GST Book PDF
GST Book PDF
GST Book PDF
pdf
Chapter 1 GST in India - An Introduction.pdf
Chapter 2 Supply under GST.pdf
Chapter 3 Charge of GST.pdf
Chapter 4 Exemptions from GST.pdf
Chapter 5.1 Time and Value of Supply.pdf
Chapter 5.2 Time and Value of Supply.pdf
Chapter 6 Input Tax Credit.pdf
Chapter 7.0 Intial Page Module 2.pdf
Chapter 7 Registration.pdf
Chapter 8 Tax Invoice, Credit and Debit Notes.pdf
Chapter 9 Payment of Tax.pdf
Chapter 10 Returns.pdf
Intermediate Course
Study Material
(Modules 1 to 2)
Paper 4
Taxation
Section B : Indirect Taxes
Module ‐ 1
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
This Study Material has been prepared by the faculty of the Board of Studies. The
objective of the Study Material is to provide teaching material to the students to enable
them to obtain knowledge in the subject. In case students need any clarification or
have any suggestion for further improvement of the material contained herein, they
may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner useful
for the students. However, the Study Material has not been specifically discussed by the
Council of the Institute or any of its Committees and the views expressed herein may
not be taken to necessarily represent the views of the Council or any of its Committees.
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E-mail : bosnoida@icai.in
BEFORE WE BEGIN …
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 and improve
competitiveness. It follows a multi-stage collection mechanism where tax is
collected at every stage and the credit of tax paid at the previous stage is
available as a set off at the next stage of transaction.
GST, at the Intermediate level, involves understanding and application of the
select provisions of the GST laws. The nitty-gritties of this new tax law coupled
with its inherent dynamism, makes the learning, understanding and application of
the provisions of this law in problem solving very interesting and challenging.
Know your Syllabus
The syllabus of Section B: Indirect Taxes covers select provisions of the Central
Goods and Services Tax Act, 2017 and Integrated Goods and Services Act, 2017.
For understanding the coverage of syllabus, it is important to read the Study
Material as the content therein has been developed keeping in mind the extent of
coverage of various topics as envisaged in the syllabus. Therefore, the provisions
which do not form part of the syllabus are not discussed or explained in the Study
Material. However, while discussing the relevant applicable provisions, a
reference may have been made to some of these excluded provisions at certain
places either by way of a footnote or otherwise.
Know your Study Material
This Study Material on Indirect Taxes is based on the provisions of the Central
Goods and Services Tax Act, 2017 and Integrated Goods and Services Act, 2017 as
amended upto 31.07.2017. The Study Material is therefore, relevant for May 2018
and November, 2018 examinations.
Efforts have been made to present the complex law of GST in a lucid manner.
Care has been taken to present the chapters in a logical sequence to facilitate
easy understanding by the students. The Study Material has been divided into
two modules for ease of handling by students. Module 1 covers Chapters 1-6 and
Module 2 covers Chapters 7-10.
The various chapters/units of this subject have been structured uniformly and
comprise of the following components:
Outcomes learning each topic have been detailed in the first page
of each chapter/unit. Demonstration of these learning
outcomes will help you to achieve the desired level of
technical competence
Students may make note of the following while reading the Study Material:
For the sake of brevity, the “ Goods and Services Tax”, “Central Goods and
Services Tax”, “State Goods and Services Tax”, “Union Territory Goods and
Services Tax”, “Integrated Goods and Services Tax”, “Central Goods and
Services Act, 2017”, “Integrated Goods and Services Act, 2017” and “Union
Territory Goods and Services Act, 2017”, “Central Goods and Services Tax
Rules, 2017” have been referred to as “GST”, “CGST”, “SGST”, “UTGST”, “IGST”,
“CGST Act”, “IGST Act”, “UTGST Act” and “CGST Rules” respectively in this
Study Material.
Unless otherwise specified, the section numbers and rules referred to in the
chapters pertain to CGST Act and CGST Rules respectively.
The illustrations, examples, questions and answers given under ‘Test Your
Knowledge’ are solved/answered on the basis of the position of law as
existing on 31st July, 2017. The reference to years/months subsequent to such
date in the examples, illustrations, questions and answers is only for the
purpose of explaining the concepts and provisions as the position of law may
change subsequently.
Though all efforts have been taken in developing this Study Material, the possibilities
of errors/omissions cannot be ruled out. You may bring such errors/omissions, if
any, to our notice so that the necessary corrective action can be taken.
We hope that the new student-friendly features in the Study Material makes your
learning process more enjoyable, enriches your knowledge and sharpens your
application skills.
SYLLABUS
PAPER – 4 : TAXATION
(One paper ─ Three hours – 100 Marks)
Objective:
Contents:
1. Basic Concepts
(i) Income-tax law: An introduction
(ii) Important definitions in the Income-tax Act, 1961
(iii) Concept of previous year and assessment year
(iv) Basis of Charge and Rates of Tax
2. Residential status and scope of total income
(i) Residential status
(ii) Scope of total income
3. Incomes which do not form part of total income (other than
charitable trusts and institutions, political parties and electoral
trusts)
(i) Incomes not included in total income
(ii) Tax holiday for newly established units in Special Economic Zones
4. Heads of income and the provisions governing computation of
income under different heads
(i) Salaries
(ii) Income from house property
Contents:
1. Concept of indirect taxes
(i) Concept and features of indirect taxes
(ii) Principal indirect taxes
2. Goods and Services Tax (GST) Laws
(i) GST Laws: An introduction including Constitutional aspects
(ii) Levy and collection of CGST and IGST
CONTENTS
1. Introduction.............................................................................................................................. 3.2
2. Relevant Definitions ............................................................................................................. 3.3
3. Extent & Commencement of CGST Act/SGST Act/ UTGST Act ........................... 3.7
4. Levy & Collection of CGST [Section 9 of the CGST Act] .......................................... 3.9
5. Composition Levy [Section 10 of the CGST Act] ............................................................... 3.54
GST IN INDIA – AN
INTRODUCTION
LEARNING OUTCOMES
After studying this Chapter, you will be able to:
explain the concept of tax and the objective for its levy
describe the concept of direct and indirect tax and the
differences between the two types of taxes
enumerate the basic features of indirect taxes and the
principal indirect taxes in India
explain the concept of GST and the need for GST in India.
discuss the framework of GST as introduced in India and
understand the various benefits to be accrued from
implementation of GST.
explain the constitutional provisions pertaining to levy of
various taxes
appreciate the need for constitutional amendment paving
way for GST.
discuss the significant amendments made by Constitution
(101st Amendment) Act, 2016.
CHAPTER OVERVIEW
Concept of GST
Benefits of GST
Constitutional provisions
1. BACKGROUND
In any Welfare State, it is the prime responsibility of the Government to fulfill the
increasing developmental needs of the country and its people by way of public
expenditure. India, being a developing economy, has been striving to fulfill the
obligations of a Welfare State with its limited resources; the primary source of
revenue being the levy of taxes. Though the collection of tax is to augment as
much revenue as possible to the Government to provide public services, over the
years it has been used as an instrument of fiscal policy to stimulate economic
growth. Thus, taxes are collected to fulfill the socio-economic objectives of the
Government.
TAX
INDIRECT TAX
DIRECT TAX
* The person paying the tax to the
* The person paying the tax to
Government collects the same
the Government directly
from the ultimate consumer.
bears the incidence of
Thus, incidnece of the tax is
the tax.
shifted to the other person.
* Progressive in nature - high
* Regressive in nature - All the
rate of taxes for people
consumers equally bear the
having higher ability to
burden, irrespective of their
pay.
ability to pay.
Goods and
Major direct and
Services Tax
indirect taxes
Indirect taxes
Customs Duty
5. CONCEPT OF GST
What is GST?
Before we proceed with the finer nuances of Indian GST, let us first understand
the basic concept of GST.
GST offers comprehensive and continuous chain of tax credits from the
producer's point/service provider's point
upto the retailer's level/consumer’s level
thereby taxing only the value added at each stage of supply chain.
In the GST regime, the major indirect taxes have been subsumed in the ambit
of GST. The erstwhile concepts of manufacture or sale of goods or rendering
of services are no longer applicable since the tax is now levied on “Supply of
Goods and/or services”.
II. CGST/SGST/UTGST/IGST
GST is a destination based tax
applicable on all transactions
involving supply of goods and
services for a consideration subject to exceptions thereof. GST in
India comprises of Central Goods and Service Tax (CGST) - levied and
collected by Central Government, State Goods and Service Tax
(SGST) - levied and collected by State Governments/Union Territories
with State Legislatures and Union Territory Goods and Service Tax
V. Registration
Every supplier of goods and/ or services is required
to obtain registration in the State/UT from where he
makes the taxable supply if his aggregate turnover
exceeds ` 20 lakh during a FY.
However, the limit of ` 20 lakh will be reduced to ` 10 lakh if the
person is carrying out business in the Special Category States – [11
Special Category States are specified in Article 279A(4)(g) of the
Constitution] - States of Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.
VI. Composition Scheme
In GST regime, tax (i.e. CGST and SGST/UTGST for intra-State
supplies and IGST for inter-State
supplies) is payable by every taxable
person and in this regard provisions have been prescribed in the law.
However, for providing relief to small businesses making intra-State
supplies, a simpler method of paying taxes and accounting thereof is
also prescribed, known as Composition Levy.
VII. Exemptions
Apart from providing relief to small-scale
business, the law also contains provisions for
granting exemption from payment of tax on
essential goods and/or services.
VIII. Manner of utilization of ITC
Input Tax Credit (ITC) of CGST and
SGST/UTGST is available throughout the
supply chain, but cross utilization of
credit of CGST and SGST/UTGST is not possible, i.e. CGST credit
cannot be utilized for payment of SGST/UTGST and SGST/UTGST
credit cannot be utilized for payment of CGST.
However, cross utilization is allowed between CGST/SGST/UTGST and
IGST, i.e. credit of IGST can be utilized for the payment of
CGST/SGST/UTGST and vice versa.
IGST SGST or
CGST
UTGST
CGST
XI. GSPs/ASPs
GSTN has selected certain IT, ITeS and financial technology
companies, to be called GST Suvidha Providers
(GSPs). GSPs develop applications to be used by
taxpayers for interacting with the GSTN.
They facilitate the tax payers in uploading invoices as well as filing of
returns and act as a single stop shop for GST related services.
They customize products that address the needs of different
segment of users. GSPs may take the help of Application Service
Providers (ASPs) who act as a link between taxpayers and GSPs.
Intra-State Supply
ILLUSTRATION
In case of local supply of goods/ services, the supplier would charge dual GST i.e.,
CGST and SGST at specified rates on the supply.
I. Supply of goods/ services by A to B
Amount (in `)
Value charged for supply of goods/ services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by A from B for local supply of goods/ 11,800
services
The CGST & SGST charged on B for supply of goods/services will be remitted
by A to the appropriate account of the Central and State Government
respectively.
A is the first stage supplier of goods/services and hence, does not have credit
of CGST, SGST or IGST.
II. Supply of goods/services by B to C – Value addition @ 20%
B will avail credit of CGST and SGST paid by him on the purchase of goods/
services and will utilise such credit for being set off against the CGST and
SGST payable on the supply of goods/services made by him to C.
Amount
(in `)
Value charged for supply of goods/ services (` 10,000 x 12,000
120%)
Add: CGST @ 9% 1080
Add: SGST @ 9% 1080
Total price charged by B from C for local supply of goods/ 14160
services
Amount (in `)
CGST payable 1080
Less: Credit of CGST 900
CGST payable to Central Government 180
SGST payable 1080
Less: Credit of SGST 900
SGST payable to State Government 180
Note: Rates of CGST and SGST have been assumed to be 9% each for the sake
of simplicity.
Inter-State Supply
ILLUSTRATION
In case of inter-State supply of goods/ services, the supplier would charge IGST at
specified rates on the supply.
I. Supply of goods/services by X of State 1 to A of State 1
Amount (in `)
Value charged for supply of goods/services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by X from A for intra-State supply of 11,800
goods/services
X is the first stage supplier of goods/services and hence, does not have any
credit of CGST, SGST or IGST.
II. Supply of goods/services by A of State 1 to B of State 2 – Value addition
@ 20%
Amount (in `)
Value charged for supply of goods/services (` 10,000 x 12,000
120%)
Add: IGST @ 18% 2,160
Total price charged by A from B for inter-State supply of 14,160
goods/services
Amount (in `)
IGST payable 2,160
Less: Credit of CGST 900
Less: Credit of SGST 900
IGST payable to Central Government 360
Amount (in `)
Value charged for supply of goods/ services 14,400
(` 12,000 x 120%)
Add: CGST @ 9% 1,296
Add: SGST @ 9% 1,296
Total price charged by B from C for local supply of 16,992
goods/services
Amount (in `)
CGST payable 1,296
Less: Credit of IGST 1,296
CGST payable to Central Government Nil
SGST payable 1,296
Central Government will transfer IGST credit of ` 864 utilised in the payment
of SGST to State 2 (Importing State).
Note: Rates of CGST, SGST and IGST have been assumed to be 9%, 9% and 18%
respectively for the sake of simplicity.
Statement of revenue earned by Central and State Governments
8. BENEFITS OF GST
GST is a win-win situation for the entire country. It
brings benefits to all the stakeholders of industry,
Government and the consumer. It will lower the
cost of goods and services, give a boost to the
economy and make the products and services
globally competitive.
The significant benefits of GST are discussed
hereunder:
Creation of unified national market: GST
aims to make India a common market with
common tax rates and procedures and remove the economic barriers thus
paving the way for an integrated economy at the national level.
Mitigation of ill effects of cascading: 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.
Elimination of multiple taxes and double taxation: GST has subsumed
majority of existing indirect tax levies both at Central and State level into one
tax i.e., GST which is leviable uniformly on goods and services. This will make
doing business easier and will also tackle the highly disputed issues relating
to double taxation of a transaction as both goods and services.
Boost to ‘Make in India' initiative: 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.
Buoyancy to the Government Revenue: GST is expected to bring buoyancy
to the Government Revenue by widening the tax base and improving the
taxpayer compliance.
9. CONSTITUTIONAL PROVISIONS
India has a three-tier federal structure, comprising the Union Government, the
State Governments and the Local Government. The power to levy taxes and
duties is distributed among the three tiers of Governments, in accordance with
the provisions of the Indian Constitution.
The Constitution of India is the supreme law of India. It consists of a Preamble,
25 parts containing 448 Articles and 12 Schedules.
25 Parts
(containing
Preamble 448
articles)
12
Schedules
Constitution of India
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.
Thus, a study of the basic provisions of the Constitution is essential for
understanding the genesis of the various taxes being imposed in India. The
significant provisions of the Constitution relating to taxation are:
I. Article 265: Article 265 of the Constitution of India prohibits arbitrary
collection of tax. It states that “no tax shall be levied or collected except
by authority of law”. The term “authority of law” means that tax proposed
to be levied must be within the legislative competence of the Legislature
imposing the tax.
II. Article 245: Part XI of the Constitution deals with relationship between the
Union and States. The power for enacting the laws is conferred on the
Parliament and on the Legislature of a State by Article 245 of the
Constitution. The said Article provides as under:
motor
high spirit aviation
petroleum natural
speed ((commonly turbine
crude gas
diesel known as fuel
petrol)
11. Discuss how GST resolved the double taxation dichotomy under previous
indirect tax laws.
12. Enumerate the deficiencies of the existing indirect taxes which led to the need
for ushering into GST regime.
13. Discuss the dual GST model to be introduced in India.
14. List the Central and State levies which will be subsumed in GST in India.
11. ANSWERS/HINTS
1. (d) 2. (a) 3. (a) 4. (b) 5. (d) 6. (b)
7. Refer Para 2.
8. Refer Para 2.
9. Refer Para 3.
10. Refer Para 9.
11. Refer Para 6.
12. Refer Para 6.
13. Refer Para 7.
14. Refer Para 7.
CHAPTER 2
LEARNING OUTCOMES
CHAPTER OVERVIEW
1. INTRODUCTION
The incidence of tax is the foundation stone of any taxation system. It
determines the point at which tax would be levied, i.e. the taxable event. The
earlier framework of taxable event in various statutes was prone to catena of
interpretations resulting in litigation since decades.
Broadly, the controversies related to issues like whether a particular process
amounted to manufacture or not, whether the sale was pre-determined sale,
whether a particular transaction was a sale of goods or rendering of services
etc. The GST laws resolve these issues by laying down one comprehensive
taxable event i.e: “Supply” - Supply of goods or services or both.
GST Law, by levying tax on the ‘supply’ of goods and/or services, departs
from the historically understood concepts of ‘taxable event’ under the State
VAT Laws, Excise Laws and Service Tax Laws i.e. sale, manufacture and service
respectively.
In the GST regime, the entire value of supply of goods and /or services is
taxed in an integrated manner, unlike the earlier indirect taxes, which were
charged independently either on the manufacture or sale of goods, or on
the provisions of services.
2. RELEVANT DEFINITIONS
Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Sec. 2(52) of CGST Act].
Agent: means a person, including a factor, broker, commission agent,
arhatia, del credere agent, an auctioneer or any other mercantile agent,
by whatever name called, who carries on the business of supply or receipt
of goods or services or both on behalf of another [Section 2(5) of CGST
Act].
Business: includes –
(c) any activity or transaction in the nature of (a) above, whether or not
there is volume, frequency, continuity or regularity of such transaction;
person but shall not include any subsidy given by the Central
Government or a State Government,
the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or services
or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State
Government.
However, a deposit given in respect of the supply of goods or services or
both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply.
[Section 2(31) of CGST Act].
Actionable claim: shall have the same meaning as assigned to it in section 3
of the Transfer of Property Act, 1882.
As per section 3 of the Transfer of Property Act, 1882, actionable claim means
a claim to any debt, other than a debt secured by mortgage of immovable
property or by hypothecation or pledge of movable property, or to any
beneficial interest in movable property not in the possession, either actual or
constructive, of the claimant, which the civil courts recognise as affording
grounds for relief, whether such debt or beneficial interest be existent,
accruing, conditional or contingent [Section 2(1) of CGST Act].
