 2019-20
Intra-state supplies = 14 lakhs
Further in this year, he has taken agency of DEF Ltd (a Delhi based company). DEF Ltd. consigned goods to Mr A. Later on, Mr A makes
sales of these goods, collect sale proceeds, retains his share/remuneration and sends balance proceeds to DEF Ltd.
Sale price of goods so sold on behalf principal (DEF Ltd) = 15 lakhs (plus 12% GST extra)
The commission/fee earned in capacity of C&F Agent = Rs 3 lakhs (20% of Sale price of goods sold on behalf of principal)
.
Author
1. Sales/supplies made in capacity of Consignment Agent: Consignment agent is supplier of goods in such transaction [Definition of
supplier as given in Sec 2(105) of CGST Act]
.
2. Such supplies shall form part of ATO in hands of supplier: [Explanation (i) to Sec 22(1)]
.
(ii) the supply of goods, after completion of job work, by a registered job worker ………………
Note: The provisions relating to job-work (and job-worker) under GST law are discussed at Final Level.
(iii) the expression “special category States” shall mean the States as specified in Article 279A (4)(g)
of the Constitution, except for the State of Jammu & Kashmir*.
Article 279-A(4)(g) of Constitution of India
There are - States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.
Note: J&K = SCS as per Constitution, but for purposes of GST registration, applicable threshold is 20 lakhs
.
(OLD REGISTERED SUPPLIER + Registered under old acts): Liable to be registered under GST (no threshold)
Date from which becomes liable to be registered = Appointed day
(2) Every person who, on the day immediately preceding the appointed day*, is registered under an existing law,
shall be liable to be registered under this Act with effect from the appointed day.
Illustration
Godrej Ltd, one of the top lock manufacturer in India, is registered under Central Excise and VAT.
Registration requirement post introduction of GST
On appointed day (w.e.f. 22nd June, 2017), Godrej Ltd. becomes liable to be registered under GST.
.
.
TRANSFER OF BUSINESS AS GOING CONCERN (TOGS): Transferee shall be liable to be registered
Date from which becomes liable to be registered = Date of transfer / succession
.
(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account
of succession or otherwise, to another person as a going concern,
the transferee or the successor, as the case may be, shall be liable to be registered with effect from the
date of such transfer or succession.
Illustration
Mr A is a GST registered person.
He transfers his business as a going concern (i.e. transfer of all assets (movable and immovable) with all its liabilities), to Mr D, who is an
unregistered person. DEF is liable to be registered with effect from the date of such transfer whether or not his turnover is above the threshold
turnover limit.
.
.
Related Issue
In both above examples, whether any unutilized ITC also gets transferred to the transferee/ successor of business?
Yes - refer Sec 18(3) (ITC in Special Circumstance) under Chapter-Input Tax Credit
AMALGAMATION/ DEMERGER - pursuant to order of HC/ Tribunal / Otherwise: Transferee liable to be registered
Date from which becomes liable to be registered = Date of issuance of ‘incorporation certificate’ by Registrar of Companies
SUPPLIER RECIPIENT
.
2. Agriculturist supplying produce arising out of cultivation of land (which is otherwise liable to tax)
..
Mr A taking land on lease + cultivating self = Agriculturist = Registration not required [Sec 23]
[Non-taxable person under GST]
HuF owning land+ cultivating by some members = Agriculturist = Registration not required [Sec 23]
[Non-taxable person under GST]
A Ltd owning land + cultivating by employing labour = Not Agriculturist = Registration required [Sec 22 or Sec 24]
[Taxable person under GST]
.
Mr A owning land + running poultry farm = Not Agriculturist = Registration required [Sec 22 or Sec 24]
[Taxable person under GST]
.
3.
.
NOTIFIED CATEGORY of supplier
.
Inter-State supply of Handicraft Goods Yes N/N 8/2017 -IT Covered ----
Intra-State Supply of Handicraft Goods by Casual Taxable Person Yes N/N 32/2017 -CT Covered ----
Inter-State supply of Job-Worker Services No N/N 7/2017 -IT ---- Covered
Inter-State supply of Any Service Yes N/N 10/2017 -IT ---- Covered
Supply of Services through ECO (intra-state) Yes N/N 65/2017 –CT ---- Covered
(dated 15th Nov, 2017)
Persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is
liable to be paid on reverse charge basis by the recipient of such goods or services or both under section 9(3) are
notified as the category of persons exempted from obtaining registration under GST law.
N/N 8/2017 -IT -dated 14th Sep, 2017 [Sec 20 of IGST Act read with Sec 23(2) of CGST Act, 2017]
Inter-State supply of Handicraft Goods
Persons engaged in supply of handicraft goods (as defined in the notification – 28 items) making inter-state supply are
notified as the category of persons exempted from obtaining registration under GST law.
dolls & toys, Handmade shawls, musical instruments,
textile (handloom products), stoles and scarves, Chain stitch etc.
.
Condition:
1. The aggregate value of such supplies, computed on all India basis, does not exceed Rs 20 Lakhs in a FY (Rs 10
lakhs in case of Special Category States, other than J&K).
2. Such supplier shall obtain PAN and generate e-way bill as per provisions of Rule 138 of CGST Rules, 2017.
N/N 32/2017 -CT -dated 15th Sep, 2017 [Sec 23(2) of CGST Act, 2017]
Intra-State supply of Handicraft Goods by Casual TP
Casual Taxable Person of handicraft goods (as defined in the notification – 28 items) making intra-state supply is notified
as the category of persons exempted from obtaining registration under GST law.
.
Condition:
1. The aggregate value of such supplies, computed on all India basis, does not exceed Rs 20 Lakhs in a FY (Rs 10
lakhs in case of Special Category States, other than J&K).
2. Such supplier shall obtain PAN and generate e-way bill as per provisions of Rule 138 of CGST Rules, 2017.
N/N 7/2017 -IT -dated 14th Sep, 2017 [Sec 20 of IGST Act read with Sec 23(2) of CGST Act, 2017]
Inter-State supply of Job-Worker Services
JOB-WORKER engaged in making inter-state supplies of SERVICES to a registered person is notified as the
category of persons exempted from obtaining registration under GST law.
.
Note: The provisions relating to job-work (and job-worker) under GST law are discussed at Final Level.
.
N/N 10/2017 -IT -dated 13th Oct, 2017 [Sec 20 of IGST Act read with Sec 23(2) of CGST Act, 2017]
Inter-State supply of Any service
The persons
making inter-State supplies of taxable services and
.
having an aggregate turnover, to be computed on all India basis, not exceeding Rs 20 lakh rupees in a
financial year
are notified as the category of persons exempted from obtaining registration under GST law.
.
Section 24 : Compulsory registration in certain cases.
Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be
required to be registered under this Act,—
(i) persons making any inter-State taxable supply; .
Note:
Inter-state supply of goods
.
(iii) persons who are required to pay tax under reverse charge; (RCM = Recipient liable to pay GST)
Note:
Supply under RCM Recipient is already registered Recipient is not already registered
RCM on notified supplies Not required Required to discharge RCM liability
RCM on supplies from URS
.
(iv) persons who are required to pay tax under sub-section (5) of section 9; (ECO liable to pay GST on notified services)
(vi) persons who are required to deduct tax u/section 51, whether or not separately registered under this Act;
Note: Recipient who is liable to deduct TDS may be one who is already GST registered (as taxpayer). Still he shall be required to take separate
registration as tax deductor.
.
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons
whether as an agent or otherwise;
Note: Agent (supplying goods on behalf of other person/principal)
If principal is ‘taxable person (GST registered entity)’ = Agent is required to take Mandatory registration .
(viii) Input Service Distributor, whether or not separately registered under this Act;
Note: ISD is HO which receives invoices of supply of services and then distribute ITC among other units. HO may be already registered as
‘taxpayer’, even then for purposes of distribution of ITC to other entities he required registration as ‘tax distributor- ISD’.
.
(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9,
through such electronic commerce operator who is required to collect tax at source under section 52;
Note: Supplier making supply through third party ECO – where such supplies are other than those falling u/Sec 9(5), then such ECO is required
to comply with TCS provisions provided in Section 52.
Such supplier required compulsory registration, irrespective of threshold. – Sec 24(ix)
Such ECO shall be required to take compulsory registration. . – Sec 24(x)
.
Also Note:
Inter-state supply of goods
Inter-State supply of Services
.
(x) every electronic commerce operator;
Note: Supplier making supplies through his own site = also an ECO
Such supplier required compulsory registration, irrespective of threshold. – Sec 24(x)
(xi) every person supplying OIDAR Services (online information and data base access or retrieval services)
from a place outside India
to a person in India, other than a registered person; and
.
Note: Overseas supplier of OIDAR services supplying services to unregistered Indian Entity is liable to pay GST.
Such supplier required compulsory registration, irrespective of threshold. – Sec 24(ix)
Special provisions have been made for registration by such person – Sec 14 of IGST
.
(xii) such other person or class of persons as may be notified by the Government on the recommendations of
the Council.
[Author: No one notified at present]
.
Author:
Supplier
Casual TP Compulsory *
(liability under FCM)
Non-Resident TP Compulsory
Others
(A) Overseas supplier of OIDAR Sr (supplying to unregistered persons in India) Compulsory
(B) All others
(a) Owning/operating self e-commerce platform Compulsory
(b) Not owning/operating self e-commerce platform
(a) Supplying using third party ECO platform Compulsory *
(b) Supply not involving any ECO platform
(i) making inter-state supplies Compulsory *
(ii) making intra-state supplies
(a) acting as agent (i.e., supply made on behalf of TP) Compulsory
(b) acting for principal Sec 22
Tax (Specified categories of recipient + Supply under contract with value > 2,50,000) Compulsory registration
deductor
Tax (ECO – providing platform to other for effecting supplies + collecting consideration from Compulsory registration
Collector recipient and then handing over to supplier)
ISD (ISD – Head office receiving bills of input services, availing ITC and distributing that among Compulsory registration
multiple units in a specified manner)
Note:
1. The provisions relating to TDS under section 51, TCS under section 52, ISD and OIDAR services have been discussed at final level. Further,
detailed provisions relating to ECO have been discussed at Final Level.
.
.
REGISTRATION PROCEDURE
Person becoming liable for registration (taxpayer/ tax-deductor/ other): Apply within 30 days
(1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration
in every such State or Union territory in which he is so liable
within thirty days from the date on which he becomes liable to registration,
in such manner and subject to such conditions as may be prescribed*:
Taxpayer being Casual TP or NRPT: Apply minimum 5 days before commencement of business
Provided that
a casual taxable person or a non-resident taxable person shall apply for registration at least five days
prior to the commencement of business.
.
Explanation.
Every person who makes a supply from the Territorial Waters Of India (TWI)
shall obtain registration in the coastal State or Union territory where the nearest point of the
appropriate base line is located.
.
.
Illustration
XYZ Cruises conducts gambling business on a ship anchored off the coast of Goa. XYZ Cruises has to get registered in Goa.
.
Author: So far as GST law is concerned, area upto 12 nautical miles belong to State / UT [Section 9 of IGST Act]
Author:
TAXPAYER Tax Deductor/ Tax
Composition REGULAR SUPPLIER Tax Collector Distributor
Supplier Other Casual NRTP Overseas supplier of (ISD)
Cases TP OIDAR Sr (providing
sr to NTOR)
Registration Registration
Rule 8: Registration Application Rule 13: Rule 14: Rule 12: Rule 8:
Rule 9: Verification of application Rule 9: (borrowed) Rule 9:
Rule 10: Grant of Registration Rule 10: (borrowed) Rule 14: Rule 12: Rule 10:
.
SEZ Developer / SEZ Unit: Deemed DISTINCT BUSINESS VERTICAL – Mandatory SEPARATE REGISTRATION
Provided that
a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall
make a separate application for registration as a business vertical distinct from his other units located outside
the Special Economic Zone:
(2) (a) The PAN shall be validated online by the Common Portal from the database maintained by CBDT;
(b) The mobile number shall be verified through a one-time password (OTP) sent to the said mobile number; and
(c) The e-mail address shall be verified through a separate one-time password (OTP) sent to the said e-mail address;
(3) On successful verification of the PAN, mobile number and e-mail address, a temporary reference number (TRN) shall
be generated and communicated to the applicant on the said mobile number and e-mail address.
(4) Using the reference number generated, the applicant shall electronically submit an application in Part B of FORM
GST REG-01, duly signed or verified through electronic verification code (EVC), along with documents specified in the said
Form at the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner.
(5) An acknowledgement shall be issued electronically to the applicant in FORM GST REG-02.
(6) Casual TP = grant of TRN Advance Deposit of Tax (estimated liability) Acknowledgment
A person applying for registration as a casual taxable person shall be given
a temporary reference number by the Common Portal for making advance deposit of tax in accordance with the
provisions of section 27 and
the acknowledgement under sub-rule (5) shall be issued electronically only after the said deposit.
Explanation.- The clarification includes modification or correction of particulars declared in the application for registration,
other than PAN, State, mobile number and e-mail address declared in Part A of FORM GST REG-01.
(3) Where the PO is satisfied with the clarification, information or documents furnished by the applicant, he may approve
the grant of registration to the applicant within 7 working days from the date of receipt of such clarification or
information or documents.
(4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) within the prescribed period or
where the proper officer is not satisfied with the clarification,
information or documents furnished, he shall, for reasons to be recorded in writing, reject such application and
inform the applicant electronically in FORM GST REG-05.
(5) Time bound disposal of registration application (3 days/ 7 days): Else registration deemed granted
If the PO fails to take any action -
(a) within 3 working days from the date of submission of application, or
(b) within 7 working days from the date of receipt of clarification, information or documents furnished by the applicant
under sub-rule (2),
the application for grant of registration shall be deemed to have been approved.
Provided that
a person having multiple business verticals [*Defined in Sec 2(18) of CGST Act] in a State or Union territory may* be granted
a separate registration for each business vertical, subject to such conditions as may be prescribed*.
Rule 11 : Separate registration for multiple business verticals within a State or a Union territory
(1) Any person having multiple business verticals within a State or a UT, requiring a separate registration for any of its busine ss
verticals shall be granted separate registration in respect of each of the verticals subject to the following conditions:
(a) Such person has more than one business vertical;
(b) All verticals shall either opt for composition scheme or for taxation as per normal scheme
(c) All separately registered business verticals of such person shall pay GST on supply of goods or services or both made
to another registered business vertical of such person and issue a tax invoice for such supply.
(2) A registered person eligible to obtain separate registration for business verticals may submit a separate application in FORM
GST REG-01 in respect of each such vertical.
(3) The provisions of rule 9 and rule 10 relating to verification and grant of registration shall, mutatis mutandis, apply to an
application submitted under this rule.
VOLUNTARILY REGISTRATION
(3) A person, though not liable to be registered under section 22 or section 24 may get himself registered
voluntarily,
and all provisions of this Act, as are applicable to a registered person, shall apply to such person.
Author :
Lock-in Upto 22 Jan, 2018, there is lock-in period of 1 year from the effective date of registration (i.e., such person
period cannot apply for cancellation of his registration before expiry of 1 year) – proviso to Rule 20 of CGST Rules
W.e.f. 23 Jan, 2018, that lock-in-period has been removed. (proviso has been deleted)
.
Not Separately Registered Premises: Premises in different States / UTS shall still be Deemed Distinct Person
(5) Where a person who has obtained or is required to obtain registration in a State or Union territory in respect of
an establishment,
has an establishment in another State or Union territory,
then such establishments shall be treated as establishments of distinct persons for the purposes of this Act.
(2) A person applying for registration as a non-resident taxable person shall be given a Temporary Reference Number by
the Common Portal for making an advance deposit of tax and the acknowledgement shall be issued electronically only
after the said deposit in his electronic cash ledger.
(3) The provisions of rule 9 and rule 10 relating to verification and grant of registration shall, mutatis mutandis, apply to an
application submitted under this rule.
Explanation. – The application for registration made by a non-resident taxable person shall be signed by his authorized
signatory who shall be a person resident in India having a valid PAN.
(3) Every person to whom a temporary registration has been granted shall, within 90 days from the date of the
grant of such registration, submit an application for registration in Part B of FORM GST REG-01
Where the said person has filed an appeal against the grant of temporary registration,
in which case the application for registration shall be submitted within 30 days from the date of issuance of order
upholding the liability to registration by the Appellate Authority.
(4) The provisions of rule 9 and rule 10 relating to verification and issue of certificate of registration shall, mutatis mutandis,
apply to an application submitted under sub-rule (3).
(5) The GSTIN assigned shall be effective from the date of order granting registration under sub-rule (1).
Registration of SPECIAL ENTITIES (U M C + Other notified): UIN granted (instead of registration number)
These are not required to take registration as outward supply is free of GST.
However, to ensure that these get even inward supplies tax free, they are allowed to take refund of GST paid on inward supplies. [Sec 55
of CGST Act, 2017]
For getting that refund, they are allotted UIN in terms of Sec 25(9) of CGST Act, 2017.
Note:
1. Entities allocated UIN = Not ‘registered person’ as defined in Sec 2(99) pf CGST Act
2. Still supplies to them = B2B Supplies
3. GST Registered regular supplier making such supplies shall declare these supplies as B2B supplies and accordingly, shall upload the
details of such invoices.
(impliedly, the details of such supplies shall be auto-populated-
o from GSTR-1 (statement of outward supplies) of supplier
o to GSTR-11 (Statement of Inward supplies of Entities having UIN).
4. Refund of Taxes.
Sec 55 of CGST Act : Right of refund granted to such entities.
Sec 54(2) of CGST Act : Procedure for claiming refund:
Quarterly claim [Form GST RFD-10]
Refund claim shall be submitted within 6 months of quarter in which such supply was received.
.
(9) Notwithstanding anything contained in sub-section (1),—
(a) any specialized agency of the United Nations Organisation or
any Multilateral Financial Institution and Organisation notified under the United Nations
(Privileges and Immunities) Act, 1947,
Consulate or Embassy of foreign countries ;
AND
(b) any other person or class of persons, as may be notified by the Commissioner,
..
(1A) UIN granted to persons specified u/Rule 25(9)(a): UIN on all India basis
[inserted by N/N 75/2017-CT (dated 29th Dec, 2017)]
The UIN granted under sub-rule (1) to a person under section 25(9)(a) shall be applicable to the territory of India.
.
after receiving a recommendation from the Ministry of External Affairs, Government of India * ,
assign a Unique Identity Number to the said person and issue a certificate in FORM GST REG-06 within a period of
three working days from the date of the submission of the application.
* UN Agencies, Consulates and Embassies will be granted UIN without applying, on recommendation of the Ministry of
External Affairs, GOI.
.
(2) The proper officer may grant registration after due verification and issue a certificate of registration in FORM GST REG-06
within 3 working days from the date of submission of application.
(3) Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming lia ble to
registration, the effective date of registration shall be the date of grant of registration under sub -rule (1) or sub-rule (3) or sub-
rule (5) of rule 9.
.
(4) Every certificate of registration shall be digitally signed by the proper officer under the Act.
Where the registration has been granted, the applicant shall be communicated the registration number, and the certificate of
registration under sub-rule (1), duly signed or verified through EVC, shall be made available to him on the Common Portal within
three days after expiry of the period specified in sub-rule (5) of rule 2.
Rule 12 : Grant of registration to persons required to deduct tax at source or to collect tax at source
Note: The provisions relating to registration of Tax Deductor / Collector under GST law are discussed at Final Level.
.
Rule 14 : Grant of registration to a person supplying OIDAR services from a place outside India to a non-
taxable online recipient
Note: The provisions relating to registration of OIDAR Service supplier under law are discussed at Final Level.
.
Rejection of application under SGST / UTGST Act = Deemed rejection under CGST Act
(2) Notwithstanding anything contained in section 25(10),
any rejection of application for registration or the Unique Identity Number under the SGST Act or
the UTGST Act shall be deemed to be a rejection of application for registration under this Act.
Section 27 : Special provisions relating to Casual Taxable Person and Non-Resident Taxable Person.
Casual TP / NRTP: RC will have limited period validity (Maximum of 90 days + Extension of 90 days)
(1) The certificate of registration issued to a casual taxable person or a non resident taxable person shall be valid for
the period specified in the application for registration or
ninety days from the effective date of registration, whichever is earlier
and such person shall make taxable supplies only after the issuance of the certificate of registration:
Provided that
the proper officer may, on sufficient cause being shown by the said taxable person, extend the said
period of ninety days by a further period not exceeding ninety days.
(3) The amount deposited under sub-section (2) shall be credited to the electronic cash ledger of such person
and shall be utilized in the manner provided under section 49.
Illustration :
Mr. Gold runs a retail shop for handmade jewellery and is registered in Chennai. Mr. Gold is planning to sell the jewellery at an exhibition in Mumbai,
to be held from 1st January 2018 to 10th January 2018. Advise time with regard to registration and payment of GST.
(ICMA Study material)
Mr. Gold should apply for registration as a casual taxable person within 5 days prior to the date of commencing the exhibition on 1st January 2018.
Mr. Gold should also make an advance deposit of the estimated tax liability for the period from 1st January 2018 to 10th January 2018.
M/s X Ltd is an advertising company located in Delhi and is registered as a normal taxable person there. Now, they have secured an assignment to
manage digital marketing for the Some Festival, which will take place in Mumbai, Maharashtra. This will require M/s X Ltd. to displace some resources
in Mumbai until the festival is over. Advise M/s X Ltd. to obtain for separate registration in the State of Maharashtra.
(ICMA Study material)
In this case, since M/s X Ltd does not have too many assignments coming from Mumbai, they can register as a Casual Taxable Person in Maharashtra
for 90 days.
Section 28 : Amendment of registration.
Applicant seeking amendment: Submit changes
(1) Every registered person and a person to whom a Unique Identity Number has been assigned shall inform the
proper officer of any changes in the information furnished at the time of registration or subsequent thereto,
in such form and manner and within such period as may be prescribed*.
Change/amendment which require PO approval: Rejection shall be only after grant of opportunity of being heard
Provided further that the proper officer shall not reject the application for amendment in the registration
particulars without giving the person an opportunity of being heard.
Amendment rejection under SGST / UTGST Act = Deemed rejection under CGST Act
(3) Any rejection or approval of amendments under the SGST Act or the UTGST Act, as the case may be,
shall be deemed to be a rejection or approval under this Act.
Provided that
Change/ Amendment of (core particulars) requiring approval of PO
(a) Where the change relates to-
(i) legal name of business;
(ii) address of the principal place of business or any additional place of business; or
(iii) addition, deletion or retirement of partners or directors, Karta, Managing Committee, Board of Trustees, Chief
Executive Officer or equivalent, responsible for day to day affairs of the business,-
which does not warrant cancellation of registration under section 29,
the PO shall, after due verification, approve the amendment within 15 working days from the date of receipt of
application in FORM GST REG-14 and issue an order in FORM GST REG-15 electronically and such amendment shall take
effect from the date of occurrence of the event warranting amendment.
(b) The change relating to sub-clause (i) and sub-clause (iii) of clause (a) in any State or Union territory shall be applicable for
all registrations of the registered person obtained under these rules on the same PAN.
Provided that any change in the mobile number or e-mail address of the authorised signatory, as amended from time to time,
shall be carried out only after online verification through the Common Portal in the manner provided under the said rule.
(2) Where the PO is of the opinion that the amendment sought under clause (a) of sub-rule (2) is either not warranted or the
documents furnished therewith are incomplete or incorrect, he may, within 15 working days from the date of receipt of the
application in FORM GST REG-14 , serve a notice in FORM GST REG-03, requiring the registered person to show cause, within
seven working days of the service of the said notice, as to why the application submitted under sub-rule (1) shall not be rejected.
(3) The registered person shall furnish a reply to the notice to show cause, issued in FORM GST REG-04 within 7 working days
from the date of the service of the said notice.
(5) Time bound disposal of amendment application (15 days/ 7 days): Else amendment deemed allowed
If the proper officer fails to take any action-
(a) within 15 working days from the date of submission of application, or
(b) within 7 working days from the date of receipt of reply to the notice to show cause under sub-rule (4),
.
the certificate of registration shall stand amended to the extent applied for and the amended certificate shall be made avail able
to the registered person on the Common Portal.
Section 29 : Cancellation of registration.
Cancellation: PO may act suo-moto or upon application by registered person
(1) The proper officer may,
either on his own motion or
on an application filed by the registered person or by his legal heirs, in case of death of such person,
cancel the registration,
in such manner and within such period as may be prescribed*,
having regard to the circumstances where,—
(a) the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
.
(c) the taxable person, other than the person registered under sub-section (3) of section 25 (i.e., one
who registered voluntarily)
, is no longer liable to be registered under section 22 or section 24.
Author
Cancellation of Registration of tax deductor / tax collector: Provisions thereof are already inbuilt in Rule 12.
Cancellation of UIN of special entities: No provisions for cancellation of UIN (infact, no need thereof)
.
(3) Where a person who has submitted an application for cancellation of his registration is no longer liable to be
registered or his registration is liable to be cancelled,
the PO shall issue an order in FORM GST REG-19,
within 30 days from the date of application submitted u/Rule 20 (1) or, as the case may be, the date of reply to
the show cause issued u/Rule 22(1),
cancel the registration, with effect from a date to be determined by him and
notify the taxable person,
directing to pay arrears of any tax, interest or penalty including the amount liable to be paid u/Sec 29(5).
(4) Where the reply furnished is found to be satisfactory, the PO shall drop the proceedings and pass an order in FORM GST
REG –20.
(5) The provisions of sub-rule (3) shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application
had been submitted by the proprietor himself.
(2) The proper officer may cancel the registration of a person from such date, including any retrospective date,
as he may deem fit, where,—
(a) a registered person has contravened such Following contravention of RP
provisions of the Act or the rules made Rule 21 : Registration to be cancelled in certain cases
thereunder as may be prescribed; or The registration granted to a person is liable to be cancelled, if
the said person,-
(a) does not conduct any business from the declared place of
business; or
(b) issues invoice or bill without supply of goods or services in
violation of the provisions of this Act, or the rules made
thereunder; or
(c) violates the provisions of section 171 of the Act or the rules
made thereunder (Anti-profiteering measures)
.
