GST Notes Semester 6
GST Notes Semester 6
TOPICS COVERED
Introduction To Goods And Services Tax(GST)
Objectives and basic scheme of GST, Meaning – Salient features of GST
– Subsuming of taxes. Benefits of implementing GST – Constitutional
amendments - Structure of GST (Dual Model) – Central GST – State /
Union Territory GST – Integrated GST - GST Council: Structure, Powers
and Functions, Provisions for amendments.
Definition: Goods, Service, Person, Business, Capital goods, Casual
taxable person, Aggregate turnover, Reverse Charge, Works contract
Goods and Services Tax is Tax levied on supply of goods or services or both in India
NO CASCADING OF TAXES - Since, only the value added at each stage is taxed under
GST, there is no tax on tax or cascading of taxes under GST system.
service tax on Convention centres, Entertainment tax and service tax on amusement /
entertainment activities.
f) State VAT was levied on the value of goods plus on Central excise on such goods
leading to cascading effect of taxes.
g) There was no uniformity in the TAX rates under VAT levied by the States.
h) Non-inclusion of several local levies in State VAT such as luxury tax, entertainment
tax, etc
D. BENEFITS OF GST
GST is win-win situation for the entire country. It brings benefits to all the stakeholders of
industry, Government and Consumers.
The Significant benefit of GST are as under:
a) The subsuming of many taxes reduces the cost of goods and services wherein the
cascading effect of taxes is eliminated.
b) GST aims to make India a common market with common tax rates and procedures
and remove the economic barriers
c) Reduction of multiplicity of taxes and fewer exemptions under GST has led to
simplification and uniformity of tax structure
d) Common and uniform classification of goods and services ensures in certainty in tax
administration
e) The automated process with greater use of Information Technology results in lesser
human interface between the tax payer and tax administration
f) The compliance cost and procedure is lesser in GST owing to uniform procedures and
uniform tax administration in whole country.
g) The removal of cascading effect will boost the manufacture and economy
E. CONSTITUTIONAL PROVISIONS
India has a three-tier federal structure, comprising the Union Government, the State
Governments and the Local Government. The power to levy taxes and duties is distributed
among the three tiers of Governments, in accordance with the provisions of the Indian
Constitution.
Power to levy and collect taxes whether, direct or indirect emerges from the Constitution of
India.
In case any tax law, be it an act, rule, notification or order is not in conformity with the
Constitution, it is called ultra vires the Constitution and is illegal and void.
The Constitution was amended in September 2016, by The Constitution (101 st Amendment) Act 2016
paving way of introduction of GST
Article 246A: Powers to make laws with respect to Goods and Services Tax:
This article grants power to Centre and State Governments to make laws with
respect to GST imposed by Centre or such State.
Centre has the exclusive power to make laws with respect to GST in case of inter-
State supply of goods and/or services.
However, in respect to the following goods, the aforesaid provisions shall apply from
the date recommended by the GST Council:
1) Petroleum Crude
2) High Speed Diesel
3) Motor Spirit (commonly known as Petrol)
4) Natural Gas
5) Aviation Turbine Fuel
F. GST COUNCIL
Article 279A of the Constitution empowers the President to constitute a joint forum
of the Centre and States namely, Goods & Services Tax Council (GST Council).
Decision making : The quorum of GST council will be one half of total members.
Decision is taken based on 3/4th majority of weighted votes, where in centre having
one third vote and all states having 2/3rd of weighted votes.
3) Specify The goods and services that may be subjected to, or exempted from
GST;
5) The threshold limit of turnover below which goods and services may be
exempted from GST;
G. RELEVANT DEFINITIONS:
1. “GOODS” means every kind of movable property other than money and securities
but includes actionable claims, 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. “SERVICES” means anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by cash or by any other mode,
from one form, currency or denomination, to another form, currency or denomination
for which a separate consideration is charged.
Explanation–– For the removal of doubts, it is hereby clarified that the
expression “services” includes facilitating or arranging transactions in
securities.
Example 2: A person goes to the bank for exchange of note of Rs. 2000 into 20 nos. of
notes of Rs. 100. Bank does not charge anything for change of denomination of Rs.
2000 note into Rs. 100 notes. This cannot be considered as transaction in money
because nothing is charged for such a transaction in money or for conversion and
therefore not a service. Thereby not liable to GST.
but shall not include any subsidy given by the Central Government or a
State Government
PROVIDED that a deposit, given in respect of the supply of goods or services or both
shall not be considered as payment made for such supply unless the supplier applies
the deposit as consideration for the said supply.