Manufacture: means processing of raw material or inputs in any manner
that results in emergence of a new product having a distinct name, character
and use and the term “manufacturer” shall be construed accordingly [Section
2(72) of CGST Act].
Money: means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance or any other instrument
recognised by the Reserve Bank of India when used as a consideration to settle
an obligation or exchange with Indian legal tender of another denomination
but shall not include any currency that is held for its numismatic value [Section
2(75) of CGST Act].
Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108) of CGST Act].
Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109) of CGST Act].
An individual An association of
A HUF
persons or a body of
individuals, whether
A Limited incorporated or not,
A firm Liability in India or outside
Partnership India
Any corporation
established
Any body corporate
by/under any Trust
Central, State or
incorporated by or
Provincial Act or under the laws of a
Government country outside A co-operative
company as defined India society registered
in section 2(45) of under any law
Companies Act, 2013 relating to
Central cooperative
Government/State societies
Government
A local
authority Society as defined
Every artificial juridical under the Societies
person, not falling Registration Act, 1860
above
A company
Our discussion in this Study Material will principally be confined to the provisions
of CGST and IGST laws as the specific State GST laws are outside the scope of
syllabus.
STATUTORY PROVISIONS
(3) Subject to sub-sections (1) & (2), the Government may, on the
recommendations of the Council, specify, by notification, the
ANALYSIS
Section 7 of the CGST Act defines the scope of supply in an inclusive manner.
The modes of supply mentioned in Section 7(1)(a) are only in the forms of
examples and the list is not exhaustive. This is substantiated by the use of
words ‘such as’ in the definition.
Provisions of scope of supply under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
The meaning and scope of supply taxable under GST can be understood in
terms of following parameters, which can be adopted to characterize a
transaction as supply:
1. Supply should be of goods or services. Supply of anything other than
goods or services like money, securities etc. does not attract GST.
Money
Anything Securities
which is
neither
Goods goods nor
Supply
NOT Supply
services
Services
Parameters
of Supply
Supply
should be
a taxable
supply
by a taxable
person
in the
course or
for furtherance
consideration of business
of goods
and services
The definition of supply begins with the term ‘Supply includes’, thus making it
clear that CGST Act intends to give an extensive meaning to the term ‘supply’. The
first part of section 7 [Clause (a) of sub-section (1)] includes 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 consideration in the course or
furtherance of business.
Supply includes
sale, transfer, in the course or
barter, exchange, for consideration furtherance of
licence, rental, business
lease, disposal
Thus, the forms of supply as contemplated in this first part have two pre-
requisites:
A. MODES OF SUPPLY
Supply includes all forms of supply of goods or services or both. Supply of
anything other than goods or services does not attract GST. Let us analyse the
terms goods and services as defined under the Act:
Goods Service
s
means means
excludes
includes includes
Anything supplied other than goods and services is outside the scope of supply.
Now, we will analyse the various illustrative modes of supply mentioned in section
7(1)(a):
I. Sale and Transfer: Earlier, VAT was levied by the State on the sale of goods
which was defined under most State VAT laws as transfer of property in
goods for consideration. Under the CGST Act, although sale has been treated
as a form of supply leviable to GST, the definition of ‘sale’ has not been
provided.
Further, the term ‘transfer’ which has also been included as a form of supply
is also not defined.
II. Barter and Exchange: While barter may deal with a transaction which only
includes an exchange of goods/services, exchange may cover a situation
where the goods are partly paid for in goods and partly in money. When
there is a barter of goods or services, same activity constitutes supply as well
as consideration.
By making a specific inclusion in the definition of supply, all barters and
exchanges would be leviable to GST.
Example of exchange
When a new car worth ` 5,00,000 is purchased in exchange of an
old car alongwith the monetary consideration of ` 4,00,000 paid
for the said purchase.
Example of barter is as follows:
Doctor Barber
treated as sales where the goods were transferred with transfer of right to
use.
Under the GST regime, such licenses, leases and rentals of goods with or
without transfer of right to use are covered under the supply of service
because there is no transfer of title in such supplies. Such transactions are
specifically treated as supply of service in Schedule-II of CGST Act.
B. CONSIDERATION
One of the essential conditions for the supply of goods and/or services to fall
within the ambit of GST is that a supply is made for a consideration. However,
consideration does not always means money. It covers anything which might be
possibly done, given or made in exchange for something else. Further, a
consideration need not always flow from the recipient of the supply. It can also
be made by a third person.
The term consideration as been defined under the CGST Act has been
summarised in the following diagram:
CONSIDERATION
By recipient or any
Deposit to be other person
considered as
payment
ONLY
Excluding subsidy given
by Central/ State
when the supplier
Governments
applies such
deposit as
consideration for
The restriction of being a taxable person is only on the supplier whereas the
recipient can be either taxable or non-taxable. Further, there is no condition that
supply needs to be made to another person, i.e. supplies made to self are also
taxable.
Meaning of taxable person: A “taxable person” is a person who is registered or
liable to be registered under section 22 or section 24 [The said sections and the
concept of taxable person thereto have been discussed in detail in Chapter 7 –
Registration].
Hence, even an unregistered person who is liable to be registered is a taxable
person. Similarly, a person not liable to be registered, but has taken voluntary
registration and got himself registered is also a taxable person.
E. TAXABLE SUPPLY
For a supply to attract GST, the supply must be taxable. Taxable supply has been
broadly defined and means any supply of goods or services or both which, is
leviable to tax under the GST Law [Discussed in detail in Chapter-3: Charge of
GST]. Exemptions may be provided to the specified goods or services or to a
specified category of persons/ entities making supply [Discussed in detail in
Chapter-4: Exemptions from GST].
The connotation of ‘supply’ gets expanded significantly through the second part
of section 7 i.e. 7(1)(b) which brings within the ambit of ‘supply’, the importation
of services for a consideration whether or not in the course or furtherance of
business. This is the only exception to the condition of supply being in course or
furtherance of business.
Ramaiyaa, a proprietor, has received the architect services for his house
from an architect located in New York at an agreed consideration of
$ 5,000. The import of services by Ramaiyaa is supply under section
7(1)(b) though it is not in course or furtherance of business.
A cloth retailer gives clothes from his business stock to his friend
free of cost. In this case, transfer of business stock would amount
to ‘supply’ if he had claimed input tax credit on his purchase of the
business asset.
What
constitutes
a ‘gift’?
The term ‘gift’ has not been defined in the GST law. In common parlance, gift
is made without consideration, is voluntary in nature and is made
occasionally. It cannot be demanded as a matter of right by the employee
and the employee cannot move a court of law for obtaining a gift.
As already mentioned that 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.
Further, the Input Tax Credit (ITC) Scheme under GST does not allow ITC of
membership of a club, health and fitness centre [Section 17(5)(b)(ii) –
Discussed in detail in Chapter – 6: Input Tax Credit].
It follows, therefore, that if such services are provided free of charge to all the
employees by the employer then the same will not be subjected to GST,
provided appropriate GST was paid when procured by the employer.
The same would hold true for 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) 1.
III. Principal – Agent: Supply of goods by a principal to his agent, without
consideration, where the agent undertakes to supply such goods on behalf of
the principal is considered as supply.
Similarly, supply of goods by an agent to his principal, without consideration,
where the agent undertakes to receive such goods on behalf of the principal
is considered as supply.
Points which merit consideration, in this regard, are as follows:
Only supply of goods is covered here.
Supply of goods between principal and agent without consideration is
also supply.
ABC Manufacturers Ltd. engages Raghav & Sons as an agent to
sell goods on its behalf. For the purpose, ABC Manufacturers Ltd.
has supplied the goods to Raghav & Sons located in Haryana.
Supply of goods by ABC Manufacturers Ltd. to Raghav & Sons will
qualify as supply even though Raghav & Sons has not paid any consideration
yet.
IV. Importation of services: Import of services by a taxable person from a
related person or from his establishments located outside India, without
consideration, in the course or furtherance of business shall be treated as
“supply”.
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. Since ABC Associates and
the branch office are related persons, services received by ABC
Associates will qualify as supply even though the head office has not charged
anything from it.
1
As clarified in a Press Release on 10.07.2017 by Ministry of Finance
VAT @ 14% on food VAT was GST @ 18% The entire supply
value = ` 14 charged on full = `19.8 would be treated
value of food as a single
2. Services by any court or Tribunal established under any law for the
time being in force.
Explanation – The term "Court" includes District Court, High Court
and Supreme Court.
STATUTORY PROVISIONS
Clauses Particulars
ANALYSIS
GST is payable on individual goods or services or both at the notified rates. The
application of rates poses no problem if the supply is of individual goods or
individual services, which is clearly identifiable and such goods or services are
subject to a particular rate of tax.
However, in certain cases, supplies are not such simple and clearly identifiable
supplies. Some of the supplies are a combination of goods or combination of
services or combination of goods and services both and each individual
component of such supplies may attract a different rate of tax.
In such a case, the rate of tax to be levied on such supplies may be a challenge. It
is for this reason, that the GST Law identifies composite supplies and mixed
supplies and provides certainty in respect of tax treatment under GST for such
supplies.
In order to determine whether the supplies are ‘composite supplies’ or ‘mixed
supplies’, one needs to determine whether the supplies are naturally bundled or
not naturally bundled in ordinary course of business.
Principal supply means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply
forming part of that composite supply is ancillary. [Section 2(90) of CGST Act]
How to determine the tax liability on composite supplies?: A composite
supply comprising of two or more supplies, one of which is a principal supply,
shall be treated as a supply of such principal supply.
Suvarna Manufacturers entered into a contract with XYZ Ltd. for supply
of readymade shirts packed in designer boxes at XYZ Ltd.’s outlet.
Further, Suvarna Manufacturers would also get them insured during
transit. In this case, supply of goods, packing materials, transport & insurance is a
composite supply wherein supply of goods is principal supply.
When a consumer buys a television set and he also gets warranty and a
maintenance contract with the TV, this supply is a composite supply. In
this example, supply of TV is the principal supply, warranty and
maintenance services are ancillary.
A travel ticket from Mumbai to Delhi may include service of food being
served on board, free insurance, and the use of airport lounge. In this
case, the transport of passenger, constitutes the pre-dominant element
of the composite supply, and is treated as the principal supply and all other
supplies are ancillary.
Works contract and restaurant services are classic examples of composite
supplies. However, the GST law identifies both as supply of services and such
services are chargeable to specific rate of tax mentioned against such services
(works contract and restaurants).
How to determine whether the services are bundled in the ordinary
course of business?
Whether the services are bundled in the ordinary course of business, would
depend upon the normal or frequent practices followed in the area of business to
which services relate. Such normal and frequent practices adopted in a business
can be ascertained from several indicators some of which are listed below:
The perception of the consumer or the service receiver - If large number
of service receivers of such bundle of services reasonably expect such services
to be provided as a package, then such a package could be treated as
naturally bundled in the ordinary course of business.
Majority of service providers in a particular area of business provide
similar bundle of services.
For example, bundle of catering on board and transport by air is a bundle
offered by a majority of airlines.
The nature of the various services in a bundle of services will also help in
determining whether the services are bundled in the ordinary course of business.
If the nature of services is such that one of the services is the main service and
the other services combined with such service are in the nature of incidental or
ancillary services which help in better enjoyment of a main service.
For example, service of stay in a hotel is often combined with a service or
laundering of 3-4 items of clothing free of cost per day. Such service is an
ancillary service to the provision of hotel accommodation and the resultant
package would be treated as services naturally bundled in the ordinary
course of business.
Other illustrative indicators, not determinative but indicative of bundling of
services in the ordinary course of business are:
There is a single price or the customer pays the same amount, no matter
how much package they actually receive or use.
The elements are normally advertised as a package.
The different elements are not available separately.
The different elements are integral to one overall supply. If one or more
is removed, the nature of the supply would be affected.
No straight jacket formula can be laid down to determine whether a service is
naturally bundled in the ordinary course of business. Each case has to be
individually examined in the backdrop of several factors some of which are
outlined above. The above principles explained in the light of what constitutes a
naturally bundled service can be gainfully adopted to determine whether a
particular supply constitutes a composite supply under GST and if so what
constitutes the principal supply so as to determine the right classification and rate
of tax of such composite supply.
5. LET US RECAPITULATE
The taxable event under GST is supply. The scope of supply under GST can
be understood in terms of following parameters:
Supply should be
Supply should Supply should made in the Supply should Supply should
be of goods or be made for a course or be made by a be a taxable
services consideration furtherance of taxable person supply
business
Consideration
Supply
in course or furtherance of
business
Consideration
Importation of
services
Supply
in course or furtherance of
business
Assets availed
Permanently
transferred/disposed
Deemed Supply
Related Person 1 Related Person 2
Employer Employee
Gifts ≤ ` 50,000 in a FY
Not supply
Deemed Supply
supplies goods
Principal Agent
supplies goods on
behalf of principal
Third person
supplies goods
to principal
Principal
Related
persons
Deemed Supply
Person out Person in India
of India supplies
services
In course or furtherance of
business
Import of
services
with without
consideration consideration
related
in course or not in course or person/distinct
futherance of futherance of person + in course Other cases
business business or futherance of
business
Non-taxable
Taxable
5. Negative list under GST [Section 7(2)(a) read with Schedule III]
No
Is the activity a supply including supply of
goods/services such as sale, transfer, barter,
exchange, licence, rental, lease or disposal?
Yes
No Is it an activity No
Is it for a
consideration? specified under
Schedule I?
Yes Yes
Is it in course No
or furtherance
of business?
Is it
No
Is it in course
or furtherance import of
of business? No service?
Yes
Yes Yes
Is it an activity specified No
in Schedule III or Activity is
Activity is
section 7(2)(b)? Supply NOT
Supply
Yes
7. ANSWERS/HINTS
1. (a) 2. (a) 3. (d) 4. (d) 5. (b) 6. (a)
7. Taxable event under GST is supply of goods or services or both. CGST and
SGST/ UTGST will be levied on intra-State supplies. IGST will be levied on inter-
State supplies.
8. Composite supply shall be treated as supply of the principal supply. Mixed
supply would be treated as supply of that particular goods or services which
attracts the highest rate of tax.
9. The statement is incorrect. Supplies of all goods and services are taxable
except alcoholic liquor for human consumption. Supply of petroleum crude,
high speed diesel, motor spirit (commonly known as petrol), natural gas and
aviation turbine fuel shall be taxable with effect from a future date. This date
would be notified by the Government on the recommendations of the GST
Council.
10. Title as well as possession both have to be transferred for a transaction to be
considered as a supply of goods. In case title is not transferred, the
transaction would be treated as supply of service in terms of Schedule II(1)(b)
of the CGST Act. In some cases, possession may be transferred immediately
but title may be transferred at a future date like in case of sale on approval
basis or hire purchase arrangement. Such transactions will also be termed as
supply of goods.
11. (a) Section 7 of the CGST Act, inter alia, provides that supply must be made
for a consideration except the activities specified in Schedule I and in
course or furtherance of business. Since, both these elements are
missing, donation of clothes and toys to children living in slum area
would not amount to supply under section 7 of the CGST Act.
(b) Schedule I of CGST Act, inter alia, stipulates that supply of goods or
services or both between related persons or between distinct persons as
specified in section 25, is supply even without consideration provided it
is made in the course or furtherance of business. Further, where a person
CHARGE OF GST
LEARNING OUTCOMES
CHAPTER OVERVIEW
Composition levy
1. INTRODUCTION
Power to levy tax is drawn from the Constitution of India. Introduction of
GST necessitated the Constitutional amendment to enable integration of the
central excise duty including additional duties of customs, State VAT and
certain State specific taxes and service tax levied by the Centre into a
comprehensive goods and services tax [Discussed in detail in Chapter-1: GST
in India – An Introduction].
The very basis for the charge of tax in any taxing statute is the taxable event
i.e the point on which the levy of tax gets attracted. As discussed earlier, the
taxable event under GST is SUPPLY. CGST and SGST/UTGST are levied on
all intra-State supplies of goods and/or services while IGST is levied on all
inter-State supplies of goods and/ or services.
Where the location of the supplier and the place of supply of goods or
services are in the same State/Union territory, it is treated as intra-State
supply of goods or services respectively.
Where the location of the supplier and the place of supply of goods or
services are in (i) two different States or (ii) two different Union Territories or
(iii) a State and a Union territory, it is treated as inter-State supply of goods
or services respectively.
2. RELEVANT DEFINITIONS
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. [Sec. 2(52) of CGST Act].
E-Commerce operator: means any person who owns,
operates or manages digital or electronic facility or
platform for electronic commerce. [Section 2(45) of CGST
Act]
Exempt supply: means supply of any goods or services or both which
attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the Integrated Goods and Services Tax
Act, and includes non-taxable supply [Section 2(47) of CGST Act].
Aggregate turnover: means the aggregate value of all taxable supplies
(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-State supplies of persons having the same Permanent Account
be computed on all India basis but excludes central tax, State tax, Union
territory tax, integrated tax and cess [Section 2(6) of CGST Act].
Business: includes –
(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;
(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, as the case may be;
(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
An individual An association of
A HUF
persons or a body of
individuals, whether
A Limited incorporated or not,
A firm Liability in India or outside
Partnership India
Any corporation
established
Any body corporate
by/under any Trust
Central, State or
incorporated by or
Provincial Act or under the laws of a
Government country outside A co-operative
company as defined India society registered
in section 2(45) of under any law
Companies Act, 2013 relating to
Central cooperative
Government/State societies
Government
A local
authority Society as defined
Every artificial juridical under the Societies
person, not falling Registration Act, 1860
above
A company
(b) where no consideration is payable for the supply of goods, the person
to whom the goods are delivered or made available, or to whom
possession or use of the goods is given or made available, and
(c) where no consideration is payable for the supply of a service, the
person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply and shall include
an agent acting as such on behalf of the recipient in relation to the goods
or services or both supplied. [Section 2(93) of CGST Act]
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 under section 9(3)/9(4), or under section 5(3)/5(4) of the IGST Act
[Section 2(98) of CGST Act].