(b) a person paying tax under section 10 has not Composition Supplier becoming a consistent non-return filer for 3
consecutive tax periods (quarters)
furnished returns for three consecutive tax
periods; or
(c) any registered person, other than a person Regular Supplier becoming a consistent non-return filer for 6
consecutive tax periods (months)
specified in clause (b), has not furnished
returns for a continuous period of six
months; or
(d) any person who has taken voluntary Voluntarily RP: failed to commenced business within 6 months of
registration
registration under sub-section (3) of section
25 has not commenced business within six
months from the date of registration; or
(e) registration has been obtained by means of RP: who has obtained registration fraudently
fraud, wilful misstatement or suppression of
facts:
Registration Cancellation: Liability to pay old due remains (even if such demand is adjudicated post cancellation)
(3) The cancellation of registration under this section shall not affect the liability of the person to pay tax and
other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any
period prior to the date of cancellation whether or not such tax and other dues are determined before or after
the date of cancellation.
Cancellation under SGST / UTGST Act = Deemed Cancellation under CGST Act
(4) The cancellation of registration under the SGST Act or the UTGST Act, as the case may be, shall be deemed
to be a cancellation of registration under this Act.
De-registered Person: Liable to pay amount in respect of inputs/ CG (including plant and machinery) in stock
[Amount payable= Higher of (a) Related ITC, (b) Output tax payable on such goods]
(5) Every registered person whose registration is cancelled shall pay an amount,
by way of debit in the electronic credit ledger or electronic cash ledger,
equivalent to
the credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in stock or
capital goods* or plant and machinery*
on the day immediately preceding the date of such cancellation
or
the output tax payable on such goods,
whichever is higher,
calculated in such manner as may be prescribed*:
Provided that
in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to
the input tax credit taken on the said capital goods or plant and machinery,
reduced by such percentage points as may be prescribed*
or
the tax on the transaction value of such capital goods or plant and machinery under section 15,
whichever is higher.
(6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed*.
[*Rule 44 of CGST Rules, 2017]
Illustration :
Does cancellation of registration impose any tax obligations on the person whose registration is so cancelled?
(CBEC FAQ)
Yes, as per Section 29(5) of the CGST Act, every registered taxable person whose registration is cancelled shall be liable to pay following amount:
.
Above amount may be paid by way of debit in the electronic credit ledger or electronic cash ledger.
Section 30 : Revocation of cancellation of registration.
.
PO to decided as to revocation
(2) The proper officer may, in such manner and within such period as may be prescribed, by order, either revoke
cancellation of the registration or reject the application:
Provided that the application for revocation of cancellation of registration shall not be rejected unless the
applicant has been given an opportunity of being heard.
Revocation of Cancellation under SGST / UTGST Act = Deemed Revocation of Cancellation under CGST Act
(3) The revocation of cancellation of registration under the SGST Act or the UTGST Act, as the case may be,
shall be deemed to be a revocation of cancellation of registration under this Act.
NON-RETURN FILER can apply only filing of returns and payment of tax & other dues
Provided that no application for revocation shall be filed if the registration has been cancelled for the failure of the registered person
to furnish returns, unless such returns are furnished and any amount due as tax, in terms of such returns has been paid along with
any amount payable towards interest, penalty and late fee payable in respect of the said returns.
.
(2) (a) Where the proper officer is satisfied, for reasons to be recorded in writing, that there are sufficient grounds for revocation of
cancellation of registration, he shall revoke the cancellation of registration by an order in FORM GST REG-22 within
thirty days from the date of receipt of the application and communicate the same to the applicant.
(b) The proper officer may, for reasons to be recorded in writing, under circumstances other than those specified in clause
(a), by an order in FORM GST REG-05, reject the application for revocation of cancellation of registration and communicate
the same to the applicant.
(3) Rejection of revocation application: Opportunity of being heard
The proper officer shall, before passing the order referred to in clause (b) of sub-rule (2), issue a notice in FORM GST REG–23
requiring the applicant to show cause as to why the application submitted for revocation under sub -rule (1) should not be rejected
and the applicant shall furnish the reply within seven working days from the date of the service of notice in FOR M GST REG-24.
(4) Upon receipt of the information or clarification in FORM GST REG-24, the proper officer shall proceed to dispose of the application in
the manner specified in sub-rule (2) within 30 days from the date of receipt of such information or clarification from the applicant.
VOLUME II
Chapter 13: Reverse Charge 157-174
Recipient = Liable to pay GST = Taxable Person
.
Recipient = Liable to pay GST = Taxable Person
.
.
FCM vs RCM
SUPPLIER RECIPIENT
Invoicing/ Tax Invoice Tax Invoice (If tax invoice not received
Documentation from supplier)
Receipt Voucher Payment Voucher
Refund Voucher
Consideration in ATO
Such supply shall be considered in part of ‘aggregate turnover’ – Sec 2(6) of CGST Act
Treatment if SUPPLIER is Composition Supplier (i.e., opted for Flat Rate Taxation Scheme)
Composition supplier shall not be liable to pay GST on such outward supply – Sec 10 of CGST Act
.
Consideration in ATO
Such supply being inward supply shall not be considered in part of ‘aggregate turnover’ – Sec 2(6)
of CGST Act
Treatment if RECIPIENT is Composition Supplier (i.e., opted for Flat Rate Taxation Scheme)
Even if recipient is composition supplier, he will be liable to pay full GST on inward supply under
RCM – Sec 10 of CGST Act
.
`
Relevant Definitions
4. Sec 2 (17) of IGST Act OIDAR Service (“Online Information And Database Access or Retrieval services)
“OIDAR 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
2. OIDAR service when supplied by overseas supplier– special treatment under GST law: The nature of OIDAR services are
such that it can be provided online from a remote location outside the taxable territory. A similar service provided by an Indian
Service Provider, from within the taxable territory, to recipients in India would be taxable. The overseas suppliers of such services
would have an unfair tax advantage should the services provided by them be left out of the tax net. Hence, GST law ensures
taxability of service provided by overseas supplier.
Location of Supplier Outside India
Place of Supply (as per Sec 11 of IGST Act) Location of recipient
Status of supply Inter-state – Sec 7(5)(c) Inter-state supply – IGST leviable
Collection of IGST:
If overseas supplier is supplying such service to a business entity in India, then RCM shall be applicable and registered entity
shall be liable to pay GST.
So far so good. Now what happens if the supplier is located outside India and the recipient in India is an individual consumer.
In such cases also the place of supply would be India and the transaction is amenable to levy of GST, but the problem would
be, how such tax would be collected. It would be impractical to ask the individual in India to register and undertake the necessary
compliances under GST for a one off purchase on the internet. So in such case, RCM has not been made applicable. Overseas
supplier shall be liable to pay GST.
How would the entity located outside india comply with the responsibilities entrusted under gst?
Overseas supplier of OIDAR services shall, for payment of integrated tax, take a single registration under the Simplified
Registration Scheme in Form GST REG-10. The supplier shall take registration at Principal Commissioner of Central Tax,
Bengaluru West who has been the designated for grant registration in such cases.
In case there is a person in the taxable territory (India) representing such overseas supplier in the taxable territory for
any purpose, such person (representative in India) shall get registered and pay integrated tax on behalf of the supplier:
In case the overseas supplier does not have a physical presence or does not have a representative for any purpose in
the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such
person shall be liable for payment of such tax.
.
“
“Governmental Authority” means an authority or a board or any other body, ––
i) set up by an Act of Parliament or a State Legislature; or
ii) established by any Government,
with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a municipality under
article 243W of the Constitution.
.
Author:
1.
2.
`
Sec 9(3) / Sec 5(3) : Reverse Charge Mechanism (RCM) .
RCM-1: (RCM by way of notification) Sec 9 (3) -CGST Sec 5 (3) - IGST
Notified supplies
Notified Goods N/N 4/2017-CT [6 categories] N/N 4/2017-IT [6 categories]
Notified Services N/N 13/2017-CT [10 categories] N/N 10/2017-IT [12 categories]
Notified Goods N/N 4/2017-CT (Rate) + N/N 4/2017-IT (Rate) – dated 28th June, 2017
.
4. 5004 to 5006 Silk yarn Any person who Any registered person
manufactures silk
yarn
from raw silk or
silk worm cocoons
for supply of silk
yarn
Taxation of Lottery
Lottery = Actionable claim = Goods
Supplier of Lottery = Supplier of Goods = Supply shall attract GST.
Valuation of Lottery
Rule 31-A of CGST Rules, 2017
(a) The value of supply of lottery run by State Governments shall be deemed to be
100/112 of the higher of following
face value of ticket or
the price as notified in the Official Gazette by the organizing State.
(b) The value of supply of lottery authorized by State Governments shall be deemed to be
100/128 of the higher of following
face value of ticket or
the price as notified in the Official Gazette by the organizing State.
.
.
Illustrations
X Ltd., a GST registered dealer, is in the business of cashew processing. During Dec 2017, it gets the following supplies:
1. Purchase of cashew nuts (not shelled or peeled) from A : Rs. 10,00,000.
2. Purchase of cashew nuts (not shelled or peeled) from B : Rs. 12,00,000.
3. Purchase of cashew nuts (not shelled or peeled) from C Ltd. : Rs. 15,00,000.
The above figures are excluding GST. GST rate is 5%.
A is a farmer and undertakes cultivation of land by paid servants under the supervision of his family.
B is not a farmer but a trader.
C Ltd. undertakes cultivation of land by paid servants under the supervision of its director.
.
Who is liable to pay GST in the aforesaid cases? Also calculate GST liability.
.
Ans.
Supply of cashew nuts (with shell – i.e., not shelled or peeled) by agriculturist to any registered person is subject to ‘reverse charge’ (it
being a notified supply u/Sec 9(3) of CGST Act / Sec 5(3) of IGST Act).
.
“Agriculturist” has been defined u/Sec 2(7) of CGST Act to mean an individual / HUF who undertakes cultivation of land by own labour or
by the labour of family or by paid servants under his supervision.
.
[Imp.]
During Feb 2018, Punjab Government issues the following lottery tickets to A Ltd., its authorized lottery distributors.
Name of ticket Face Value Price Notified in Sale of Lottery GST Rate Location of recipient
Official Gazette
Superb Lottery 1,000 per ticket 800 per ticket All over India 28% A Ltd.- HO in Mumbai
(800 tickets)
Mahalaxmi 2,000 per ticket 1,800 per ticket Only within Punjab 12% A Ltd. – BO in Punjab
Lottery
(1,400 tickets)
Determine who will pay GST in this case (quantum of GST calculation is required).
Ans.
If the supplier of lottery tickets is a State Government / Union Territory / Local Authority and recipient of supply is a lottery distributor /
selling agent, the recipient will have to pay GST under reverse charge mechanism. Thus, in given case, GST will be payable by A ltd. as
follows —
Recipient of Nature of supply Taxable value* (Rs.) IGST @28% CGST @6% SGST @6%
supply (Rs.) (Rs.) (Rs.)
A Ltd. Inter-State 6,25,000 1,75,000 — —
(head office) [(Rs. 1,000 × 800) × 100 ÷ 128]
A Ltd. Intra-State 25,00,000 — 1,50,000 1,50,000
(branch office) [(Rs. 2,000 × 1,400) × 100 ÷ 112]
Author
This mode of calculating taxable value of supply has been laid down by Rule 31-A of CGST Rules, 2017.
CGST Rules, 2017 are not part of Inter Syllabus, but will be discussed at CA Final Level.
.
.
`
Notified Services N/N 13/2017-CT (Rate) + N/N 10/2017-IT (Rate) – dated 28th June, 2017
Illustration
Supplier Recipient Person liable to pay
(Event Organizer) (Person taking sponsorship of
event and paying for that)
A Ltd. M ltd.
Mr X
Mr B N Ltd.
Mr Y
. For example, A
pharmaceutical company makes a payment to U to fund U's booth at a health fair. U places a sign in the booth displaying the
pharmaceutical company's name and slogan, “Better Research, Better Health,” which is an establis hed part of the company's identity.
.
excluding, -
(1) renting of immovable property, and
(2) services specified below-
(i) services by the Department of Posts by way
of speed post, express parcel post, life
insurance, and agency services provided to a
person other than CG, SG or UT or local
authority;
(ii) services in relation to an aircraft or a vessel,
inside or outside the precincts of a port or an
airport;
(iii) transport of goods or passengers.
Summary
Mr A ----
Mr B
`
Summary
Supplier RECIPIENT
Insurance Agent Entity carrying on
Insurance Business
(service in capacity of (whether life insurance RCM applicable
insurance agent) of general insurance)
.
`
(a) The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located
in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.
.
1) A Ltd. enters into contract with B Ltd. whereunder it will deliver the goods at doorstep of B Ltd. For materializing
that contract, it enters into service contract with a GTA. A Ltd. books consignment and pays GTA for its service.
.
(b) “Body Corporate” has the same meaning as assigned to it in Sec 2(11) of the Companies Act, 2013.
Company vs Body Corporate:
.
Every Company is body corporate, but every body corporate is not company.
Company = Body Corporate + Registered under Companies Act, 2013
.
Body Corporate = Registered as Companies as well not registered as Company (e.g., RBI, SBI, ICAI, LIC etc]
[However, .
(c) the business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall
be treated as the person who receives the legal services for the purpose of this notification.
.
Advocate / Advocate Firm providing Legal Services:
.
(d) the words and expressions used and not defined in this notification but defined in the CGST Act, the IGST Act,
and the UTGST Act shall have the same meanings as assigned to them in those Acts.
.
(e) ‘A limited Liability Partnership (LLP)’ formed and registered under the provisions of LLP Act, 2008 shall also be
considered as a partnership firm or a firm. [inserted on 22 August, 2017]
.
(f) “Insurance Agent” shall have the same meaning as assigned to it in Sec 2(10) of the Insurance Act, 1938.
.
“insurance agent” means an insurance agent licensed under section 42 who receives or agrees to receive payment by way of
commission or other remuneration in consideration of his soliciting or procuring insurance business [including business relating
to the continuance, renewal or revival of policies of insurance.
N/N 4/2017-IT (Rate) [Only those entries reproduced which are different from CGST/UTGST notifications]
Category of Supply of Services Supplier Recipient of Service
of service [Liable to pay GST under RCM]
11 Any service supplied Any person Any person located in the taxable
by any person located in a non-taxable territory located in a territory other than Non-Taxable
to any person other than non-taxable online non-taxable Online Recipient.
recipient (NTOR) territory
Author:
1.
2.
Illustration
Supplier Recipient GST levy Exemption Person liable RCM Notification
to pay
Interior Interior Reliance Ltd. Yes No To be identified Reliance Ltd.
Designor Designing (Import of GST payable
service – IGST
levy)
Interior Interior Mr A Yes Yes Not to be -----
Designor Designing (Household entity GST not identified
– not carrying on payable
business)
.
`
Foreign Shipping Company supplying transportation service to Foreign Exporter [CIF Contracts]
.
Inter-state Sec 7 [IGST Act] Yes Sec 7(5)(c): Supply in India + Non intra-state
9 (4) 5 (4)
FCM
Annexure-1: Taxation of GTA
.
Supplier GTA
N/N 12/2017-CT (Rate) - Para 2(ze) defines GTA
“GTA” means any person who provides service in relation to transport of goods by road and issues
consignment note, by whatever name called.
.
CBEC clarification
Transporter = GTA only if transportation is covered by consignment note (also called ‘bilty’)
If such a consignment note is not issued by the transporter, the supplier will not come within the ambit of GTA.
If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter)
and the transporter becomes responsible for the goods till its safe delivery to the consignee. It is only the services
of such GTA, who assumes agency functions, that is being brought into the GST net.
.
Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the
term GTA. – Supply of transportation service by them stands exempted under N/N 12/2017
.
.
Recipient Recipient = Person who pays consideration - Consignor or consignee (as the case may be)
RCM notification contains a clarificatory explanation clarifying as to who is recipient of GTA service
The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in
the taxable territory shall be treated as the person who receives the service for the purpose of this
notification.
.
GST liability
Applicable As notified on recommendation of GST Council
rate N/N 11/2017- CT (rate)
Services of GTA in relation to CGST SGST IGST RCM
transportation of goods (including used
household goods for personal use)
If ITC is availed by GTA 6% 6% 12% RCM Not applicable (GTA shall pay)
If ITC is not availed by GTA 2.5% 2.5% 5% RCM Applicable (Recipient shall pay)
.
Exemptions
Yes N/N 12/2017-CT (Rate) + N/N 9/2017-IT (Rate)
N/N 12/2017-CT (Rate)
(Sr.no. 21-A) – GTA service to Non-GST Registered (non-specified entities) – exempt
.
`
Supply involves various events- at what time tax is required to be computed/ assessed?
Taxable event triggering levy of GST is ‘supply of goods and/or services’. But at times becomes difficult to exactly determine as at what
point of time the taxable event occurred.
e.g., Consider situation of Mr A making supply of goods to Mr B. materialization of this supply transaction involves:
a) entering into contract for supply transaction;
b) Dispatch of goods by Mr A from his place of business
c) Receipt of goods by Mr B at his place of business
d) Post receipt, payment of consideration by Mr B to Mr A.
Now, undisputedly supply transaction has taken place but at what time ‘supply shall be treated to be taken place.
.
Every tax law must provide for ‘time of assessment of tax’. Lack of clarity in ‘time of assessment’ of tax’ provisions can cr eate confusion
and unwarranted/unnecessary disputes.
CGST law has made provision for determination of ‘time of supply (ToS)’.
Goods Sec 12 of CGST Act, 2017
.
1. ToS vary in case of ‘goods’ and ‘services’ (as tracking TOS for supply of goods is easy in comparison to services)
2. Also, ToS vary in case of ‘FCM’ and ‘RCM’
.
.
.
Sec 12 ToS of GOODS Sec 13 ToS of SERVICES
DoI + 31 DoI= Date of Invoice / Other DoI + 61 DoI= Date of Invoice / Other
days Document issued by days Document issued by
supplier supplier
DoP DoP = Earlier of DoP DoP = Earlier of
- Entry in Books - Entry in Books
- Entry in Bank - Entry in Bank
. .
Note
If above not possible:
.
ToS = Date of entry in books of recipient
DoP -
-
.
Supply of .
Vouchers V (identifiable ToS = Date of issuance of V V (identifiable ToS = Date of issuance of V
[Sub-section (4)] supply) supply)
IPL received -
[Sub-section (6)] Interest / ToS = Date of receipt of such Interest / ToS = Date of receipt of
Penalty/ late addition in value Penalty/ late such addition in
fee fee value
.
.
/
Section 12 : Time of supply of GOODS.
Liability to pay = Shall be as per ToS
(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.
.
Author : ToS of goods shall be strictly as per Sec 12. Taxpayer cannot argue that actual ToS is something else.
Illustration:
Supply involves movement of Invoice date Removal Delivery Receipt of TOS
goods date payment
1 Delayed issue of invoice 26-10-17 20-10-17 26-10-17 26-10=17 20-10-17
2 Interstate stock transfer 10-10-17 20-10-17 26-10-17 - 10-10-17
3 Advance received, invoice for full 30-10-17 10-11-17 14-11-17 30-10-17 30-10-17
amount issued on same day (40%
advance, 60% post supply 20-11-17 30-10-17
payment)
Illustration:
Supply otherwise Invoice date Receipt of Delivery Receipt of TOS
than by involving invoice payment
movement of goods by
recipient
1 Delayed issue of invoice 30-10-17 5-11-17 26-10-17 10-11-17 26-10-17
ToS of goods to the extent of 50,000 is 17th Sep, as this payment was received before the date of invoice [Section 12(2)(b)].
In the given facts, invoice was required to be issued on 20 Oct, the date on which goods were made available to the recipient. But supplied
has not raised invoice timely, hence, last date of invoicing shall be considered. ToS of goods to the extent of the balance amount of 11,50,000
shall be 20th October [Section 12(2)(a)].
Supply of goods to Mr B
Invoice to be issued u/Sec 31(1) = Date of removal of goods = 10th Aug, 2017 (Rs 1260)
Invoice actually issued = 10th Aug, 2017 (Rs 1260)
Date of payment received = 17th Aug, 2018 (Rs 1300)
For Rs 1260 (consideration for goods supplied), ToS shall be 10th Aug, 2017, date of invoice being earlier than date of payment.
Rs 40 has been paid in excess of billed amount. Rs 40 is resulting into ‘advance’ in hands of Mr A. This being in nature of advance, in general,
TOS shall be date of receipt of this amount. However, in terms of proviso to Sec 12(2), excess payment not being in excess of Rs 1,000, supplier
can opt to pay GST on it at later stage of invoicing. In that case, The time of supply for Rs 40 can be taken as the date of the next invoice
.
(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:
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.
Author :
Illustrations (ICAI Study material)
1. Determine the time of supply from the given information:
May 4: Supplier invoices goods taxable on reverse charge basis to Pillar & Co. (30 days from the date of issuance of invoice
elapse on June 3)
June 12: Pillar & Co receives the goods, which were held up in transit
July 3: Payment made for the goods
Author :
Voucher – Sec 2 (118) of CGST Act
“Voucher” means an instrument
where there is an obligation to accept it as consideration or part consideration for a supply
of goods or services or both and
where the goods or services or both to be supplied or the identities of their potential suppliers
are either indicated on the instrument itself or in related documentation, including the terms
and conditions of use of such instrument;
Author :
1. Voucher (can be termed as ‘token’ also) = It entitles the holder to receive goods or services in accordance with its
terms (as it is acceptable as consideration (or part consideration) for a supply of goods and/or services).
The voucher can be following 2 types
(a) .
– it state the monetary value (face value) on it.
(b) – it state that bearer is entitled to receive a specific goods or services mentioned in
voucher when he redeems the voucher.
2. Time of supply of voucher in terms of Sec 12(4) and Sec 13(4) of CGST Act, 2017
a. If supply is identifiable at that time:
b.
As the supply against which the coupon will be redeemed is not known on the date of the sale of the coupon, the time of supply of
the coupon will be the date on which the employee redeems it against food / provision items of his choice.
2. With each purchase of a large pizza during the Christmas week from Perfect Pizza, one can buy a voucher for Rs 20 which will be
redeemable till 5 Jan for a small pizza.
.
As the supply against which the voucher will be redeemed is known on the date of the sale, the time of supply is the date of issue of
the voucher.
ToS not determinable:-- ToS = Due date of return Date of paying tax
(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.
.
Author :
Illustrations (ICAI Study material)
1. Mr A is a supplier who is making B2C supplies (intra-state supplies). He didn't take GST registration. Investigation reveals clandestine
removal of goods by him.
The evidence is in the form of noting, often undated, and some corroborative material.
The supplier voluntarily pays tax during the investigation, to close the case.
.
The time of supply will be the date on which the tax is paid, as being unregistered, the supplier is not required to file periodical returns.
Author :
1. Commercially, all the contract of supplies stipulate payment of interest/late fee/penalty etc. for payment of consideration
beyond the agreed time period.
Sec 15 which deals with determination of value of supply, provides that interest, late fee or penalty for delayed payment
of any consideration of supply shall also form part of value of such supply [Sec 15(2) of CGST Act, 2017]
.
ToS (FCM) :
Invoice issued timely: Earlier of [(DoI) or (DoP)]
Invoice not issued timely: Earlier of [(DoS) or (DoP)]
(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; or
(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; or
(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:
Author :
Illustrations (ICAI Study material)
1. Determine the ToS from the following particulars:
6 May: Booking of convention hall, sum agreed Rs. 15000, advance of Rs. 3000 received
15 Sep: Function held in convention hall
27 Oct: Invoice issued for Rs. 15,000, indicating balance of Rs. 12,000 payable
3 Nov: Balance payment of Rs. 12,000 received
.
Date of Invoice Date of Payment
6 May: 3,000 (Advance)
15 Sep: Service provided
15 Oct: Due date of invoicing
(within 30 days of provisioning of service – as prescribed in Sec 31(2))
27 Oct: Actual Invoicing (15,000)
3 Nov: 12,000 (Balance paid)
As per section 31 read with rule 47 of CGST Rules, the tax invoice is to be issued within 30 days of supply of service. In the given case,
the invoice is not issued within the prescribed time limit. As per section 13(2)(b), in a case where the invoice is not issued within the
prescribed time, the time of supply of service is the date of provision of service or receipt of payment, whichever is earlier.
Therefore, the time of supply of service to the extent of Rs. 3,000 is 6th May as the date of payment of Rs. 3000 is earlier than the
date of provision of service. The time of supply of service to the extent of the balance Rs. 12,000 is 15th September which is the date
of provision of service.
2. Investigation shows that ABC & Co carried out service of cleaning and repairs of tanks in an apartment complex, for which the
Apartment Owners’ Association showed a payment in cash on 4th April to them against work of this description. The dates of the work
are not clear from the records of ABC & Co. ABC & Co have not issued invoice or entered the payment in their books of account.
The time of supply cannot be determined vide the provisions of clauses (a) and (b) of section 13(2) as neither the invoice has been
issued nor the date of provision of service is available as also the date of receipt of payment in the books of the supplier is also not
available. Therefore, the ToS will be determined vide section 13(2)(c) i.e., the date on which the recipient of service shows receipt of
the service in his books of account.
Thus, time of supply will be 4th April, the date on which the Apartment Owners’ Association records the receipt of service in its books
of account.
Small advances upto Rs 1,000, then ToS = DoI
Provided that
where the supplier of taxable service receives an amount upto 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.
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.
As there is no prior entry of the amount in the books of account of ABC Ltd., July 2 will be the time of supply, being the date of payment
in terms of section 13(3).
.
ToS not determinable:-- ToS = Due date of return Date of paying tax
(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.
Ans. (i) Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the
time of removal of goods. In instant case, the supplier has issued invoice upto time of removal of goods (i.e., 16 th Aug, 2017).
.
(ii) Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the
time of removal of goods which includes even collection of goods by the recipient. In instant case, the supplier has issued invoice
.
upto time of removal of goods (i.e., 10th Aug, 2017).
As per Sec 12, ToS shall be earlier of following dates:
(A) Date of invoice (1st August 2017) or date on which invoice is required to be issued (10th August 2017)
(B) Date of payment (presumed to be much later date)
.
Thus, ToS in this case is 1st Aug, 2017.