4. “BUSINESS” includes –
a) Any trade, commerce, manufacture, profession, vocation or any other similar
activity, whether or not it is for a pecuniary benefit;
b) Any activity or transaction in connection with or incidental or ancillary to (a)
above;
c) Supply or acquisition of goods including capital assets and services in
connection with commencement or closure of business;
d) Provision by a club, association, society, or any such body of the facilities or
benefits to its members, as the case may be;
e) admission, for a consideration, of persons to any premises;
f) services provided by a race club by way of totalisator or a licence to book maker
in such club
g) any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities
5. “PERSONS” includes –
a) an individual
b) a Hindu Undivided Family
c) a company including a foreign company
d) a firm or LLP
e) an association of persons or a body of individuals
f) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company
g) a co-operative society
h) a local authority;
i) Central Government or a State Government;
j) a trust
k) every artificial juridical person, not falling within any of the above.
7. “reverse charge” means the liability to pay tax by the recipient of supply of goods or
services or both instead of the supplier of such goods or services or both;
1. Dual GST:
2. Legislative Framework:
There is a single legislation for levying CGST – CGST Act, 2017
3. Compensation Cess:
GST Compensation Cess at specified rate has been imposed under
the Goods and Services Tax (Compensation to States) Cess Act, 2017
on the specified luxury items or demerit goods, like pan masala,
tobacco, aerated waters, motor cars etc., computed on value of
taxable supply. Compensation Cess is liveable on intra-state supplies
and inter-state supplies with a view to provide for compensation to
the States for the loss of revenue arising on account of
implementation of the GST. E.g.
- All SUV vehicles – 22%; Cars exceeding 1200 CC – 15%; Cars
exceeding 1500CC 17%
- Motor cycles exceeding 350CC – 3%
- Pan masala – 60%
- Aerated drinks – 15%
- Cigarettes exceeding 70MM – 5% plus Rs. 3.668 per stick
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.
Supply of Services supplied through ECO:
services by way of transportation of passengers by a radio-
taxi, motorcab, maxicab and motor cycle;
services by way of providing accommodation in hotels, inns,
guest houses, clubs, campsites or other commercial places meant
for residential or lodging purposes, if such supplier is not liable for
registration;
services by way of house-keeping, such as plumbing,
carpentering etc, if such supplier is not liable for registration;
e.g. Amazon, Flipkart, Ola, Uber, UrbanClap, makemytrip.
C. CONCEPT OF SUPPLY
The concept of ‘Supply’ is very important in GST structure.
Supply with consideration in course/ furtherance of
business Taxable Event (Supply)
Import of services with consideration whether or not in
course/ furtherance of business includes
3. Negative supplies:
activities or Transactions which shall be neither Supply of Goods
nor Supply of Services – Negative List.
Sl. Activities or transactions which shall be treated
No. 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.
4. Composite Supply
It comprises of two or more taxable supplies of Goods or Services which
are naturally bundled and supplied in conjunction with each other, in the
ordinary course of business, one of which is a principal supply. It shall be
treated as a supply of such principal supply.
e.g. Booking Train Tickets: You are booking Rajdhani train ticket
which also includes the meals on the train. This is treated as
bundle of supplies. It is a composite supply where the products
cannot be sold separately. The transportation of passenger is,
therefore, the principal supply . The rate of tax applicable to the
principal supply will be charged to the whole composite supply.
Therefore, the rate of GST applicable to the transportation of
passengers by rail will be charged by IRCTC on the booking of
Rajdhani ticket.
e.g. An air conditioner is sold and along with cost of AC, charges are
collected separately for transportation, Installation, Insurance, Annual
maintenance. The rate of tax applicable for AC is applied for all other
charges collected.
5. Mixed Supply:
6. Exempt Supply :
Any supply of goods or service included in negative list or which is
specifically exempted by way of Notification issued is regarded as
exempt supply. In other words any supply which is not a taxable
supply is considered as exempt supply
GST law empowers the Central Government or State Government
as the case may be to grant exemption from tax. The exemption is
granted on recommendation of the GST Council.
Exemption can be from whole of the tax or part of the tax, with or
without conditions.
GOODS EXEMPT FROM TAX: e.g.
a) Items such as unbranded atta/ maida/ besan, unpacked food
grains, milk, eggs, curd, lassi, fresh fruits and fresh vegetables.
b) Live animals, meat, poultry, birds, insects, fish, meat, fillets,
c) Human hair, human blood, semen, live trees and plants,
d) Jaggery of all types, bread, papad, Non aerated / mineral water,
Salt, firewood,
e) Stamp papers, envelopes, post card, Cheque books,
f) Silk worm, raw silk, Gandhi topi, Khadi yarn, Indian national flag,
Idols made of clay
8) Taxable Supply
Any supply which is not specifically exempted or not included in
negative list is regarded as taxable supply. To consider any supply
as exempted supply it should be notified, if not the same will be
regarded as taxable supply. All taxable supplies need to be
notified.