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. [Section 2(102) of CGST Act]
Supplier: in relation to any goods or services or both, shall mean the
person supplying the said goods or services or both and shall include an
agent acting as such on behalf of such supplier in relation to the goods or
services or both supplied. [Section 2(105) of CGST Act]
Taxable supply: means a supply of goods and/or services which is
chargeable to tax under CGST Act. [Section 2(108) of CGST Act]
Non-taxable supply: means a supply of goods or services or both which
is not leviable to tax under CGST Act or under IGST Act. [Section 2(78) of
CGST Act]
Taxable person: means a person who is registered or liable to be registered
under section 22 or section 24. [Section 2(107) of CGST Act]
It is important to note that even an unregistered person who is liable to be
registered is a taxable person. Similarly, a person not liable to be registered,
but has taken voluntary registration and got himself registered is also a
taxable person.
Section 22 enumerates the persons liable to be registered under CGST Act and section
24 lists the persons liable to be registered compulsorily under the said law. The said
sections and the concept of taxable person thereto has been discussed in detail in
Chapter 7 – Registration.
*It is pertinent to note that the CGST Act applies to the State of Jammu
and Kashmir also.
India: “India” means-
Baseline
Continental Shelf
(upto 200 NM from TWI)
(ii) State GST law of the respective State/Union Territory with State Legislature
[Delhi and Puducherry]** extends to whole of that State/Union Territory.
Maharashtra GST Act, 2017 extends to whole of the State of the
Maharashtra.
**State: includes a Union territory with Legislature [Section 2(103) of the CGST
Act].
(iii) Union Territory Goods and Services Tax Act, 2017 extends to the Union
territories** of the Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli, Daman and Diu, Chandigarh and other territory, i.e. the Union
Territories without State Legislature [Section 1 of the UTGST Act].
**Union territory: means the territory of—
(a) the Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli;
(d) Daman and Diu;
(e) Chandigarh; and
(f) other territory.
Explanation––For the purposes of this Act, each of the territories specified in
sub-clauses (a) to (f) shall be considered to be a separate Union territory
[Section 2(114) of CGST Act].
STATUTORY PROVISIONS
Sub-section Particulars
(2) The central tax on the supply of petroleum crude, high speed
diesel, motor spirit (commonly known as petrol), natural gas
and aviation turbine fuel shall be levied with effect from such
date as may be notified by the Government on the
recommendations of the Council.
ANALYSIS
A tax called the Central Goods and Services Tax (CGST) shall be levied on all
intra-State supplies of goods or services or both.
The tax shall be collected in such manner as may be prescribed and shall be
paid by the taxable person. However, intra-State supply of alcoholic liquor
for human consumption is outside the purview of CGST.
Value for levy: Transaction value under section 15 of the CGST Act.
Rates of CGST: Rates for CGST are rates as may be notified by the
Government on the recommendations of the GST Council [Rates notified are
0%, 0.125%, 1.5%, 2.5%, 6%, 9% and 14%]. Maximum rate of CGST will be
20%.
However, CGST on supply of the following items has not been levied
immediately. It shall be levied with effect from such date as may be notified
by the Government on the recommendations of the Council:
petroleum crude
high speed diesel
motor spirit (commonly known as petrol)
natural gas and
aviation turbine fuel
Reverse charge - Tax payable by recipient of supply of goods or services
or both
CGST shall be paid by the recipient of goods or services or both, on reverse
charge basis, in the following cases:
Supply of goods or services or both, notified by the Government on the
recommendations of the GST Council.
Supply of taxable goods or services or both by an unregistered supplier
to a registered person
All the provisions of the CGST Act shall apply to the recipient in the aforesaid
cases as if he is the person liable for paying the tax in relation to the supply
of such goods or services or both.
representational advocates.
services before any
court, tribunal or
authority, directly or
indirectly,
to any business entity
located in the taxable
territory, including
where contract for
provision of such
service has been
entered through
another advocate or a
firm of advocates, or by
a firm of advocates, by
way of legal services, to
a business entity.
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 Central
Government,
State
Government or
Union territory
or local
authority;
(ii) services in
relation to an
aircraft or a
vessel, inside
or outside the
precincts of a
port or an
airport;
(iii) transport of
goods or
passengers.
1
Detailed provisions relating to Electronic Commerce Operator shall be discussed at Final
level.
supplier supplies the selected product/ service to the consumer. The price/
consideration for the product/ service is collected by the ECO from the
consumer and passed on to the actual supplier after the deduction of
commission by the ECO.
The Government may notify specific categories of
services the tax on intra-State supplies of which
shall be paid by the electronic commerce
operator (ECO) if such services are supplied
through it. Such services shall be notified on the
recommendations of the GST Council.
Notification No. 17/2017 CT (R) dated 28.06.2017 has notified the
following categories of services supplied
through ECO for this purpose –
(a) services by way of transportation of
passengers by a radio-taxi, motorcab,
maxicab and motor cycle;
(b) 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 electronic commerce
operator is liable for registration under section 22(1) of the CGST
Act.
(i) Radio taxi: means a taxi including a radio cab, by whatever name
called, which is in two- way radio communication with a central
control office and is enabled for tracking using Global Positioning
System (GPS) or General Packet Radio Service (GPRS).
(ii) Maxicab/ Motorcab/ 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.
As per Motor Vehicles Act, 1988,
Maxicab: means any motor vehicle constructed or adapted to
All the provisions of the CGST Act shall apply to such ECO as if he is the
supplier liable for paying the tax in relation to the supply of above services.
Person liable to pay GST for above specified services when supplied
through ECO
If the ECO does not have physical Person liable to pay tax is the
presence in the taxable territory person representing the ECO
If the ECO has neither the physical Person liable to pay tax is the
presence nor any representative person appointed by the ECO for
in the taxable territory the purpose of paying the tax
GST Rates prescribed for various goods: Broadly, six rates of CGST have
been notified for goods, viz., 0.125%, 1.5%, 2.5%, 6%, 9% and 14%. Some
items have been kept at Nil rate 2. Equivalent rate of SGST/ UTGST will also be
levied.
GST Rates prescribed for various services: Broadly, four rates of CGST have
been notified for services, viz., 2.5%, 6%, 9% and 14%. Equivalent rate of
SGST/ UTGST will also be levied. A new Scheme of Classification of
Services 3 has been devised wherein the services of various descriptions have
been classified under various sections, headings and groups. Each group
2
Students may refer the CBEC website for the complete Schedule of CGST Rates for
goods, for knowledge purposes.
3
Students may refer the Scheme of Classification of Services from CBEC website for
knowledge purposes.
consists of various Service Codes (Tariff). Chapters referred are the Chapters
of the First Schedule to the Customs Tariff Act, 1975 4.
Chapter
Section
Heading
Group
Service
Code
(Tariff)
4
The provisions relating to Customs Act and Customs Tariff Act have been discussed in
detail at Final Level.
commission agents,
commodity brokers,
and auctioneers and
all other traders who
negotiate whole sale
commercial
transactions between
buyers and sellers, for
a fee or commission’.
– Services of electronic
whole sale agents and
brokers.
– Services of whole sale
auctioning houses.
(ii) Accommodation in 6
hotels, inns, guest
houses, clubs,
campsites or other
commercial places
meant for residential
or lodging purposes
having declared
tariff of a unit of
accommodation of
` 1,000 and above
but less than ` 2,500
per unit per day or
equivalent.
Explanation.- Declared
tariff: includes charges for
all amenities provided in
the unit of accommodation
(given on rent for stay) like
furniture, air conditioner,
refrigerators or any other
amenities, but without
deferred payment or
other valuable
consideration,
provided by a
restaurant, eating joint
including mess,
canteen,
having the facility of
air-conditioning or
central air-heating in
any part of the
establishment, at any
time during the year.
(vi) Accommodation in 9 -
hotels, inns, guest
houses, clubs,
campsites or other
commercial places
meant for residential
or lodging purposes
having declared
tariff of a unit of
accommodation of `
2,500 and above but
less than ` 7,500 per
unit per day or
equivalent.
The term declared tariff has
already been defined.
(viii) Accommodation in 14
hotels including five
star hotels, inns,
guest houses, clubs,
campsites or other
commercial places
meant for residential
or lodging purposes
having declared
tariff of a unit of
accommodation of `
7,500 and above per
unit per day or
equivalent.
The term declared tariff has
already been defined.
utilised for
paying central
tax or integrated
tax on the
supply of the
service
passengers.
(b) Stage carriage: has
the meaning assigned
to it in section 2(40) of
the Motor Vehicles
Act, 1988.
As per section 2(40),
stage carriage means
a motor vehicle
constructed or
adapted to carry more
than 6 passengers
excluding the driver
for hire/reward at
separate fares paid by
or individual
passengers, either for
the whole journey/for
stages of the journey
(c) Radio taxi: means a
taxi including a radio
cab, by whatever name
called, which is in two-
way radio
communication with a
central control office
and is enabled for
tracking using Global
Positioning System
(GPS) or General
Packet Radio Service
(GPRS).
(v) Transport of 6 -
passengers by air,
with/without
accompanied
belongings, in other
than economy class.
Explanation no.
(iv)]
recognisably
systematic series, not
open to use by
passengers.
(ii) Temporary or 9 -
permanent transfer or
permitting the use or
enjoyment of
Intellectual Property
(IP) right in respect
of Information
Technology software.
[Please refer to Explanation
no. (v)]
in or offering to
engage in aircraft
operations;
(b) Scheduled air
transport service:
means an air transport
service undertaken
between the same two
or more places
operated according to
a published time table
or with flights so
regular or frequent
that they constitute a
recognisable
systematic series, each
flight being open to
use by members of the
public;
(c) Scheduled air cargo
service: means air
transportation of
cargo or mail on a
scheduled basis
according to a
published time table
or with flights so
regular or frequent
that they constitute a
recognisably
systematic series, not
open to use by
passengers.
22 Heading Telecommunications, 9 -
9984 broadcasting and
information supply
services.
fishing, animal
husbandry: mean-
(i) Services relating to
cultivation of plants
and rearing of all life
forms of animals,
except the rearing of
horses, for food, fibre,
fuel, raw material or
other similar products
or agricultural produce
by way of—
(a) agricultural
operations
directly related
to production of
any agricultural
produce including
cultivation,
harvesting,
threshing, plant
protection or
testing;
(b) supply of farm
labour;
(c) processes carried
out at an
agricultural farm
including tending,
pruning, cutting,
harvesting, drying,
cleaning,
trimming, sun
drying,
fumigating,
curing, sorting,
grading, cooling
or bulk packaging
and such like
operations which
do not alter the
essential
characteristics of
agricultural
produce but
make it only
marketable for the
primary market;
(d) renting/leasing
of agro
machinery or
vacant land with
or without a
structure
incidental to its
use;
(e) loading,
unloading,
packing, storage
or warehousing
of agricultural
produce;
(f) agricultural
extension
services;
(g) services by any
Agricultural
Produce
Marketing
Committee/
Board or services
provided by a
commission
agent for sale or
purchase of
agricultural
produce.
(h) Services by way of
pre-conditioning,
pre-cooling,
ripening, waxing,
retail packing,
labelling of fruits
and vegetables
which do not
change or alter
the essential
characteristics of
the said fruits or
vegetables.
(i) Carrying out an
intermediate
production
process as job
work in relation
to cultivation of
plants and rearing
of all life forms of
animals, except
the rearing of
horses, for food,
fibre, fuel, raw
material or other
similar products
or agricultural
produce
leather falling
under Chapter 41
in the First
Schedule to the
Customs Tariff
Act, 1975.
Man made fibres: means
staple fibres and filaments
of organic polymers
produced by
manufacturing processes
either,-
(a) by polymerisation of
organic monomers to
produce polymers
such as polyamides,
polyesters, polyolefins
or polyurethanes, or
by chemical
modification of
polymers produced by
this process [for
example, poly vinyl
alcohol prepared by
the hydrolysis of
polyvinyl acetate]; or
(b) by dissolution or
chemical treatment of
natural organic
polymers (for example,
cellulose) to produce
polymers such as
cuprammonium rayon
(cupro) or viscose
rayon, or by chemical
modification of natural
organic polymers (for
example, cellulose,
casein and other
proteins, or alginic
acid), to produce
polymers such as
cellulose acetate or
alginates.
(ii) Manufacturing -
services on physical
inputs (goods) owned
by others, other than
(i) above.
(v) Gambling. 14 -
Notes:
1. Value of supply of service and goods portion in such
supply in construction of complex service involving
transfer of property in land/undivided share of land:
shall be computed as follows:
Amount* aforesaid
service
land/undivided
share of land
(iii) The rules for the interpretation of the First Schedule to the Customs Tariff
Act, 1975, the Section and Chapter Notes and the General Explanatory
Notes of the First Schedule shall, so far as may be, apply to the
interpretation of heading 9988 [Heading 9988 is for manufacturing
services on physical inputs (goods) owned by others].
(iv) Wherever a rate has been prescribed in this notification subject to the
condition that credit of input tax charged on goods or services used in
supplying the service has not been taken, it shall mean that,-
(a) credit of input tax charged on goods or services used exclusively in
supplying such service has not been taken; and
(b) credit of input tax charged on goods or services used partly for
supplying such service and partly for effecting other supplies eligible
for input tax credits, is reversed as if supply of such service is an
exempt supply and attracts provisions of section 17(2) of the CGST
Act, 2017 and the rules made thereunder.
(v) Information technology software: means any representation of
instructions, data, sound or image, including source code and object
code, recorded in a machine readable form, and capable of being
manipulated or providing interactivity to a user, by means of a computer
or an automatic data processing machine or any other device or
equipment.
(vi) Agricultural extension: means application of scientific research and
knowledge to agricultural practices through farmer education or training.
(vii) Agricultural produce: means any produce out of cultivation of plants
and rearing of all life forms of animals, except the rearing of horses, for
food, fibre, fuel, raw material or other similar products, on which either
no further processing is done or such processing is done as is usually
done by a cultivator or producer which does not alter its essential
characteristics but makes it marketable for primary market.
(viii)Agricultural Produce Marketing Committee or Board: means any
committee or board constituted under a State law for the time being in
force for the purpose of regulating the marketing of agricultural produce.
STATUTORY PROVISIONS
Sub-section Particulars
(2) The registered person shall be eligible to opt under sub-section (1),
if––
Provided that where more than one registered persons are having the
same Permanent Account Number (issued under the Income-tax Act,
1961), the registered person shall not be eligible to opt for the scheme
under sub-section (1) unless all such registered persons opt to pay tax
under that sub-section.
(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).
(4) A taxable person to whom the provisions of sub-section (1) apply shall
not collect any tax from the recipient on supplies made by him nor
shall he be entitled to any credit of input tax.
(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 the provisions of
section 73 or section 74 shall, mutatis mutandis, apply for
determination of tax and penalty.
ANALYSIS
Overview of the Scheme
The objective of composition
scheme is to bring simplicity and
to reduce the compliance cost for
the small taxpayers. Small
taxpayers with an aggregate
turnover in a preceding financial
year up to ` 75 lakh shall be
eligible for composition levy.
Suppliers opting for composition levy need not worry about the classification
of their goods or services or both, the rate of GST applicable on the same,
etc. They are not required to raise any tax invoice, but simply need to issue a
Bill of Supply [Discussed in detail in Chapter-8: Tax Invoice, Credit and Debit
Notes] wherein no tax will be charged from the recipient.
At the end of a quarter, the registered person opting for composition levy
would pay a certain specified percentage of his turnover of the quarter as tax,
without availing the benefit of input tax credit.
Registered persons making inter-State supplies or making supplies through
e-commerce operators who are required to collect tax at source shall not be
eligible for composition scheme. The provisions relating to composition levy
are contained in section 10 of CGST Act, 2017 and Chapter-II [Composition
Rules] of Central Goods and Services Tax (CGST) Rules, 2017. The said rules
have been incorporated at the relevant places.
Turnover limit for Composition Levy [Section 10(1)]
Section 10 of the CGST Act provides the turnover limit of ` 50 lakh for
composition levy. However, proviso to section 10(1) empowers the
Government to increase the said limit of ` 50 lakh upto ` 1 crore, on the
recommendation of the Council.
In view of said power of the Government to increase the turnover limit for
Composition Levy as granted by proviso to section 10(1), the turnover limit
for Composition Levy for CGST and SGST purposes for all eligible
Assam Nagaland
Manipur Sikkim
Meghalaya Tripura
Himachal Pradesh
*In case of Uttarakhand and Jammu and Kashmir, the turnover limit will
be ` 75 lakh.
Excludes
Includes --CGST
Value of all outward --SGST
supplies
--UTGST
--Taxable supplies
--Exempt supplies --IGST
--Exports --Cess
--Inter-State supplies --Value of inward supplies
of persons having the
on which tax is payable
same PAN be computed
on all India basis. under reverse charge.
*These are composition rates specified under rule 7 of the CGST Rules, 2017.
An equivalent amount of SGST is also payable.
Intimation of opting for composition levy [Rules 3 & 4]
(i) Intimation by person applying for registration: Any
person who is not registered and applies for registration
may give an option to pay tax under composition levy in
Part B of the registration form, viz., FORM GST REG-01. The same
shall be considered as an intimation to pay tax under Composition Levy.
Such intimation shall be considered only after the grant of registration to
the applicant and his option to pay tax under composition levy shall be
effective from the date from which registration is effective.
(ii) Intimation by a registered person: A registered person who opts to pay
tax under composition levy scheme shall electronically file an
intimation in prescribed form on the Common Portal [www.gst.gov.in],
prior to the commencement of the FY for which said option is
exercised.
He shall also furnish the statement in prescribed form in accordance
with the provisions of rule 44(4) of CGST Rules, 2017 [Discussed in detail
in Chapter 6 – Input Tax Credit] within 60 days from the commencement
of the relevant FY. Any intimation in respect of any place of business in a
State/UT shall be deemed to be an intimation in respect of all other
places of business registered on the same PAN.
The option to pay tax under composition levy shall be effective from the
beginning of the FY.