(iii) Since the payment has been received prior to date of invoice (actual date of issuance or due date of issuance), the ToS shall be
date of receipt of payment, i.e., 26th July, 2017.
.
Note: It has been assumed that P.Y. turnover exceeds Rs. 1.50 crore and thus, special procedure as to non-taxation of
advances is not available to M/s X Ltd.
(iii) For purposes of determination of ToS, the date of payment is considered to be earlier of the date of receipt of payment in bank
account or date of entry in books of accounts. Thus, in instance case, the date of receipt of payment is 28 th July, 2017.
Since the date of receipt of payment is prior to date of invoice (actual date of issuance or due date of issuance), the ToS
shall be date of receipt of payment, i.e., 28 th July, 2017.
.
Note: It has been assumed that P.Y. turnover exceeds Rs. 1.50 crore and thus, special procedure as to non-taxation of
advances is not available to M/s X Ltd.
2. A machine has to be supplied at site. It is done by sourcing various components from vendors and assembling the machine at site. The
details of the various events are:
17th September Purchase order with advance of Rs. 50,000 is received for goods worth Rs. 12 lakh and entry duly made in
the seller’s books of account
20th October The machine is assembled, tested at site, and accepted by buyer
23rd October Invoice raised
4th November Balance payment of Rs. 11,50,000 received
Determine the time of supply(ies) in the above scenario.
(ICAI Study Material)
Ans. Given transaction is procurement of parts and bringing them directly to site for assembly at customers site. The supply is being
effected by direct delivery of assembled goods at customer’s site. Thus, in term of Sec 31, invoicing for such goods is required by
the time goods are made available to the recipient, i.e., 20th October in the case before us.
.
Note: It has been assumed that P.Y. turnover exceeds Rs. 1.50 crore and thus, special procedure as to non-taxation of advances
is not available to M/s X Ltd.
3. Investigation shows that 150 cartons of ceramic capacitors were dispatched on 2 nd August but no invoice was made and the cartons were
not entered in the accounts. There was no evidence of receipt of payment.
What is the time of supply of the 150 cartons?
(ICAI Study Material)
Ans. Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the
time of removal of goods. In instant case, the supplier is required to issue invoice upto time of removal of goods (i.e., 2 nd Aug).
But the supplier has not issued invoice upto time of removal of goods (i.e., 2nd Aug).
In this case, date of receipt of payment is not ascertainable.
Author: Since there is no evidence of receipt of payment, time of supply of the goods will be 2nd August, the date when the
invoice should have been issued.
.
4. Modern Security Co. provides service of testing of electronic devices. In one case, it tested a batch of devices on 4 th and 5th September but
could not raise invoice till 19th November because of some dispute about the condition of the devices on return. The pay ment was made
in December.
What is the method to fix the time of supply of the service?
(ICAI Study Material)
Ans. The time of supply of services, if the invoice is not issued in time, is the date of payment or the date of provision of service,
whichever is earlier [Section 13(2)(b)]. In this case, the service is provided on 5 th September but not invoiced within the prescribed
time limit. Therefore, the date of provision of service, i.e., 5 th September, will be the time of supply.
5. Determine the time of supply in the following cases assuming that GST is payable under reverse charge :
Date of receipt of Date of payment by recipient of goods Date of issue of invoice by
goods supplier of goods
(1) (2) (3)
(i) July 1 August 10 June 29
(ii) July 1 June 25 June 29
(iii) July 1 Part payment made on June 30 and balance amount paid on July June 29
20
(iv) July 5 Payment is entered in the books of account on June 28 and debited June 1
in recipient’s bank account on June 30
(v) July 1 Payment is entered in the books of account on June 30 and debited June 29
in recipient’s bank account on June 26
(vi) August 1 August 10 June 29
Ans.
Date of Date of payment by recipient of goods Date of issue of Date Time of supply
receipt of invoice by immediately of goods
goods supplier of following 30 [Earlier of (1), (2) & (4)]
goods days from
date of
invoice
(1) (2) (3) (4) (5)
(i) July 1 August 10 June 29 July 30 July 1
(ii) July 1 June 25 June 29 July 30 June 25
(iii) July 1 Part payment made on June 30 and June 29 July 30 June 30 for part payment made
balance amount paid on July 20 and July 1 for balance amount
(iv) July 5 Payment is entered in the books of June 1 July 2 June 28 (i.e., when payment is
account on June 28 and debited in entered in the books of account
recipient’s bank account on June 30 of the recipient)
(v) July 1 Payment is entered in the books of June 29 July 30 June 26 (i.e., when payment is
account on June 30 and debited in debited in the recipient’s bank
recipient’s bank account on June 26 account)
(vi) August 1 August 10 June 29 July 30 July 30 (i.e., 31st day from
issuance of invoice)
6. Determine the time of supply in the following cases assuming that GST is payable under reverse charge :
Date of payment by recipient for supply of services Date of issue of invoice by supplier of
services
(1) (2)
(i) August 10 June 29
(ii) August 10 June 1
(iii) Part payment made on June 30 and balance amount paid on September 1 June 29
(iv) Payment is entered in the books of account on June 28 and debited in recipient’s June 1
bank account on June 30
(v) Payment is entered in the books of account on June 30 and debited in recipient’s June 29
bank account on June 26
Ans.
Date of payment by recipient for Date of issue of invoice by Date immediately Time of supply of goods [Earlier
supply of services supplier of services following 60 days of (1) & (3)]
from invoice
(1) (2) (3) (4)
(i) August 10 June 29 August 29 August 10
(ii) August 10 June 1 August 1 August 1
(iii) Part payment made on June 30 and June 29 August 29 June 30 for part payment and
balance amount paid on September 1 August 29 for balance amount
(iv) Payment is entered in the books of June 1 August 1 June 28 (i.e. when payment is
account on June 28 and debited in entered in the books of account
recipient’s bank account on June 30 of the recipient)
(v) Payment is entered in the books of June 29 August 29 June 26 (i.e. when payment is
account on June 30 and debited in debited in the recipient’s
recipient’s bank account on June 26 bank account)
7. Sodexo meal coupons are sold to a company on 9 th August for being distributed to the employees of the said company. The coupons are
valid for six months and can be used against purchase of food items. The employees use them in various stores for purchases o f various
edible items on different dates throughout the six months.
What is the date of supply of the coupons?
(ICAI Study Material)
Ans. As the coupons can be used for a variety of food items, which are taxed at different rates, the supply cannot be identified a t the time of
purchase of the coupons. Therefore, the time of supply of the coupons is the date of their redemption in terms of section 12(4).
Annex-1: Special Provisions for certain categories of Registered Persons
.
N/N 40/2017-CT (dated 13th Oct, 2017) as amended by N/N 66/2017-CT (dated 15th Nov, 2017)
.
Suppliers of Goods (all suppliers other than composition supplier): Exempted from payment of tax on advances
(i.e., GST payable only when supply has been made)
.
.
In exercise of the powers conferred by section 148 of the CGST Act, 2017, the CG, on the recommendations of the Council,
hereby notifies
the registered person who did not opt for the composition levy under section 10 of the said Act
.
Analysis
Receipt of advance followed by Supply of goods followed by receipt of
supply of goods payment
Supplier of Goods* Intra-State Supply FCM
RCM
.
.
In exercise of the powers conferred by section 148 of the CGST Act, 2017 , the CG, on the recommendations of the Council,
hereby notifies the following classes of registered persons, namely-
.
(a) registered persons who supply development rights to a developer, builder, construction company or any other registered
person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure;
and
(b) registered persons who supply construction service of complex, building or civil structure to supplier of development
rights against consideration, wholly or partly, in the form of transfer of development rights,
as the registered persons in whose case the liability to pay central tax on supply of the said services, on the consideration
received
in the form of construction service referred to in clause (a) above and
in the form of development rights referred to in clause (b) above,
shall arise at the time when the said developer, builder, construction company or any other registered person, as the case
may be, transfers possession or the right in the constructed complex, building or civil structure, to the person supplying the
development rights by entering into a conveyance deed or similar instrument (for example allotment letter).
Analysis
Supply of Service
(Supply of development rights – consideration in form of construction
service)
Landowner Developer, Builder,
Construction Company or
any other Person
(Registered Person) (Registered Person)
Supply of Service
(Supply of construction service – consideration in form of development
rights)
.
.
Illustration
Mr. A, a land owner, enters into following agreement with PQR Builder:
1) Mr A will transfer development rights to PQR builder enabling PQR Builder to construct residential complex thereon.
2) The residential complex will consist of 25 residential units.
3) In lieu of transfer of development rights, PQR Builder will handover full constructed 10 residential units to Mr A.
4) Rest 15 residential units shall belong to PQR builder who shall be entitled to sell those in the market.
.
.
VALUATION
.
Relevant provisions Sec 15 (Similar provisions Sec 21 of UTGST Act has Sec 20 of UTGST Act has
are contained in borrowed the provisions of borrowed the provisions of Sec
SGST Act) Sec 15 of CGST Act. 15 of CGST Act.
[However, import of goods is
valued as per provisions of
Customs Tariff Act]
.
2. Supply not satisfying above conditions: Value as per rules [Sec 15(4)]
[Rules= CGST Rules, 2017 - Rule 27 to 31]
NOTIFIED SUPPLIES: Value as per Rule
Supplies notified by Govt (on recommendation of Value as per rules [Sec 15(5)]
GST Council)
.
.
d) Interest late fee penalty for delayed payment of any consideration for supply
Author :
1. Conditions for applicability of Sec 15(1):
1) Supply taking place for price, i.e., (TV has been defined as ‘price actually paid/payable’ and not as
consideration in money. ‘consideration actually paid/payable’)
2) Supplier and recipient are not related. [Related defined in explanation to Sec 15]
3) Price is the sole consideration of [It means there should not be any other direct or indirect benefit from supplier.
supply. This condition would be violated only if there is some consideration from the
buyer for the direct or indirect benefit of the supplier]
Under the GST law, consideration can be in “money or otherwise”, and also
includes the monetary value of an act or forbearance, in relation to a supply.
Consideration may also flow from any person other than the recipient. In
cases where the money received in respect of the supply is not the sole
consideration, the “price is not the sole consideration”. E.g. Buyer of capital
goods discharges the loan of seller, goods purchased on exchange offer, etc.
This refers to payment made in cash, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance, other RBI recognized instruments. credit card, monetary voucher, token
or other means whether in physical or electronic form that represents a right to receive supply to the value of an amount stated or
recorded on it.
: Payment in cash
A customer bought a laptop for 25,000. He paid the seller with 25,000 cash.
Payment via other physical instrument in replace of cash
Arun pays 2500 for car service by using his debit card. The amount concerned will be automatically deducted from his bank account.
: Payment via electronic form in replace of cash
Nimit downloaded an application from a web site to his android phone. The application cost him Rs 300 which is deducted from his
pre-paid credit by the Telco.
This refers to a consideration made in the form other than money. It covers anything which might possibly be done, given or made
in exchange for the supply. For example:
(a) Barter transaction;
(b) Exchange of goods / service; or
(c) Condition imposed on making the supply.
Barter arrangement
Hari who is a cloth trader buys a second hand table from Ahmad. Hari does not pay in money but agrees to provide Ahmad with
some pieces of cloth.
Exchange of services
Rishi provides catering services for Ahmad’s birthday party. In return Ahmad agrees to draw lay out plan for Rishi’s kitchen for
free.
: Condition imposed upon the making of the supply
A marketing company offers a sundry shop with a supply of 500 cartons of mineral water at a price which is 50% lower from the
market price, on the conditions that the sundry shop provides a special shelf at the cashier’s counter for the company to display its
product for 2 weeks.
In agreeing to provide a special shelf, the sundry shop is providing non- monetary consideration, with the value equals to the 50%
reduction in the price of the mineral water.
This refers to the consideration for the supply which is partly made in money and partly something else (either goods or services).
A furniture company is offering its customers a new model of sofa set for 51,500. Arun who wants to redecorate his
living room, negotiates with the company to accept his antique sofa set as a trade in, together with a cash payment of 28,000 for the
new sofa set. The deal is finalized when the furniture company agrees with Arun’s suggestion.
Illustrations
Comprehensive
.
3) Supply of printer for 6,000 in cash and old printer No Refer CGST Rules, 2017
4) Supply for printer for Rs 10,000 to a related party No Refer CGST Rules, 2017
5) Supply without consideration [Sec 7(1)(c) read with No Refer CGST Rules, 2017
Schedule I]
- To unrelated party (like permanent transfer of assets
on which ITC has been availed)
- To related party (like gifts to sole distributor)
.
Heavily Discounted Supplies / Nominally Priced Supplies
E-commerce portals often sell their products at nominal price (Re. 1) during season / flash sales. On what value GST will be charged on
such transactions?
Illustrations
.
Supplier of service of renting of immovable property Basic price + Municipal Tax + TV= (Basic Price + Municipal
GST tax)
Supplier of service of transportation of passengers by Basic price + User TV = (Basic Price + User
Airlines Development Fees + Development Fees + Passenger
Passenger Service Fee + Fuel Service Fee + Fuel Surcharge)
Surcharge + GST
.
(b) any amount that the supplier is liable to pay but which has been incurred by the recipient of the
in relation to such supply supply and not included in the price actually paid
or payable for the goods or services or both;
.
Analysis:
The prescription in this clause is to identify any occasion where costs – in respect of which the supplier is the principal obligor
– are diverted away from the principal such that the recipient directly makes the payment resulting in lowering the rightful va lue of
supply.
GST (any kind) Charged separately
.
Not Charged separately
Illustrations
.
[* Payment of selling commission is principal obligation of supplier. Payment of such commission by recipient is only
discharging obligation of supplier and thus, lowering down value of supply price charged by supplier. Sec 15(2)(b), therefore,
provides for addition of such payment]
[* Payment of buying commission is not principal obligation of supplier. It is direct obligation of recipient. Sec 15(2)(b) does
not authorize addition of such payment where the recipient is the principal obligor]
.
(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
Analysis: .
Illustrations
.
AKJ Foods Pvt. Ltd. gets an order for supply of processed food from a customer. The customer wants the consignment tested for
gluten or specified chemical residues. AKJ Foods Pvt. Ltd. does the testing and charges a testing fee for the same from the
customer. AKJ Foods Pvt. Ltd. argues that such testing fess should not form part of the consideration for the sale as it is a separ ate
activity.
Is his argument correct in the light of section 15?
(ICAI Study Material)
The supply transaction has been for monetary consideration to unrelated party and is not involving any additional consideration.
Thus, it shall be valued on the basis of ‘transaction value’ as provided for in Sec 15(1) of CGST Act.
Section 15(2) mandates the addition of certain elements to transaction value to arrive at taxable value. As per Sec 15(2),
amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or suppl y of
services shall be included in taxable value. Since AKJ Foods Pvt. Ltd. does the testing before the delivery of goods, the charges
therefor will be included in the taxable value.
Therefore, AKJ Foods Pvt. Ltd.’s argument is not correct. The testing fee should be added to the price to arrive at taxable v alue
of the consignment.
(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
Analysis: .
Illustrations
.
.
SUPPLY OF SERVICES
Supply price of services (say, telecom service) = Basic price (10,000) + GST
Consideration payable by a fixed date
Belated payment will attract LATE FEES
Buyer made delayed payment alongwith late fees
Value Time of Supply
Supply of Service Sale Price = 10,000 Earlier of [Invoicing / Payment]
[Services – Sec 13(1) of CGST Act]
(Belated Payment) Late Fee = 50 Date of receipt of such addition in value
[Services – Sec 13(6) of CGST Act]
.
..
Mezda Banners, an advertising firm, gives an interest-free credit period of 30 days for payment by the customer. Its customer
ABC paid for the supply 32 days after the supply of service. Mezda Banners waived the interest payable for delay of two days.
The Department wants to add interest for two days as per contract. Should notional interest be added to the taxable value?
(ICAI Study Material)
The supply transaction has been for monetary consideration to unrelated party and is not involving any additional consideration.
Thus, it shall be valued on the basis of ‘transaction value’ as provided for in Sec 15(1) of CGST Act.
In terms of provisions of Sec 15(2), supplier shall include interest for delayed payment of supply consideration. However,
such interest shall form part of value only when it is received (as per provisions of Sec 13(6) – time of supply in case of supplier
of services). In given case, since interest has been waived (i.e., not received in actual), it shall not be subject to any GS T liability.
.
(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.
Analysis:
Subsidy is a sum of money given to keep the price of a service or goods low.
Subsidy by Govt. (CG / SG) Directly linked to price of supply
.
Not Directly linked to price of supply
Illustrations
A philanthropic association makes a substantial donation each year to a reputed private management institution to subsidise t he
education of low income group students who have gained admission there. The fee for these individuals is reduced thereby,
coming to Rs. 3 lakh a year compared to Rs. 5 lakh a year for other students.
What would be the taxable value of the service of coaching and instruction provided by the institution?
(ICAI Study Material)
As per section 15(2)(e), the value of a supply includes subsidies directly linked to the price, excluding State Government
and Central Government subsidies. In this case, the subsidy is not from the Government but is from a philanthropic
association. Further, the subsidy is directly linked to the price of supply. Therefore, the subsidy is to be added back to the
price to arrive at the taxable value, which comes to Rs. 5 lakh a year.
.
Are subsidies received from Private Enterprises for setting up factory/premise in backward regions shall be includible?
.
Non-Govt. Subsidy is includible but only if it is directly linked to the price of the supply.
Subsidy for setting up factory/business premise in backward area is not directly linked to the price of the supply, it shall not be included. .
+
Credit note is issued by supplier and recipient has
reversed ITC based on that
Other Cases
.
Illustrations
X Ltd. is a biscuit manufacturing company in Bhiwandi (Maharashtra). It generally gives a trade discount of 20 per cent in th e list price
when goods are purchased by a distributor. During December 2017, it offers Christmas Bonanza under which is special Christmas discount
of 10 per cent is given on the list price of all products to its distributors in addition to normal discount of 20 per cent . A Ltd., one of the
distributors from Karnataka, purchases 1,000 packets of chocolate biscuits (list price Rs. 40 per packet of 118 gram) on November 30,
2017 and 2,000 packets of the same biscuits on December 1, 2017. GST rate is 18 per cent. Determine the value of supply.
.
Quantity discounts are not recorded on the face of the invoice. Can the Quantity discounts be claimed as deduction while computing GST?
(IDTC FAQ)
Quantity Discounts are allowed based on the volume / value of purchases made by the customer for a particular period.
The discount is allowed at the end of a particular period based on the pre-agreed rates entered into between the supplier and
the recipient. Such discounts will be eligible for exclusions by way of credit notes, only where the supplier is in a position to
link the discount to each and every invoice, and the recipient reverses the credit to the extent of such discount.
.
Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to whom it charges the lis t price minus standard discount and
pays GST accordingly. When goods remain unsold with the dealers, it offers additional discounts on the stock as an incentive to push
the sales.
Can this additional discount be reduced from the price at which the goods were sold and concomitant tax adjustments made?
(ICAI Study Material)
In terms of provisions of Sec 15(3), supplier shall be entitled to claim exclusion of ‘discount’ and only net price shall be considered as
transaction value. However, discount provided post supply transaction are admissible as deduction/exclusion only if granted o n basis of
agreement existing at time of supply. Under the case before us, post supply discount has been given, no agreement as to grant of such
discount was in existence at the time of supply. Thus, given discount shall not be excludible. The supply which has been already subjected
to GST on full value shall remain unaffected by grant of such discount
Author : Value where supply is not fulfilling condition of Sec 15(1) = Value determined as per CGST Rules (Rule 27 to 32)
* Provisions of Sec 15(4) (i.e. CGST Rules) are out of scope of CA Inter
Author : CG, upon recommendation of GST Council, may provide for special valuation provisions in respect of any supply notified by it.
* Provisions of Sec 15(5) (i.e. CGST Rules) are out of scope of CA Inter
(RELATED PERSON: as defined in Section 15)
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 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*;
.
(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.
Supplier Recipient
Mr A Agent (Sole Agent/ Distributor)
Mr B Agent (one of his 10 agents)
Mr C Agent (Sole Agent of Maharashtra)
Author :
RELATED PERSONS
1) Persons – officers/directors in each other Illustrations:
businesses A is a director in DEF Ltd. A and DEF Ltd. are not related persons.
A is CFO in a proprietorship firm run by B. Simultaneously, B is CEO in
firm of A. Since both A and B are officers in one’s another business, A
and B are related person.
2) Persons are legally recognized partners in Legally recognized: parties shall be legally recognized as partners under prevalent
business law viz. Partnership Act, 1932 or Limited Liability Partnership Act.
3) Persons are employer and employee
.
2. Ms. Priya holds 30% shares of ABC Ltd. and 35% shares of XYZ Ltd. ABC Ltd. and XYZ Ltd. are related.
3. Q Ltd. has a deciding role in corporate policy, operations management and quality control of R Ltd. It can be said that Q Ltd. controls R
Ltd. Thus, Q Ltd. and R Ltd. are related.
4. Alpha Ltd. controls the composition of Board of directors of Beta Ltd. and Gama Ltd. It is said to control both Beta Ltd. and Gama Ltd.
Beta Ltd. and Gama Ltd. are related persons.
5. Brita Ltd. and Grita Ltd. together control Margarita Ltd. Brita Ltd. and Grita Ltd. are related persons.
For yours practice:
MCQs
.
Value of supply under section 15 is : Which of the following statement(s) is/are correct?
(a) Wholesale price (price charged to wholeseller) (a) Section 15 of CGST Act prescribes different provisions for valuation
(b) Market value (price of goods as normally prevailing in market) of goods and services
(c) Maximum retail price (price affixed on goods which will be (b) CGST Act and IGST Act have different provisions for valuation of
payable by ultimate consumer) supply
(d) Transaction value (price actually paid/payable by supplier for (c) Section 15 of CGST Act prescribes same set of provisions for
his supply) valuation of goods and services
(d) Both (a) and (b)
The value of supply should include What deductions are allowed from the transaction value
(a) Any non-GST taxes, duties, cesses, fees charged by supplier (a) Discounts offered to customers, subject to conditions
separately (b) Packing Charges, subject to conditions
(b) Interest, late fee or penalty for delayed payment of any (c) Amount paid by customer on behalf of the supplier, subject to
consideration for any supply conditions
(c) Subsidies directly linked to the price except subsidies provided (d) Freight charges incurred by the supplier for CIF terms of supply,
by the Central and State Government subject to conditions
(d) All of the above
When can the transaction value be rejected for computation of value If the goods are supplied to related persons then how should the
of supply taxable person ascertain the value of supplies?
(a) When the buyer and seller are related and price is not the sole (a) Seek the help of the GST officer
consideration (b) Use the arm’s length price as required under the Income Tax law
(b) When the buyer and seller are related or price is not the sole (c) Identify the prices at which goods are sold by the unrelated
consideration person to his customer
(c) It can never be rejected (d) Refer the Rules which will be prescribed for this purpose
(d) When the goods are sold at very low margins
Ans. (d)
Ans. (b)
.
Mr. Mohan purchases 10,000 Hero ink pens worth Rs. 4,00,000 from Lekhana Wholesalers. Mr. Mohan’s wife is an employee in Lekhana Wholesalers.
The price of each Hero pen in the open market is Rs. 52. The supplier additionally charges Rs 5,000 for delivering the goods to the recipient’s place
of business.
Valuation of given transaction shall be as per Sec 15(1) of CGST Act, 2017 as it fulfils all the following conditions:
(1) Supply has taken place made for a price (monetary consideration).
(2) Price charged for supply is sole consideration for supply (i.e., recipient is not liable to pay any non-monetary consideration).
(3) Supplier (Lekhana Wholesller) and recipient (Mr Mohan) are not related person ((Lekahana and Mohan are not employer and employee)
- Mr. Mohan and Lekhana Wholesalers would not be treated as related persons merely because the spouse of the recipient is an employee
of the supplier, although such spouse and the supplier would be treated as related persons)
.
Now, in terms of Sec 15(1) of CGST Act, 2017, the value of supply shall be Rs 4,05,000 (Rs 4,00,000 + Rs 5,000 charged for delivery of goods at
recipient place).
.
Note:
1. All amounts given in questions have been presumed to be exclusive of GST.
(imp)
Samriddhi Advertisers conceptualised and designed the advertising campaign for a new product launched by New Moon Pvt Ltd. fo r a consideration
of Rs. 5,00,000. Samriddhi Advertisers owed Rs. 20,000 to one of its vendors in relation to the advertising servi ce provided by it to New Moon Pvt
Ltd. Such liability of Samriddhi Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed the payment of con sideration and
thus, paid Rs. 15,000 as interest.
Determine the value of taxable supply made by Samriddhi Advertisers.
(ICAI Study Material)
Ans. Statement showing computation of value of taxable supply
Particulars Rs.
Service charges 5,00,000
Payment made by New Moon Pvt. Ltd to vendor of Samriddhi Advertisers [Liability of the supplier 20,000
being discharged by the recipient, is includible in the value in terms of section 15(2)(b)]
Interest for delay in payment of consideration [Includible in the value in terms of section 15(2)(d)] 15,000
Value of taxable supply 5,35,000
Note:
1. Interest element has been paid and thus, shall form part of value of supply.
2. All amounts (including interest paid for delayed payment) given in questions have been presumed to be exclusive of GST.
Value addition due to interest charged for Rs. 15,000 Receipt of interest from recipient 20th of Next month
delated payment of consideration
.
(Expected)
On July 5, 2017, Z supplies 25 tones of a chemical to B at the rate of Rs. 80,000 per ton. Compute the value of supply and GST liability from
the following data:
He charges additionally the following –freight : Rs. 3,12,000, packing charges : Rs. 72,000, weighing charges : Rs. 30,000, inspection
charges : Rs. 12,000,
He also charges cost of an instrument which is specially purchased by Z to manufacture this chemic al : Rs. 1,10,000 (this instrument
cannot be used for other purpose).
GST rate is 18 per cent.
Inspection charges are directly borne by B and not included in invoice.
State Government has paid a subsidy of Rs. 40,00,000 to Z to set up chemical manufacturing plant in Chennai. This subsidy was paid
during 2016-17.