D.PLACE OF SUPPLY
‘Place of Supply’ under GST is an important factor as it defines whether
the transaction will be treated as intra – State (i.e., within same State) or
inter – State (i.e., between two States) and accordingly chargeability of
tax i.e., levy of CGST & SGST or IGST will be determined.
While determining the levy of taxes as per the place of supply, two
things are considered:
E. TIME OF SUPPLY
i) The time of supply of Goods shall be the earlier of the following dates, namely:
a. the date of supply of goods or
b. the date of issue of invoice (on every supply required) or
c. the last date on which he is required, to issue the invoice with respect to the
supply; or
d. the date on which the supplier receives the payment
Note: “the date on which the supplier receives the payment” shall be the date on
which the payment is entered in his books of account or the date on which the
payment is credited to his bank account, whichever is earlier
ii) In case of goods on which tax is 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 the goods, or
b. The date of payment or
c. The date immediately following thirty days from the date of issue of invoice or
any other document
iii) In case of supply of Vouchers by a supplier, the time of supply shall be:
a. the date of issue of voucher, if the supply is identifiable at that point; or
b. the date of redemption of voucher, in all other cases
iv) The time of supply to the extent it relates to an addition in the value of supply by
way of interest, late fee or penalty for delayed payment of any consideration
shall be the date on which the supplier receives such addition in value.
ii) The time of supply of Services if invoice NOT issued before or within 30 days
of provision of service, shall be the earliest of the following dates, namely
a. the date of provision of service, or
b. the date of receipt of payment, whichever is earlier.
iii) In case of service on which tax is payable or on Reverse Charge Basis, the time
of supply shall be the earlier of the following dates, namely:
a. the date of payment
the date immediately following sixty days from the date of issue of invoice by the supplier.
VALUE OF SUPPLY
Value of supply means the money that a seller collects for the goods and
services supplied. The amount collected by the seller from the buyer is
the value of supply.
But where parties are related and a reasonable value may not be charged,
or transaction may take place as a barter or exchange; the GST law
prescribes that the value on which GST is charged must be its
‘transactional value’.
Transaction Value - This is the value at which unrelated parties would
transact in the normal course of business. It makes sure GST is charged
and collected properly, even though the full value may not have been
paid.
a. If the transaction is with a related party, and/or price is not the sole
consideration for the supply of goods / services, then the value will
be determined as per the Rules for Valuation. In respect of certain
notified supplies also, the value will be determined in the manner as
stipulated in the rules for valuation.
b. The specified valuation rules are:
C. PRACTICE QUESTIONS
1. ND sold Machine X for 4,00,000 net in exchange of Machine Y. This
machine was purchased by ND for Rs. 6,00,000. Determine the taxable
value of Machine X in following independent scenarios:
a) Open market value of machine X is 6,80,000/-
b) Open market value not available the value of machine Y is 2,60,000
c) Open market value not available, nor value of machine Y could be
determined.
ANSWER
a) In terms of GST valuation Rules (quote Sl ‘I’ of table) the taxable
value of supply where money is not the sole consideration shall be:
(1)Open market value of such supply
(2)If (1) fails, then Total consideration in money and any other form.
(3)If (1) and (2) fails then, Value of supply of like and kind.
(4)If (1), (2) or (3) fails then IV or V in that order
Accordingly since the open market value of Machine X is given, the
same shall be taken at Rs. 6,80,000/- Clarifying that if open market
value available do not use other options, since if (1) fails next
options to be used.
b) Considering the same aforesaid valuation rule, now in this case the
open market value is not available. Now we apply (2) of valuation
rule which states that the value of money and the value of benefit
received shall be taken as taxable value. ND receives money of Rs.
4,00,000 and also the machine Y which is valued at Rs. 2,60,000/-.
Adding of the money value plus the kind value shall be the taxable
value and which shall be Rs. 6,60,000/-
c) When open market value and even the value of kind received is not
determinable, then the value shall be 110% of cost to the supplier.