Conditions and restrictions for composition levy [Rule 5]
Person opting for composition levy has to comply with the following
conditions:
he is neither a casual taxable person nor a non-resident taxable person
[Concept of casual taxable person and non-resident taxable person has
been discussed in detail in Chapter 7: Registration].
the goods held in stock by him have not been purchased from an
unregistered supplier and where purchased, he pays the tax under
reverse charge under section 9(4).
he shall pay tax under section 9(3)/9(4) (reverse charge) on inward supply
of goods or services or both.
he was not engaged in the manufacture of goods as notified under
section 10(2)(e), during the preceding FY. The following goods have
been hereby notified vide Notification No. 8/2017 CT dated
27.06.2017:
Supplier of goods
Supplier of services which are not Supplier of inter-
other than supplier taxable under the State outward
of food articles. CGST Act/SGST Act/ supplies of goods 🌠🌠
UTGST Act.
Person supplying
Manufacturer of
goods through an
icecream, panmasala
electronic commerce
and tobacco
operator
🌠🌠
There is no restriction on
Composition Supplier to
procure goods from
inter-State suppliers.
A dealer ‘X’ has two offices in Delhi and is eligible for composition
levy. If ‘X’ opts for the composition scheme, both the offices would
pay taxes under composition scheme and abide by all the
conditions as may be prescribed for the composition scheme.
Composition scheme supplier cannot collect tax [Section 10(4)]
Taxable person opting for the composition scheme shall not collect tax from
the recipient on supplies made by him. It implies that a composition scheme
supplier cannot issue a tax invoice.
Composition scheme supplier cannot enter into credit chain [Section
10(4)]
Taxable person opting for the composition scheme is not entitled to any
credit of input tax.
Imposition of penalty in case of irregular availment of the
composition scheme [Section 10(5) read with rule 6(4) and 6(5)]
If a taxable person has paid tax under the composition scheme though he
was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 of the CGST Act shall be applicable for
determination of tax and penalty.
Further, where the proper officer has reasons to believe that the registered
person was not eligible to pay tax under composition levy or has
contravened the provisions of the Act/provisions of this Chapter, he may
issue a show cause notice to such person in prescribed form.
Upon receipt of the reply to such show cause notice from the registered
person in prescribed form, the proper officer shall issue an order in
prescribed form within 30 days of the receipt of such reply, either
accepting the reply, or denying the option to pay tax under composition
levy from the date of the option or from the date of the event concerning
such contravention, as the case may be.
Example explaining the conputation of amount payable under
composition levy by the person eligible for such scheme
Taxpayer ‘A’ is a manufacturer having one unit – A1 in UP and another unit – A2
in MP. Total turnover of two units in last FY was ` 55 lakh (` 25 lakh + ` 30 lakh).
Total turnover of two units in the second quarter of this financial year was ` 15
lakh (` 5 lakh + ` 10 lakh).
*It is pertinent to note that the IGST Act applies to the State of Jammu and
Kashmir also.
STATUTORY PROVISIONS
Sub-section Particulars
services.
Provided that where an electronic commerce operator
does not have a physical presence in the taxable territory,
any person representing such electronic commerce
operator for any purpose in the taxable territory shall be
liable to pay tax.
Provided further that where an electronic commerce
operator does not have a physical presence in the taxable
territory and also does not have a representative in the
said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay tax.
ANALYSIS
A tax called the Integrated Goods and Services Tax (IGST) shall be levied on
all inter-State supplies of goods or services or both. The tax shall be collected
in such manner as may be prescribed and shall be paid by the taxable person.
However, inter-State supply of alcoholic liquor for human consumption is
outside the purview of IGST.
Value for levy: Transaction value under section 15 of the CGST Act
Rates of IGST: IGST is approximately the sum total of CGST and SGST/UTGST.
Maximum rate of IGST will be 40%.
Goods imported into India: For the goods imported into India, the IGST
shall be levied and collected as per the section 3 of the Custom Tariff Act,
1975 i.e. the additional duty shall be as per the Custom Tariff Act, 1975 and
the value shall also be determined as per the said Act. In other words, IGST
shall be levied as additional duty of customs in addition to basic customs
duty under the Customs Tariff Act, 1975.
However, the credit of such levy be allowed under GST law and thus, it is
inherently embedded in the GST mechanism.
Reverse charge - Tax payable by recipient of supply of goods or services
or both: IGST shall be paid by the recipient of goods or services or both, on
reverse charge basis, in the following cases:
Supply of goods or services or both, notified by the Government on the
recommendations of the GST Council.
Supply of taxable goods or services or both by an unregistered supplier
to a registered person.
All the provisions of the IGST Act shall apply to the recipient in the aforesaid
cases as if he is the person liable for paying the tax in relation to the supply
of such goods or services or both.
List of services taxable under reverse charge, i.e. the services where tax
is payable by the recipient: Notification No. 10/2017 IT (R) dated
28.06.2017 has notified specified categories of supply of services wherein
whole of the IGST shall be paid on reverse charge basis by the recipient of
services. All the services which have been notified for reverse charge
purposes under CGST Act (as given in S.No. 4 of this Chapter) have also been
notified for reverse charge under IGST Act. Further, following two services
are additionally included for IGST purposes:
It is important to highlight that the above provision shall apply only in case of
supply of services.
IGST Rates prescribed for various goods: Broadly, six rates of IGST have
been notified for goods, viz., 5%, 12%, 18%, 28%, 3% and 0.25% 1.
IGST Rates prescribed for various services: Broadly, four rates of IGST have
been notified for services, viz., 5%, 12%, 18% and 28%. CGST Rates for
services have already been discussed in earlier paras. IGST rates for such
services can be computed on the basis of the same.
For certain specified goods and services, nil rate of IGST has been notified.
8. LET US RECAPITULATE
1. Extent & Commencement of CGST Act/ SGST Act/ UTGST Act/ IGST Act
States of India
Union Territories
without State
Legislature
1
Students may refer the CBEC website for the complete Schedule of IGST Rates for goods for
knowledge purposes.
Value for levy Transaction value under section 15 of the CGST Act
If the ECO does not have Person liable to pay tax is the
physical presence in the person representing the ECO
taxable territory
If the ECO has neither the Person liable to pay tax is the
physical presence nor any person appointed by the ECO
representative in the for the purpose of paying the
taxable territory tax
Composition levy
Aggregate Turnover
Supplier of services other He is neither a casual
(AT) ≤ ` 75 lakh during
than supplier of food taxable person nor a non-
the FY. In Special
articles resident taxable person
Category States, AT
≤ ` 50 lakh except
Uttarakhand & J&K Supplier of goods which Stock has not been purchased
(≤ ` 75 lakh) are not taxable under from an unregistered supplier,
the CGST Act/SGST where purchased tax paid under
Act/UTGST Act reverse charge
Tax is not collected
from recipient of supply
Supplier of inter-State
outward supplies of goods He shall pay tax under
section 9(3)/9(4) (reverse
charge) on inward supplies
Input tax credit is
not availed Person supplying goods through
an electronic commerce operator He is not engaged in
manufacturer of notified
goods
Composition Scheme if
Manufacturer of certain
availed shall include all Words “Composition
goods as may be notified taxable person, not
registered persons
by the Government eligible to collect tax on
having same PAN
supplies” is mentioned at
the top of the bill of supply
Words “composition
taxable person” displayed
at prominent places
Composition Rates
Category of Rate
registered persons
Manufacturer 2%
Supplier of food 5%
Traders 1%
10. ANSWERS/HINTS
1. (a) 2. (c) 3. (d) 4. (d) 5. (a) 6. (a) 7. (c) 8. (a) 9. (a)
10. (a)
11. (a) Since GST on services provided or agreed to be provided by an arbitral
tribunal to any business entity located in the taxable territory is payable
under reverse charge, in the given case, GST is payable by the recipient -
business entity.
(b) GST on sponsorship services provided by any person to any body corporate
or partnership firm located in the taxable territory is payable under reverse
charge. Since in the given case, services have been provided to an
individual, reverse charge provisions will not be attracted. GST is payable
under forward charge by the supplier – company.
(c) GST on services provided or agreed to be provided by the Central
Government, State Government, Union Territory, or local authority to any
CHAPTER 4
CHAPTER OVERVIEW
India
1. INTRODUCTION
When a supply of goods and/or services falls within the purview of charging
section, such supply is chargeable to GST. However, for determining the
liability to pay the tax, one needs to further check whether such supply of
goods and/or services are exempt from tax.
Exempt supply has been defined as supply of any goods or services or both
which attracts nil rate of tax or which may be wholly exempt from tax and
includes non-taxable supply. Power to grant exemption from GST has been
granted vide section 11 of the CGST Act and vide section 6 of the IGST Act.
State GST laws also contain identical provisions granting power to exempt
SGST.
Under earlier Indirect Tax regime, a larger number of exemptions were
enjoyed by the taxpayers. The idea is to prune the exemption list under GST
Regime. Area based exemptions have been done away with under GST.
Essential goods/services, i.e. public consumption products/services, have
been exempted. Items such as unbranded atta/maida/besan, unpacked food
grains, milk, eggs, curd, lassi and fresh vegetables are among the items
exempted from GST. Further, essential services like health care services,
education services, etc. have also been exempted.
In this chapter, we shall discuss the power to grant exemption from tax under
CGST Act/IGST Act and list of services exempt from GST in detail and an overview
of the goods exempt from tax.
2. RELEVANT DEFINITIONS
Section 2(47) of the CGST Act, 2017 defines Exempt Supply as supply of any
goods or services or both which attracts nil rate of tax or which may be wholly
exempt from tax under section 11, or under section 6 of the IGST Act, and
includes non-taxable supply.
Various other definitions as contained in the exemption Notification No.
12/2017 CT (R) dated 28.06.2017/ Notification No. 9/2017 IT (R) dated
28.06.2017 providing exemption from CGST/IGST respectively, to specified
services are provided as under:
Advertisement: means any form of presentation for promotion of, or
bringing awareness about, any event, idea, immovable property, person,
service, goods or actionable claim through newspaper, television, radio or
any other means but does not include any presentation made in person.
Advocate: has the same meaning as assigned to it in clause (a) of sub-
section (1) of section 2 of the Advocates Act, 1961. Advocate means an
advocate entered in any roll under the provisions of the Advocates Act, 1961
[Section 2(1)(a) of the Advocates Act, 1961].
Agricultural extension: means application of scientific research and
knowledge to agricultural practices through farmer education or training.
Agricultural produce: means any produce out of cultivation of plants and
rearing of all life forms of animals, except the rearing of horses, for food,
fibre, fuel, raw material or other similar products, on which either no further
processing is done or such processing is done as is usually done by a
cultivator or producer which does not alter its essential characteristics but
makes it marketable for primary market.
Radio taxi: means a taxi including a radio cab, by whatever name called,
which is in two-way radio communication with a central control office and is
enabled for tracking using the Global Positioning System or General Packet
Radio Service;
Recognised sporting event: means any sporting event,-
(i) organised by a recognised sports body where the participating team or
individual represent any district, State, zone or country;
(ii) organised -
(A) by a national sports federation, or its affiliated federations, where the
participating teams or individuals represent any district, state or
zone;
(B) by Association of Indian Universities, Inter-University Sports Board,
School Games Federation of India, All India Sports Council for the
Deaf, Paralympic Committee of India or Special Olympics Bharat;
(C) by Central Civil Services Cultural and Sports Board;
(D) as part of national games, by Indian Olympic Association; or
(E) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;
Recognised sports body: means –
(i) Indian Olympic Association;
(ii) Sports Authority of India;
(iii) a national sports federation recognised by the Ministry of Sports and
Youth Affairs of the Central Government, and its affiliate federations;
(iv) national sports promotion organisations recognised by the Ministry of
Sports and Youth Affairs of the Central Government;
(v) the International Olympic Association or a federation recognised by the
International Olympic Association; or
(vi) a federation or a body which regulates a sport at international level and
its affiliated federations or bodies regulating a sport in India.
Religious place: means a place which is primarily meant for conduct of
prayers or worship pertaining to a religion, meditation, or spirituality;
Renting in relation to immovable property: means allowing, permitting or
granting access, entry, occupation, use or any such facility, wholly or partly, in
an immovable property, with or without the transfer of possession or control
of the said immovable property and includes letting, leasing, licensing or
other similar arrangements in respect of immovable property;
Reserve Bank of India: means the bank established under section 3 of the
Reserve Bank of India Act, 1934;
Residential complex: means any complex comprising of a building or
buildings, having more than one single residential unit;
Rural area: means the area comprised in a village as defined in land revenue
records, excluding-
the area under any municipal committee, municipal corporation, town area
committee, cantonment board or notified area committee; or any area that
may be notified as an urban area by the Central Government or a State
Government;
Senior advocate: has the same meaning as assigned to it in section 16 of the
Advocates Act, 1961 which, inter alia, provides that an advocate may, with his
consent, be designated as senior advocate if the Supreme Court or a High
Court is of opinion that by virtue of his ability standing at the Bar or special
knowledge or experience in law he is deserving of such distinction. Senior
advocates shall, in the matter of their practice, be subject to such restrictions
as the Bar Council of India may, in the interest of the legal profession,
prescribe.
Single residential unit: means a self-contained residential unit which is
designed for use, wholly or principally, for residential purposes for one family.
Special category States: shall mean the States as specified in sub-clause (g)
of clause (4) of article 279A of the Constitution.
Specified organisation: shall mean,-
• Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand
Undertaking; or
• ‘Committee’ or ‘State Committee’ as defined in section 2 of the Haj
Committee Act, 2002.
Stage carriage: shall have the same meaning as assigned to it in clause (40)
of section 2 of the Motor Vehicles Act, 1988. Stage carriage means a motor
vehicle constructed or adapted to carry more than 6 passengers excluding
the driver for hire or reward at separate fares paid by or for individual
passengers, either for the whole journey or for stages of the journey [Section
2(40) of the Motor Vehicles Act, 1988].
State Electricity Board: means the Board constituted under section 5 of the
Electricity (Supply) Act, 1948.
State Transmission Utility: shall have the same meaning as assigned to it in
clause (67) of section 2 of the Electricity Act, 2003.
State Transport Undertaking: has the same meaning as assigned to it in
clause (42) of section 2 of the Motor Vehicles Act, 1988. State transport
undertaking means any undertaking providing road transport service, where
such undertaking is carried on by-
i. the Central Government or a State Government;
ii. any Road Transport Corporation established under section 3 of the Road
Transport Corporations Act, 1950.
iii. any municipality or any corporation or company owned or controlled by
the Central Government or one or more State Governments, or by the
Central Government and one or more State Governments.
Explanation-For the purposes of this clause, road transport service means a
service of motor vehicles carrying passengers or goods or both by road for
hire or reward [Section 2(42) of the Motor Vehicles Act, 1988].
Tiger reserve: has the same meaning as assigned to it in clause (e) of section
38K of the Wild Life (Protection) Act, 1972.
Tour operator: means any person engaged in the business of planning,
scheduling, organizing, arranging tours (which may include arrangements for
accommodation, sightseeing or other similar services) by any mode of
transport, and includes any person engaged in the business of operating
tours.
Trade union: has the same meaning as assigned to it in clause (h) of section
2 of the Trade Unions Act, 1926.
Vessel: has the same meaning as assigned to it in clause (z) of section 2 of
the Major Port Trusts Act, 1963.
Wildlife sanctuary: means a sanctuary as defined in the clause (26) of the
section 2 of The Wild Life (Protection) Act, 1972.
Zoo: has the same meaning as assigned to it in the clause (39) of the section
2 of the Wild Life (Protection) Act, 1972.
STATUTORY PROVISIONS
Sub-section Particulars
ANALYSIS
(i) Exemption from payment of tax: The Government is empowered to grant
exemption from tax, if it is necessary in public interest so to do, on
recommendation of the GST council, by way of issuance of-
I. Notification
The Government
may generally
on
exempt supply of
recommendatio BY
goods and/or
n of the GST NOTIFICATION
services of any
council
specified
description
The Government
may exempt any
on
goods and/or BY SPECIAL
recommendation
services on which ORDER
of the GST Council
tax is leviable from
payment of tax
under
circumstances of
an exceptional in the public
nature to be interest.
stated in such
order
whole of the tax. Since GST is a tax for common man, everyday items used by the
common man have been included in the list of exempted items.
Items such as unbranded atta/maida/besan, unpacked food grains, milk, eggs,
curd, lassi and fresh vegetables are among the items exempted from GST.
Some of the examples of the goods exempted from tax have been provided
herein 1:
1
Students may go through the complete list of goods exempt from GST on CBEC website –
www.cbec.gov.in, for knowledge purposes.
6 Services BY Government:
Services by the Central Government, State Government, Union territory
or local authority excluding the following services—
(a) services by the Department of Posts by w ay of
speed post, express parcel post, life insurance, and
agency services provided to a person other than the
Central Government, State Government, Union
territory;
(b) services in relation to an aircraft or a vessel,
in side or outside the precincts of a port or an
airport;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.
(b) a period of three years has not elapsed from the date of entering
into an agreement as an incubatee.
zone or Country;
(b) by Association of Indian Universities, Inter-University Sports Board,
School Games Federation of India, All India Sports Council for the
Deaf, Paralympic Committee of India or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
any natural resource where such right to use was assigned by the
Central Government, State Government, Union territory or local
authority before the 1st April, 2016:
However, the exemption shall apply only to tax payable on one time
charge payable, in full upfront or in installments, for assignment of
right to use such natural resource.
66 Services provided -
(a) by an educational institution to its students,
faculty and staff;
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and
staff;
(ii) catering, including any mid-day meals scheme sponsored by
the Central Government, State Government or Union territory;
(iii) security or cleaning or house- keeping services performed in
such educational institution;
(iv) services relating to admission to, or conduct of examination
by, such institution; upto higher secondary:
However, nothing contained in entry (b) shall apply to an educational
institution other than an institution providing services by way of pre-
school education and education up to higher secondary school or
equivalent.
79 Services by way of
admission to a
museum, national
park, wildlife
sanctuary, tiger
reserve or zoo.
Above services have been exempted from both CGST and IGST by virtue
of notifications issued under respective Acts.
Apart from this, list of services exempt from IGST by Notification No. 9/2017
IT (R) dated 28.06.2017 also include following three services.