Z is required to make payment within 15 days of supply. However, payment is made in October 2017 and for late payment, Z char ges
interest of Rs. 11,000.
.
Black and White Pvt. Ltd. has provided the following particulars relating to goods sold by it to Colourful Pvt. Ltd.
Particulars Rs
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 5,000
Packing charges (not included in price above) 1,000
Black and White Pvt. Ltd. received Rs 2000 as a subsidy from a NGO on sale of such goods. The price of Rs 50,000 of the goods is after
considering such subsidy.
Black and White Ltd. offers 2% discount on the list price of the goods which is recorded in the invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd.
(ICAI Study Material)
Statement showing computation of value of taxable supply of goods
Particulars Rs
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods (All taxes other than levied under GST law are 5,000
includible)
Packing charges (packing being incidental expenses is includible) 1,000
Subsidy from NGO on sale of goods (Non-Govt. subsidy directly linked to price of goods is includible) 2,000
Total (excluding discount) 58,000
Less: Discount (2% of List price of goods = 2% of 50,000 = 1,000) (1,000)
Transaction Value as per Section 15(1) 57,000
(Expected)
From the following information determine the value of taxable supply as per provisions of Section 15 of the CGST Act, 2017:
Rs
Contracted value of supply of goods 11,00,000
Thus,
Contracted price = [(Basic Price + Elements includible u/Sec 15(2) + GST)] + [Elements not includible as per Sec 15(2)]
[Basic Price + Elements includible u/Sec 15(2) + GST] = [ Contracted price - Elements not includible as per Sec 15(2)]= TV (GST
inclusive)
TV (tax exclusive) = [Basic Price + Elements includible u/Sec 15(2)] - GST*
.
* GST element shall be computed as follows: [Basic Price + Elements includible u/Sec 15(2)] * GST / (100 + GST Rate)
.
From the following information determine the value of taxable supply as per provisions of section 15 of the CGST Act, 2017?
Rs
Value of machine 15,00,000
The invoice value includes the following
(1) Taxes (other than CGST/SGST/IGST) charged separately by the supplier 15,000
(2) Weighment and loading charges 25,000
(3) Consultancy Charges in relation to pre-installation planning 10,000
(4) Testing Charges 2,000
(5) Inspection Charges 4,500
Other Information:
(i) Subsidy received from Central government for setting up factory in backward region 51,000
(ii) Subsidy received from third party for supply of machine to recipient 50,000
(iii) Trade discount actually allowed shown separately in invoice 24,000
The contract is all-inclusive (i.e., recipient shall not be liable to pay GST over and above the above amount)
Statement showing computation of value of taxable supply of goods
Particulars Rs Rs
Value of machine 15,00,000
Less :
(1) Taxes other than CGST/SGST/IGST charged separately by the supplier [WN-1] —
(2) Weighment and loading charges [WN-2] —
(6) Trade discount actually allowed shown separately in invoice [WN-4] 24,000 -24,000
Add : Subsidy received from third party for supply of machine to recipient [WN-3] 50,000
Cum tax value 15,26,000
Less : GST @12% [15,26,000 × 12 ÷ 112] [WN-5] 1,63,500
Value of taxable supply 13,62,500
Working Notes :
(1) As per Section 15(2) of CGST Act, 2017, any duty, taxes, cesses, fees and other charges, charged separately by supplier are t o be included in
value of taxable supply.
(2) As per Section 15(2) of CGST Act, 2017, any amount charged for anything done by the supplier in respect of the supply of good s at the time of,
or before delivery of goods shall be included in the value of taxable supply. Hence, weighment and loading charges, consultancy charges, testing
charges and inspection charges shall also be included in the value of taxable supply.
(3) As per Section 15(2), the value of supply shall include subsidies directly linked to the price excluding subsidie s provided by the Central Government
and State Governments. Hence, subsidy received from third party for timely supply of machine to recipient will be included in the value of taxable
supply whereas subsidy received from Central government for setting up factory in backward region shall not be included in value of taxable
supply.
(4) As per Section 15(3), the value of the supply shall not include any discount which is given before or at the time of the supp ly if such discount
has been duly recorded in the invoice issued in respect of such supply. Hence, the same is deductible to arrive at value of taxable supply.
INPUT TAX CREDIT
Legal Provisions
.
.
Availment of Credit
Section Matter
Eligible person Registered Person (not being a composition supplier)
Registered Person = Person who is registered (i.e., having GSTIN) [Sec 2(94)]
Composition Supplier is not entitled to claim ITC [Sec 10]
Status of Outward Supply shall not be an exempt supply
Outward
Supply
Exempt Supply = Nil Rated + Fully Exempt + Non-Taxable Supply [Sec 2(94)]
Special Inclusions: Supply under RCM + Securities Trading + Supply transactions of land/building [Sec 17(3)]
Special Exclusions Supply to Nepal/Bhutan + Financial Services (Interest) + Overseas transportation of goods [Sec
17 read with Explanation to Rule 42 and Rule 43 of CGST Rules]
Eligible Taxes Input Tax (GST + Cess – whether paid to supplier or paid self under RCM)
Input Tax = GST (CGST + SGST/UTGST + IGST) + Cess [Sec 2(62)]
GST + Cess paid on RCM basis is also eligible credit [Sec 2(62)]
In respect of procurements made from composition supplier upon which GST has been paid under composition
levy, is not eligible credit [Sec 2(62)]
Sources of Registered Person (not being a composition supplier)
Procurement Unregistered Person
Reason of supplier being unregistered ITC
Goods/ Services being nil-rated or wholly exempt NO GST payable on goods
No RCM Concept
No question of ITC arises at all
Goods/Services chargeable to GST GST payable on goods
RCM Concept applicable
First, GST shall be paid under RCM.
Thereafter, ITC shall be availed of GST so paid.
.
of RECEIPT VOUCHER issued for advances) Goods procured but directly delivered to customers
Receipt by customer = Receipt by RP (supplier)
ITC can be availed.
Tax charged has actually been paid to Post payment of GST and filing of return by supplier,
Government. transactions are matched and then ITC becomes final for
recipient.
Suppliers under RCM
Pay first
Then avail ITC.
Return has been filed u/Sec 39 ITC is claimable only through return.
(GSTR—3 is filed u/Sec 39) Till return is filed, ITC remains inadmissible.
.
Conditions of If depreciation claimed of tax component, then ITC of tax component shall not be admissible.
assuring no .
Time-limitation ITC in respect of any invoice / debit note for any supply shall be taken maximum by end of earlier of the
for availing following period:
ITC End of FY in which supply was received with invoice/ debite note
Due Date Of filing Return u/Sec 39 (GSTR-3) for Sep Month (i.e., 20th Oct)
following end of FY
Actual date Of filing Annual Return (GSTR-9) (i.e., Actual date may be
[* Due date of filing of this return is 31 Dec] earlier or later than 20th Oct)
.
Unpaid [Second proviso to Sec 16 + Rule 37]
supplier, Unpaid Supplier Impact on ITC
impact on ITC Unpaid for a maximum No impact on ITC availed
[Invoices overdue
for payment]
period of 180 days from date
of issuance of invoice by
supplier
Unpaid for more than 180 Impact on ITC availed
days from date of issuance of Rule 37 of CGST Rules
invoice by supplier Timing: Month following the expiry of 180 days
Impact: Add ITC availed to the Output Tax liability of the month
Interest liability: Interest@18% p.a. shall be payable (from date of
original availment of ITC till date of payment of output tax liability)
.
(a) Don't Avail Tax paid on (I + IS) used for non-business purposes Don't claim in GSTR-2
(b) Avail (full) Tax paid on (Deemed Supply between Separately Claim full in GSTR-2
registered Establishments/Branches/offices)
Tax paid as per any of following Sec 74 Determination of tax not paid or short paid
section or erroneously refunded or input tax
has been wrongly availed or utilized
by reason of fraud or any willful
misstatement of suppression of facts
[SCN + Demand Order] (within 5 years
from the due date for furnishing of
annual return for the relevant FY)
Sec 129Detention, Seizure and release of goods
and conveyance in transit
Goods transported in contravention of
legal provisions: Release only upon
payment of tax and penalty equal to
100% of tax payable
Sec 130Confiscation of goods or conveyances and
levy of penalty
Receipts of any goods in contravention of
legal provisions with intent to evade
payment of tax: Goods liable to
confiscation. Additionally, owner of
such goods shall be liable to any tax
and penalty in respect of such goods.
In all such cases, if supplier issues a TAX INVOICE at a
later stage, it should be clearly marked as ‘ITC NOT
ADMISSIBLE’- Rule 53(3) of CGST Rules, 2017
Situations Based Goods Lost
Goods Stolen
Goods Destroyed
Goods Written-off
Goods disposed of by way of Gift
Goods given away as free Samples
Others
Membership of club
Membership of Health and fitness
centre
Exceptions
Life Insurance Service 1. Statutory obligation of employer to provide
these to his employees & Govt. so notified
Health Insurance Service 2. Recipient of such service is himself providing
the same category of service (e.g., insurance
Rent-a-cab Service service availed by re-insurance company)
3. Recipient of such service is himself providing
different category of service but these inwards
supplies are used as an element of taxable
composite or mixed supply
Goods/Services
Food & Beverages (F&B) Exceptions
Outdoor Catering 1. Recipient of such service is himself providing
Beauty Treatment the same category of goods and/or service
Health Services (e.g., Supplier of F&B has taken supply of F&B
Cosmetic and plastic surgery from another supplier of F&B)
2. Recipient of such service is himself providing
different category of service but these inwards
supplies are used as an element of taxable
composite or mixed supply
Relevant Definitions
1 Sec 2 (94) Registered Person
.
“Registered Person” means a person who is registered under section 25 but does not include a person having a Unique
Identity Number
Author :
1. Registered person = Person registered u/Sec 25 (whether u/Sec 22 or section 24) = basically, holder of GSTIN
.
2. Registered person shall not include a person having UIN (Unique Identity Number)
Any specialized agency of the United Nation Organization or any Multilateral Financial Institution and Organization notified
under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries and any other
person or class of persons, as may be notified by the Commissioner shall be granted a UIN for the purpose of GST Law.
Holder of UIN claims refund of input tax paid on inward supplies (they don't claim ITC)
.
Taxable Supply (say, @28%) , but subject to ‘REVERSE CHARGE’: Whether exempt supply?
Such supply is not ‘exempt supply’ as defined under Sec 2(47).
However, ITC shall still not be admissible to supplier in view of provisions relating to blocked credit as laid down in Sec 17(3)
of CGST Act.
.
Author :
1. Zero-rated supply (Sec 16 of IGST Act) = [Export Supplies + Supplies to SEZ Unit / SEZ Developer]
2. If supply is zero-rated supply, then ITC is admissible – irrespective of such supply otherwise exempt supply or not.
..
3.
.
.
Illustration
Mr A = GST Registered = Graphics Designer
He acquires 5 computers – 4 of which are placed in his officer for business use and the other is placed in his home for his son to do his
school work on. The individual is entitled to claim ITC only of 4 computers.
.
Author :
1. Input Service = Any Service + used/ intended to be used in course or furtherance of business .
Illustration
Amit, an employee, is dismissed and goes into the business of carryon on an enterprise as a sole trader.
Amit brings unfair dismissal proceedings against his former employer. For that, he avails services of lawyer.
Though Amit is now operating as a sole trader, he cannot claim ITC for the legal services availed by him as it is incurred in relation to his
past employment, not the present business.
. .
Tax paid on goods/ services under Reverse Charge [Notified or automatic cases]
Tax payable u/Sec 9 (3) & (4) of CGST Act
Tax payable u/Sec 5 (3) & (4) of IGST Act
Tax payable under respective charging sections SGST Act
Tax payable u/Sec 7 (3) & (4) of UTGST Act
Note:
1.
.
Supplier opted for composition levy:
Such supplier is statutorily prohibited from collected ‘composition levy’ from the recipient. – Sec 10(4) of CGST Act
Such supplier is statutorily prohibited from issuing ‘tax invoice’ to the recipient. Rather, he shall issue ‘bill of supply’ for
supply made by him – Sec 31(3)(c) of CGST Act
.
Considering above provision, the recipient is even otherwise not entitled to avail any ITC in respect of his inward supplies
from supplier who has opted for composition levy.
The exclusion of tax paid under composition levy from definition of ‘input tax’ is only by way of abundant
precaution.
2.
- Sec 11 of GST (State Compensation Act), 2017]
.
INPUT TAX CREDIT
Author :
Registered Person
Note:
UIN holder are not ‘registered person’ [They don't claim ITC, they claim refund]
Composition supplier is ‘registered person’ but cannot claim credit as not claiming ITC is a pre-
condition for entering into ‘composition scheme’
.
Input tax= GST only (other taxes are not input tax)
ITC admissible only if Inward Supplies be used/ intended to be used in course or furtherance of business.
.
There are many conditions / restrictions – all to be complied with
ITC shall be claimed as per manner laid down in Sec 49 (Payment of tax).
Sec 49 of CGST Act
RP shall self-assess ITC in his return.
His self-assessed ITC shall be credited to e-credit ledger.
Such ITC shall be in accordance with provisions of Sec 41.
.
(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.
.
Discuss how Mr X shall discharge his liabilities of Rs 2,40,000 (40,000 for Oct month + 2,00,000 for Dec month)
.
(2) Supporting Document: shall be complete in all respects + information therein shall be furnished in GSTR-2
(Return of INWARD SUPPLIES to be submitted by recipient on monthly basis by 15 th of following month)
Input tax credit shall be availed by a registered person only if
all the applicable particulars as specified in provisions of Chapter V are contained in the said document, and
the relevant information, as contained in the said document, is furnished in FORM GSTR-2 by such person.
(3) GST demand order (on mala-fide grounds): Such GST not admissible as ITC
No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of
any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.
Author :
Conditions-1: Possession of supporting documents Sec 16(2)(a)
.
(Received from registered supplier) (received from unregistered supplier / other entity)
Documents specified in Sec 16(2)(a) Documents prescribed by Rule 36 of CGST Rules
1) Tax invoice 1) Self invoice (in case of inward supply under RCM from URP)
Illustration
Mr B (GST registered) has procured inward supplies worth Rs 1,00,000 from Mr A (GST registered).
Mr A has recovered GST at appropriate rate from Mr B.
Discuss the admissibility of ITC to the buyer recipient in following cases:
.
Mr A has not provided tax invoice for the supply. Mr A is not entitled to ITC as he is not into possession of
supporting document.
Mr A has provided tax invoice for the supply, that tax invoice is Mr A is not entitled to ITC as he is not into possession of
not containing GSTIN of B. supporting document which is complete in all respect.
.
Illustration
Mr C is the supplier of stationery items of various kind.
Mr C has supplied certain stationary to Mr D in the month of Jan, 2018. [Goods: SP 5,000 + GST@5%]
Tax invoice was issued for the supply and provided to Mr D. Mr D booked ITC of GST element
.
Illustration
No ITC on advances
XYZ makes an advance payment in Dec, 20XX and orders 10 MT of a particular Dec, 20XX: ITC cannot be booked.
chemical which is in short supply. The supplier of the chemical issues receipt voucher
for the advances.
10 MT Chemicals were supplied in Jan, 20X1. Tax invoice issued alongwith.
Contractual supplies (single contract – followed by supply in lot) – ITC only upon receipt of last installment
S Ltd. a registered manufacturer of Jaipur entered in a contract with a supplier for Oct, 20XX: ITC cannot be booked (not even for
supply of Input 'X' in October, 20XX. As per contract it was agreed that 10,000 kgs 5,00 units received in Oct month)
of Input 'X' will be supplied for Rs. 7,28,000 (inclusive of GST) in 4 lots. Invoice of
Rs. 7,28,000 has been issued with supply of first lot of Input 'X'.
Goods were supplied – [First lot (2,500 Units on 19th Oct, 20XX) + Second lot
(2,500 Units on 29th Oct, 20XX) + Third lot (2,500 Units on 19th Nov, 20XX) + Forrth
lot (2,500 Units on 29th Nov, 20XX
In above case, what if S Ltd. does not issue a single tax invoice. Rather it issues ITC can be booked for each invoice.
separate tax invoices for each lot.
Illustration
Supply under ‘Bill to ……….., Ship to ……….’ Model
Ganesh trader (GST registered in Maharashtra) has entered into contract with Maruti Ltd. Yes
(GST registered in Maharashtra). Maruti Traders shall deemed to have
Maruti Trader is having advance order from Prime hardware (GST Registered in Kranatka) received goods when these goods are
for supply of same goods. Hence, Maruti trader has requested Ganesh Trader to make delivered to Prime Hardware.
direct delivery to his buyer (Prime Hardware).
In this transaction, Ganesh trader will raise Bill/ Invoice to Maruti Trader, but will
deliver goods to Prime Hardware.
Whether Maruti Trader can avail ITC of his purchase from Ganesh Trader, though it has
not received goods?
Conditions-3: ITC only if GST has been paid to Govt. Sec 16(2)(c)
.
FCM (GST charged by supplier) RCM (GST not charged by registered supplier)
Supplier Recipient Supplier Recipient
Tax invoice issued Tax invoice issued
(SP + GST) (SP)
Tax paid Tax paid
Book ITC Pay GST
Book ITC
Illustrations
A supplies goods to B, issues tax invoice and collects GST.
A does not pay that GST to the Government. B is not entitled to the ITC of tax paid to A, even if B has paid the tax to A.
A supplies goods to B, issues tax invoice for Rs 1,00,000 + GST-18,000.
A, while discharging his GST liability, set-off his ITC of Rs 10,000 and pays balance by cash.
B is entitled of ITC of 18,000 in this case.
Illustrations
Dec, 2017:
Outward Supplies: Gross GST on supplies made during Dec, 2017 = Rs 10,00,000
Inward Supplies: GST thereon Rs 7,00,000
.
Case-A: Tax not paid, return not filed by due date – tax paid on 30th June
Interest payable on gross GST of 10,00,000
No ITC admissible till return is filed -- Sec 16(2)(d) of CGST Act, 2017
Since no ITC admissible, the outstanding liability is ‘gross GST liability’ of 10,00,000
Case-B: Tax not paid, return filed by due date – tax paid on 30th June
Interest payable on net GST of 3,00,000
ITC admissible as return is filed -- Sec 16(2)(d) of CGST Act, 2017
Since ITC admissible, the outstanding liability is ‘Net GST liability’ of 3,00,000
If there is default in payment of tax and filing of returns, interest is payable on gross tax payable or net tax payable?
(IDTC FAQ)
Gross tax payable, if there is default in payment of tax and filing of returns, input tax credit will become ineligible as per Section 16(2)
(d) of the CGST Act. Therefore, the taxable person will not be allowed claim set-off of input tax credit for calculation of interest.
Pay yours supplier timely (within 180 days): Else ITC becomes reversibly
Provided further that
where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on
which tax is payable on REVERSE CHARGE basis, the amount towards the value of supply along with
tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by
the supplier,
an amount equal to the input tax credit availed by the recipient shall be added to his output
tax liability, along with interest thereon, in such manner as may be prescribed*:
[*Refer Rule 37 of CGST Rules, 2017]
Provided also that
the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount
towards the value of supply of goods or services or both along with tax payable thereon.
Illustration
Supplier unpaid for more than 180 days: ITC reversal
Jan, 20XX:
Mr A (GST Registered) supplied a machine (SP 3,00,000 + GST of Rs 54,000) to Mr B (GST Registered).
Date of Supply: 10th Jan, 20XX Month of Supply: Jan, 20XX
Mr A paid GST on due date and file his return.
Mr B also filed his return claiming ITC. (Credit stands matched too)
Mr B noticed some minor issues in machine and hence, he withheld payment to Mr A till Mr A rectify those minor defaults.
Over 180 days went by in this dispute.
Computation of 180 days Start from ………………….. End on ………………………….
Upon expiry of above mentioned 180 days, recipient (Mr B) shall be required to pay back ITC availed alongwith interest.
Payback Add to Output tax liability (OTL)
How to add to OTL? Through return Return of which month?
(Statement GSTR-2)
Sep, 20XX:
Mr A (supplier) rectifies the defaults in machine. Mr B makes payment of the bill.
Reclaim ITC Through return Return of which month?
.
Exceptions to the above principal
Supplies under RCM – not hit by this proviso
Supplies without consideration [Sec 7(1)(c) read with Schedule I] – not hit by this proviso
Jan, 20XX:
Mr X (GST registered) has supplied goods to his consignment agent, Mr Y (GST registered) for making sale on his behalf.
This transaction of supply is treated as ‘supply’ under GST, though no consideration is charged for such supply.
Date of Supply: 10th Jan, 20XX Month of Supply: Jan, 20XX
Mr X paid GST on due date and file his return.
Mr Y also filed his return claiming ITC. (Credit stands matched too)
.
.
Rule 37 : Reversal of ITC in case of NON-PAYMENT OF CONSIDERATION
(1) Supplier (supplying under FCM) remaining unpaid for more than 180 days: consequences
A registered person,
who has availed of input tax credit on any inward supply of goods or services or both,
but fails to pay to the supplier thereof the value of such supply along with the tax payable thereon within
the time limit specified in the second proviso to sub-section (2) of section 16 ,
.
T/L u/Sec 16(2) = 180 days from date of issue of invoice by supplier
shall
furnish the details of such supply, the amount of value not paid and the amount of input tax credit
availed of proportionate to such amount not paid to the supplier in
FORM GSTR-2
for the month immediately following the period of one hundred and eighty days from the date of
issue of invoice.
(4) Re-booking of credit post payment to supplier: Limitation shall not be applicable
The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-availing of any credit, in
accordance with the provisions of the Act or these rules, that had been reversed earlier.
.
Capital goods : No ITC of GST paid, if that has been added to cost and depreciation claimed
(3) Where the registered person has claimed depreciation on the tax component of the cost of CAPITAL
GOODS and plant and machinery under the provisions of the Income-tax Act, 1961,
the input tax credit on the said tax component shall not be allowed.
Author :
1. If any CG is purchased for at a price of (Value + GST). the price has been paid.
o If ITC is claimed on such goods, then depreciation shall be claimed on net cost only.
o If depreciation is claimed on ‘total cost (including GST component paid on inward supply), then ITC shall not be admissible.
FY 2017-18
Due Date Actual Date
Case-A Case-B Case-C
Sep, 2018- Regular return GSTR-3 20th Oct, 2018 20th Oct 19th Oct 19th Oct
Annual Return- GSTR-9 31st Dec, 2018 31st Dec 30th Nov 18th Aug
Date by which any ITC for invoice / debit note 20th Oct 20th Oct 18th Aug
relating to FY 2017-18 can be claimed
.
Author: Same time limit is applicable for all invoices/ debit notes relating to a particular FY. Thus, invoice dating 1 April, 20XX and invoice dating
31 march, 20XX, shall have same time Limitation.
.
.
Illustration
XYZ Ltd. purchased goods valuing 5,00,000 (exclusive of GST) under the cover of invoice dated 25-12-2017. The company made
payment to the supplier on the same date. Since there was a doubt regarding admissibility of ITC on such inputs, the company did
not take the ITC at the time of receipt of input. The company obtained clarification from a legal consultant who opined that the
goods were eligible as inputs. The opinion was received on 05-05-2018. The company now wants to avail Input tax credit of the tax
paid on such inputs. Can it do so? The company has filed its annual return for the year 2017-18 on 12-08-2018.
.
Sec 16(4) provides time limitation as to availment of ITC. As per Sec 16(4), ITC i.r.o. any invoice for supply of goods or se rvices or
both can be availed upto the earlier of following 2 dates—
(a) the due date of furnishing of GSTR-3 for September month following the end of financial year to which such invoice pertains
(i.e., 20th Oct, 2018); or
(b) the date of furnishing of the relevant annual return (in ours case, that is 12 th Aug, 2018).
In ours case, XYZ ltd. can book ITC relating to FY 2017-18 maximum by 12th Aug, 2018. Thus, it can avail ITC on 5 th May, 2018.
[ICAI Study Material]
Hercules Machinery delivered a machine to XYZ in January 2018 under Invoice no. 49 dated 28 th Jan, 2018 for Rs 4,15,000 + GST,
and undertook trial runs and calibration of the machine as per the requirements of XYZ.
The amount chargeable for the post-delivery activities was covered in a debit note raised on 25 April 2018 for Rs 50,000 + GST.
Hercules Machinery did not file its annual return till October, 2018.
What shall be the outer time limit for taking ITC on basis of such debit note?
.
Tax invoice: FY 2017-18 20th Oct, 2018 Post Oct, 2018 20 Oct, 2018
28 Jan, 2018 (FY to which such invoice
pertains)
Subsequent debit note: FY 2017-18 20th Oct, 2018 Post Oct, 2018 20 Oct, 2018
25 April, 2018 (FY to which such invoice
relating to such debit note
pertains)
.
Comprehensive Illustration
XYZ Ltd., is engaged in manufacture of taxable goods. He is GST registered.
Compute the ITC available with XYZ Ltd. for the month of October, 2018 from the following particulars:-
Inward supplies GST (Rs.) Remarks
(i) Inputs ‘A’ 1,00,000 One invoice on which GST payable was Rs. 10,000, is missing
(ii) Inputs ‘B’ 50,000 Inputs are to be received in two installments. First installment has been received in October, 2018.
(iii) Capital goods 1,20,000 XYZ Ltd. has capitalized the capital goods at full invoice value inclusive of GST as it will avail
depreciation on the full invoice value.
(iv) Input services 2,25,000 One invoice dated 20.01.2018 on which GST payable was 50,000 has been received in October,
2018.
Note: The annual return for the financial year 2017-18 was filed on 15th September, 2018.
[ICAI Study Material]
Computation of ITC available with XYZ Ltd. for the month of October, 2018
Inward supplies GST (Rs.)
(i) Inputs ‘A’ [Registered person is not entitled to ITC if he is not in possession of tax invoice -Section 16(2)] 90,000
(ii) Inputs ‘B’ [Registered person is entitled to ITC only upon receipt of last lot/installment of goods -Section 16(2)] Nil
(iii) Capital goods [Registered person is not entitled to ITC if he is claiming depreciation of GST element -Section 16(3)] Nil
(iv) Input services [As per section 16(4), ITC on an invoice cannot be availed after the due date of furnishing of the return 1,75,000
for the month of September following the end of financial year to which such invoice pertains or the date of filing annual
return, whichever is earlier.