Accordingly for this option the taxable value shall be 6,00,000 x
110%, which is Rs. 6,60,000
es tickets
and
fee
Domestic 1,00,9 9,51 4,990 1,15,400
Bookings 00 0
International 3,16,8 20,93 15,670 3,53,480
Bookings 80 0
ANSWER
A supplier dealing in second hand / used goods has option to consider
taxable value being the excess of sale price over purchase price. (refer VI
of above table) the taxable value shall be as below
Partic Sale Purchas Taxable Remarks
ulars price e price value
Car A 12,00,0 10,80,0 1,20,000 Loss to be ignored
00 00 and even cant be
Car B 14,00,0 11,20,0 2,80,000 set off against profit
00 00 of other supply.
Also no expense will
Car C 15,00,0 15,50,0 0 be allowed as
00 00
Answer:
The general rule for determination of taxable value of supply is
the consideration received for supply irrespective of its break up
and irrespective of whatever name called. The only exception is
amount incurred as pure agent. (particularly statutory
payments) There is no provision for deduction of re-
imbursements for determining at taxable value. In the given case
the taxable value shall be Rs. 57,500/- including the
reimbursement of salary to security guard.
ANSWER
In continuation of answer for question 4, any amount collected by
a person in the course of providing supply will not be considered
for taxable supply, if the supplier is acting as pure agent and
makes payment to 3rd party on authorisation by the recipient. Eg
: A Chartered accountant receives Rs. 40,000/- from his client
which includes Rs. 25,000 of income tax of client which is paid by
the CA. The sum of Rs. 25,000 will not be considered as taxable
value as the CA is incurring this purely on the authorisation of the
recipient and also being statutory payment. In detail refer this
link http://cbic.gov.in/resources//htdocs-
cbec/gst/51_GST_Flyer_Chapter26.pdf;jsessionid=C146E90CB640F0E95548C0F05EB058
E1.
In the given case the taxable value of supply shall only be Rs. 12,000/-
at Bangalore. The firm received money from various clients for the
services rendered in the month of November
- Accounting and auditing services of Rs.1,25,000
- Representation before various statutory authorities Rs. 1,00,000
- Cost accounting and cost auditing of Rs.50,000
- Secretarial auditing Rs. 35,000
- Verification of declarations in prescribed forms of compliance for
obtaining a certificate of commencement of business Rs. 40,000
- Certificate of documents to be filed before registrar of companies
Rs. 25,000
- Ledger maintenance, non-professional services and preparation of
coaching material Rs. 20,000
- Fee for routine visits to income tax offices Rs. 55,000
- Remuneration for teaching CA students Rs. 30,000
- Fee for outsourcing work of a client such as billing and ledger
posting Rs. 75,000
- Services rendered in Delhi Rs. 70,000
Calculate GST payable, IGST 18%, CGST 9%, SGST 9%
ANSWER
Any supply which is not a negative supply, exempted supply or zero rated
supply will be taxable supply. It does not matter the kind or type of
supply. The same is taxable at the rates prescribed under GST Act.
The given case relates to a supplier engaged in supply of Chartered
Accountancy Services. In case of CA of Firm of CA no service have been
exempted under GST Act and accordingly all the services given above are
taxable. Even teaching services by any professional (but not capacity as
employee) is taxable.
The total taxable value of intra state supply Rs. 5,55,000 and the taxable
value of inter state supply is Rs. 70,000.
CGST Rs. 49,950; SGST 49,950 (555000 x 9%) and IGST Rs. 12,600
(70,000 x 18%)
INPUT TAX
B. RELEVANT DEFINITIONS
Input means any goods other than capital goods used or
intended to be used by a supplier in the course or furtherance
of business.
the books of account of person claiming the input tax credit and
which is used or intended to be used in course or furtherance of
business.
Input service distributor means an office of the supplier of
goods or services or both which receives tax invoices issued
towards the receipt of input services and issues a prescribed
document for the purposes of distributing the credit of central
tax, State tax, integrated tax or Union territory tax paid on the
said services to a supplier of taxable goods or services or both
having the same Permanent Account Number as that of the said
office. Eg A Ltd having registered office at Delhi has branches
at Chennai, Mumbai & Bangalore. The invoice statutory Audit
fees of A Ltd is made to the registered office which covers the
audit of branches also. Here A Ltd is referred to as input service
distributor and can distribute the credit to its branches in
prescribed manner.
(10) When the goods are received in instalments, credit shall be take
upon receipt of last instalment
(11) The payment for receipt of goods or services should be made within
180 days from the date of invoice. If not paid the credit already
taken shall be reversed along with interest till the date of reversal
(12) In case of capital goods, depreciation on input tax shall not be
claimed
(13) The input tax must be claimed within due date of filing GST returns
for September of next financial year.
Note : SGST can be utilized for IGST only after CGST is fully
utilized.