6. LET US RECAPITULATE
1. Power to exempt from tax [Section 11 of the CGST Act/ section 6 of IGST
Act]
Power to exempt from tax
by way of issuance of
• exempt generally
exempt from payment of tax under
• either absolutely or subject to such
circumstances of an exceptional
conditions as may be specified,
nature to be stated in such order, in
• goods and/or services of any specified
public interest.
description.
11. When exemption from whole of tax collected on goods or services or both has
been granted absolutely, can a person pay tax?
8. ANSWERS/HINTS
1. (c) 2. (d) 3. (d) 4. (c) 5. (d)
6. Services provided to a recognized sports body by an individual inter alia as a
referee in a sporting event organized by a recognized sports body is exempt
from GST.
Since in the first case, the football match is organized by Sports Authority of
India, which is a recognized sports body, services provided by the individual
as a referee in such football match will be exempt.
However, when he acts as a referee in a charity football match organized by a
local sports club, he would not be entitled to afore-mentioned exemption as
a local sports club is not a recognized sports body and thus, GST will be
payable in this case.
7. Services by an artist by way of a performance in folk or classical art forms of
(i) music, or (ii) dance, or (iii) theatre are exempt from GST, if the
consideration charged for such performance is not more than ` 1,50,000.
However, such exemption is not available in respect of service provided by
such artist as a brand ambassador.
Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap
manufactured by RXL Pvt. Ltd., the services rendered by her by way of a
classical dance performance in the concert organized by RXL Pvt. Ltd. to
promote its brand will not be eligible for the above-mentioned exemption
and thus, be liable to GST. The fact that the proceeds of the concert will be
donated to a charitable organization will not have any bearing on the
eligibility or otherwise to the above-mentioned exemption.
8. Computation of value of taxable supply
Particulars (`)
Notes:
1. Services by an entity registered under section 12AA of the Income-tax
Act, 1961 by way of charitable activities are exempt from GST. The
activities relating to advancement of yoga are included in the definition
of charitable activities. So, such activities are exempt from GST.
2. Services by business facilitator or a business correspondent to a banking
company with respect to accounts in its rural area branch have been
exempted from GST.
3. Services provided by cord blood banks by way of preservation of stem
cells or any other service in relation to such preservation are exempt
from GST.
4. Services provided to a recognized sports body only by an individual as a
player, referee, umpire, coach or team manager for participation in a
sporting event organized by a recognized sports body are exempt from
GST. Thus, services provided by commentators are liable to GST.
9. (i) Yes. Services provided TO an educational institution by way of
transportation of students are exempted from GST.
(ii) No. Services provided by way of vehicle parking to general public are not
exempted from GST. Therefore, GST is payable on the same.
10.
11. No, the person supplying exempted goods or services or both shall not collect
the tax in excess of the effective rate.
LEARNING OUTCOMES
After reading this Unit, you will be able to-
understand what constitutes the value of a taxable supply of
goods / services when the supply is made to an unrelated
person and price is the sole consideration for the supply
identify the various inclusions in/exclusions from the value of
taxable supply
pinpoint the situations when the discount will be included /not
included in the value of supply
ascertain who are related persons
VALUE OF SUPPLY
1. INTRODUCTION
GST is payable (i) on supply of goods and / or services for a consideration in the
course of or furtherance of business; (ii) on certain supplies made without a
consideration as specified in Schedule I to the CGST Act.
As GST is levied as a percentage of the value of
supply, whether of goods or of services, it
becomes important to know how to arrive at the
value on which tax is to be paid. Provisions
relating to ‘value of supply’ set out the mechanism
to compute such value basis which CGST and
SGST/UTGST (intra-State supply) and IGST (inter-
State supply) should be paid.
Section 15 of the CGST Act supplemented with the Chapter IV: Determination of
Value of Supply of CGST Rules 3 prescribes the provisions for determining the value
of goods and services.
Section 15 of the CGST Act provides common provisions for determining the value
of goods and services. It provides the mechanism for determining the value of a
supply which is made between unrelated persons and when price and only the price
is the sole consideration of the supply. When value cannot be determined under
section 15, the same is determined using Chapter IV: Determination of Value of
Supply of CGST Rules.
Provisions of value of supply under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
Agent means a person, including a factor, broker, commission agent, arhatia, del
credere agent, an auctioneer or any other mercantile agent, by whatever name
called, who carries on the business of supply or receipt of goods or services or
both on behalf of another [Section 2(5)].
3
Chapter IV: Determination of Value of Supply of CGST Rules will be discussed at the Final level.
Factor Who
carries on
business of
Broker
supply of
goods and
Commission agent /or
services
AGENT
Arhatia
On behalf
Auctioneer of another
Mercantile agent
Cess shall have the same meaning as assigned to it in the Goods and Services
Tax (Compensation to States) Act [Section 2(22)].
Consideration in relation to the supply of goods or services or both includes –
(a) any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of goods
or services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a State
Government;
(b) the monetary value of any act or forbearance, in respect of, in response to,
or for the inducement of, the supply of goods or services or both, whether
by the recipient or by any other person but shall not include any subsidy
given by the Central Government or a State Government;
Provided that a deposit given in respect of the supply of goods or services or
both shall not be considered as payment made for such supply unless the
supplier applies the deposit as consideration for the said supply [Section 2(31)].
CONSIDERATION
Goods means every kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply or under a
contract of supply [Section 2(52)].
Market value shall mean the full amount which a recipient of a supply is required
to pay in order to obtain the goods or services or both of like kind and quality at
or about the same time and at the same commercial level where the recipient and
the supplier are not related [Section 2(73)].
Money means the Indian legal tender or any foreign currency, cheque, promissory
note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money
order, postal or electronic remittance or any other instrument recognised by the
Reserve Bank of India when used as a consideration to settle an obligation or
exchange with Indian legal tender of another denomination but shall not include
any currency that is held for its numismatic value [Section 2(75)].
Foreign Currency
Cheque
Promissory note
Traveller Cheque
Money Order
Postal or electronic
remittance
Person includes-
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not,
in India or outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act
or a Government company as defined in section 2(45) of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to cooperative societies;
(j) a local authority;
(k) Central Government or a State Government;
(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 [Section 2(84)].
Prescribed means prescribed by rules made under this Act on the
recommendations of the Council [Section 2(87)].
Recipient of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to
whom the goods are delivered or made available, or to whom possession
or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person
to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed as
a reference to the recipient of the supply and shall include an agent acting as
such on behalf of the recipient in relation to the goods or services or both
supplied [Section 2(93)].
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
STATUTORY PROVISIONS
(a) any taxes, duties, cesses, fees and charges levied under any
law for the time being in force other than this Act, the State
Goods and Services Tax Act, the Union Territory Goods and
Services Tax Act and the Goods and Services Tax
(Compensation to States) Act, if charged separately by the
supplier;
(3) The value of the supply shall not include any discount which is given
(4) Where the value of the supply of goods or services or both cannot
be determined under sub-section (1), the same shall be determined
in such manner as may be prescribed.
(c) persons who are associated in the business of one another in that one
is the sole agent or sole distributor or sole concessionaire, howsoever
described, of the other, shall be deemed to be related
ANALYSIS
The CGST law has different provisions for determining the taxable value of a supply
of goods / services in the following situations:
Supplies made for a price in money (monetary consideration), to unrelated
persons Sub-sections (1) to (3) of section 15;
Supplies made for non-monetary consideration, or for part monetary
consideration and part other, or involving additional consideration, or to
related persons, or for specific classes of supply Sub-sections (4) and (5) of
section 15 read with the Chapter IV: Determination of Value of Supply of CGST
Rules.
The ‘Explanation’ to section 15 defines ‘related person’ to cover various situations
of control, including sole agent, sole distributor and sole concessionaire.
A. Supplies to unrelated persons where price is the sole consideration
(i) Transaction value [Section 15(1)]
When a transaction of supply of goods / services is made
between two persons (see definition of “person”) who are not related to
each other (see definition of “related person” in ‘Explanation’ to section
15), and
price is the sole consideration (see definition of consideration) for the
supply,
the price actually paid or payable for the said supply of goods or services
or both.
This is the price for the specific supply that is being valued. It includes the amount
already paid at the time the supply is being valued for tax, as well as the amount
payable and not yet paid at that time. The word ‘payable’ refers to price that is
agreed to be paid for the goods / services.
Contracted price for 1 MT of cement from X Ltd to Y: ` 7000.
Advance payment before despatch: ` 700.
Payable after credit period of 30 days: ` 6300.
Base taxable value: ` 7000. (Additions as further discussed below may also have to
be made.) This would be so even though only ` 700 has been received at the time
of payment of GST on the supply.
(b) Taxes other than GST, if charged separately by the supplier
[Section 15(2)(a)]
GST and GST cess are not part of taxable value, but other taxes/cesses/fees etc.
will form part of the value of taxable supply, if separately billed. For instance,
if a supplier of goods pays a municipal tax in relation to the goods being
supplied and bills the same separately, such tax will form part of the value of
taxable supply. In the same situation, if the supplier pays the municipal tax but
does not charge the same separately, even then such tax will form part of the
value of taxable supply as the supplier would have factored such tax while
computing the cost of the goods.
(c) Payments made to third parties by the recipient on behalf of the
supplier in relation to the supply [Section 15(2)(b)]
A supplier may need to incur various expenses in order to make a particular
supply of goods / services. In the normal course, he would pay these amounts
and they would form part of the value that he charges from the customer
(recipient of supply).
However, even if the customer makes direct payment of some of such liabilities
(of the supplier) to the third parties, and the supplier does not include this amount
in his bill, it would still form part of the value of the taxable supply.
Shown in the No
invoice
+
In terms of an not
agreement that included in
After the supply existed at the the value
time of supply of supply
+
Can be linked Discounts
to invoices included in
+
the value of
supply
Proportionate
ITC reversed by
recipient
No
Yes
No
Yes
Whether the supply is a
notified supply u/s 15(5)?
No
ILLUSTRATION 1
Black and White Pvt. Ltd. has provided the following particulars relating to goods
sold by it to Colourful Pvt. Ltd.
Particulars `
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
CGST and SGST chargeable on the goods 10,440
Packing charges (not included in price above) 1,000
Black and White Pvt. Ltd. received ` 2000 as a subsidy from a NGO on sale of
such goods. The price of ` 50,000 of the goods is after considering such subsidy.
Black and White Ltd. offers 2% discount on the list price of the goods which is
recorded in the invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd.
ANSWER
Particulars `
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
[Includible in the value as per section 15(2)(a)]
CGST and SGST chargeable on the goods [Not includible in the
value as per section 15(2)(a)]
Packing charges [Includible in the value as per section 15(2)(c)] 1,000
Subsidy received from a non-Government body [Since subsidy is 2,000
received from a non-Government body, the same is included in
the value in terms of section 15(2)(e)]
Total 58,000
Less: Discount @ 2% on `. 50,000 [Since discount is known at the 1,000
time of supply, it is deductible from the value in terms of section
15(3)(a)]
Value of taxable supply 57,000
ILLUSTRATION 2
Samriddhi Advertisers conceptualised and designed the advertising campaign for a
new product launched by New Moon Pvt Ltd. for a consideration of ` 5,00,000.
Samriddhi Advertisers owed ` 20,000 to one of its vendors in relation to the
advertising service provided by it to New Moon Pvt Ltd. Such liability of Samriddhi
Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed the
payment of consideration and thus, paid ` 15,000 as interest.
Determine the value of taxable supply made by Samriddhi Advertisers.
ANSWER
Particulars `
Service charges 5,00,000
Payment made by New Moon Pvt. Ltd to vendor of Samriddhi 20,000
Advertisers [Liability of the supplier 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 15,000
value in terms of section 15(2)(d)]
Value of taxable supply 5,35,000
4. LET US RECAPITULATE
VALUE OF SUPPLY
Assessable Value
=
Transaction value u/s 15 Value to be determined under Chapter IV:
Determination of Value of Supply of CGST Rules
+
⇒ Taxes other than GST
⇒ Third party payments made by customer in relation to supply, which supplier was
liable to pay and were not included in the price
⇒ Incidental expenses till delivery of goods/ for supply of services, if charged to
recipient
⇒ Subsidies linked to price of supply other than the ones given by Central/State
Governments
⇒ Interest/late fee/penalty for delay in payment of consideration
⇒ Post supply discount/incentive, if not known in advance & invoice-wise
(c) Section 15 of CGST Act prescribes same set of provisions for valuation of goods
and services
(d) (a) and (b)
6. Discount given after the supply is deducted from the value of taxable supply, if –
(a) such discount is given as per the agreement entered into at/or before the
supply
(b) such discount is linked to the relevant invoices
(c) proportionate input tax credit is reversed by the recipient of supply
(d) all of the above
7. 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 separate activity.
Is his argument correct in the light of section 15?
8. A philanthropic association makes a substantial donation each year to a reputed
private management institution to subsidise the education of low income group
students who have gained admission there. The fee for these individuals is reduced
thereby, coming to ` 3 lakh a year compared to ` 5 lakh a year for other students.
What would be the taxable value of the service of coaching and instruction provided
by the institution?
9. 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?
10. Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to whom it
charges the list price minus standard discount and pays GST accordingly. When goods
remain unsold with the dealers, it 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?
6. ANSWERS/HINTS
1. (d) 2. (d) 3. (a) 4. (a) & (b) 5. (c) 6. (d)
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 value of the consignment.
8. 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. Therefore, the subsidy is to be added back to the price to arrive at
the taxable value, which comes to ` 5 lakh a year.
9. This is a supply that is valued as per transaction value under section 15(1) as the
price is the sole consideration for the supply and the supply is made to unrelated
person. The concept of transaction value has been expanded to include certain
elements like interest which are actually payable. Once waived, the interest is not
payable and is therefore, not to be added to transaction value.
10. The discounts were not known or agreed at the time of supply of goods to the
dealers. Therefore, such discounts cannot be reduced from the price on which tax
had been paid in terms of section 15(3).
LEARNING OUTCOMES
After reading this Unit, you will be able to identify the point
in time when the liability to pay GST arises -
on supply of goods or services where GST is payable under
forward charge
on supply of goods or services where GST is payable under
reverse charge
on supply of vouchers exchangeable for goods and services
1. INTRODUCTION
GST is payable on supply of goods or services. A supply consists of elements that
can be separated in time, like purchase order / agreement, despatch (of goods),
delivery (of goods) or provision or performance of service, entry in the records,
payment, and entry of the payment in the records
or deposit in the bank.
So, at which of these points of time will GST
become payable? Will it become payable when an
agreement to supply goods or services is made, or
when the goods are shipped or the services are
provided, or when the invoice is issued or when
payment is made? What if the goods are shipped
over a period of time? What if the service is provided over a period of time?
Provisions relating to ‘time of supply’ provide answer to all such and other
questions that arise on the timing of the liability to pay CGST and SGST/UTGST
(intra-State supply) and IGST (inter-State supply) as time of supply fixes the point
in time when the liability to pay tax arises.
The CGST Act provides separate provisions for time of supply for goods and services
vide sections 12 and 13 of CGST Act. Section 14 provides for the method of
determining the time of supply in case there is a change in the rate of tax on supply
of goods or services. 1 Sections 12 and 13 use the provisions of section 31 relating
to issue of tax invoice as a reference point, hence it will be advantageous to refer
to Chapter 8: Tax Invoice, Credit and Debit Notes in conjunction with this one.
Events like issuing of invoices, receipt of payment, provision of service, receipt of
services in books of account need to be analysed to determine the time of supply when
the tax on supply is payable under forward charge. When the tax on supply is payable
under reverse charge, events like date of receipt of goods, date of making payment
etc. need to be analysed to determine the time of supply. The provisions relating to
time of supply essentially push the tax collection event to the earliest possible time.
In the subsequent pages of this Unit, sections 12 and 13 are extracted, followed by
their analysis, to understand how to determine the time of supply of goods and
services respectively. When studying the statutory provisions, the definitions
(extracted first) must also be referred to simultaneously, so as to understand the
precise meaning of the terms used.
Provisions of time of supply under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
Associated enterprises shall have the same meaning as assigned to it in section
92A of the Income-tax Act, 1961 [Section 2(12)].
Document includes written or printed record of any sort and electronic record as
1
Provisions of section 14 relating to determination of time of supply in case of change in rate of
tax in respect of supply of goods or services will be discussed at the Final level.
defined in clause (t) of section 2 of the Information Technology Act, 2000 [Section 2(41)].
Goods means every kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply or under a
contract of supply [Section 2(52)].
GOODS
MEANS
INCLUDES
Recipient
If consideration is
Person liable to pay the
payable for supply of
consideration
goods and/or services
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 [Section 2(102)].
SERVICES
MEANS
Activities
relating to use
Anything INCLUDING of money or its
conversion for
a consideration
EXCLUDING
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied [Section 2(105)].
and includes an
agent acting on
means the behalf of such
person supplier in
Supplier in supplying the relation to the
relation to any said goods goods and/or
goods and/or and/or services services
services
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 under sub-section (3) or sub-section (4) of section 9, or under sub-section
(3) or sub- section (4) of section 5 of the Integrated Goods and Services Tax
Act [Section 2(98)].
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 [Section 2(118)].
STATUTORY PROVISIONS
(1) The liability to pay tax on goods shall arise at the time of supply
as determined in terms of the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following
dates, namely:-
(a) the date of issue of invoice by the supplier or the last date
on which he is required, under sub-section (1) of section
31, to issue the invoice with respect to the supply; or
Explanation 1. For the purposes of clauses (a) and (b), the “supply”
shall be deemed to have been made to the extent it is covered by
the invoice or, as the case may be, the payment.
Explanation 2. For the purpose of clause (b), “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.
(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:
(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––
(b) in any other case, be the date on which the tax is paid.
ANALYSIS
Section 12 covers the determination of time of supply in the following situations:
Supply of goods by supplier where supplier is liable to pay tax;
Receipt of goods that are taxable under reverse charge;
Supply of vouchers that can be used to pay for goods;
Residual cases
Addition to value of supply by way of interest or fee or penalty for delayed
payment.
We consider below how the time of supply is determined in each of these situations.
In case of goods sent or taken on approval for sale or return, invoice should
be issued before or at the time of supply or 6 months from the date of
removal, whichever is earlier [Section 31(7)].