Since the annual return for the FY 2017-18 has been filed on 15th September, 2018 (prior to due date of filing the return for
September, 2018 i.e., 20th Oct, 2018), ITC on the invoice pertaining to FY 2017-18 cannot be availed after 15th Sept, 2018]
Total 2,65,000
.
..
(1) the value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty ; and
(2) the value of security shall be taken as 1% of the sale value of such security.
..
Section 17 : Apportionment of credit and blocked credits.
Usage of goods/services for business as well as non-business purposes: ITC restricted to extent of business
(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.
.
Author : Availment of credit in case of MIXED USE (Business use and non-business use)
Exclusive Common
(CG + I + IS) (CG + I + IS)
Business Use Fully allowed
Registered Section 17 (1)
Person Allowed to extent of ITC attributable to
Non-Business Use Fully not allowed business use
Illustrations
Mr A is a GST registered graphic designer.
5 Computers purchased – 4 put to business use and 1 put to personal use of his son.
ITC of 4 computers is admissible.
Amit, an employee, is dismissed and goes into the business of carryon on an enterprise as a sole trader.
Amit brings unfair dismissal proceedings against his former employer. For that, he avails services of lawyer.
Though Amit is now operating as a sole trader, he cannot claim ITC for the legal services availed by him as it is incurred in
relation to his past employment, not the present business.
Illustrations
Situations Admissibility of ITC
Mr A = Sole-proprietor providing coaching services = GST registered
He has purchased car (Rs 8,0,000 + GST)
Car is used for going to his coaching centre and then coming back
Exempted supply: Scope widened to include ‘Supply under RCM’ and ‘2 out of Scope Supply’
(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.
[*Refer CGST Rules, 2017 (Explanation to Chapter V: ITC)]
Author : Availment of credit by MIXED SUPPLIER (making taxable supply + exempt supply)
Exclusive Common
(CG + I + IS) (CG + I + IS)
Taxable Chargeable to tax Fully allowed
Supply Zero-Rated Supply Section 17 (2)
Exports Allowed to extent of ITC
Supply to SEZ attributable to taxable supply
Manner to be prescribed for attribution of credit given under sub sec (1) and (2)
(6) The Government may prescribe* the manner in which the credit referred to in sub-sections (1) and (2)
may be attributed. [*Refer Rule 42 (Input & Input Service) and 43 (Capital Goods) of CGST Rules, 2017]
.
.
Author : Taxpayer not left with any choice as to application/selection of any method.
Rule 42: : Manner of determination of ITC in respect of inputs or input services and reversal thereof
C3
(Non-Exempt: (balancing
Common) fig)
Notes:
1. Exempt Supply (Common Credit): D1 = C2 * E/ F
E = Aggregate Value of Exempt Supplies
.
2. Non-Exempt Supply (Common Credit): C3 (balancing fig) – it shall be computed separately for CGST, SGST/UTGST and IGST.
.
Provisional Computation for each month – Final Computation for whole year: (complete upto 20th Oct
following end of FY)
In case the resultant computation results in short credit availed. Then such credit can be claimed in the electronic credit l edger.
Further, if on computation for the whole year, the registered person has claimed excess ITC on a month on month basis, then such
excess claimed ITC shall be added back to the output liability – now, shall be paid with interest
Illustration 1
S Ltd., a registered supplier, supplies taxable as well as exempted goods. Details of turnover of supply of goods during the
month of August, 2018 includes :
Particulars Rs.
Value of Taxable Supply of Goods (including zero-rated supply of goods) 55,00,000
Value of Supply of Exempted Goods (exempted supplies) 10,00,000
Value of out of Scope Supply (Transaction in Security) 10,00,000
Total 75,00,000
Details of Input tax credit for the month of August, 2018 are as under :
Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)
Total ITC available 1,80,000 1,80,000 2,16,000
The above ITC on input / input services includes the following
(i) Credit on input goods/services exclusively used for supplying goods for personal 22,500 22,500 60,000
use
(ii) Credit on input goods/services exclusively used for supplying exempted goods 45,000 45,000 72,000
(iii) Credit availed on input/services which are ineligible under Section 17(5) 42,000 42,000 48,000
(iv) Credit on input/input services exclusively used for supplying taxable goods 63,000 63,000 23,400
(including Zero rated supplies)
Determine the ITC entitlement of S Ltd. for month of August, 2018 and also determine the amount, if any, to be added to
output tax liability of PQR Ltd. during August, 2018.
.
Solution : Computation of ITC eligible for the tax period August, 2018
Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)
Total Input tax credit in tax period [T] 1,80,000 1,80,000 2,16,000
Less : ITC exclusively related to non-business supply [T1] 22,500 22,500 60,000
Less : ITC exclusively related to exempted supply [T2] 45,000 45,000 72,000
Less : Blocked ITC [T3] 42,000 42,000 48,000
Input tax credit credited to the E- ledger [C1] 70,500 70,500 36,000
C1 = T - [T1 + T2 + T3]
Less: ITC exclusively related to taxable supply (including zero-rated supplies) 63,000 63,000 23,400
[T4]
Common credit of input and input services used for providing supply of 7,500 7,500 12,600
services [C2] C2 = C1 - T4
Ineligible Common Credit (determined as per Rule 42)
Common credit related to non-business (deemed 5% of C 2) (375) (375) (630)
Common credit related to exempted supplies (Common Credit * Exempted (2,000) (2,000) (3,360)
TO=20,00,000 / Aggregate TO = 75,00,000)
Net eligible common credit C3 = C2 - [D1 + D2] 5,125 5,125 8,610
Total credit eligible i.e. [T4 + C3] 68,125 68,125 32,010
Amount to be added to output tax liability 2,375 2,375 3,990
where,
o ‘E’ is the aggregate value of exempt supplies during the tax period, and
o ‘F’ is the total turnover in the State of the registered person during the tax period:
Provided that
where the registered person does not have any turnover during the said tax period or the
aforesaid information is not available,
the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the last tax period for
which details of such turnover are available, previous to the month during which the said value
of ‘E/F’ is to calculated;
(j) the amount of credit attributable to non-business purposes if common inputs and input services are used
partly for business and partly for non-business purposes, be denoted as ‘D2’, and shall be equal to five per
cent. of C2; and
(k) the remainder of the common credit shall be the eligible input tax credit attributed to the purposes of
business and for effecting supplies other than exempted supplies but including zero rated supplies and
shall be denoted as ‘C3’, where,-
C3 = C2 - (D1+D2);
(l) the amount ‘C3’ shall be computed separately for input tax credit of central tax, State tax, Union
territory tax and integrated tax;
(m) the amount equal to aggregate of ‘D1’ and ‘D2’ shall be added to the output tax liability of the registered
person:
Provided that
where the amount of input tax relating to inputs or input services used partly for purposes
other than business and partly for effecting exempt supplies has been identified and
segregated at invoice level by the registered person,
the same shall be included in ‘T1’ and ‘T2’ respectively, and
the remaining amount of credit on such inputs or input services shall be included in ‘T4 ’
Solution
1. Exclusive CG
(a) Exclusively used for non-business purposes 23,400 (11,700 + 11,700) ITC not admissible
(b) Exclusively used for making exempt supply 21,600 (10,800 + 10,800) ITC not admissible
(c) Exclusively used for taxable supply (including 90,000 (45,000 + 45,000) ITC admissible Credit to E-credit
0-rating) ledger
2. Common CG
(a) Common Credit arising in tax period (out 82,080 (41,040 + 41,040) ITC admissible Credit to E-credit
of New acquisitions for the tax period, Aug ledger
2018)
(b) Attribution of Common Credit towards 912 (456+ 456) ITC Reversals Add to output tax
exempt Supply made in Aug, 2018 liability
.
CGST SGST
Total Common Credit attributable to the tax period, Aug 2018 (Credit Tm 684 684
of C / 60) (41,040/60) (41,040/60)
Common Credit attributable to other CG whose useful life remains
during the tax period, Aug 2018 (Credit of A / 60) (Credit of B / 60)
(Credit of A / 60) Tm 840 840
(50,400/ 60) (50,400/ 60)
the input tax credit in respect of capital goods, which attract the provisions of sub-sections (1) and (2) of section 17, being
partly used for the purposes of business and partly for other purposes, or
partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies,
shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-
.
(a) the amount of input tax in respect of capital goods used or intended to be used exclusively for non-business
purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM
GSTR-2 and shall not be credited to his electronic credit ledger ;
(b) the amount of input tax in respect of capital goods used or intended to be used exclusively for effecting
supplies other than exempted supplies but including zero-rated supplies shall be indicated in FORM GSTR-2
and shall be credited to the electronic credit ledger;
(c) the amount of input tax in respect of capital goods not covered under clauses (a) and (b), denoted as ‘A’, shall
be credited to the electronic credit ledger and
the useful life of such goods shall be taken as five years from the date of invoice for such goods:
CG earlier used exclusively for non-business/exempt supply, now put to use for common usage
Provided that
where any capital goods earlier covered under clause (a) is subsequently covered under this clause
(i.e., common usage),
the value of ‘A’ shall be arrived at by reducing the input tax at the rate of five percentage points
for every quarter or part thereof and
the amount ‘A’ shall be credited to the electronic credit ledger;
Explanation: An item of capital goods declared under clause (a) on its receipt shall not attract the provisions
of sub-section (4) of section 18 if it is subsequently covered under this clause .
[ : It is obvious – treatment provided under this clause, no treatment required u/Sec 18(4).]
(d) the aggregate of the amounts of ‘A’ credited to the electronic credit ledger under clause (c), to be denoted as
‘Tc’, shall be the common credit in respect of capital goods for a tax period:
CG earlier used exclusively for non-exempt supply, now put to use for common usage
Provided that
where any capital goods earlier covered under clause (b) is subsequently covered under clause (c)
(i.e., common usage),
the value of ‘A’ arrived at by reducing the input tax at the rate of five percentage points for
every quarter or part thereof shall be added to the aggregate value ‘Tc’;;
(e) the amount of ITC attributable to a tax period on common capital goods during their useful life, be denoted as
‘Tm’ and calculated as:-
Tm= Tc÷60
(f) the amount of ITC, at the beginning of a tax period, on all common capital goods whose useful life remains
during the tax period, be denoted as ‘Tr’ and shall be the aggregate of ‘Tm’ for all such capital goods.
(g) the amount of common credit attributable towards exempted supplies, be denoted as ‘Te’, and calculated as:
Te= (E÷ F) x Tr
where,
‘E’ is the aggregate value of exempt supplies, made, during the tax period, and
‘F’ is the total turnover of the registered person during the tax period:
Provided that
where the registered person does not have any turnover during the said tax period or the aforesaid
information is not available,
the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the last tax period for which
details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to
calculated;
(h) the amount Te along with applicable interest shall, during every tax period of the useful life of the concerned capital
goods, be added to the output tax liability of the person making such claim of credit.
(2) The amount Te shall be computed separately for central tax, State tax, Union territory tax and integrated tax.
Latest Amendment
(a) the value of supply of services specified in the N/N 42/2017-Integrated Tax (Rate);
N/N 42/2017-IT provides full exemption to supply of services having place of supply in Nepal and Bhutan, against payment in Indian
rupees.
(b) the value of services by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount, except in case of 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; and
(c) the value of supply of services by way of transportation of goods by a vessel from the customs station of
clearance in India to a place outside India.
Financial Service of Extending loans / advances (by bank or any private entity)
Financial Service of Extending Processing Fee Chargeable to GST Such supply =
deposits / loans / advances Non-exempt
supply
Interest income Exempted by Notification Such supply = Newly inserted
[through N/N 12/2017-CT (Rate)- Exempt supply explanation::
Entry No. 27] Such supply = Non-exempt
However, this exclusion is
not applicable to Banking
Co.,& Financial Institution
as for them special
provision as to ITC
availment has been made
available.
Sea Transportation of GOODS (from Customs Station in India to a place outside India – i.e., of EXPORT GOODS)
Sea transportation of Export Freight Charges Exempted by Notification Such supply = Newly inserted
Goods [through N/N 12/2017-CT (Rate) – Exempt supply explanation::
(Supplier and recipient in Entry 19-B (inserted w.e.f. 25th Jan, Such supply = Non-exempt
India: PoS as per Sec 12 of 2018)]
IGST Act = Location of
recipient who is GST
Registered)
.
Banking company / Financial Institutions: as mixed supplier has special option for ITC availment
Ad-Hoc Method: Avail ITC of 50% of Input tax
(4) A banking company or a financial institution including a non-banking financial company, engaged in
supplying services by way of accepting deposits, extending loans or advances shall have the option to
either comply with the provisions of sub-section (2), or
avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods
and input services in that month and the rest shall lapse:
.
Relaxation from restriction of 50%: (Inter-branch supplies: GST paid shall be admissible as full ITC)
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.
..
(a) the said company or institution shall not avail the credit of,-
(i) tax paid on inputs and input services that are used for non-business purposes, and
(ii) the credit attributable to supplies specified in sub-section (5) of section 17, in FORM GSTR2;
(b) the said company or institution shall avail the credit of tax paid on inputs and input services referred to in the
second proviso to sub-section (4) of section 17 and not covered under clause (a);
(c) 50% of the remaining amount of input tax shall be the input tax credit admissible to the company or the
institution and shall be furnished in FORM GSTR-2;
(d) the amount referred to in clauses (b) and (c) shall, subject to the provisions of sections 41, 42 and 43, be
credited to the electronic credit ledger of the said company or the institution.
Illustrations
Dena Bank, having a branch in Jaipur engaged in supply of services by way of accepting deposits and extending loans opted for Section
17(4). Its head office is in Mumbai and branch in Mumbai. ITC (CGST & SGST) available for the month August, 20XX is Rs 90,000. Determine
the amount of admissible ITC for Dena Bank, Jaipur Branch.
Total ITC of 90,000 includes credit relating to —
Particulars Input tax [CGST & SGST]
(1) Services availed from Mumbai Head Office (deemed distinct person under GST law) 18,000
(2) Outdoor catering services received for its employees 16,900
(3) Auditing Services 22,500
(4) Goods which are used for personal use of employees 6,500
ITC availment table for Dena Bank (Jaipur branch) which has opted for Sec 17(4)
(a) Don't Avail Tax paid on (I + IS) used for non-business purposes ----
(b) Avail (full) Tax paid on (Deemed Supply between Separately registered 18,000
Establishments/Branches/offices) = 18,000
(c) Avail (50%) Rest of Input Tax (90,000 – 16,900 – 6,500 – 18,000) = 48,600 24,300
Total Admissible ITC (available for utilization for August Month GST liability) 42,300*
* Note: Rest all credit other than admissible credit will lapse.
.
BLOCKED ITC
Credit in respect of input tax incurred on certain acquisitions is specifically prohibited. Such GST is added to cost of inward supplies and
this is known as blocked credit.
Blocked credit is in conflict with the fundamental characteristics of GST. But denial of credit can be justified on following grounds:
i) To avoid the administrative burden of controlling the actual use of such goods/services, which may be easily used for dual purposes
(business / private) due to their very nature;
ii) It is way of reducing the risk of fraud; and
iii) Such supplies are supposed to contain an element of consumption in the real life sense of the term, e.g. entertainment in a restaurant.
The commonly excluded items are entertainment expenses and motor vehicle related expenses.
.
(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (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;
Author:
Motor Vehicle Sec 2(76) Motor Vehicle shall have meaning as has been assigned to it under Motor Vehicles Act, 1988.
Author:
Supplier Outward supply Inward supply Admissibility of ITC
Easy Cab Rent-a-Cab Sr Rent-a-Cab Sr Yes
(sub-contracting)
Grand Hotel Accommodation Sr Rent-a-Cab Sr Yes
(for pick up of visitors from airport)
Ekatvam Academy Coaching Sr Rent-a-Cab Sr No.
(for intra-city travel of its outstation
faculties)
Call Centre Business Support Sr Rent-a-Cab Sr No
(for daily pick and drop of employees –
mandatory under State Law)
Shyam Garments Supplier of Garments Insurance of trading stock Yes
Insurance of factory building Yes
Insurance of motor vehicles ….
(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;
.
Author:
Supplier Outward supply Inward supply Admissibility of ITC
Builder / Contractor Construction Sr (works contract) Construction Sr (works contract) Yes.
(Construction of big project for (sub-contracting)
Reliance)
Ekatvam Academy Coaching Sr Construction Sr (works contract) No.
(Construction of an additional floor
of its GST registered officer)
Ekatvam Academy Coaching Sr Construction Sr (works contract) Yes.
(Repairs of toilet costing 20,000)
Grand Hotel Accommodation Sr Renovation No
(30 years old structure now
renovated at cost of 30,00,000)
.
(d) goods or services or both received by a taxable person for construction of an immovable property
(other than plant or machinery) on his own account including when such goods or services or both are
used in the course or furtherance of business.
Author:
Supplier Outward supply Inward supply Admissibility of ITC
Builder / Contractor Construction Sr (works Purchase of building material Yes.
contract) Architect service
(Construction of big Procurement of labour from labour
project for Reliance) contractor
Builder / Contractor Construction Sr (works Purchase of building material No.
contract) Architect service
(Constructing its new Procurement of labour from labour
Head Office) contractor
Ekatvam Academy Coaching Sr Purchase of building material No.
Architect service
Construction Sr (pure labour
contract)
.
(e) goods or services or both on which tax has been paid under section 10;
Author: Tax paid under Sec 10 = GST under Composition Scheme
Supplier working under composition scheme is not entitled to collect any GST from recipient.
Thus, recipient is not entitled to any ITC.
(f) goods or services or both received by a NON-RESIDENT TAXABLE PERSON except on goods
imported by him;
Author: NRTP = Person who occasionally undertakes supply, but has no fixed place of business or residence in India.
He is not allowed any ITC except that of goods imported by him and supplied here.
.
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
Author: ITC is not allowed in such cases as the destruction or writing off of goods or giving them as gift/sample takes them out of
the supply chain and it is an event which is functionally equivalent to consumption.
Mahesh Electronics Supplier of 1000 pieces of USB 2.0 pen drives (of
electronic items value of 500 each) written off this
year
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
Author:
Sec 74 It deals with recovery of tax not paid or short paid by reason of fraud, willful Tax paid is not eligible as ITC.
misstatement or suppression of facts
Sec 129 It deals with detention, seizure and release of goods in transit which had been Tax paid is not eligible as ITC.
removed in contravention of legal provisions.
.
Sec 130 It deals with confiscation of goods in certain circumstances. Tax paid is not eligible as ITC.
Illustration
M/s. X Ltd. supplied taxable goods from the factory after manufacture in the month of Oct 2017 for sale to a distributor for Rs.
8,00,000. M/s X Ltd has suppressed this transaction. However, he deposited the GST @12% on these goods on 10-1-2018 against
show cause notice issued under Section 74 (when there is fraud) of the CGST Act, 2017 by the Central Tax Officer and passed t he
order accordingly.
Whether distributor namely recipient of these goods is eligible to take input tax credit.
(ICMA Study Material)
As per Sec 17(5) of the CGST Act 2017*, No credit on payment of tax due to fraud, willful-misstatement or suppression of fact
etc. shall be allowed.
In the given case no input tax credit was available to registered person if the supplier has paid tax in pursuance of order w here
any demand has been confirmed on account of any fraud, willful-misstatement or suppression of facts and so on under Sec. 74
of the CGST Act, 2017.
Hence, input tax credit is not allowed to recipient of these goods (i.e. distributor in the given case).
(iv) Food items for consumption of employees working in the factory 25,000
(v) Goods are used for running a guest house in a factory 80,000
GST paid on Food & Beverages used in guest house = Rs 60,000
GST paid on other items (like floor cleaning material etc.) = Rs 20,000
Determine the amount of ITC available with ABC Ltd. for treatment of various items.
(ICAI Study Material)
Computation of ITC available with ABC Co. Ltd. for the month of August
Items ITC (Rs)
(iv) Foods items for consumption of employees working in the factory Nil
[ITC of F&B (food & beverages) is not allowed unless it is used for making outward taxable supply of same category or used
as an element of composite or mixed supply. This being not the case with ABC Ltd., ITC is not admissible to it]
EXIT from COMPOSITION LEVY: [Input in Stock: Full Credit + Capital Goods: Reduced Credit]
(c) where any registered person ceases to pay tax under section 10,
he shall be shall be entitled to take credit of input tax
in respect of inputs held in stock and inputs contained in semi-finished or finished goods held
in stock and
on capital goods*
on the day immediately preceding the date from which he becomes liable to pay tax under section 9:
Provided that the credit on capital goods shall be reduced by such percentage points as may be
prescribed*;
[Rule 40 of CGST Rules]
EXEMPT SUPPLY CHARGEABLE TO GST [Input in Stock: Full Credit + Capital Goods: Reduced Credit]
(d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply,
such person shall be shall be entitled to take credit of input tax
in respect of inputs held in stock and inputs contained in semi-finished or finished goods held
in stock and
on capital goods* exclusively used for such exempt supply
on the day immediately preceding the date from which such supply becomes taxable:
Provided that the credit on capital goods shall be reduced by such percentage points as may be
prescribed*;
[Rule 40 of CGST Rules]
E-Declaration in all cases of credit becoming available (containing details of stock of which credit is being availed)
(b) The registered person shall
within thirty days from the date of becoming eligible to avail of input tax credit under sub-section
(1) of section 18 or
within such period as may be extended, by notification by Commissioner 11,
shall make a declaration, electronically, on the Common Portal in FORM GST ITC-01 to the effect that
he is eligible to avail of input tax credit as aforesaid.
.
.
(c) The declaration under clause (b) shall clearly specify the details relating to the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock, or as the case may be, capital goods–
(i) on the day immediately preceding the date from which he becomes liable to pay tax under the
provisions of the Act, in the case of a claim under section 18(1)(a),
(ii) on the day immediately preceding the date of grant of registration, in the case of a claim under section 18
(1)(b),
(iii) on the day immediately preceding the date from which he becomes liable to pay tax under section 9,
in the case of a claim under section 18(1)(c),
(iv) on the day immediately preceding the date from which supplies made by the registered person becomes
taxable, in the case of a claim under section 18(1)(d).
1
N/N 44/2017 (13th Oct): RP becoming eligible to ITC in months of July, Aug or Sep, 2017 can submit declaration till 31 st
Oct, 2017.
Illustrations
Person becoming liable for registration- getting registered
C Ltd. is engaged in supplying taxable goods to its customers within the state and it is not liable for registration under Se ction 22 of CGST Act,
2017. From 15-02-2018 onwards, it started inter state supply of taxable goods hence it applied for registration on 25-02-2018 and same has
been granted to him.
Its CGST, SGST and IGST liability for the month of February, 2018 is Rs 10,500, Rs 10,500 and Rs 21,0 00 respectively and C Ltd. has to make
e-payment of tax on the due date i.e., on 20-03-2018.
C Ltd. has provided the following details of stock of input held on 14-02-2018 and tax paid thereon :
Particulars CGST (Rs) SGST (Rs)
Inputs received on 10-01-2018 (Invoice dated 11-01-2018) lying in stock 3,600 3,600
Inputs received on 25-10-2017 (Invoice dated 26-10-2017) lying in semi finished stock 7,500 7,500
Inputs received on 15-01-2017 (Invoice dated 12-01-2017) contained in Finished Goods 9,600 9,600
Briefly explain the tax payable by C Ltd. in cash, if any,
Note : PQR (Pvt.) Ltd. has not opted for the Composition scheme.
.
Solution : As per Section 18(1)(a), a person applying for registration within 30 days from date on which he becomes liable to registrati on under
this Act and has been granted registration shall be entitled to take credit of input tax in respect of input held in stoc k, or contained in semi
finished or finished goods in stock on date immediately preceding the date from which he becomes liable to registration i.e., 14th February,
2018.
As per section 18(2), a registered person shall not be entitled to take input tax cre dit in respect of any supply of goods or services or both to
him after the expiry of 1 year from the date of issue of tax invoice relating to such supply.
In view of above provision Input tax credit available to C Ltd. will be computed as follows :
Particulars CGST @6% SGST @6%
Inputs received on 10-01-2018 (Invoice dated 11-01-2018) lying in stock as on 14-02-2018 3,600 3,600
Inputs received on 25-10-2017 (Invoice dated 26-10-2017) lying in semi finished stock as on 14- 7,500 7,500
02-2018
Inputs received on 15-01-2017 (Invoice dated 11-01-2017) contained in Finished Goods as on 14- --- ---
02-2018- ineligible due to time limitation provided in Sec 18(2)
Total Eligible input tax credit 11,100 11,100
Computation of Tax payable in cash by C Ltd. for month of February, 2018 :
Particulars CGST (Rs) SGST (Rs) IGST (Rs)
Voluntarily Registration
Mr. A applies for voluntary registration on 22 nd November and obtained registration on 25 th November. Mr. A has stock on the following two
dates:
Date Opening balance (units) Purchased (units) Sold (units) Closing Stock (units)
21 November
st
12,000 20,000 8,000 24,000
Note: ITC on capital goods not allowed as per provisions of Sec 18(1)(b) of CGST Act.
As per Section 18(1)(c), where any registered person ceases to pay tax under Section 10, he shall be entitled to take credit of input tax
in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day
immediately preceding the date from which he becomes liable to pay tax under Section 9.
Therefore, in given case, ABC traders shall be entitled from 01-04-2018 to avail credit available as on 31-03-2018.
As per Rule 40 of the CGST Rules, 2017, the capital goods credits is to be claimed after reducing the tax paid on such capital goods by
5% points per quarter of a year or part thereof from the date of invoice or such other documents on which the capital goods were
received by the taxable person.
Input tax credit available to ABC Traders in respect of inputs :
Particulars (Rs.)
Date of invoice of capital goods 25-09-2017
Date from which ABC traders are liable to pay tax under Section 9 01-04-2018
No. of quarters from date of invoice 3
CGST and SGST paid on capital goods procured on 25-09-2017 14,400
ITC to be reduced by Rs. 14,400 × 5% × 3 quarters 2,160
Credit (CGST and SGST) available on capital goods 12,240
Note : As per Section 2(92), "quarter" shall mean a period comprising three consecutive calendar months, ending on the last day of
March, June, September and December of a calendar year.