F. PRACTICE QUESTIONS
1) Calculate GST liability from the following information:
a) Sales made to customers outside the state – Rs. 25,00,000
b) Sales made to customers within state – Rs. 35,00,000
c) Export of goods outside India – Rs. 10,00,000
d) Purchases made from outside state – Rs. 40,00,000
e) Purchase made from within state – Rs. 30,00,000
4,50,00
Sales outside state- Interstate 25,00,000 0
4,50,00 3,15,00
IGST 8,10,000 0 0 45,000
2,70,00
CGST 2,70,000 - 0 NA
2,70,00
SGST 2,70,000 - NA 0
(2,70,0
Net GST payable/ Carried fwd - 00) -
ANSWER
Assumption : Since it is not stated where the dealer is registered and
considering that within state details separately given, it is assumed that
all the places specifically stated in question are outside the state of
supplier and accordingly treated as inter state supply and wherever place
of supply not stated is within the state.
Computation of Tax
Liability
Taxabl
Particulars GST Rate e value IGST CGST SGST
OUTPUT TAX
6,00,00 54,00
Sale within state 18% 0 - 0 54,000
20,00,0 1,00,0
Sale to Kolkota 5% 00 00
6,00,00
Sale to SEZ 0% 0 -
10,00,0 2,80,0
Sale to unregd dealer 28% 00 00
4,00,00
Sale to Bangalore exempt 0 -
4,40,0 54,00
Total output Tax 00 0 54,000
INPUT TAX
10,00,0
Purchase exempt Exempt 00 - -
8,72,0
Total input Tax 00 7,500 7,500
B GST liability
Taxable
Particulars value IGST CGST SGST
OUTPUT TAX
Sale - Computer outside
state 41,10,000 4,93,200
2,14,20
Sale - Computer within state 35,70,000 0 2,14,200
2,25,03
4,93,200 1
INPUT TAX
5,24,80 1,71,1
Total GST payable C+D 0 31 1,71,131
Add : Consequnce of delay
5,29,71 1,76,1
Total amount payable 7 09 1,76,109
D) Conditions
i) Cannot collect tax on supply of goods or services except for
restaurant service
ii) Not eligible to take any input tax credit
iii) The option shall automatically lost once the turnover exceeds the
prescribed limits.
iv) The tax invoice must state that he is registered under composition
levy.
v) The option must be exercised at the time of registration or in case
of already registered suppler before the commencement of
financial year by filing electronic form.
REGISTRATION
vi) The validity of E way bill shall be one day for every 100 Kms and
in case of Over dimensional cargo it is one day for every 20 Kms.
Goods should the destination place within such validity period.
vii) If owing to exceptional nature like breakdown, the goods are not
delivered within the validity period then the details of same shall
be immediately uploaded in the portal.
viii) Supply of goods without E-way bill or any contravention of
provision relating to E-way bill will be liable for penalty not less
than one time and up to three times of tax involved and also
liable for confiscation of goods.
A) PAYMENT OF TAXES:
i) The GST shall be paid by internet banking, credit/debit cards,
NEFT or RTGS modes only. The amount so paid shall be credited
to Electronic Cash Register
ii) The deposit of money in Electronic cash register shall state
whether it is for CGST or SGST/UTGST or IGST.
iii) The amount available in Electronic cash register can be used for
payment of tax, cess, interest, penalty, fees or any other
amounts payable under GST Act. The utilisation of cash can be
used only for particular GST (like CGST, SGST, IGST for which the
cash is available)
iv) The input tax credit as self assessed and claimed by the supplier
shall be credited to Electronic Credit Register
v) The balance in Electronic Credit register can be used only for
payment Tax and not any other amounts like interest, fees or
penalty. Further the Credit of CGST cannot be used to pay SGST
or vice versa. The credit of IGST is utilised first for IGST, then for
CGST and then for SGST liability.
vi) The GST liability of a particular shall be paid within 20th of
subsequent month in case of all category of suppliers. Non
payment of same within prescribed date will be liable for interest
@ 18% PA for the number of days of delay.
vii) In case of excess or wrong claim of input tax interest @ 24% PA
shall be levied till the date of reversal of such wrong claim.
B) RETURNS:
i) Return is a statement of specified particulars of business
transactions to be submitted in prescribed manner within the
prescribed time.
ii) Every supplier shall self assess his transactions, determine his
net tax liability, pay the same and file the prescribed returns
within the due dates.
iii) Every registered supplier shall submit the following returns in
electronic form in GSTN portal:
a) GSTR 1 containing the details of outward supplies within on
monthly basis within 10th of subsequent month.