The provisions relating to time of supply of goods in case of forward charge can
be depicted as under:
Whichever is earlier
invoice u/s section 31
BANK
Date on which the
payment is credited to the
supplier’s bank account
ILLUSTRATION 1
A machine has to be supplied at site. It is done by sourcing various components from
vendors and assembling the machine at site. The details of the various events are:
17th September Purchase order with advance of ` 50,000 is received for goods
worth ` 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
rd
23 October Invoice raised
4th November Balance payment of ` 11,50,000 received
ANSWER
The time of supply of goods to the extent of ` 50,000 is 17th September, as this
payment was received before the date of invoice [Section 12(2)(b)]. The time
of supply of goods to the extent of the balance amount of ` 11,50,000 is 20th
October which is the date on which the goods were made available to the
recipient as per section 31(1)(b), and the invoice should have been issued on
this date [Section 12(2)(a)].
ILLUSTRATION 2
Gas is supplied by a pipeline. Monthly payments are made by the recipient as
per contract. Every quarter, invoice is issued by the supplier supported by a
statement of the goods dispatched and payments made, and the recipient has to
pay the differential amount, if any. The details of the various events are:
If neither the date of invoice nor the date of payment is available, the
residual provisions under sub-section (5) of section 12 become applicable
[discussed under point (iv)].
The provisions relating to time of supply of goods in case of reverse charge can
be depicted as under:
Date on which
goods are received
Whichever is earlier
in the books of
account of the
recipient of goods
BANK
Date on which the
payment is debited
from the bank
account of the
recipient of goods
ILLUSTRATION 3
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Bridge &
Co. (30 days from the date of issuance of invoice elapse on June 3)
May 12 Bridge & Co receives the goods
May 30 Bridge & Co makes the payment
ANSWER
Here, May 12 will be the time of supply, being the earliest of the three stipulated
dates namely, receipt of goods, date of payment and date immediately following
30 days of issuance of invoice [Section 12(3)]. (Here, date of invoice is relevant
only for calculating thirty days from that date.)
ILLUSTRATION 4
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Pillar &
Co. (30 days from the date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
July 3 Payment made for the goods
ANSWER
Here, June 4, 31st day from the date of supplier’s invoice, will be the time of
supply, being the earliest of the three stipulated dates namely, receipt of
goods, date of payment and date immediately following 30 days of issuance
of invoice [Section 12(3)].
Date of issue of the voucher, if the supply that it covers is identifiable at that
point, or
Date of redemption of the voucher in other cases.
With each purchase of a large pizza during the Christmas week from
Perfect Pizza, one can buy a voucher for ` 20 which will be redeemable
till 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.
(iv) Residual case [Section 12(5)]
If the situation is not covered by any of the provisions discussed above, the time
of supply is fixed under sub-section (5) of section 12, in the following manner:
whichever is earlier
Addition in value by
way of interest, late
fee/penalty for delayed
payment of Date on which the supplier
Time of supply
consideration for receives such addition in value
goods
STATUTORY PROVISIONS
(1) The liability to pay tax on services shall arise at the time of supply, as
determined in terms of the provisions of this section.
(2) The time of supply of services shall be the earliest of the following dates,
namely:-
(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:
(i) the supply shall be deemed to have been made to the extent it
is covered by the invoice or, as the case may be, the payment.
(ii) “the date of receipt of payment” shall be the date on which the
payment is entered in the books of account of the supplier or
(b) the date immediately following sixty days from the date of
issue of invoice or any other document, by whatever name
called, in lieu thereof by the supplier:
(4) In case of supply of vouchers by a supplier, the time of supply shall be-
(5) Where it is not possible to determine the time of supply of services in the
manner specified in sub-sections (2), (3) or (4), the time of supply shall
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value of
supply by way of interest, late fee or penalty for delayed payment of any
(6) In a case where the supply of services ceases under a contract before the
completion of the supply, the invoice shall be issued at the time when the
supply ceases and such invoice shall be issued to the extent of the supply
made before such cessation.
Chapter VI: Tax Invoice, Credit and Debit Notes of CGST Rules
ANALYSIS
Section 13 stipulates how to determine time of supply in the following situations:
Supply of service on which the supplier is liable to pay tax,
Receipt of service that is taxable under reverse charge basis,
Supply of vouchers that can be used to pay for services,
Residual cases,
Addition to value of supply by way of interest or fee or penalty for delayed payment.
Below we consider these in more detail.
(i) Supply of service where supplier is liable to pay tax (Forward charge)
[Section 13(2) read with sub-sections (2), (5) & (6) of section 31 and rule
47 of CGST Rules]
For supply of service on which the supplier is liable to pay tax, the time of supply
will be the earlier of the dates arrived at by methods (A) and (B), as follows:
(A) Date of invoice or date of receipt of payment (to the extent the payment covers
the services), whichever is earlier, if the invoice is issued in time as per section
31;
(B) Date of provision of service or date of receipt of payment (to the extent the
payment covers the services), whichever is earlier, if the invoice is not issued in
time as per section 31,
If these two methods are not applicable, the time of supply will be the date on which
the recipient of service shows receipt of the service in his books of account.
Meaning of “date of receipt of payment”
“Date of receipt of payment” in the above situation refers to the date on which
the payment is recorded in the books of account of the entity (supplier of
service) that receives the payment, or the date on which the payment is
credited to the entity’s bank account, whichever is earlier.
Significance of “to the extent the payment covers the services”
Suppose, a part of the consideration is paid in advance or invoice is issued for part
payment, the time of supply will not cover the full supply. The supply shall be deemed
to have been made to the extent it is covered by the invoice or the part payment.
Time limit for issuance of invoice for supply of services
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice needs
to be issued either before the provision of service or within 30 days (45 days
in case of insurance companies/ banking companies/ financial institutions
including NBFCs) from the date of supply of service.
In case of cessation of supply of services before completion of supply, the
invoice (to the extent of the supply made before such cessation) should be
issued at the time when the supply ceases.
In case of continuous supply of services, the invoice should be issued either (i)
on/ before the due date of payment or (ii) before/ at the time when the supplier
of service receives the payment (iii) on/ before the date of completion of the
milestone event when the payment is linked to completion of an event.
In case of insurance companies/ banking companies/ financial institutions
including NBFCs/ telecom companies/ notified supplier of services making
taxable supplies between distinct persons as specified in section 25 2, invoice
may be issued before or at the time of recording such supply in the books of
account or before the expiry of the quarter during which the supply was made.
The provisions relating to time of supply of services in case of forward charge can
be depicted by way of a diagram given at the next page.
ILLUSTRATION 5
Determine the time of supply from the following particulars:
6th May Booking of convention hall, sum agreed ` 15000, advance of
` 3000 received
15th September Function held in convention hall
27th October Invoice issued for ` 15000, indicating balance of ` 12000
payable
3rd November Balance payment of ` 12000 received
ANSWER
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 ` 3,000 is 6th May as
the date of payment of ` 3000 is earlier than the date of provision of service.
The time of supply of service to the extent of the balance ` 12,000 is 15th
September which is the date of provision of service.
2
Concept of distinct persons has been discussed in Chapter 7: Registration
Is invoice
YES Time of
issued within Date of issue of
Supply
the time invoice
specified u/s
31(2)? Date on which the
Whichever is earlier
NO payment is
recorded in the
Time of
Supply books of account of
the supplier
BANK
Date on which the
payment is credited
to the supplier’s
bank account
Whichever is earlier
If time of supply
cannot be Date of receipt of services in
determined by the books of account of the
both the above recipient
methods, then
ILLUSTRATION 6
Investigation shows that ABC & Co carried out service of cleaning and repairs of
tanks in an apartment complex, for which the Apartment Owners’ Association
showed a payment in cash on 4th April to them against work of this description. The
dates of the work are not clear from the records of ABC & Co. ABC & Co have not
issued invoice or entered the payment in their books of account.
ANSWER
The time of supply cannot be determined vide the provisions of clauses (a) and
(b) of section 13(2) as neither the invoice has been issued nor the date of provision
of service is available as also the date of receipt of payment in the books of the
supplier is also not available. Therefore, the time of supply will be determined
vide clause (c) of section 13(2) i.e., the date on which the recipient of service shows
receipt of the service in his books of account.
Thus, time of supply will be 4th April, the date on which the Apartment Owners’
Association records the receipt of service in its books of account.
Excess payment upto ` 1000: Option of taking invoice date as time
of supply
In terms of the proviso to sub-section (2) of section 13, if payment received is up
to ` 1,000 in excess of the invoice value, the supplier can choose to take the related
invoice date as the time of supply in relation to this excess value.
A telephone company receives ` 5000 against an invoice of ` 4800.
The excess amount of ` 200 can be adjusted against the next invoice.
The company has the option to take the date of the next invoice as the
time of supply of service in relation to the amount of ` 200 received in
excess against the earlier invoice.
(ii) Receipt of services that are taxable under reverse charge
[Section 13(3)]
The time of supply of service on which GST is payable on reverse charge basis
(except on services received from associated enterprises located outside India)
under sub-sections (3) and (4) of section 9 is determined in terms of section
13(3)(a) and (b) as follows:
The time of supply for such service will be the earlier of the following:
Date of payment, or
Date immediately following 60 days since issue of invoice (or any other
document in lieu of invoice) by the supplier.
If it is not possible to determine the time of supply by using these parameters,
then the time of supply will be the date of entry of the service in the books of
account of the recipient of supply.
Meaning of “Date of payment”
“Date of payment” in the above situation refers to the date on which the
payment is recorded in the books of account of the entity that receives the
service (recipient of service), or the date on which the payment is debited from
the entity’s bank account, whichever is earlier.
Import of services between associated enterprises
In the case of service received from an associated enterprise located outside
India, the time of supply will be the date of payment for the service, or the date
of entry of the service in the books of account of the recipient, whichever is
earlier.
The provisions relating to time of supply of services in case of reverse charge can
be depicted by way of a diagram given at the next page.
ILLUSTRATION 7
Determine the time of supply from the given information. (Assuming that service
being supplied is taxable under reverse charge)
May 4 The supplier of service issues invoice for service provided. There
is a dispute about amount payable, and payment is delayed.
August 21 Payment made to the supplier of service
ANSWER
Here, July 4 will be the time of supply, being the earliest of the two stipulated
dates namely, date of payment and date immediately following 60 days since
issue of invoice.
Whichever is earlier
the books of account of
the recipient of services
Date on which the
payment is debited from
the bank account of the
recipient of services
st DAY
61st day from issue of
invoice by the supplier
ILLUSTRATION 8
Determine the time of supply from the given information.
ANSWER
As there is no prior entry of the amount in the books of account of ABC Ltd.,
July 2 will be the time of supply, being the date of payment in terms of second
proviso to section 13(3).
(iii) Vouchers [Section 13(4)]
The term voucher has already been explained under the Heading “Time of
Supply of Goods”. The time of supply of vouchers that are exchangeable for
services is stipulated as the date of issue of the voucher, if the supply is identifiable
at that point, or the date of redemption of the voucher in other cases.
Best Hospitality Services enters into agreement with Drive Marketing
Ltd by which Drive Marketing Ltd. markets Best Hospitality Services’
hotel rooms and sells coupons / vouchers redeemable for a discount
against stay in the hotel.
As the supply against which the voucher will be redeemed is identifiable, the time
of supply of the voucher will be its date of issue.
(iv) Residual case [Section 13(5)]
If the situation is not covered by any of the provisions discussed above, the
time of supply is fixed under sub-section (5) of section 13, in the following
manner:
Date on which periodical return for the period is required to be filed, or
In any other case, date on which GST is paid.
(v) Enhancement of value on account of interest/late fee etc. for delayed
payment of consideration [Section 13(6)]
The provisions for time of supply in case of addition in value by way of interest,
late fee/penalty for delayed payment of consideration are same for goods and
services.
Section 13(6) prescribes that time of supply in case of addition in value by way
of interest/ late fee/penalty for delayed payment of consideration for a service
is the date on which the supplier receives such addition in value.
Date on which payment is Date on which payment is 61st day from supplier’s
credited in the bank credited in the bank invoice
account of the supplier account of the supplier
5. LET US RECAPITULATE
The provisions relating to time of supply of goods and services can be better
understood if the same are studied simultaneously appreciating the similarities and
differences between the two scenarios. Therefore, such provisions have been
summarised by way of a comparison table to help students remember and retain
the provisions in a better and effective manner:
Where the above events are not ascertainable, the time of supply shall be the
date of entry in the books of account of the recipient of supply
Supply of vouchers exchangeable for goods and services [Sections 12(4) and 13(4)]
Supply of goods and services in residual cases [Sections 12(5) and 13(5)]
10. Determine the time of supply in the following cases assuming that GST is payable
under reverse charge:
(1) (2)
(i) August 10 June 29
11. Kabira Industries Ltd engaged the services of a transporter for road transport of
a consignment on 17th June and made advance payment for the transport on the
same date, i.e., 17th June. However, the consignment could not be sent
immediately on account of a strike in the factory, and instead was sent on
20th July. Invoice was received from the transporter on 22nd July.
What is the time of supply of the transporter’s service?
Note: Transporter’s service is taxed on reverse charge basis.
12. Raju Pvt Ltd. receives the order and advance payment on 5th January for carrying
out an architectural design job. It delivers the designs on 23rd April. By oversight,
no invoice is issued at that time, and it is issued much later, after the expiry of
prescribed period for issue of invoice.
When is the time of supply of service?
13. Investigation shows that 150 cartons of ceramic capacitors were despatched on 2nd
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?
14. An order is placed on Ram & Co. on 18th August for supply of a consignment of
customised shoes. Ram & Co. gets the consignment ready and informs the customer
and issues the invoice on 2nd December. The customer collects the consignment
from the premises of Ram & Co. on 7th December and hands over the payment on
the same date, which is entered in the accounts on the next day, 8th December.
What is the time of supply of the shoes?
15. Sodexo meal coupons are sold to a company on 9th August for being distributed to
the employees of the said company. The coupons are valid for six months and can
be used against purchase of food items. The employees use them in various stores
for purchases of various edible items on different dates throughout the six months.
What is the date of supply of the coupons?
16. A firm of lawyers issues invoice for services to ABC Ltd. on 17th Feb. The payment is
contested by ABC Ltd. on the ground that on account of negligence of the firm, the
company’s case was dismissed by the Court for non-appearance, which necessitated
further appearance for which the firm is billing the company. The dispute drags on
and finally payment is made on 3rd November.
Identify the time of supply of the legal services.
Note: Legal services are taxable on reverse charge basis.
17. Modern Security Co. provides service of testing of electronic devices. In one case, it
tested a batch of devices on 4th and 5th September but could not raise invoice till 19th
November because of some dispute about the condition of the devices on return.
The payment was made in December.
What is the method to fix the time of supply of the service?
18. An income-tax and money laundering case against Mr. XYZ, working in a multi-
national company, reveals a large volume of undisclosed assets, which he claims as
service income. On this basis, the GST authorities investigate the GST liability. Dates
of provision of service, whether in the first half or the second half of the financial
year being scrutinised by income-tax authorities, are not known. Mr. XYZ voluntarily
pays GST during the investigation.
What is the time of supply of the services?
7. ANSWERS/HINTS
1. (c) 2. (d) 3. (a) 4. (b) 5. (d) 6. (d) 7. (d) 8. (c)
9.
10.
11. Time of supply of service taxable under reverse charge is the earlier of the
following two dates in terms of section 13(3):
• Date of payment
• 61st day from the date of issue of invoice
In this case, the date of payment precedes 61st day from the date of issue of
invoice by the supplier of service. Hence, the date of payment, that is 17th June,
will be treated as the time of supply of service [Section 13(3)(a)].
12. Since the invoice has not been issued within the prescribed time period, time
of supply of service will be the earlier of the following two dates in terms of
section 13(2)(b):
• Date of provision of service
• Date of receipt of payment
The payment was received on 5th January and the service was provided on 23rd
April. Therefore, the date of payment, i.e., 5th January is the time of supply of
the service in this case.
13. Time of supply of goods is the earlier of the following two dates in terms of
section 12(2):
• Date of issue of invoice/last date on which the invoice is required to be
issued
• Date of receipt of payment
In this case since the invoice has not been issued, the time of supply will be the
last date on which the invoice is required to be issued or date of receipt of
payment, whichever is earlier.
The invoice for supply of goods must be issued on or before the despatch of
goods i.e., on 2nd August. 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.
14. Time of supply of goods is the earlier of the following two dates in terms of
section 12(2):
• Date of issue of invoice/last date on which the invoice is required to be
issued
• Date of receipt of payment
In this case,
Date of invoice: 2nd December
Date of actual receipt of payment: 7th December.
Date of recording payment in books of account : 8th December.
Therefore, the date of receipt of payment will be 7th December (earlier of two
dates namely, date of recording the payment in books of account and date of
crediting of payment in bank account). However, as the invoice date is earlier
than date of payment, the time of supply will be 2nd December.
15. As the coupons can be used for a variety of food items, which are taxed at
different rates, the supply cannot be identified at the time of purchase of the
coupons. Therefore, the time of supply of the coupons is the date of their
redemption in terms of section 12(4).
16. Time of supply of services that are taxable under reverse charge is earliest of
the following two dates in terms of section 13(3):
• Date of payment [3rd November]
• 61st day from the date of issue of invoice [19th April]
The date of payment comes subsequent to the 61st day from the issue of
invoice by the supplier of service. Therefore, the 61st day from supplier’s
invoice has to be taken as the time of supply. This fixes 19th April as the time
of supply.
17. The time of supply of services, if the invoice is not issued in time, is the date of
payment or the date of provision of service, whichever is earlier [Section
13(2)(b)]. In this case, the service is provided on 5th September but not invoiced
within the prescribed time limit. Therefore, the date of provision of service, i.e.,
5th September, will be the time of supply.
18. Where it is not possible to determine the time of supply in terms of date of
invoice or date of provision of service or date of receipt of payment or date of
receipt of services in the books of account of the recipient, and where
periodical return is not to be filed (Mr. XYZ, being an employee in a multi-
national company, is not a registered person), the date of payment of tax is
taken as the time of supply [Section 13(5)(b)].