Change in constitution of REGISTERED PERSON (merger/ de-merger etc)
(3) Where there is a change in the constitution of a registered person on account of sale, merger, demerger,
amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities,
the said registered person shall be allowed to transfer the ITC which remains unutilised in his electronic
credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such
manner as may be prescribed*.
[Rule 41 of CGST Rules]
Rule 41: : Transfer of credit on sale, merger, amalgamation, lease or transfer of a business
(1) TRANSFEROR: Furnish details of ITC intended to be transferred (Form GST ITC-02)
A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in
ownership of business for any reason,
furnish the details of sale, merger, demerger, amalgamation, lease or transfer of business, in FORM GST ITC-02,
electronically on the Common Portal along with a request for transfer of unutilized input tax credit lying in his
electronic credit ledger to the transferee :
Provided that
in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new
units as specified in the demerger scheme.
.
R Ltd. a registered manufacturer demerged its entity into RX Cement Ltd. and RY Steel ltd. The total value of Assets of R Ltd . is Rs.
25,00,000 and unutilised credit on account of CGST, SGST and IGST amounted to Rs. 60,000, Rs. 45,000 and Rs. 84,600 respectively.
The value of assets of RX Cement Ltd. and RY Steel Ltd. is Rs. 12,00,000 and Rs. 13,00,000 respectively obtained as per the scheme.
Discuss the eligibility of credit transferred to new units on account of Demerger.
.
(3) TRANSFEREE: Shall accept details furnished by transferor over Common Portal
The transferee shall, on the Common Portal, accept the details so furnished by the transferor
and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit
ledger.
.
Author :
Transfer of ITC
TRANSFEROR TRANSFEREE
Furnish details of ITC [GST ITC-02] Accept the details
(4) Where any registered person who has availed of ITC opts to pay tax under section 10 or,
where the goods or services or both supplied by him become wholly exempt,
he shall pay AN AMOUNT, by way of debit in the electronic credit ledger or electronic cash ledger,
equivalent to the credit of input tax
in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock and
on capital goods, reduced by such percentage points as may be prescribed*,
on the day immediately preceding the date of exercising of such option or, as the case may
be, the date of such exemption:
[Rule 44 of CGST Rules]
Provided that
after payment of such amount, the balance ITC, if any, lying in his electronic credit ledger shall lapse.
(b) for capital goods held in stock the ITC involved in the remaining useful life in months shall be
computed on pro-rata basis,
taking the useful life as five yeaRs.
Illustration
Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months= 5 months ignoring a part of the month
Input tax credit taken on such capital goods= Ç
Input tax credit attributable to remaining useful life= C multiplied by 5/60
(2) Separate determination for Input tax (CGST) & Input Tax (IGST)
The amount, as prescribed in sub-rule (1) shall be determined separately for input tax credit of [central tax, State
tax, Union territory tax and integrated tax].
(3) Problem in computation due to UNAVAILABILITY OF INVOICES:
Where the tax invoices related to the inputs held in stock are not available,
the registered person shall estimate the amount under sub-rule (1)
based on the prevailing market price of goods on the effective date of occurrence of any of the
events specified in Section 18 (4) or, as the case may be, Section 29 (5).
(4) ITC Reversal: Add to the OUTPUT TAX liability & disclose details over portal
The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person
Illustration – RP now opting for composition levy (Reverse ITC earlier availed)
D ltd. a registered person supplying taxable goods in Jaipur has opted to pay tax on composition scheme u/Sec 10 with effect from 1st April,
2018. It provides following information relating to balance of input tax credit lying as on 31 st March, 2018 :
(1) Inputs lying in stock as such valued at Rs 1,68,000 (inclusive of CGST & SGST @12%)
(2) Inputs contained in finished goods where tax invoice is not available relating to such inputs but it is known that market price of such inputs
(inclusive of CGST & SGST @12%) on 28-02-2018 Rs 89,600.
(3) Input tax on capital goods purchased on 25-10-2017 is Rs. 72,000.
(4) Balance in Electronic credit Ledger is Rs 1,20,000.
Decide whether D ltd. is eligible for ITC lying on 31 st March, 2018.
.
As per Section 18(4), where any registered taxable person who has availed of input tax credit opts to pay to under Section 10 i.e. composition
scheme, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in
respect of inputs held in stock and inputs contained in semi-finished or finished goods held on stock and on capital goods, taking useful life of
capital goods 5 years, on the day immediately preceding the date of exercising such option.
Therefore, in given case D Ltd. is required to pay following amounts :
Particulars (Rs.)
ITC Availed CG (+ plant and machinery) supplied by RP (i.e., no longer used in business): ITC Reversal
Higher of 2 : (a) [ITC availed reduced by 5% per quarter or part thereof] (b) [GST on TV (determined as per Sec 15)]
(6) In case of supply of capital goods or plant and machinery, on which ITC has been taken,
the registered person shall pay AN AMOUNT equal to
the ITC taken on the said capital goods or plant and machinery
reduced by such percentage points as may be prescribed*
or
the tax on the transaction value of such capital goods or plant and
machinery determined under section 15,
whichever is higher:
Provided that
where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person
may pay tax on the transaction value of such goods determined under section 15.
How to compute reduced ITC on CG?
.
Where the amount so determined is more than the tax determined on the transaction value of the capital
goods,
the amount determined shall form part of the output tax liability and
the same shall be furnished in FORM GSTR-1.
.
.
Rule 40: : Manner of claiming credit in SPECIAL CIRCUMSTANCES
(2) ITC Availed CG (+ plant and machinery) supplied by RP (i.e., no longer used in business): ITC Reversal
(with reduction of 5% per quarter or part thereof)
The amount of credit in case of supply of capital goods or plant and machinery, for the purposes of sub-
section (6) of section 18, shall be calculated by
reducing the input tax on the said goods at the rate of five percentage points for every quarter or part
thereof from the date of issue of invoice for such goods.
.
.
Illustration
Granites Textiles Ltd. purchased a needle detecting machine on 8th July, 2017 from Makhija Engineering Works Ltd. for Rs. 10,00,000
(excluding GST) paying GST @ 18% on the same. It availed the ITC of the GST paid on the machine and started using it for manu facture of
goods. The machine was sold on 22nd October, 2018 for Rs. 7,50,000 (excluding GST), as second hand machine to LT. Pvt. Ltd. The GST
rate on supply of machine is 18%.
State the action which Granites Textiles Ltd. is required to take, if any, in accordance with the statutory GST provisions on the sale
of the second-hand machine.
(ICAI RTP Inter May 2018)
Computation of amount payable by A Ltd.
Reduced ITC on such used CG ITC taken on capital goods 1,80,000
Less: 30% reduction (No. of quarters = 6 ) (54,000)
[5% x 6 = 30% reduction]
Balance ITC 1,26,000
.
PAYMENT OF TAX (FCM or RCM)
.
CGST Act:
Sec 49 Payment of tax, interest, penalty and E-credit ledger: Use for paying tax dues only
other amounts. E-Cash ledger: Use for payment of tax and other dues also
Sec 50 Interest on delayed payment of tax Interest@18% p.a. [in 2 exceptional cases - 24%
p.a.]
.
.
CGST Rules:
R-85 E-liability register Debit (Demands) Credit (Demands discharged)
R-86 E-credit register Debit (ITC used / refunded) Credit (ITC availed)
R-87 E-cash register Debit (Cash used / refunded) Credit (Deposits through challan +
TDS / TCS deposited by tax
deductor or tax collector)
Note: In reality rounding off is not required at invoice level. Only consolidated payment to Government has to be rounded off.
Sec 49: Payment of tax, interest, penalty and other amounts.
E-cash Ledger (Money Deposited into it for subsequent utilization for payment of GST liability – tax, interest, fine etc.)
(1) Every deposit made
towards tax, interest, penalty, fee or any other amount by a person
by internet banking or by using credit or debit cards or National Electronic Fund Transfer or
Real Time Gross Settlement or
by such other mode* and subject to such conditions and restrictions as may be prescribed*,
.
shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be
prescribed*. [Rule 87 of CGST Rules, 2017]
* Authorized Bank [Sec 2(14) of CGST Act]: Authorized bank shall mean a bank or a branch of bank authorized
by the Government to collect the tax or any other amount payable under this Act.
E-credit Ledger (ITC self-assessed in GST Return is into this ledger which is used for payment of GST liability on outward supply)
(2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic
credit ledger, in accordance with section 41, to be maintained in such manner as may be prescribed*.
[Rule 86 of CGST Rules, 2017]
Author :
In the E-Cash ledger, information is kept minor head-wise for each major head.
MANNER OF UTILIZATION OF AMOUNT REFLECTED IN E-CASH LEDGER: The amount available in the E-Cash Ledger can
be utilized for payment of any liability for the respective major and minor heads.
Illustration.
Following is position of E-cash ledger of Mr A as at end of Aug, 2017:
MAJOR HEAD MINOR HEAD
IGST TAX INTEREST PENALTY FEE OTHER
(50,000) (5,000) ---- --- ---
Use of E-credit ledger (having CGST credit) : payment of tax dues only (that too CGST & IGST)
(4) The amount available in the electronic credit ledger may be used for
making any payment towards output tax under this Act or under the Integrated Goods and Services
Tax Act
in such manner and subject to such conditions and within such time as may be prescribed*.
[Rule 86 of CGST Rules, 2017]
Author :
Sec 2(82) of CGST Act, 2017
“Output Tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or
services or both made by him or by his agent but excludes tax payable by him on reverse charge basis;
1. Output Tax= CGST payable on taxable supply made by taxable person (made by him or his agent)
2. However, tax payable under RCM (reverse charge mechanism) shall not be considered as output tax
Thus,
E-credit ledger cannot be used for payment of interest, penalty or fees or amount other than tax.
Also, it cannot be used where GST is payable under Reverse charge.
Illustrations
Value of supply of goods and services – Rs 1,200. SGST and CGST rate on supply of goods and services is 10% each.
Value of receipt of goods and services Rs 1,000. SGST and CGST rate on receipts is 10% each.
.
Net tax payable by cash by the dealer in E- Cash Ledger Nil Nil
Surplus credit 28 28
.
Value of supply of goods and services in inter-state Rs 100. Value of supply of goods and services intra-state - Rs 1,100.
Value of goods received Inter-state - Rs 900. Value of receipt of goods and service Intra-State - Rs 100.
IGST rate on receipts and supply is 20%. SGST and CGST rate on receipt and supply is 10% each.
Less: ITC on inward supplies (IGST =Rs 180, CGST = Rs 10, CGST = Rs 10)
IGST used towards IGST, CGST and SGST (in that order) (20) IGST
CGST used towards CGST and thereafter, IGST (10) CGST
(100) IGST
SGST used towards SGST and thereafter, IGST (10) SGST
(60) IGST
Net tax payable by cash by the dealer in E- Cash Ledger Nil Nil 40
.
Balances of E-Cash / E-Credit Ledger refunded as per provisions of Sec 54 (refund provisions)
(6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty,
fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance
with the provisions of section 54.
v
Author : As per provisions of Sec 54, ITC is refundable under following 2 situations:
Sec Registered person shall be allowed refund of unutilized ITC at the end of any tax period.
54(3) Refund shall be admissible only under following 2 situations
(ii) Where credit has accumulated on account of rate of tax on inputs being higher than rate of tax on output supplies (i.e.,
in case of Inverted tax structure)
* Tax period [Sec 2(106) of CGST Act]: Tax period means the period for which the return is required to be furnished.
Thus, tax period = Month (Normally) and Quarterly (Composition Dealer)
Illustrations
Jyoti Ltd. has following tax liabilities under the provisions of Act-
S.N Particulars Amount
o (Rs.)
1. Tax liability of CGST, SGST/UGST, IGST for supplies made during August 2017 1,00,000
2. Interest & Penalty on delayed payment and filing of returns belonging to August 2017 20,000
3. Tax liability of CGST, SGST/UGST, IGST for supplies made during September 2017 1,20,000
4. Interest & Penalty on delayed payment and filing of returns belonging to September 2017 20,000
5. Demand raised as per section 73 or section 74 under CGST Act, 2017 belonging to July 2017 8,00,000
6. Demand raised as per the old provisions of Indirect Taxes 1,00,000
Jyoti Ltd. has Rs. 5,00,000 in Electronic cash ledger. Suggest Jyoti Ltd. in discharging the tax liability.
Balance in Electronic cash ledger can be used in the following manner to discharge tax liability by Jyoti Ltd.-
Particulars Amount (Rs.)
Balance available in Electronic cash ledger 5,00,000
Less-
Firstly, self-assessed tax & other dues of preceding tax period tax period
o Tax liability of CGST, SGST/UGST, IGST for supplies made during August 2017 (1,00,000)
o Interest & Penalty on delayed payment and filing of returns belonging to August 2017 (20,000)
3,80,000
then, self-assessed tax & other dues of preceding tax current tax period
o Tax liability of CGST, SGST/UGST, IGST for supplies made during September 2017 (1,20,000)
o Interest & Penalty on delayed payment and filing of returns belonging to September 2017 (20,000)
2,40,000
then, any other amounts including confirmed demands u/Sec 73 & 74
o Demand raised as per section 73 or section 74 under CGST Act, 2017 (2,40,000)
Balance in electronic cash ledger Nil
The balance amount of Rs. 5,60,000 towards demand raised under section 73 or section 74 under CGST Act, 2017 to be
discharged before discharging liability of demand rose under old provisions of Indirect Taxes.
Illustration
(imp)
If there is default in payment of tax and filing of returns, interest is payable on gross tax payable or net tax payable?
(IDTC FAQ)
Gross tax payable, if there is default in payment of tax and filing of returns, ITC will become ineligible as per
Section 16(2) (d) of the CGST Act. Therefore, the taxable person will not be allowed claim set-off of ITC for
calculation of interest.
Dec, 2017:
Outward Supplies: Gross GST on supplies made during Dec, 2017 = Rs 10,00,000
Inward Supplies: GST thereon Rs 7,00,000
.
Tax not paid, return not filed by due date – tax paid on 30th June
Interest payable on gross GST of 10,00,000
No ITC admissible till return is filed -- Sec 16(2)(d) of CGST Act, 2017
Since no ITC admissible, the outstanding liability is ‘gross GST liability’ of 10,00,000
.
Author:
ITC (CGST paid on intra-state supply) ----- used for payment of Output Liability (IGST payable on inter-state supply)
CREDIT SETTLEMENT (as done by GSTN – Goods and Services Tax Network)
Amount equal to CGST so set-off shall be transferred from ‘central tax account’ to the ‘integrated tax account’
.
Who will make this transfer? – CG (* Taxpayer is not concerned with such transfer)
Within what time frame transfer shall be made: Rules will specify the time frame
CGST Rules: Payment Mechanism
Rule 85 : Electronic Liability ledger
(1) All dues under GST to be accounted for in E-liability Register
The electronic liability register specified under section 49(7) shall be maintained in FORM GST PMT-01 for each
person liable to pay tax, interest, penalty, late fee or any other amount on the common portal
and all amounts payable by him shall be debited to the said register .
.
(2) Use/Debits into E-Liability register
The electronic liability register of the person shall be debited by-
(a) the amount payable towards tax, interest, late fee or any other amount payable as per the return
furnished by the said person;
(b) the amount of tax, interest, penalty or any other amount payable as determined* by a proper
officer in pursuance of any proceedings under the Act or as ascertained by the said person;
(c) the amount of tax and interest payable as a result of mismatch under section 42 or section 43 or section
50; or
(d) any amount of interest that may accrue from time to time.
(4) If the refund so filed is rejected, either fully or partly, the amount debited under sub- rule (3), to the extent of
rejection, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM
GST PMT-03.
.
Explanation: For the purposes of this rule, it is hereby clarified that a refund shall be deemed to be rejected,
if the appeal is finally* rejected or
if the claimant gives an undertaking to the proper officer that he shall not file an appeal.
.
(5) E-Credit Ledger: Only permissible entries shall be made (its usage is restricted in comparison to E-cash ledger)
Save as provided in the provisions of this Chapter, no entry shall be made directly in the electronic credit ledger
under any circumstance.
Author :
1. Only e-Challan: Manual/physical challans are not allowed under the GST Challan. It is mandatory to generate challan
online on the GST portal.
2. Single challan for all tax dues: Same challan shall be used for payment of all taxes, interest, penalty or other dues.
3. Validity period of Challan: Challan once generated shall be valid for 15 days
4. CPIN (Common Portal Identification Number): it is created for every challan successfully generated over common
portal. (CPIN- the challan- is valid for 15 days)
5. Payment through challan: Different modes of deposits (as permitted) shall be used for payment of tax dues.
6. CIN (Challan Identification Number): CIN is generated by banks, once payment in lieu of a generated challan is
successful. [it is 17 digit number – 14 digit CPIN + 3 Digit Bank Code]
a. CIN is generated only when payment has been realized and credited to the appropriate government account.
b. CIN is communicated by authorized bank to taxpayer as well as to GSTN.
.
(iv) Over the Counter payment through authorised banks for deposits up to ten thousand rupees per
challan per tax period, by cash, cheque or demand draft:
Provided that the restriction for deposit up to ten thousand rupees per challan in case of an Over
the Counter payment shall not apply to deposit to be made by –
(a) Government Departments or any other deposit to be made by persons as may be notified by the
Commissioner in this behalf;
(b) Proper officer or any other officer authorised to recover outstanding dues from any person, whether
registered or not, including recovery made through attachment or sale of movable or immovable properties;
(c) Proper officer or any other officer authorised for the amounts collected by way of cash, cheque or demand
draft during any investigation or enforcement activity or any ad hoc deposit:
Explanation.– For the purposes of this sub-rule, it is hereby clarified that for making payment of any amount
indicated in the challan, the commission, if any, payable in respect of such payment shall be borne
by the person making such payment.
Author: Suppose, GST payment due for the tax period is 20 lakhs. Bank will be charging commission for collection of GST on behalf
of CG. But this commission will be charged by bank from the taxpayer and not to Government. Thus, bank will charge (Commissio n
+ GST applicable) to the taxpayer.
(4) Payment by unregistered person: TIN will be generated to facilitate payment
[Note: Unregistered person is not allowed ITC]
Any payment required to be made by a person who is not registered under the Act, shall be made on the
basis of a TEMPORARY IDENTIFICATION NUMBER generated through the common portal.
.
(5) Deposits through NEFT/ RTGS: allowed from ANY BANK
Where the payment is made by way of National Electronic Fund Transfer or Real Time Gross Settlement
mode from any bank, the mandate form shall be generated along with the challan on the common portal
and the same shall be submitted to the bank from where the payment is to be made:
.
Provided that the mandate form shall be valid for a period of fifteen days from the date of generation of challan.
(11) If the refund so claimed is rejected, either fully or partly, the amount debited under sub-rule (10), to the extent
of rejection, shall be credited to the electronic cash ledger by the proper officer by an order made in FORM
GST PMT-03.
.
Explanation 1.- The refund shall be deemed to be rejected if the appeal is finally rejected.
.
Explanation 2—For the purposes of this rule, it is hereby clarified that a refund shall be deemed to be rejected,
if the appeal is finally* rejected or
if the claimant gives an undertaking to the proper officer that he shall not file an appeal.
.
(3) UIN for credit to e-liability register for credits other than those due to payment
A unique identification number shall be generated at the common portal for each credit in the
electronic liability register for reasons other than those covered under sub-rule (2).
Tax Invoice, Credit & Debit Notes, E-way bill
Bill of Supply
Debit Note
Credit Note
Delivery Challan
.
.
CGST Act:
.
Section Matter
Sec 31 Tax Invoice
[Tax Invoice + Revised Tax Invoice +Bill of Supply + Receipt Voucher + Refund Voucher + Payment Voucher]
Sec 32 Prohibition on unauthorized collection of tax
Unregistered person cannot collect GST
(1) A person who is not a registered person shall not collect in respect of any supply of goods or services
or both any amount by way of tax under this Act.
.
RECIPIENT
Tax Invoice/ Invoice Sec. 2(66) Sec 31(3)(f)
Payment Voucher Sec. 2(66) Sec 31(3)(g) R-52 Payment Voucher
CGST Act, 2017
Taxable
Supply
Nil rated Goods Not RP ---- ---- Yes
(Notified rate- Nil)
Differences between
Invoice/ Tax invoice -- Sec 31(1)/(2) Bill of Supply -- Sec 31(3)(c)
Who shall Registered Supplier + Supplying taxable Registered Supplier + Supplier of
issue? goods + Not working under composition Exempted Goods
scheme Registered Supplier + working under
composition scheme or
.
Use by
recipient
(B2C) Supply No ITC admissible to recipient No ITC admissible to recipient
Invoice serves purpose of booking expense BoS serves purpose of booking expense
Consolidated Low value Supplies (less than 200/-) + (B2C) Low value Supplies (less than 200/-) + (B2C)
invoice/ BoS Supply – where recipient not demanding invoice/bill Supply– where recipient not demanding invoice/bill
Illustrations
Mr A is supplier of following goods:
1) Alcoholic Liqour [SP 3,000 + VAT]
2) Keyboard – [SP 2,000 + GST@Nil]
3) Mobile Phone – [SP 10,000 + GST@18%]
4) Cigarette – [SP 3,000 + GST@ 28% (Cess Extra)]
5) Soft-Drink- [SP 500 + GST@ 28% (Cess Extra)]
.
Mr A is GST Registered.
Discuss the invoicing requirement under following cases:
Supply made Nature of supply Tax Invoice
1) Alcoholic Liqour Non-taxable supply Bill of Supply Sec 31(3)(c) + R-49
7) Alcoholic Liquor + Soft-Drink Taxable supply + Option-1: One document Sec 31(1) + R-46-A
(separately charged) Non-taxable supply Tax invoice-cum-bill of supply
Option-2: Two documents
Sec 31(1) + R-46
Tax invoice (Soft Drink)
Sec 31(3)(c) + R-49
Bill of supply (Liquor)
Ans.
He needs to tax invoice in all the cases.
.
Supply (3) & (4) are zero-rated supply (not exempt supply) and hence, tax invoice shall be raised for such supplies also.
Supply (3): Supply shall carry endorsement ‘supply meant for export’
Supply (3): Supply shall carry endorsement ‘supply to SEZ unit’
Jain & Sons is a trader dealing in stationery items. It is registered under GST and has undertaken following sales during the day:
Recipient of Supply Amount
1) Raghav Traders – a registered retail trader 190
2) Dhruv Enterprises – an unregistered trader 358
3) Gaurav – a painter (unregistered) 500
4) Oberoi Orphanage – an unregistered entity 188
5) Aaradhya – a Student (unregistered) 158
None of the recipients require a tax invoice [Raghav Traders being a composition dealer].
Determine in respect of which of the above supplies, Jain & Sons may issue a Consolidated Tax Invoice instead of Tax Invoice at the end of the
day?
[ICAI Study Material]
Solution
1) Low value supplies but recipient is GST registered – Tax Invoice is mandatory
2) Not Low value supplies– Tax Invoice is mandatory
3) Not Low value supplies– Tax Invoice is mandatory
4) Low value supplies and recipient is GST unregistered – Tax Invoice is not mandatory (presuming recipient is not asking for tax invoice)
5) Low value supplies and recipient is GST unregistered – Tax Invoice is not mandatory (presuming recipient is not asking for tax invoice)
In respect of supplies to Oberoi Orphanage and Aaradhaya, a single consolidated tax invoice can be generated at the end of the day.
1) Sale to A Ltd. (his distributor in other state). As per contract, Mr R to deliver goods at A Ltd’s office
2) Goods sent on approval to B Ltd. (new client within state). B Ltd. to communicate his acceptance/rejection within 3 days of
delivery of goods.
Solution
1) Sale to A Ltd. (his distributor in other state). As per contract, Mr R to deliver goods at A Ltd’s office
Obligation of Supplier (Mr R)
Mr R shall raise tax invoice at time of removal/dispatch of goods.
Invoice shall be raised in 3 copies – original for buyer/recipient, duplicate for transporter and triplicate for supplier.
Invoice shall mention ‘Place of Supply + Name of State’ (as supply is inter-state)
..
2) Goods send on approval to B Ltd. (new client within state). B Ltd. to communicate his acceptance/rejection within
3 days of delivery of goods.
Obligation of Supplier (Mr R)
(At time of dispatch)
Mr R cannot raise tax invoice at time of removal/dispatch of goods – as this removal/transfer is not treated as supply at this
moment. Invoice shall be raised at the time when the transaction is treated as supply as per GST provisions.
Goods shall be dispatched with ‘delivery challan’.
Delivery challan shall be raised in 3 copies – original for consignee, duplicate for transporter and triplicate for consignor.
(Subsequent acceptance of goods by recipient)
Now, invoice shall be raised.
Invoice shall be raised in 3 copies – original for buyer/recipient, duplicate for transporter and triplicate for supplier.
Invoice need not mention ‘Place of Supply + Name of State’ (as supply is intra-state)
.
A Ltd. is manufacturer supplier of liquid gas which is subject to GST @12%.
The liquid gas is a product of exceptional nature because quantity of removal can be ascertained only after goods are actually delivered
from special tankers into the tank of buyers.
A ltd. removes liquid gas from its factory in a special tanker lorry. At stage of removal from factory, provisional quantity is determined
(Gross weight minus tare weight/unladen weight/empty weight of lorry tanker). Then, liquid gas is delivered to each customer and quantity
delivered is recorded.
Advice A Ltd. as to how it shall comply with invoicing requirement under GST law.
Solution
Considering the special nature of product and consequent requirements of gas industry, GST law has made special provisions as to invoicing.
Rule 55 of CGST Act, 2017 makes special provisions in this regard.
Obligation of Supplier (A Ltd.)
(At time of dispatch)
Since exact quantity removed is not known at time of removal of goods from the premises, the liquid gas is permitted to be re moved from
the premises on basis of ‘delivery challan’.
Delivery Challan shall be raised in 3 copies – original for consignee, duplicate for transporter and triplicate for consignor.
Provisional Quantity shall be mentioned on the delivery challan.
In April, 2018, Vimal has purchased fabric and avails ITC on such fabric.
He now wishes to send this fabric to Mr C for getting the job-work done.
.
Advice A Ltd. as to how it shall comply with invoicing requirement under GST law.
Solution
Transfer of goods for job-work is not considered as supply but the consignor/principal needs to follow the specified procedure as laid down
in Sec 143 of CGST Act, 2017 read with Rule 45 of CGST Rules, 2017. It basically requires that quarterly intimation of goods sent for job-
work shall be submitted over the common portal [Form GST ITC 04]. The intimation contains the details of goods sent for job -work as well
as goods received back after job-work.
Obligation of Supplier (Vimal Ltd.)
(At time of dispatch)
Since transfer of goods for job-work does not constitute supply, the removal of such goods from the premises shall be under ‘delivery challan’ .
Delivery Challan shall be raised in 3 copies – original for consignee, duplicate for transporter and triplicate for consignor.
2) A Ltd. is supplier of cement making machinery. The machinery is of huge size and their removal necessitated removal in CKD/Condition.
Removal of a single machinery is done in 3 installments.
Solution
1) Hero Cycle Industries ltd.- removal of cycles in CKD/ SKD condition
Obligation of Supplier (Hero Cycles)
it shall raise tax invoice at time of removal/dispatch of goods.
Invoice shall be raised in 3 copies – original for buyer/recipient, duplicate for transporter and triplicate for supplier.
Invoice shall mention ‘Place of Supply + Name of State’ (as supply is inter-state)
..
.
2. Credit & Debit Note
Under GST, the credit or debit note is issued only when they are preceded by a tax invoice in respect of a taxable supply.
Summary Provisions:
REGISTERED SUPPLIER
Initially Tax invoice issued
Tax Adjustment Reduction of Output tax liability Increase of Output tax liability
(supplier) (subject to doctrine of unjust enrichment)
Tax Invoice
Section 31 : Tax invoice.
GOODS: Invoicing + Time limit
(1) A registered person supplying taxable goods shall, before or at the time of,—
(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other
particulars as may be prescribed*: [Rule 46 of CGST Rules, 2017]
Provided that the Government may, on the recommendations of the Council, by notification, specify the categories
of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may
be prescribed. [Rule 55 of CGST Rules, 2017]
Author :
Registered Person supplying goods shall be bound to issue invoice.
Tax invoice is primary document evidencing the supply. It It is also vital for availing tax credit. Unless the
creates time of supply (i.e., point of time when GST becomes recipient has tax invoice in his possession, he
payable) cannot take credit
At time of
removal of goods or
delivery of goods Goods have to be removed under cover of tax invoice.
In general, no goods can be transported without tax invoice. (law
has provided certain exceptional situations – proviso to Sec 31(1) read with
rule 55 of CGST Rules, 2017)
Before
removal of goods or
delivery of goods In case he does so, his time of supply will arise at that very point
itself and he will become liable liable to pay GST.
.
.
Description, quantity and value of goods, GST charged on goods
Other particulars as prescribed by Rule 46 of CGST Rules
Illustration:
Supply involving movement of goods
Order received Dispatch of goods Receipt of goods Payment Invoicing –
At recipient’s premises On/before
1) 10th Oct 12th Oct 18th Oct 30th Nov
(Contract for delivery at (owned vehicle of supplier)
buyer’s premises)
2) 10th Oct 12th Oct 18th Oct 30th Nov
(Contract for delivery at (through transporter)
buyer’s premises)
Provided that the Government may, on the recommendations of the Council, by notification and subject to such
conditions as may be mentioned therein, specify the categories of services in respect of which—
(a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or
(b) tax invoice may not be issued.
[Rule 54 of CGST Rules, 2017]
Author:
Supplier of service may issue tax invoice
- before provisioning of service (dry cleaner may issue invoice at time of receipt of goods
for dry cleaning)
- after provisioning of service, but within 30 (Taxiwala raising invoice after providing service of
days / 45 days transportation of passengers)
(Beauty parlour raising invoice after providing services of
45 days Insurer beauty treatment)
Banking Company (GST practitioner raising invoice after providing GST
FI (including NBFC) return filing service to the client)
30 days All others
Quarterly Invoicing in certain cases of supplies between deemed distinct persons
Insurer + Banking Co,. + FI (including NBFC) Telecom Operator + Other Notified Category of
supplier
Services between deemed distinct persons (i.e., separately registered premises of such entities) -
Inter-Branch Services
Invoice may be raised at any of following 2 stages
– before at the time such supplier records the same in his books of account;
– before the expiry of the quarter during which the supply was made.
Illustration:
XYZ Bank – [HO + Zonal Branches + Regional Branches + Local Branches]
One of local branch received a loan applicant from Mr A.
As per policy, loan application will be handled by Regional Branch.
Local branch received processing fees for the loan sanctioned.
Regional Branch will raise invoice for his work of handing loan application.
Invoice for its service can be raised by regional branch by any of following 2 dates:
as and when it records the same in its books or
before expiry of quarter in which loan was handled
.
Special Cases:
Other documents acceptable as Tax Invoice – Rule 54 of CGST Rules, 2017
1) Transportation of goods: ROAD Transportation by GTA
Any other document issued by GTA which is containing information prescribed u/Rule 46 and additional
particulars prescribed u/Rule 54(3) shall be acceptable as tax invoice.
Low Value Supplies: No need of individual tax invoice (instead issued Consolidated Tax Invoice for the day)
(b) a registered person may not issue a tax invoice if the value of the goods or services or both supplied is less
than two hundred rupees subject to such conditions and in such manner as may be prescribed*;
(d) a registered person shall, on receipt of ADVANCE PAYMENT with respect to any supply of goods or services
or both, issue A RECEIPT VOUCHER or any other document, containing such particulars as may be
prescribed*, evidencing receipt of such payment;
REFUND VOUCHER: (for documenting refund of ADVANCES)
(e) where, on receipt of advance payment with respect to any supply of goods or services or both the registered
person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in
pursuance thereof, the said registered person may issue to the person who had made the payment, a REFUND
VOUCHER against such payment;
.
(f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 (i.e.,
Recipient liable to pay GST under RCM) shall issue an INVOICE in respect of goods or services or both received
by him from the supplier who is not registered on the date of receipt of goods or services or both;
PAYMENT VOUCHER: (documenting any payment made for supply under RCM)
(g) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 (i.e.,
Recipient liable to pay GST under RCM) shall issue a PAYMENT VOUCHER at the time of making payment
to the supplier.
CONTINUOUS SUPPLY OF GOODS: Invoicing + Time limit
(4) In case of CONTINUOUS SUPPLY OF GOODS, where successive statements of accounts or successive payments
are involved,
the invoice shall be issued before or at the time
each such statement is issued or, as the case may be,
each such payment is received.
Author :
.
: Supply of Goods will be continuous supply of goods under any of following 2 situations:
.
Situation 1 Supply of ANY GOODS fulfilling following conditions
a) Provided continuously or on recurrent basis (under a contract);
b) Supplier invoices recipient on a regular or periodic basis
Situation 2 Supply of NOTIFIED GOODS (even if it does not fulfill above criteria)
* No notification at present.
Illustration
A Ltd. is a private coaching Institute, GST registered.
It has entered into contract with V-Stationary Private Ltd. for supply of stationary on regular basis.
As per contract, V-stationary will supply stationary to A Ltd. as and when ordered for by A Ltd.
V-Stationary will prepare consolidated statement of supply covering 2 months supply.
Post verification of this statement, A Ltd. will pay within next 10 days.
2. Vendor managed inventory (VMI) where the agreed periodicity of billing is, say, monthly/fortnightly etc;
3. Supply of say, 5 Litres cans on as and when required basis with a frequency of monthly billing under a contract;
.
CONTINUOUS SUPPLY OF SERVICES: Invoicing + Time limit
(5) Subject to the provisions of clause (d) of sub-section (3),
in case of CONTINUOUS SUPPLY OF SERVICES,—
(a) where the due date of payment is ascertainable the invoice shall be issued on or before the due
from the contract, date of payment;
(b) where the due date of payment is not ascertainable the invoice shall be issued before or at the time
from the contract, when the supplier of service receives the
payment;
(c) where the payment is linked to the completion of the invoice shall be issued on or before the date
an EVENT, of completion of that event.
Author :
: Supply of services will be continuous supply of services under any of following 2 situations:
.
Situation 1 Supply of ANY SERVICE fulfilling following conditions:
(a) Provided continuously or on recurrent basis (under a contract);
(b) Contract period > 3 months
(c) There are periodic payment obligations
Situation 2 Supply of NOTIFIED SERVICES (even if it does not fulfill above criteria)
* No notification at present..
Illustration
A Ltd. is a private coaching Institute, GST registered.
It is running following courses:
Courses Duration Lectures Schedule Payment Schedule CSS or not Invoicing provisions
Animation 1 year Daily (except Sunday) Enrollment – 20,000
Course After 3 months – 50,000
After next 3 months –
Balance – 30,000
MS Word 2 Months Daily (except Sunday) Enrollment – 3,000
and Excel After 3 months – 5,000
After next 3 months –
Balance – 2,000
GST Course 3 months Saturday and Sunday Enrollment – 10,000
Accounting of week After 3 months – 15,000
After next 3 months –
Balance – 5,000
Mobile 5 Months 5 days a week Enrollment – full fee
Application
Courses
.
Illustration
4. Labour Contractor/ Manpower supplier enters into contract with Builder for supply of manpower for 12 months
– recipient builder to make payment by 15 th of succeeding month
Supply of services ceases before completion of supply: Timing of Invoice
(6) In a case where the supply of services ceases under a contract before the completion of the supply,
.
the invoice shall be issued at the time when the supply ceases and
.
such invoice shall be issued to the extent of the supply made before such cessation.
Illustration
Mr A, an architect, entered into contract with DLF Ltd for its new residential project (Agreed consideration = 10,00,000 + GS T, as
applicable). As per contract, payment will be made after completion of service by Mr A.
DLF Ltd. failed to obtain requisite government clearances/permissions so it informed Mr A as to cancellation of contract between
them.
Mr A has already started with the work but not completed the design.
Whether Mr A is required to issue tax invoice in respect of this supply, which has not been completed?
Illustration
Mr A, GST registered, is supplier of X goods.
It has send certain goods on approval to Mr Z. (Date of removal is 20 th Jan, 2018)
Discuss the invoicing requirement under following situations:
.
Mr Z approves the goods on 2nd Sep, 2018 (i.e., beyond 6 months of removal – 6 months expired on 20 July, 2018)
.
Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and
interest on such supply has been passed on to any other person.
.
.
Debit Note: Issued by Registered Supplier (2 situations)
(3) Where a tax invoice has been issued for supply of any goods or services or both and
the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable
in respect of such supply,
the registered person, who has supplied such goods or services or both, shall issue to the recipient A DEBIT NOTE
containing such particulars as may be prescribed*. (Rule 53 of CGST Rules, 2017)
.
Explanation. For the purposes of this Act, the expression “debit note” shall include a supplementary invoice.
Author: SUPPLEMENTARY INVOICE issued by supplier shall also constitute ‘debit note’ [Explanation to Sec 34]. Thus, any
supplementary invoice issued by supplier shall also contain the above mentioned particulars.
(e) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient
is un-registered and where the value of taxable supply is fifty thousand rupees or more ;
(f) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient
is un-registered and where the value of taxable supply is less than fifty thousand and the recipient requests that such details be recorded
in the tax invoice
(m) place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;
(n) address of delivery where the same is different from the place of supply ;
Supply by Mr A of Delhi to Mr B of UP
Place of supply as per GST law = Principal place of business of recipient (Mr B) = UP
Thus, such supply is inter-state supply (IGST chargeable)
.
Invoicing requirement of Mr A
Mention POS (UP) and Name of State (UP)
Also mention, address of delivery of goods (Maharashtra)
.
GST Sec 31(3) Supplier cannot raise Tax Recipient shall get himself GST registered (incase
Unregistered + R-46 Invoice he is not already a registered taxpayer) as he has to
He will raise commercial discharge his GST liability.
invoice / bill. Now, recipient required to issue ‘invoice / tax invoice’
as per Sec 31(3)(f). This tax invoice shall be raised
at time of receipt of goods and/or services.
Recipient shall also generate ‘payment voucher’ at
time of making payment to supplier. [Sec 31(3)(g)]
.
(p) signature or digital signature of the supplier or his authorized representative:
Relaxation as to mentioning of HSN Code and/or SAC
Provided that
the Commissioner may, on the recommendations of the Council, by notification, specify -
(i) the number of digits of HSN code for goods or the Accounting Code for services, that a class of registered persons
shall be required to mention, for such period as may be specified in the said notification , and
(ii) the class of registered persons that would not be required to mention the HSN code for goods or the Accounting
Code for services, for such period as may be specified in the said notification:
Note: Importers / Exporters (doing import/export which are inter-state supply under GST law): HSN of 8 digits is compulsory
(as it has to be compatible with global standards)
Self-Invoice in case of person liable to pay tax under RCM: Recipient shall self-sign the invoice
Provided further that
where an invoice is required to be issued under clause (f) of sub-section (3) of section 31, it shall bear the
signature or digital signature of the recipient or his authorized representative:
ZERO RATED SUPPLY: Invoicing thereof shall prominently display the option of zero-rating has been opted for
Export Supply: Special Details of unregistered recipient of export supply to be mentioned
Provided also that
in case of export of goods or services,
the invoice shall carry an endorsement
“SUPPLY MEANT FOR EXPORT ON PAYMENT OF INTEGRATED TAX” or
“SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT
OF INTEGRATED TAX”, as the case may be,
and
shall, in lieu of the details specified in clause (e) , contain the following details:
(i) name and address of the recipient;
(ii) address of delivery; and
(iii) name of the country of destination:
Author:
1. Exports are zero-rated under GST – Sec 16 of IGST Act.
2. Export shall prominently indicate
– ‘Supply meant for Export on payment of IGST’ or
– ‘Supply meant for Export under Bond/LuT without payment of IGST’
3. Further, recipient of export supply will be unregistered under GST. In his case, following details are required:
1) Name and address of recipient
2) Address of Delivery;
3) Name of destination country;
Author :
Sec 31(3)(b): It provides that a registered person may not issue tax invoice:
if the value of supply of goods and/or services is less than Rs 200
Said relaxation is subject to prescribed conditions (as mentioned in above proviso of Rule 1).
.
Conditions to be fulfilled
1) Recipient is not a registered person.
.
2) Recipient does not require tax invoice.
This condition means if unregistered recipient demands tax invoice from the registered supplier (for any reason whatsoever
– like claiming expenditure in his office), then registered supplier shall provide him tax invoice.
.
.
.
Rule 47 : TIME LIMIT for issuing tax invoice (by supplier of SERVICES)
Supply of Services: Invoice within 30 days of supply of service (Insurance / banking Co. – 45 days allowed)
The invoice referred to in rule 46, in case of taxable supply of SERVICES, shall be issued within a period of thirty days
from the date of supply of service:
Provided that
where the supplier of services is an insurer* or a banking company or a financial institution, including a non-
banking financial company,
the period within which the invoice or any document in lieu thereof is to be issued shall be forty five days from
the date of supply of service:
Supply of Services between ‘deemed distinct persons’: Invoicing before/at ‘entry in books’ or ‘expiry of quarter’
Provided further that
an insurer* or a banking company or a financial institution, including a non- banking financial company, or
a telecom operator, or
any other class of supplier of services as may be notified by the Government on the recommendations of the Council,
making taxable supplies of services between distinct persons as specified in section 25,
may issue the invoice
before or at the time such supplier records the same in his books of account or
before the expiry of the quarter during which the supply was made.
Author : Tax period: The period for which the return is required to be furnished – Sec 2(106) of CGST Act, 2017
.
Rule 49 : Bill of supply
Particulars to be stated on Bill of Supply
A bill of supply referred to in Section 31(3)(c) shall be issued by the supplier containing the following details:-
(a) name, address and GSTIN of the supplier;
(b) a consecutive serial number not exceeding sixteen characters,
in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-
” and “/” respectively, and any combination thereof,
unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
.
Provisos to Rule 46 as applicable to tax invoice shall also be applicable to bill of supply
Provided that
the provisos to rule 46 shall, mutatis mutandis, apply to the bill of supply issued under this rule.
Covering document of ‘non-taxable supply’ = Bill of Supply for purposes of GST Act
Provided further that
any tax invoice or any other similar document issued under any other Act for the time being in force in respect of any
non-taxable supply shall be treated as bill of supply for the purposes of the Act.
Author :
Non-taxable Supply: Supply which is not leviable to CGST or IGST – Sec 2(78) of CGST Act
Exempt Supply includes non-taxable supply [Sec 2(47) of CGST Act]
.
.
Rule 50 : Receipt voucher
Particulars in Receipt Voucher
A receipt voucher referred to in Section 31 (3)(d)* shall contain the following particulars:
(a) name, address and GSTIN of the supplier;
(b) a consecutive serial number not exceeding sixteen characters,
in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash symbolised as
“-” and “/” respectively, and any combination thereof,
unique for a financial year;
(c) date of its issue;
(d) name, address and GSTIN or UIN, if registered, of the recipient;
(e) description of goods or services;
(f) amount of advance taken;
(g) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(h) amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union
territory tax or cess);
(i) place of supply along with the name of State and its code, in case of a supply in the course of inter-State trade or commerce;
(j) whether the tax is payable on reverse charge basis ; and
(k) signature or digital signature of the supplier or his authorized representative:
Author :
Every registered supplier shall document receipt of advance payments towards supply of any goods and/ or services
by way of issuance of ‘receipt voucher’ – Sec 31(3)(d) of CGST Act, 2017
Treatment of ADVANCE: When either applicable rate of tax or nature of supply is not determinable
Provided that
where at the time of receipt of advance,
(i) the rate of tax is not determinable, the tax shall be paid at the rate of eighteen per cent.;
(ii) the nature of supply is not determinable, the same shall be treated as inter-State supply.
Author :
Illustration (When rate of tax is not determinable)
.
Mr A, registered supplier of goods entered into contract with Mr B for supply of goods ‘X’ and ‘Y’ for a consideration of 2,00,000
and 3,00,000 respectively.
Goods ‘X’ and “Y’ are chargeable to different rates of GST.
Mr B made a deposit (which under GST is treated as advance) of Rs 50,000 towards such supplies, without mentioning this
advance is towards supply of X / Y.
In such case, tax @18% shall be paid on advance.
A revised tax invoice referred to in section 31 and credit or debit note referred to in section 34
shall contain the following particulars -
(a) the word “Revised Invoice”, wherever applicable, indicated prominently;
(b) name, address and GSTIN of the supplier;
(c) nature of the document;
(b) a consecutive serial number not exceeding sixteen characters,
in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash symbolised
as “-” and “/” respectively, and any combination thereof,
unique for a financial year;
(e) date of issue of the document;
(f) name, address and GSTIN or UIN, if registered, of the recipient;
(g) name and address of the recipient and the address of delivery, along with the name of State and its code , if such recipient
is un-registered;
(h) serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
(i) value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be,
debited to the recipient ; and
(j) signature or digital signature of the supplier or his authorized representative:
(2) Revised Tax Invoice: covering supplies made during period of effective date of registration and actual issuance of
registration certificate
Every registered person who has been granted registration with effect from a date earlier than the date of issuance
of certificate of registration to him*,
may issue revised tax invoices in respect of taxable supplies effected during the period starting from the effective
date of registration till the date of issuance of certificate of registration :
CONSOLIDATED Revised Tax Invoice (recipient wise consolidation)
(intra-state supply to unregistered person: consolidated revised tax invoice may be issued to the recipient)
Provided that
the registered person may issue a consolidated revised tax invoice in respect of all taxable supplies made to a
recipient who is not registered under the Act during such period:
(inter-state supply to unregistered person: consolidated invoice may be issued to the recipient)
Provided further that
in case of inter-State supplies,
where the value of a supply does not exceed two lakh and fifty thousand rupees, a consolidated revised invoice
may be issued separately in respect of all recipients located in a State, who are not registered under the Act.
Author :
CGST Rules : Rule 10 (Issue of Registration Certificate):
Person becoming Registration applied for Registration Effective date of registration
liable for registration Granted
Within 30 days Date on which applicant becomes liable
(timely application) to registration – Rule 10(2)
illustration
10 Dec, 2017 Supplier become liable for registration (as threshold crossed)
20 Dec, 2017 Registration application made
28 Dec, 2017 Registration Granted
In this case, registration granted shall be effective from 10 Dec, 2017 (date on which supplier becomes liable to registration).
E.g. E.g.
Mr A supplies goods to Mr B (recipient) Mr P supplies goods to Mr Q (recipient)
Following intra-state supplies made to Mr B during Following inter-state supplies made to Mr Q during that
that period: period:
1) Supply-1: Value 60,000; 1) Supply-1: Value 60,000;
2) Supply-2: Value 50,000; 4) Supply-2: Value 50,000;
3) Supply-3: Value 3,00,000; 5) Supply-3: Value 3,00,000;
. .
Mr A can issue single/consolidated RTI to Mr B Mr P can issue single/consolidated RTI covering supply-
(Total invoice value = 4,10,000)
.
1 and supply-2 (Total invoice value = 1,10,000)
.
. ..
.
(3) Tax payable under Sec 74 / 129 / 130 : ITC not admissible
Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of
section 74 or section 129 or section 130
shall prominently contain the words “INPUT TAX CREDIT NOT ADMISSIBLE”.
.
Author :
Section Subject matter
Sec 74 Demand Adjudicated of GST not paid/ short-paid: MALA-FIDE cases
Sec 129 Transportation of goods in contravention of provisions of GST Act: Seizure of goods and subsequent release
of goods upon payment of GST
Sec 130 Confiscation of goods: Redemption thereof upon payment of ‘redemption fine’, ‘penalty’ and ‘GST’ also
Rule 54 : Tax invoice in SPECIAL CASES
(1) Invoicing by ISD: refer it as ISD INVOICE / ISD Credit Note
An ISD invoice ……… . : Discussed in Chapter of ITC
.
(5) All above special provisions equally applicable to BoS / Vouchers / Revised Tax Invoice / Debit or Credit Notes
The provisions of sub-rule (2) or sub-rule (4) shall apply, mutatis mutandis, to the documents issued under
rule 49 (i.e., Bill of Supply) or
rule 50 (i.e., Receipt Voucher) or rule 51 (i.e., Refund Voucher) or rule 52 (i.e., Payment Voucher) or
rule 53 (i.e., Revised Tax Invoice and Credit / Debit Notes).
Author : Special provisions of Rule 54(2) / (3) / (4) shall also be applicable to documents issued under Rule 49, 50, 51, 52, 53.
.
Rule 55 : Transportation of goods without issue of invoice
(1) Delivery Challan for Certain transportation of goods
For the purposes of
(a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board, (Nothing notified at present)
(3) Transportation under delivery challan- Declared over portal in E-way Bill
Where goods are being transported on a delivery challan in lieu of invoice,
the same shall be declared as specified in Rule 138 (i.e., in E-Way Will)
Author: Rule 138 requires declaration of goods under transportation by transporter. Transporter needs to declare goods
in e-way bill. (refer Annexure)
(4) If Tax invoice cannot be issued at time of removal of goods, then issue tax invoice after delivery
Where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be
issued at the time of removal of goods for the purpose of supply,
the supplier shall issue a tax invoice after delivery of goods.
(5) Transportation of goods in SKD /CKD form: Invoice for total amount with first lot and delivery challan for subsequent lots
Where the goods are being transported in a semi knocked down or completely knocked down condition,
(a) the supplier shall issue the complete invoice before dispatch of the first consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice;
(c) each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified
copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last consignment .
Author : Manner of Transportation of goods in CKD/ SKD Condition (say, generator)
1) Make complete invoice
2) Start Consignment Documents to be prepared Documents accompanying consignment
Dispatch First Invoice Duplicate copy of Invoice (transporter’s copy)
consignment
Subsequent Delivery Challan – 3 copies Delivery Challan (duplicate copy of transporter)
consignment (giving reference to invoice) Certified copy of Invoice
Last Delivery Challan – 3 copies Delivery Challan (duplicate copy of transporter)
Consignment (giving reference to invoice) ORIGINAL copy of Invoice (buyer’s copy)
.
Author:
PIC (person-in-cahrge) of a conveyance = transporter carrying consignment of goods
Such PIC when carrying goods of value more than Rs 50,000 shall carry with him following:
o Documents = E-way Bill** + Invoice / Bill of Supply / Delivery Challan
o Devices = RFID Reader (Radio Frequency Identification Reader) – this device is to be and get the said device
embedded on to the conveyance
and the said person shall be liable to produce the documents and devices and also allow the inspection of goods .
Presently, e-way bill system has been withheld by CG due to technical glitches.
Therefore, provisions related to e-way bill not applicable.
RETURNS
Overseas Supplier of OIDAR Services (providing service to non-GST registered Indian recipient);
.
Signing of Returns
A taxpayer needs to electronically sign the submitted returns otherwise it will be considered not-filed.
Taxpayers can electronically sign their returns using a DSC (mandatory for all types of companies
and LLPSs), E-sign (Aadhaar-based OTP verification), or EVC (Electronic Verification Code sent to
the registered mobile number of the authorized signatory).
Author:
1. Tax Period = Monthly / Quarterly
.
Form of Return Different forms prescribed for different persons [GSTR-1 to GSTR-10]1
.
GSTR-3 Monthly Return for a Normal TP including 20th of the next month
normal taxpayer casual TP
GSTR-5 Monthly Return for a Non- Non-resident TP 20th of the month succeeding
Resident Taxpayer the tax period & within 7 days
after expiry of registration
GSTR-6 Monthly Return for an Input Input Service 13th of the next month
Service Distributor (ISD) Distributor
GSTR-7 Monthly Return for Tax Deductor 10th of the next month
authorities deducting tax at (u/Sec 51)
source
GSTR-8 Monthly Statement for E- ECO- tax collector 10th of the next month
Commerce Operator (u/Sec 52)
depicting supplies effecting
through it
1 GSTR-11 is filed by UIN Holder. GSTR-11 is statement of inward supplies filed by UIN Holder which is used by it for filing refund
claim of input tax paid by such entity on inward supplies.