Therefore, the date when Mr. XYZ pays the GST will be the time of supply.
LEARNING OUTCOMES
Relevant definitions
Input Tax credit
Apportionment of credit
and blocked credits
Availability of credit in
special circumstances
1. INTRODUCTION
In earlier indirect tax regime, the
credit mechanism for indirect taxes
levied by the Union Government was
governed by the CENVAT Credit Rules,
2004; and the credit mechanism for state-level VAT on sale of goods was governed
by the States under their respective VAT Acts and Rules. The VAT legislations
allowed ITC of VAT on inputs and capital goods in transactions within the state, but
not on inputs and capital goods coming in the State from outside the state, on
which central sales tax was paid. CENVAT Credit Rules, 2004 allowed availing and
utilization of credit of duty/tax paid on both goods (capital goods and inputs) and
services by the manufacturers and the service providers across the country.
The credit across goods and services was integrated vide the CENVAT Credit Rules,
2004 in the year 2004 to mitigate the cascading effects of central levies namely,
central excise and service tax. However, the credit chain remained fragmented on
account of State-Level VAT as the credit of central taxes could not be set off against
a State levy and vice versa. The chain further got distorted as ITC was not available
on inter-State purchases. This resulted in cascading of taxes leading to increase in
costs of goods and services.
The GST regime promises seamless credit on goods and services across the entire
supply chain with some exceptions like supplies charged to tax under composition
scheme and supply of exempted goods and/or services. ITC is considered to be
the backbone of the GST regime. In fact, it is the provisions of ITC which essentially
make GST a value added tax i.e., collection of tax at all points of supply chain after
allowing credit of tax paid at earlier points.
Chapter V of the CGST Act [Sections 16 to 21] & Chapter V: Input Tax Credit of the
CGST Rules [Rules 36-45] prescribe the provisions relating to ITC. State GST laws
also prescribe identical provisions in relation to ITC. In this Chapter, provisions of
sections 16, 17 and 18 have been discussed; 1 first the statutory provisions of these
sections together with the relevant rules have been extracted followed by their
analysis.
Provisions of ITC under CGST Act have also been made applicable to IGST
Act vide section 20 of the IGST Act.
Before proceeding to understand the provisions of section 16, 17, 18 and the
relevant rules let us first go through few relevant definitions.
2. RELEVANT DEFINITIONS
Agent means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or
services or both on behalf of another [Section 2(5)].
Business includes
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager
1
Provisions of ITC relating to job work and input service distributor [Sections 19, 20 and 21]
will be discussed at the Final level.
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
(c) the tax payable under the provisions of sub-section (3) and (4) of section
5 of the IGST Act;
(d) the tax payable under the provisions of sub-section (3) and sub-section (4)
of section 9 of the respective State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-section (3) and sub-section (4)
of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy [Section 2(62)].
Input tax credit means the credit of input tax [Section 2(63)].
Inward supply in relation to a person, shall mean receipt of goods or services
or both whether by purchase, acquisition or any other means with or without
consideration [Section 2(67)].
Motor vehicle shall have the same meaning as assigned to it in clause (28) of
section 2 of the Motor Vehicles Act, 1988 [Section 2(76)].
Motor vehicle or vehicle under the Motor Vehicles Act, 1988 means any
mechanically propelled vehicle adapted for use upon roads whether the power
of propulsion is transmitted thereto from an external or internal source and
includes a chassis to which a body has not been attached and a trailer; but
does not include a vehicle running upon fixed rails or a vehicle of a special type
adapted for use only in a factory or in any other enclosed premises or a vehicle
having less than four wheels fitted with engine capacity of not exceeding thirty-
five cubic centimetres. [Section 2(28) of Motor Vehicles Act, 1988].
Non-resident taxable person means any person who occasionally undertakes
transactions involving supply of goods or services or both, whether as principal
or agent or in any other capacity, but who has no fixed place of business or
residence in India [Section 2(77)].
Principal means a person on whose behalf an agent carries on the business of
supply or receipt of goods or services or both [Section 2(88)].
Recipient of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to
whom the goods are delivered or made available, or to whom possession
or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person
to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed as
a reference to the recipient of the supply and shall include an agent acting as
such on behalf of the recipient in relation to the goods or services or both
supplied [Section 2(93)].
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied [Section 2(105)].
Taxable supply means a supply of goods or services or both which is leviable
to tax under CGST Act [Section 2(108)].
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 (SEZ)
developer or a Special Economic Zone unit [Section 16(1) of IGST Act].
STATUTORY PROVISIONS
Provided also that the recipient shall be entitled to avail of the credit
of input tax on payment made by him of the amount towards the
value of supply of goods or services or both along with tax payable
thereon.
(3) Where the registered person has claimed depreciation on the tax
component of the cost of capital goods and plant and machinery
under the provisions of the Income-tax Act, 1961, the input tax
credit on the said tax component shall not be allowed.
(4) A registered person shall not be entitled to take input tax credit in
respect of any invoice or debit note for supply of goods or services
or both after the due date of furnishing of the return under section
39 for the month of September following the end of financial year
to which such invoice or invoice relating to such debit note pertains
or furnishing of the relevant annual return, whichever is earlier.
(2) Input tax credit shall be availed by a registered person only if all
the applicable particulars as specified in the provisions of Chapter
(1) A registered person, who has availed of input tax credit on any
inward supply of goods or services or both, but fails to pay to the
supplier thereof the value of such supply along with the tax
payable thereon within the time limit specified in the second
proviso to sub-section (2) of section 16, shall furnish the details of
such supply, the amount of value not paid and the amount of input
tax credit availed of proportionate to such amount not paid to the
supplier in FORM GSTR-2 for the month immediately following
the period of one hundred and eighty days from the date of the
issue of the invoice.
Provided that the value of supplies made without consideration as
specified in Schedule I of the said Act shall be deemed to have been
paid for the purposes of the second proviso to sub-section (2) of
section 16.
(2) The amount of input tax credit referred to in sub-rule (1) shall be
added to the output tax liability of the registered person for the
month in which the details are furnished.
(3) The registered person shall be liable to pay interest at the rate notified
under sub-section (1) of section 50 for the period starting from the
date of availing credit on such supplies till the date when the amount
added to the output tax liability, as mentioned in sub-rule (2), is paid.
(4) The time limit specified in sub-section (4) of section 16 shall not
apply to a claim for re- availing of any credit, in accordance with
the provisions of the Act or the provisions of this Chapter, that had
been reversed earlier.
ANALYSIS
(i) Eligibility for taking ITC [Section 16(1)]
(a) Registration under GST
Every registered person shall be entitled to ITC charged on inward supply
of goods and / or services. This is subject to the provisions relating to use
of ITC under section 49 and the conditions and restrictions in the rules.
[Section 49 prescribes provisions relating to payment of tax, interest, penalty
& other amounts. The same has been discussed in detail in Chapter 9:
Payment of Tax.]
(b) Goods/services to be used for business purposes
ITC will be available on goods and/or services which are used in the course
or furtherance of the business [See definition of business]; the “intention
to use” the goods and/or services in the course or furtherance of business
would also lead to availing of credit on such goods and/or services. Thus,
tax paid on goods and or/services which are used or intended to be used
for non-business purposes cannot be availed as credit. ITC will be credited
in Electronic Credit Ledger.
(ii) Conditions for taking ITC [Section 16(2)]
The registered person will be entitled to ITC on a supply only if ALL the
following four conditions are fulfilled:
(a) Possession of tax paying document [Section 16(2)(a) read with rule
36 of the CGST Rules]
ITC can be availed on the basis of any of the following documents:
i) Invoice issued by a supplier of goods and/or services
ii) Invoice issued by recipient (receiving goods and/or services from
unregistered supplier) along with proof of payment of tax (in case of
reverse charge)
iii) A debit note issued by supplier
iv) Bill of entry or similar document prescribed under Customs Act
v) Revised invoice
2
Concept of Input Service Distributor will be dealt with at the Final level.
details on this are given under the Heading “How ITC is availed and
utilized”.)
(d) Filing of return [Section 16(2)(d)]
The registered person taking the ITC must have filed his return under
section 39.
Note: The details of inward supplies are to be filed in GSTR – 2 by the 15th
of the month succeeding the month in which the supplies were received 3.
With the furnishing of such details, electronic credit ledger gets credited
with the relevant ITC.
(iii) Goods received in lots: ITC available only on receipt of last lot
[First proviso to section 16(2)]
In case the goods covered under an invoice are not received in a single
consignment but are received in lots / instalments, the ITC can be taken only
upon receipt of the last lot / instalment.
XYZ makes an advance payment in August and orders 10 MT of a
particular chemical which is in short supply. The supplier of the
chemical raises a bill for the entire amount in August and collects
GST from XYZ on the advance paid. The chemical is delivered in
lots over a period of three months and the supply is completed in November.
Though XYZ paid some tax in advance as early as August, he can take the ITC
only on receipt of last instalment of the chemical in the month of November.
(iv) Payment for the invoice to be made within 180 days [Second
proviso to section 16(2) read with rule 37 of CGST Rules]
The registered person must pay the supplier, the value of the goods and/or
services along with the tax within 180 days from the date of issue of invoice. In
the event of failure to do so, the details of such supplies and corresponding credits
thereon must be furnished in the GSTR 2 of the month immediately following such
180 days. Such credits availed by the registered person would be added to his
output tax liability of the month in which the details are furnished, with interest.
3
For a detailed understanding of the various kinds of returns/statements and the manner of
filing thereof, students may refer Chapter 10: Returns. GSTR 2 is a statement of inward
supplies received by a registered supplier. The same has been explained in detail in Chapter
10: Returns
Interest will be paid @ 18% from the date of availing credit till the date when
the payment is made to the supplier.
However, once the payment is made, the recipient will be entitled to avail the
credit again without any time limit [see discussion on time limit for availing
credit under point (vi)]. In case part payment has been made, proportionate
credit would be allowed.
Exceptions
This condition of payment of value of supply plus tax within 180 days does not
apply in the following situations:
Supplies on which tax is payable under reverse charge
Deemed supplies without consideration
Due to a quality dispute, PZP Ltd withheld payment on a machine
supplied by a vendor till it could be rectified. Over 180 days went
by in this dispute. The credit taken by PZP on the invoice got added
to the output tax liability of PZP and thus, it had to pay back the
credit. Only after the vendor rectified the machine and PZP released the
payment, could PZP take the credit again.
(v) If depreciation claimed on tax component, ITC not allowed
[Section 16(3)]
If the person taking the ITC on capital goods and plant and machinery has
claimed depreciation on the tax component of the cost of the said items under
the Income-tax Act 1961, the ITC on the said tax component shall not be
allowed. Thus, in respect of the tax paid on such items, dual benefit cannot be
claimed under Income-tax Act, 1961 and GST laws simultaneously. In other
words, either depreciation on the tax component can be claimed under Income
Tax Act or ITC of such tax paid can be availed under GST laws.
(vi) Time limit for availing ITC: Due date of filing of return for the
month of September of succeeding financial year or date of filing
of annual return, whichever is earlier [Section 16(4)]
ITC on invoices pertaining to a financial year or debit notes relating to invoices
pertaining to a financial year can be availed any time till the due date of filing
of the return for the month of September of the succeeding financial year or
the date of filing of the relevant annual return, whichever is earlier.
It may be noted that the return for the month of September is to be filed by
STATUTORY PROVISIONS
Section 17
Sub-section Clause Apportionment of credit and blocked credits
(1) Where the goods or services or both are used by the registered
person partly for the purpose of any business and partly for other
purposes, the amount of credit shall be restricted to so much of
the input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered
person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the Integrated Goods and
Services Tax Act and partly for effecting exempt supplies under
the said Acts, the amount of credit shall be restricted to so much
of the input tax as is attributable to the said taxable supplies
including zero-rated supplies.
(3) The value of exempt supply under sub-section (2) shall be such as
may be prescribed, and shall include supplies on which the
recipient is liable to pay tax on reverse charge basis, transactions
in securities, sale of land and, subject to clause (b) of paragraph
5 of Schedule II, sale of building.
(4) A banking company or a financial institution including a non-
banking financial company, engaged in supplying services by way
of accepting deposits, extending loans or advances shall have the
option to either comply with the provisions of sub-section (2), or
avail of, every month, an amount equal to fifty per cent. of the
eligible input tax credit on inputs, capital goods and input services
in that month and the rest shall lapse:
Provided that the option once exercised shall not be withdrawn
during the remaining part of the financial year:
Provided further that the restriction of fifty per cent. shall not apply
to the tax paid on supplies made by one registered person to another
registered person having the same Permanent Account Number.
(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;
(b) the following supply of goods or services or both:—
(i) food and beverages, outdoor catering, beauty
treatment, health services, cosmetic and plastic
surgery except where an inward supply of goods
or services or both of a particular category is
used by a registered person for making an
outward taxable supply of the same category of
goods or services or both or as an element of a
taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
(iii) rent-a-cab, life insurance and health insurance
except where ––
(A) the Government notifies the services which
are obligatory for an employer to provide
to its employees under any law for the time
being in force; or
(h) input tax credit left after attribution of input tax credit
under clause (g) shall be called common credit, be denoted
as ‘C2’ and calculated as-
C2 = C1- T4;
(i) the amount of input tax credit attributable towards exempt
supplies, be denoted as ‘D1’ and calculated as-
D1= (E ÷ F) × C2
where,
‘E’ is the aggregate value of exempt supplies during the tax
period, and
‘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 be
calculated by taking values of ‘E’ and ‘F’ of the last tax
period for which the details of such turnover are available,
previous to the month during which the said value of ‘E/F’
is to be calculated;
Explanation: For the purposes of this clause, it is hereby
clarified that the aggregate value of exempt supplies and
the total turnover shall exclude the amount of any duty or
tax levied under entry 84 of List I of the Seventh Schedule
to the Constitution and entry 51 and 54 of List II of the said
Schedule;
(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 ‘C 3’,
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 the purposes other than business
and partly for effecting exempt supplies has been identified and
segregated at the 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’.
(2) The input tax credit determined under sub-rule (1) shall be
calculated finally for the financial year before the due date for
furnishing of the return for the month of September following the
end of the financial year to which such credit relates, in the
manner specified in the said sub-rule and,-
(a) where the aggregate of the amounts calculated finally in
respect of ‘D1’ and ‘D2’ exceeds the aggregate of the
amounts determined under sub-rule (1) in respect of ‘D1’
and ‘D2’, such excess shall be added to the output tax
liability of the registered person in the month not later
than the month of September following the end of the
financial year to which such credit relates and the said
person shall be liable to pay interest on the said excess
amount at the rate specified in sub-section (1) of section
50 for the period starting from the first day of April of the
succeeding financial year till the date of payment; or
(b) where the aggregate of the amounts determined under
sub-rule (1) in respect of ‘D1’ and ‘D2’ exceeds the
aggregate of the amounts calculated finally in respect of
‘D1’ and ‘D2’, such excess amount shall be claimed as credit
by the registered person in his return for a month not later
than the month of September following the end of the
financial year to which such credit relates.
ANALYSIS
Section 17 requires apportionment and concomitant restriction of ITC in two
situations as also blocking of ITC on specified inward supplies.
Less: Input tax on inputs & input services that are intended (T1)
to be used exclusively for non-business purposes
Less: Input tax on inputs & input services that are (T2)
intended to be used exclusively for exempt supplies
Less: Input tax on inputs & input services which are (T3)
ineligible for credit [blocked credits- see discussion under
point (ii)]
Less: ITC on inputs & input services that are intended to (T4)
be used exclusively for taxable supplies including zero
rated supplies
Notes: (i) If the registered person does not have any turnover during the
said tax period, or the above information is not available, the values for the
last tax period may be used.
(ii) Exempt supplies include supplies charged to tax under reverse charge,
transactions in securities, sale of land and sale of building when entire
consideration is received after completion certificate issued by the
competent authority.
(iii) Aggregate value of exempt supplies and total turnover excludes the
central excise duty, State excise duty and VAT.
Notes: (i) If the registered person does not have any turnover during the
said tax period, or the above information is not available, the values for the
last tax period may be used.
(ii) Aggregate value of exempt supplies and total turnover excludes the
central excise duty, State excise duty and VAT.
(iii) Exempt supplies include supplies charged to tax under reverse charge,
transactions in securities, sale of land and sale of building when entire
consideration is received after completion certificate issued by the
competent authority.
(iv) Amount of Te has to be computed separately for CGST, SGST/UTGST
and IGST.
Credit of tax paid on inputs and input services that are used for non-
business purposes and items mentioned u/s section 17(5) [blocked
credits] cannot be availed.
The restriction of availing 50% ITC shall not apply to the tax paid on
supplies procured from another registration within the same entity i.e.,
100% credit of such tax can be availed.
The option once exercised cannot be changed during the remaining
part of the financial year.
B. Blocked credits [Section 17(5)]
ITC of tax paid on almost every inputs and input services used for supply of
taxable goods or services or both is allowed under GST except a small list of
items provided u/s 17(5). The negative list covers mainly items of personal
consumption, inputs use of which results into formation of an immovable
property (except plant and machinery), telecommunication towers, pipelines
laid outside the factory premises, etc. and taxes paid as a result of detection of
evasion of taxes. The detailed list is given hereunder:
(a) Motor vehicles and conveyances, EXCEPT WHEN USED
For transportation of goods
For making the following taxable supplies:
• Further supply of such vehicles of conveyances; or
• Transportation of passengers; or
• Imparting training on driving, flying, navigating such vehicles or
conveyances.
A car dealer is allowed ITC on cars purchased for resale; a cab
service is allowed ITC on cars purchased for use as cabs; a
driving school is allowed ITC on cars purchased for use in
teaching driving.
(b) Foods and beverages, outdoor catering, beauty treatment, health services,
cosmetic and plastic surgery, EXCEPT WHEN
An inward supply of these is used for making an outward taxable
supply of the same category or as an element of a taxable composite
or mixed supply.