1. Statement of OUTWARD SUPPLIES - Sec 37
3) Frequency Monthly (tax period) Tax period not over, still to furnish GSTR-
1 in following cases:
4) Due date? On/before 10th of next month A regular TP who has applied for cancellation
of registration will be allowed to file GSTR-1
after confirming receipt of the application.
A casual TP shall file GSTR-1 after closure of
business
5) Extension Commissioner / Commissioner of State/UT may Time to time extension have been given.
extend [Refer-Chapter ‘GST- A quick Review’]
9) Rectification Yes
Unmatched transactions (arising due to application of Sec
42 (ITC matching) or Sec 43 (Cr Note Matching) shall be
rectified
- Related tax (alognwith interest) shall be paid
Time-Limit for rectification: Earlier of following 2 dates:
(a) Filing of Return for Sep Month (following end of FY);
(b) Filing of Annual Return (for the FY)
Diagrammatic flow of filing process of GSTR-1
.
Supplier files details of his outward supplies of a month GSTR-1 furnished by the supplier is made available
in Form GSTR–1 by 10th day of the month succeeding to the recipient(s) in Form GSTR-2A after 10th day
the relevant month. of the month succeeding the relevant month.
.
Modifications made by the recipient in GSTR-2 are made Recipient reviews GSTR 2A and files details of his
available to the supplier in Form GSTR-1A. The supplier inward supplies in Form GSTR- 2 after making
can accept or reject the modifications made by the modifications, if any, after 10th day but on or before
recipient between 15th day and the 17th day of the 15th day of the month succeeding the relevant
month succeeding the relevant month. month.
.
.
If supplier accepts the modifications, GSTR-1 filed by him Such amended details of outward supply are
will be amended to that extent. reflected in Form GSTR-3 to be filed by the supplier
on or before 20th day of the month succeeding the
relevant month.
.
GSTR-1 filed: GSTR-3 filed : Mismatched transactions (mismatch u/sec 42 or Sec 43)
Supplier shall, upon discovery of any error or omission therein , rectify such error or omission.
Such discovery may be due to communication to him of mis-match report by the system.
Tables 9, 10 and 11(II) of GSTR-1 provide for amendments in details of taxable outward supplies furnished in earlier periods.
Maximum time-limit for rectification: The maximum time limit within which such amendments are permissible is earlier of
the following dates :
Date of filing of monthly return u/Sec 39 for the month of September following the end of the financial year to
which such details pertain i.e. upto 20th October of the following financial year; or
(actual) Date of filing of the relevant annual return.
Consequences of rectification: Any resultant liability shall be paid with interest @18% p.a.
Other Aspects :
GSTR-1 needs to be filed even if there is no business activity (Nil Return) in the tax period.
.
Filing of GSTR-1 for current month is possible only when GSTR-1 for the previous month has been filed.
.
All values like invoice value, taxable value and tax amounts in GSTR-1 are to be declared up to 2 decimal digits. The rounding off
of the self-declared tax liability to the nearest rupee will be done in GSTR-3.
.
Taxpayer opting for voluntary cancellation of GSTIN will have to file GSTR-1 for active period.
.
In cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer, GSTR -1 will be available for filing
only for the period during which the taxpayer was registered as normal taxpayer. The GSTR-1 for the said period, even if filed with
delay would accept invoices for the period prior to conversion.
GSTR-1: Details of outward supplies [invoice level details vs consolidated details]
Contents of information in GSTR-1 : The kinds of details of outward supplies which are furnished in GSTR-1 are as under —
(1) Invoice wise and consolidated details: RP is required to furnish details of invoices and revised invoices issued in relation
to supplies made by him to registered and unregistered persons during a month in GSTR-1 in the following manner :
.
B2B supplies: For such supplies, all invoices will have to be uploaded irrespective of whether they are intra-State or inter-
State supplies. This is so because the recipient will take ITC and thus, invoice matching is required to be done.
B2C supplies: For B2C supplies, uploading in general may not be required as the buyer will not be taking ITC. However, still
in order to implement the destination based principle, invoices of value more than Rs. 2.5 lakh in inter-State B2C supplies will
have to be uploaded. For inter-State invoices below Rs. 2.5 lakh, State wise summary will be sufficient and for all intra-State
invoices, only consolidated details will have to be given.
Invoices can be uploaded at any time during the tax period and not just at the time of filing.
(c) Description of each item in the invoice will not be uploaded. Only HSN code in respect of supply of goods and
accounting code in respect of supply of services will have to be fed. The same depends upon the annual turnover of
preceding financial year. As per Notification No. 12/2017-CT dated 28-06-2017, the number of digits of HSN code
to be quoted are as under:
Annual turnover in the preceding financial year Number of Digits of HSN Code
Upto Rs. 1.5 crore Nil
More than Rs. 1.5 crore and upto Rs. 5 crore 2
More than Rs. 5 crore 4
.
.
CONTENTS OF GSTR-1
(1) Contents of GSTR-1 :
Basic & Other Details Details of Outward Supplies
GSTIN B2B
Legal name and Trade name B2C
Aggregate turnover in previous year Zero rated and Deemed exports
Tax period Debit / Credit notes issued
HSN-wise summary of outward supplies Nil rated / Exempted / Non GST
Details of documents issued
Advances received / advances adjusted Amendments for prior period
Table 5 Invoice-wise details of taxable outward inter-State supplies to unregistered persons where the invoice value
is more than Rs. 2.5 lakh
Table 6 Invoice-wise details of zero rated supplies i.e. Exports and Supplies made to SEZ unit or SEZ developer and
deemed exports
Table 6A Exporters to claim GST refund on goods exported out of India has to furnish details in this table.
Table 7 Consolidated details of taxable supplies (intra-state supplies and inter-state supplies of invoice value up to
Rs. 2.5 lakh, net of debit notes and credit notes) to unregistered persons
Table 8 Nil rated, exempted and non GST outward supplies
Table 9 Amendments to taxable outward supply details furnished in returns for earlier tax periods in Tables 4, 5 & 6
Table 10 Amendments to taxable outward supply to unregistered persons furnished in returns for earlier tax periods in
Table 7
Table 11 Consolidated statement of advances received / advance adjusted in the current tax period / Amendments of
information furnished in earlier tax period.
In cases, where assessee has received advance in one tax period (say, Aug, 20XX) and invoice is issued in
subsequent tax period (say, Nov, 20XX), the liability on account of such advances and adjustment thereof against
subsequent tax period is required to be shown separately in the return.
.
Where against an advance the invoice is issued in the same tax period, the advance need not be shown separately
in Form GSTR-1 but the specified details of invoice itself can be directly uploaded on the system.
.
Details of all advances against which the invoices have not been issued till the end of the tax period shall have
to be reported on a consolidated basis in Table 11 of Form GSTR-1. As and when the invoices against these advances are
issued, they have to be declared in Form GSTR-1 and the adjustment of the tax paid on advances against the tax payable
on the invoices uploaded in Form GSTR-1 shall have to be done in Table 11 of Form GSTR-1.
.
3) Frequency Monthly
4) Due date? On/before 15th of next month GSTR-2 cannot be furnished till 10th: GSTR-2
for a particular month is filed after the 10 th day
but on or before the 15th day of the immediately
succeeding month
5) Extension Commissioner / Commissioner of State/UT may extend Time to time extension have been given.
[Refer-Chapter ‘GST- A quick Review’]
9) Rectification Yes
Unmatched transactions (arising due to application of Sec 42
(ITC matching) or Sec 43 (Cr Note Matching) shall be rectified
- Related tax (alognwith interest) shall be paid
Time-Limit for rectification: Earlier of following 2 dates:
(a) Filing of Return for Sep Month (following end of FY);
(b) Filing of Annual Return (for the FY)
Yes, the recipient can himself feed the invoices not uploaded by his supplier.
.
The credit on such invoices will also be given provisionally but will be subject to matching.
On matching, if the invoice is not uploaded by the supplier, both of them will be intimated.
o If the mismatch is rectified, provisional credit will be confirmed.
o But if the mismatch continues, the amount will be added to the output tax liability of the recipient in the returns for the month
subsequent to the month in which such discrepancy was communicated.
Diagrammatic flow of filing process of GSTR-1 & GSTR-2
.
GSTR-2 filed: GSTR-3 filed : Mismatched transactions (mismatch u/sec 42 or Sec 43)
Supplier shall, upon discovery of any error or omission therein , rectify such error or omission.
Such discovery may be due to communication to him of mis-match report by the system.
.
Tables 6 of GSTR-2 provide for amendments in details of taxable outward supplies furnished in earlier periods.
Maximum time-limit for rectification: The maximum time limit within which such amendments are permissible is earlier of
the following dates :
Date of filing of monthly return u/Sec 39 for the month of September following the end of the financial year to
which such details pertain i.e. upto 20th October of the following financial year; or
(actual) Date of filing of the relevant annual return.
Consequences of rectification: Any resultant liability shall be paid with interest @18% p.a.
CONTENTS OF GSTR-2
(1) Contents of GSTR-2 :
Basic & Other Details Details of Inward Supplies
GSTIN B2B supplies under forward charge
Year Supplies under reverse charge
Tax Period Import of inputs and capital goods
Legal name and Trade name Debit / Credit notes
HSN summary of inward supplies Supplies from composition taxable person and Nil rated
ISD Credit / TDS Credit / TCS Credit / exempted / Non GST supplies
Advances paid / advances adjusted Amendments for prior period
ITC reversal / reclaim
Addition / reduction in output tax due to mismatch
.
(2) Information to be given in tables : The broad contents of the various tables are given below :
Table 3 Inward supplies received from a registered person other than the supplies attracting reverse charge (invoice-
wise details)
Table 4 Inward supplies on which tax is to be paid on reverse charge (invoice-wise details)
Table 5 Inputs / capital goods received from overseas or from SEZ units on a bill of entry (bill of entry-wise details)
Table 6 Amendments to details of inward supplies furnished in returns for earlier tax periods in Taxable 3, 4 and 5
[including debit notes / credit issued and their subsequent amendments]
Table 7 Supplies received from composition taxable person and other exempt / Nil rates / Non GST supplies received
[Information pertaining to such inward supplies can be given in a consolidated manner (i.e., not invoice wise)]
Table 8 ISD credit received
Table 9 TDS and TCS Credit received
Table 10 Consolidated statement of advances paid / advance adjusted on account of receipt of supply
.
Expected Questions:
How does the registered recipient need to account for Advances paid for inward supplies under RCM in his GSTR-2?
.
As per section 12 and 13 of CGST Act (sections dealing with determination of time of supply), advance payment also attracts
GST liability.
In such cases, even if the invoice is not received, the recipient is required to pay tax. The details of tax paid on such
advance payments are required to be entered in Table 10A. When the invoice for inward supplies against such advance
.
payments is received in subsequent tax period, the same is shown in Table 10B of GSTR-2 of that tax period.
.
Whether the registered recipient is required to identify ineligible ITC in GSTR-2 (like inward supplies whose ITC is blocked as per Sec 17(5) of
CGST Act)?
.
The registered person shall specify the inward supplies in respect of which he is not eligible, either fully or partially, for ITC in FORM GSTR-
2 where such eligibility can be determined at the invoice level.
The registered person shall declare the quantum of ineligible ITC on inward supplies which
is relatable to non-taxable supplies or for purposes other than business and
cannot be determined at the invoice level in FORM GSTR-2.
.
Illustration
A Ltd. engaged in making ‘taxable supply (GST@18%)’ as well as ‘exempt supply’
Inward supply for exclusive use in making exempt supply – Show it as supply ineligible for ITC (such ineligibility is determinable at invoice
being as supply is for exclusive use)
Inward supply for common use, i.e., both in making exempt supply and taxable supply – Don’t show it as supply ineligible for ITC. But,
one consolidated amount for ineligible ITC can be reported in Table 11.
.
3. Return - Sec 39
.
Sec 39 (3) Tax Deductor GSTR-7 Monthly 10th of the next month
[+ Rule 66]
/
Sec 52 ECO – tax collector GSTR-8 Monthly 10th of the next month
[+ Rule 67]
Spl Case: [FY 2017-18 : Regular TP switching over to Composition TP & such switch over allowed immediately (not from next year)]
Switch over from Regular Scheme to Composition Scheme
Normal Rule: Give intimation over portal, that will be effective from beginning of next year
Exception: only for FY 2017-18, supplier can give intimation and switch over to composition from next month itself - Rule 3(3A) of CGST Rules,
Illustration:
Mr A is intra-state supplier of Goods X.
He started business in Aug, 2017 (FY 2017-18).
He crossed his threshold limit of 20 lakhs on 5 th Oct, 2017.
He gets registered as regular TP (i.e., did not opt for composition scheme at time of registration)
From 20th Nov, 2017, he wishes to switch over to composition scheme with immediate effect.
Whether it is possible for him to do so?
Rule 3(3A) of CGST Rules makes it possible for him to avail composition scheme in the year itself (i.e., FY 2017-18).
He can submit his intimation of such option over common portal.
Supposedly, Mr A submits his intimation on 20 th Nov, 2017. In this case, composition scheme will be available to him on/from 1 st Dec, 2017
(first day of next month in which intimation is submitted).
Post opting for composition, Mr A will become liable to pay GST and file return on quarterly basis. [Due date = 18 th of month following end
of relevant quarter]
Returns formality for the quarter of [Oct + Nov + Dec (2017) shall be as follows:
Period covered in quarter Status of Supplier Return
Oct Month+ Nov Month Regular Supplier GSTR-3 (due date 20th Nov, 2017 / 20th Dec)
Dec month Composition Supplier GSTR-4 (due date 18th Jan, 2018)
.
Return of Regular TP (GSTR-3) Sec 39
1) Who shall file? Regular Taxable Person (TP)
(including casual taxable person)
2) Form? GSTR-3
5) Extension Commissioner / Commissioner of State/UT may Time to time extension have been given.
extend [Refer-Chapter ‘GST- A quick Review’]
7) Matching Yes
=
9) Rectification Yes
Time-Limit for rectification: Earlier of following 2 dates: Rectification cannot be done if any
(a) Due date of Filing of Return for Sep Month omission / incorrect particulars are being
(following end of FY) – i.e., 20th Oct of succeeding FY; discovered than as a result of scrutiny,
(b) Date of actual Filing of Annual Return (for the FY) audit, inspection or enforcement activity
by the tax authorities
Other Aspects :
Every registered person, who is required to furnish a return shall pay to the Government the tax due as per such
return (i.e., self-assessed liability) not later than the last date on which he is required to furnish such return (i.e.,
due dates of filing return). [Sec 39(7)]
GSTR-3 needs to be filed even if there is no business activity (Nil Return) in the tax period.
.
Filing of GSTR-3 for current month is possible only when GSTR-3 for the previous month has been filed. [Sec 39(10)]
o Pending earlier period returns, current tax period return cannot be filed
.
GSTR-3B1:
Since GSTN is not working properly, taxpayer would be required to pay tax and file a simple return GSTR-3B.
It contains summary details of outward and inward supplies.
This return has to be filed till 30th June, 2018.
.
FORM GSTR-3B is notified as the form for return by the Commissioner when the due dates for furnishing GSTR-1 and GSTR-2 are
extended.
GSTR-3B = Summary return, containing summary of outward and inward supplies liable to reverse charge, eligible
ITC, payment of tax etc.
GSTR-3B does not require invoice-wise data of outward supplies.
1 For presently prevailing returns, due dates and extended time limits, kindly refer Chapter ‘GST: A Quick Preview’
Section 40 : First return.
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.
e.g.,
Mr A, intra-state supplier of goods, crosses threshold on 10 Oct, 20XX. (becoming liable to pay GST - thus, becoming Taxable Person)
He applied for registration on 3 Nov, 20XX. (within 30 days of his becoming liable to pay GST)
Registration was granted to him on 6 Nov, 20XX (within 3 days of application - thus, becoming Registered Person)
Mr A has become registered person and now going to file his first return on – 20th Dec (GSTR-3)
.
His first return shall cover:- [Outward supplies from (10th Oct, 20XX) till (30th Nov, 20XX)]
Every registered required to file Sec 39 return shall file ANNUAL RETURN (exception: Casual TP)
(1) Every registered person, other than
an Input Service Distributor,
a person paying tax under section 51 or section 52, (i.e., tax deductor and tax collector)
a casual taxable person* and a non-resident taxable person,
.
shall furnish an annual return for every financial year electronically
in such form and manner as may be prescribed*
[Form GSTR-9 (for composition supplier- GSTR-9A) -Rule-80]
on or before 31 December following the end of such financial year.
st
Author :
Casual TP (in a state/UT): Liable to file regular returns only, not liable to file annual return u/Sec 44 (reason is obvious:
he may not be operative in that State/ UT by the year end)
RP liable to GST Audit u/Sec 35: Filing of Annual Return: Attach copy of (Audited Accounts) + Reconciliation Statement
[RP requiring GST Audit= RP whose ATO (on all India basis) exceeds Rs. 2 Crores]
(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section
(5) of section 35 shall furnish, electronically, the annual return under sub-section (1)
along with
a copy of the audited annual accounts and
a reconciliation statement, reconciling the value of supplies declared in the return furnished for the
financial year with the audited annual financial statement, and such other particulars as may be prescribed.
Illustration
Mr A took registration in Oct, 2017. Due to health issues, he stops his business from Dec, 2020.
He applied for cancellation of his registration in Feb, 2021.
PO ordered cancellation in March, 2021. Cancelation will be effective from April, 2021 once Mr A has discharged all his past dues.
Mr A shall file final return upto July, 2021 (within 3 months of April, 2021 – the date of registration cancellation being later)
Mr A took registration in Oct, 2017. In Dec, 2020 he was found guilty of doing ‘bill trading (sale of bills without supplying goods)’ in the month
of June-Dec, 2020.
PO ordered cancellation in Dec, 2020. Registration was cancelled with retrospective effective from June, 2020.
Mr A shall file final return upto March, 2021 (within 3 months of Dec, 2020 – the date of cancellation order being later)
Illustration
Mr. Y, a registered person, has filed its GSTR-3 for the month of September on 19 th November. Determine the amount of late fee payable, if
any, by Mr. Y under Sec 47 of CGST Act.
As per section 47, any registered person who fails to furnish, inter alia, the returns required under section 39 by the due date is required to
pay a late fee of Rs100 for every day during which such failure continues subject to a maximum amount Rs 5,000.
.
Due date of filing GSTR-3 for a month is 20th day of the succeeding month i.e. 20 th October.
Thus, there is a delay of 30 days [11 + 19] by Mr. Y in filing of GSTR-3 for the month of September.
Hence, late fee of Rs 3,000 (100 × 30) will be payable by Mr. Y.
LATE FEE
Statement / Return CGST Act SGST Act / UTGST Act IGST Act
Statement of Outward Supplies Rs 100/ per day, Rs 100/ per day, No late fees
(Section 37) (Maximum Rs. 5,000) (Maximum Rs. 5,000) (Sec 20 of IGST Act)
Statement of inward Supplies same as above same as above No late fees
(Section 38)
Return (regular return) same as above same as above No late fees
(Section 39)
Final Return same as above same as above No late fees
(Section 45)
Annual Return Rs 100/ per day, (Maximum Rs 100/ per day, No late fees
(Section 44) @0.25% on turnover in the (Maximum @0.25% on
State/UT) turnover in the State/UT)
Annexure:
[Sec 42:: Matching of ITC (tax invoice/ debit notes)] [Sec 43:: Matching of Credit Notes]
Author :
1. Self-assessed (self-claimed) ITC = Provisional – till it is matched over portal with the valid return (valid return= tax
paid return) of corresponding suppliers of inward supplier
2. Though provisional, it is still credited to E-credit ledger:
Not only it is credited, its available for utilization for payment of self-assessed tax of that month – Sec 41(2)
.
Provisional ITC can be used only for payment of self-assessed liability
(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.
Supplier’s return shall be a valid return (i.e., he must have paid taxes on his reported supply.
If supplier has not paid GST at all, then his return shall be treated as invalid return. Further, ITC
claim of recipient has to be rejected as condition of claiming ITC stands unfulfilled [Sec 16(2)(c)]
If supplier has paid GST, then his return shall be a valid return. Conditions of claiming ITC stands
fulfilled and this ITC is allowed provisionally. However, its final acceptance shall be accepted subject
to matching over common portal as per provisions of Sec 42.
Illustration
Oct, 2017- ITC claimed by Mr A is being matched with corresponding details in valid returns of
corresponding suppliers.
Mr A filed return on 20th Nov, 2017.
Matching will be carried out by 30 th Nov, 2017.
Results of matching will be reported/communicated by 30 th Nov, 2017.
.
(A) Duplication of claim (ITC found to be claimed twice for same invoice)
Transactions where the input tax credit is duplicated by the recipient
Whether portal will Yes, portal will send matching report.
communicate this? [Form GST MIS 1 (send to recipient/claimant)]
[Sec 42(4)]
What portal will do? The amount claimed as ITC that is found to be in excess on account of
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.
[Sec 42(6)]
In simple words,
Portal will add the excess claimed ITC to the output tax liability of the month in
which matching has been done.
.
Illustration
Oct, 2017- ITC claimed by Mr A is Rs 10,000.
Mr A filed return on 20th Nov, 2017.
Matching carried out by 30 th Nov, 2017.
One invoice with GST of Rs 500/- was wrongly entered twice and found and communicated in
matching process.
Matching will be reported on 30 th Nov, 2017.
Now, this will be added to the OTL (Output tax liability) of recipient for Nov, 2017 and recipient
shall be liable to pay Rs 500 with interest @18% p.a.
.
Transactions where the claim for ITC is higher than the output tax as declared by the supplier
Transactions where the claim for ITC is higher than the output tax as declared by the supplier because the
supplier has not furnished a particular transaction
.
Recipient can request his supplier to report that transaction and thus, rectify the discrepancy.
Action of Supplier Action on part of recipient
Reporting Tax payment Finalization of Addition to OTL of
ITC subsequent months
Supplier rectifying the discrepancy
Nov, 2017 GSTR-3 filed on 20th Dec Now, he is paying that ITC stands -------
Reporting that transaction GST with Interest finalized
@18% p.a. (1 month)
.
.
Whether recipient can reclaim Supplier can still report the transaction in any subsequent months.
ITC at any subsequent stage? .
.
Illustration
A’s GSTR 2 for October includes an Invoice no. 47 from supplier ‘B’ on which ‘A’ has taken `3,600 as ITC, but B’s GSTR 1 for
October does not show this invoice.
On matching of credit after filing of GSTR 3 (for the month of October) on 20th November, this discrepancy is communicated on
the GST Common Portal to ‘B’ in the month of November itself, who rectifies his omission and includes Invoice no. 47 in his
GSTR-1 [Statement of Outward Supplies] thereby reflecting the same in his GSTR 3 filed for the month November and pays tax
on it alongwith interest. This confirms the credit taken by ‘A’.
In an alternate scenario, B does not add the Invoice in his GSTR-1 Statement of Outward Supplies for November due to his
accountant being on leave.
‘A’ finds `3,600 added to his output tax liability for the month of December, and pays it with interest @ 18% as required on 20th
January (next year).
He communicates the problem to ‘B’, who looks into the issue and rectifies the discrepancy and includes Invoice no. 47 in his
GSTR-1 [Statement of Outward Supplies] thereby reflecting the same in his GSTR-3 for March and pays tax on it alongwith
interest.
Under section 42(7), ‘A’ can reduce the said amount from his output tax liability, and the interest paid will be refunded to his
electronic cash ledger subject to a maximum of amount of interest paid by the supplier ‘B’.
.
1. Matching:
What is matched? Reduction in OTL due to issuance of credit note by the supplier in his return (GSTR-3)
shall be matched over portal with the ITC reversals by recipient.
Recipient’s return shall be a valid return (i.e, he must have paid GST dues as per his return).
Illustration
Oct, 2017- reduction in OTL claimed by Mr X is being matched with corresponding details in valid
returns of corresponding recipient (Mr Y).
Mr X filed return on 20th Nov, 2017.
Matching will be carried out by 30 th Nov, 2017.
Results of matching will be reported/communicated by 30 th Nov, 2017.
.
3. Transactions mis-matched:
.
(A) Duplication of claim (Reduction in OTL claimed twice for same credit note)
Transactions where credit note is duplicated by the supplier
Whether portal will Yes, portal will send matching report.
communicate this? [Form GST MIS 1 (send to supplier/claimant)]
[Sec 43(4)]
What portal will do? 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 the duplication is
communicated.
[Sec 43(6)]
In simple words,
Portal will add the excess reduction to the output tax liability of the month in which
matching has been done.
.
Illustration
Oct, 2017- Reduction claimed by Mr X is Rs 10,000.
Mr X filed return on 20th Nov, 2017.
Matching carried out by 30 th Nov, 2017.
One credit note with GST of Rs 500/- was wrongly entered twice and found and communicated
in matching process.
Matching will be reported on 30 th Nov, 2017.
Now, this will be added to the OTL (Output tax liability) of the supplier for Nov, 2017 and supplier
shall be liable to pay Rs 500 with interest @18% p.a.
.
Transactions where the claim for reduction of OTL is higher than the ITC reversed by the recipient.
Transactions where the claim for reduction of OTL is higher than the ITC reversed by the recipient because
the recipient has not furnished a particular transaction
.
Illustration
Oct, 2017- Reduction in OTL claimed by Mr X is Rs 10,000.
Mr X filed return on 20th Nov, 2017.
Matching carried out and communicated on 30th Nov, 2017.
One credit note with GST of Rs 500/- is not matching with corresponding valid return of recipient as recipient has not
declared such credit note in his return.
Supplier can request his recipient to report that transaction and thus, rectify the discrepancy.
Action of Recipient Action on part of Supplier
Reporting Tax payment Finalization claim Addition to OTL of
of reduction of subsequent months
OTL
Recipient rectifying the discrepancy
Nov, 2017 GSTR-3 filed on 20th Dec Now, he is doing ITC Reduction of OTL -------
Reporting that transaction reversals (paying that as claimed in
(i.e., incorporating the GST) with Interest credit note stands
details of credit note) @18% p.a. (1 month) finalized
.
.
Whether suppplier can reclaim Recipient can still report the transaction in any subsequent months.
ITC at any subsequent stage? .