(h) Inward supplies on which tax has been paid under the composition scheme
(i) Inward supplies received by a non-resident taxable person except goods
imported by him
STATUTORY PROVISIONS
(a) a person who has applied for registration under this Act
within thirty days from the date on which he becomes
liable to registration and has been granted such
registration shall be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day
immediately preceding the date from which he becomes
liable to pay tax under the provisions of this Act;
4
These provisions will be discussed at Final level.
(2) A registered person shall not be entitled to take input tax credit
under sub-section (1) in respect of any supply of goods or services
or both to him after the expiry of one year from the date of issue of
tax invoice relating to such supply.
(4) Where any registered person who has availed of input tax credit
opts to pay tax under section 10 or, where the goods or services or
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:
(5) The amount of credit under sub-section (1) and the amount payable
under sub-section (4) shall be calculated in such manner as may be
prescribed.
Provided that where refractory bricks, moulds and dies, jigs and
fixtures are supplied as scrap, the taxable person may pay tax on
the transaction value of such goods determined under section 15.
(1) The input tax credit claimed in accordance with the provisions of
sub-section (1) of section 18 on the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock, or the
credit claimed on capital goods in accordance with the provisions
of clauses (c) and (d) of the said sub-section, shall be subject to the
following conditions, namely -
(c) the declaration under clause (b) shall clearly specify the
details relating to the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock,
or as the case may be, capital goods–
(2) The amount of credit in the case of supply of capital goods or plant
and machinery, for the purposes of sub-section (6) of section 18,
shall be calculated by reducing the input tax on the said goods at
the rate of five percentage points for every quarter or part thereof
from the date of the issue of the invoice for such goods.
Provided that in the case of demerger, the input tax credit shall be
apportioned in the ratio of the value of assets of the new units as
specified in the demerger scheme.
(3) The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the un-
utilized credit specified in FORM GST ITC-02 shall be credited to
his electronic credit ledger.
(4) The inputs and capital goods so transferred shall be duly accounted
for by the transferee in his books of account.
(1) The amount of input tax credit relating to inputs held in stock,
inputs contained in semi-finished and finished goods held in stock,
and capital goods held in stock shall, for the purposes of sub-section
(4) of section 18 or sub-section (5) of section 29, be determined in
the following manner, namely,-
(b) for capital goods held in stock, the input tax credit
involved in the remaining useful life in months shall be
computed on pro-rata basis, taking the useful life as five
years.
(3) Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount under
sub-rule (1) based on the prevailing market price of the goods on
the effective date of the occurrence of any of the events specified in
sub-section (4) of section 18 or, as the case may be, sub-section (5)
of section 29.
(4) The amount determined under sub-rule (1) shall form part of the
output tax liability of the registered person and the details of the
amount shall be furnished in FORM GST ITC-03, where such
amount relates to any event specified in sub-section (4) of section
18 and in FORM GSTR-10, where such amount relates to the
cancellation of registration.
(5) The details furnished in accordance with sub-rule (3) shall be duly
certified by a practicing chartered accountant or cost accountant.
(6) The amount of input tax credit for the purposes of sub-section (6)
of section 18 relating to capital goods shall be determined in the
same manner as specified in clause (b) of sub-rule (1) and the
amount shall be determined separately for input tax credit of
central tax, State tax, Union territory tax and integrated tax:
Provided that where the amount so determined is more than the tax
determined on the transaction value of the capital goods, the
amount determined shall form part of the output tax liability and
the same shall be furnished in FORM GSTR-1.
ANALYSIS
Section 18 provides for
(1) entitlement of ITC on inputs in stock and contained in finished goods or work-
in-progress and capital goods (i) at the time of registration/voluntary
registration, (ii) on coming into regular tax-paying status by exiting
composition levy, (iii) on coming into tax-paying status on account of exempt
supply becoming taxable supply
(2) reversal of ITC on inputs in stock and contained in finished goods or work-in-
progress and capital goods (i) at the time of exit from regular tax-paying status
by opting for composition levy, (ii) at the time of exit from tax-paying status
on account of taxable supply becoming exempt supply
(3) amount payable on supply of capital goods or plant and machinery on which
ITC has been taken
(4) transfer of ITC on account of change in constitution of the registered person
(i) Entitlement of ITC at the time of registration/voluntary
registration or switching to regular tax paying status or coming
into tax-paying status [Sub-sections (1) and (2) of section 18 read
with rule 40 of CGST Rules]
The credit on inputs held in stock and contained in semi-finished goods or
finished goods held in stock and capital goods at the time of
registration/voluntary registration or coming into regular tax/tax-paying status
will be available in the following manner:
2 Provision for
transfer of liabilities
•Sale
1 •Merger
Change in constitution •Demerger
of registered person •Amalgamtion
•Lease
•Transfer of business
In the case of demerger, ITC will be apportioned in the ratio of the value of
assets of the new units as specified in the demerger scheme.
The registered person will have to furnish the details of change in constitution
on the common portal and submit a certificate from practicing Chartered
Account/Cost Accountant certifying that the change in constitution has been
done with a specific provision for transfer of liabilities. Upon acceptance of
such details by the transferee on the common portal, the unutilized ITC will be
credited to his electronic credit ledger. The transferee will record the inputs
and capital goods so transferred in his books of account.
STATUTORY PROVISIONS
(2) The credit referred to in sub-section (1) shall be utilised only for
payment of self-assessed output tax as per the return referred to
in the said sub-section.
(b) with the integrated goods and services tax paid under
section 3 of the Customs Tariff Act, 1975 in respect of
goods imported by him; and
(2) The claim of input tax credit in respect of invoices or debit notes
relating to inward supply that match with the details of
corresponding outward supply or with the integrated goods and
services tax paid under section 3 of the Customs Tariff Act, 1975
in respect of goods imported by him shall be finally accepted and
such acceptance shall be communicated, in such manner as may
be prescribed, to the recipient.
(7) The recipient shall be eligible to reduce, from his output tax
liability, the amount added under sub-section (5), if the supplier
declares the details of the invoice or debit note in his valid return
within the time specified in sub-section (9) of section 39.
(8) A recipient in whose output tax liability any amount has been
added under sub-section (5) or sub-section (6), shall be liable to
pay interest at the rate specified under sub-section (1) of section
50 on the amount so added from the date of availing of credit till
the corresponding additions are made under the said sub-
sections.
(9) Where any reduction in output tax liability is accepted under sub-
section (7), the interest paid under sub-section (8) shall be
refunded to the recipient by crediting the amount in the
corresponding head of his electronic cash ledger in such manner
as may be prescribed:
(10) The amount reduced from the output tax liability in contravention
of the provisions of sub-section (7) shall be added to the output
tax liability of the recipient in his return for the month in which
such contravention takes place and such recipient shall be liable
(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.
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(f) the State tax or Union territory tax shall not be utilised
towards payment of central tax.
ANALYSIS
(i) Availing ITC
(a) Provisional credit
The Electronic Credit Ledger [ECrL] maintains the tax credits separately for IGST
(on imports and inter-state inward supplies), CGST and STGST/ UTGST. Such
details are fetched from the invoice-level data entered by the registered person
in his GSTR 2 filed by the 15th of the month following the month in which
supplies are received.
As seen earlier in this chapter, one of the conditions for taking ITC by the
recipient of the supply is that “the tax charged in respect of such supply has
actually been paid to the Government, either in cash or through utilization of
ITC admissible in respect of the said supply” [Section 16(2)]. For this reason, the
statute provides that the ITC will first be taken provisionally in the electronic
credit ledger (Section 41), then after filing of GSTR 3 (consolidated monthly
return) be matched with the available information of tax payment in respect of
that supply (Section 42) 5.
(b) Matching of credit
Matching of ITC would be done only after the due date of furnishing of GSTR
3. ITC taken provisionally by the recipient on the basis of GSTR-2 will be
matched by the system-
⇒ with the details of outward supplies furnished by the supplier in GSTR 3
(filed by 20th of the month following the relevant month);
⇒ with the IGST paid on the goods imported by him;
⇒ for any duplication of claims of ITC.
Any discrepancy arising out of the verification (“matching”) against a supplier’s
return of outward supplies will be communicated to the supplier, who will get
a chance to rectify it while filing GSTR 3 for the month in which discrepancy
5
Refer Chapter 10 : Returns for a detailed understanding of the provisions relating to different
types of returns and matching concept [Sections 41, 42 & 43].
has been communicated. If he does not do this, then under section 42(5), the
amount of credit taken will be added to the output tax liability of the recipient
in his return for the month succeeding the month in which the discrepancy has
been communicated, and he has to pay the same with interest @ 18% from the
date of taking the credit. Thus, in effect, the ITC can be taken provisionally for
2 months.
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 by the system to ‘B’, who rectifies his omission and includes
Invoice no. 47 in his GSTR 3 for November and pays tax on it. This confirms
the credit taken by ‘A’.
Hence cross-utilization of credit is available only between CGST and IGST and
SGST/UTGST and IGST. The main restriction is that the CGST credit cannot be
utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized
for payment of CGST.
To illustrate, a supplier making intra-State, inter-State and imported purchases
will be eligible for ITC as under:
CGST BCD
IGST
SGST IGST
SGST/UTGST
ITC of ITC of
CGST SGST/
SGST/ UTGST CGST
UTGST
ILLUSTRATION 1
ABC Co. Ltd. is engaged in the manufacture of heavy machinery. It procured the
following items during the month of July.
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by
giving necessary explanations for treatment of various items.
Note:
(i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) ABC Co. Ltd. is not eligible for any threshold exemption.
ANSWER
Computation of ITC available with ABC Co. Ltd. for the month of July
ILLUSTRATION 2
XYZ Ltd., is engaged in manufacture of taxable goods. Compute the ITC available
with XYZ Ltd. for the month of October, 2018 from the following particulars:-
(iii) Capital goods 1,20,000 XYZ Ltd. has capitalised the capital
goods at full invoice value inclusive
of GST as it will avail depreciation
on the full invoice value.
Note:
(i) All the conditions necessary for availing the ITC have been fulfilled.
(ii) ABC Co. Ltd. is not eligible for any threshold exemption.
(iii) The annual return for the financial year 2017-18 was filed on 15th September, 2018.
ANSWER
Computation of ITC available with XYZ Ltd. for the month of October, 2018
Total 2,65,000
ILLUSTRATION 3
Mr. X, a supplier of goods, pays GST under regular scheme. Mr. X is not eligible for
any threshold exemption. He has made the following outward taxable supplies in a
tax period:
Particulars (` )
He has also furnished the following information in respect of purchases made by him
in that tax period:
Particulars (` )
Mr. X has following ITCs with him at the beginning of the tax period:
Particulars (` )
CGST 30,000
SGST 30,000
IGST 70,000
Note:
(i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the net GST payable by Mr. X during the tax period. Make suitable
assumptions as required.
ANSWER
Computation of GST payable by Mr. X on outward supplies
Note : ITC of IGST has been used to pay IGST, CGST and SGST in that order.
7. LET US RECAPITULATE
I. Definitions of certain key terms have been summarized by way
of diagrams as under:
BUSINESS
EXEMPT SUPPLY
means includes
Non-taxable
supply
Supply attracting NIL rate of Supply wholly exempt
tax from
CGST IGST
Goods Services
used/intended to be used in
the course/ furtherance of
business
INPUT TAX
IGST
Tax payable Tax payable Composition
leviable on
under forward under reverse tax
import of
charge charge
goods
Principal
means
Agent
any person supplying goods and/or as
services occasionally In any other
capacity
INWARD SUPPLY
means
with/without consideration
ZERO-RATED SUPPLY
Cash Utilisation of
Goods delivered to Time limit for
ITC
third person on the availing ITC - ITC
Goods received direction of the pertaining to a
in lots – ITC registered person particular FY can
allowed upon If depreciation deemed to be be availed by 20th
receipt of last lot claimed on tax received by the October of next FY
component, ITC not registered person or filing of annual
allowed ⇒ ITC available to return, whichever
registered person is earlier.
[Bill to Ship to Exception: Re-
Model] availment of ITC
reversed earlier
Attributable to
Used partly for business
business purposes
and partly for non-
business purposes
Goods and/or
services ITC available
only as
Used partly for making
taxable (including zero
rated supplies) supplies Attributable to taxable
& partly for exempt supplies including zero
supplies rated supplies
Exempt supplies include supplies charged to tax under reverse charge, transactions in
securities, sale of land and sale of building when entire consideration is received post
completion certificate.
Total IT on I + IS
T1 T2 T3 C1
D1 D2 C3
To be added to output
tax liability
• C3 will be computed separately for ITC of CGST, SGST/ UTGST and IGST.
• ∑ (D1 + D2) will be computed for the whole financial year, by taking
exempted turnover and aggregate turnover for the whole financial year.
If this amount is more than the amount already added to output tax
liability every month, the differential amount will be added to the output
tax liability in any of the month till September of succeeding year along
with interest @ 18% from 1st April of succeeding year till the date of
payment.
• If this amount is less than the amount added to output tax liability every
month, the additional amount paid has to be claimed back as credit in
GSTR 3 of any month till September of the succeeding year.
IT = Input tax
I = Inputs
IS = Input services
ECrl = Electronic Credit Ledger
CC = Completion Certificate
CED = Central Excise Duty
SED = State Excise Duty
ZRS = Zero rated supply
ES = Exempt supplies
IT on CG used exclusively for non- IT on CG used exclusively IT on CG not covered under (a) & (b).
business/exempt supplies for taxable supplies Useful life of CG → 5 years from date of
including zero rated invoice
supply (ZRS)
Te
Added to output tax liability E → Aggregate value of exempt supplies during the
along with interest tax period; F → Total turnover during the tax period.
If no turnover during the tax period/values not
available, values for last tax period may be used.
• Te will be computed separately for ITC of CGST, SGST/ UTGST and IGST.
• Exempt supplies include reverse charge supplies, transactions in securities, sale of land and sale
of building when entire consideration is received after completion certificate.
• Aggregate value of exempt supplies and total turnover excludes the central excise duty, State
excise duty & VAT.
(A) MV & OC used for Where a particular (A) Services notified by the Goods
transportation of goods category of such Government as being imported
(B) MV & OC used for inward supplies is obligatory for an employer by him
making taxable supplies used for making an to provide to its employees
of- outward taxable under any law
(i) such MV & OC supply of the same (B) Where a particular
(ii) transportation of category - [Sub- category of such inward
passengers contracting] or as an supplies is used for making
(iii) imparting training on element of a taxable an outward taxable supply
driving/ flying/ navigating composite or mixed of the same category [Sub-
such MV & OC supply contracting] or as part of a
taxable composite or mixed
supply
EXCEPTIONS
EXCEPTIONS
Credit available on
such exceptions
(A) WCS for P & M (A) Construction of P & M
(B) Where WCS for immovable (B) Construction of
property is input service for further immovable property for
supply of WCS [Sub-contracting] others
Registered person
switching from Registered person's Person applying for Person obtaining
composition levy to exempt supplies registration within 30 voluntary
regular scheme of becoming taxable days of becoming liable registration
payment of taxes for registration
Credit entitled on
Credit entitled on
• Inputs as such held in stock
• Inputs as such held in stock
• Inputs contained in semi-finished goods held in
• Inputs contained in semi-
stock
finished goods held in stock
• Inputs contained in finished goods held in stock
• Inputs contained in finished
• Capital goods [In case of exempt supply
goods held in stock
becoming taxable Capital Goods used
exclusively for such exempt supply] reduced
by 5% per quarter or part thereof from the
date of invoice
Note: ITC claimed shall be verified with the
corresponding details furnished by the corresponding
supplier.
ITC, in all the above cases, is to be availed within 1 year from the date of issue of invoice
by the supplier.
Registered person (who has Supplies of registered Cancellation of Supply of capital goods
availed ITC) switching from person getting wholly registration (CG)/ plant and machinery
regular scheme of payment exempted from tax (P& M) on which ITC has
of tax to composition levy been taken
Amount to be paid is
Amount to be reversed is equivalent to ITC on : equivalent to higher of
• Inputs held in stock/ inputs contained in semi-finished or finished goods the following:
held in stock (i) ITC on CG or P&M
• Capital goods less 5% per quarter or
on the day immediately preceding the date of switch over/ date of part thereof from the
exemption/date of cancellation of registration date of invoice
(ii) Tax on transaction
value of such CG or P &
M
• If amount at (i)
Manner of reversal of credit on inputs and capital goods & other exceeds (ii), then
conditions reversal amount will
(i) Inputs ⇒ Proportionate reversal based on corresponding invoices. If such be added to output
invoices not available, prevailing market price on the effective date of switch tax liability.
over/ exemption/cancellation of registration should be used with due • Separate ITC reversal
certification by a practicing CA/ Cost Accountant is to be done for
(ii) Capital goods ⇒ Reversal on pro rata basis pertaining to remaining useful CGST, SGST/UTGST
life (in months), taking useful life as 5 years. and IGST
(iii) ITC to be reversed will be calculated separately for ITC of CGST, • Tax to be paid on
SGST/UTGST and IGST. transaction value
(iv) Reversal amount will be added to output tax liability of the registered when refractory
person. bricks, moulds, dies,
(v) Electronic credit/cash ledger will be debited with such amount. Balance jigs & fixtures are
ITC if any will lapse. supplied as scrap.
Transaction Credit
Inter-State-supply IGST
The protocol to avail and utilize the credit of CGST, SGST/UTGST and IGST is
as follows:
(c) 20th October of the next financial year or the date of filing annual return
whichever is earlier
(d) No limit
3. If the goods are received in lots/installment, ------------------------------
(a) 50% ITC can be taken on receipt of 1st installment and balance 50% on
receipt of last installment.
(b) ITC can be availed upon receipt of last installment.
(c) 100% ITC can be taken on receipt of 1st installment.
(d) Proportionate ITC can be availed on receipt of each lot/installment.
4. For banking companies using inputs and input services partly for taxable supplies
and partly for exempt supplies, which of the statement is true?
(a) ITC shall be compulsorily restricted to credit attributable to taxable supplies
including zero rated supplies
(b) 50% of eligible ITC on inputs, capital goods, and input service shall be
mandatorily taken in a month and the rest shall lapse.
(c) Banking company can choose to exercise either option (a) or option (b)
(d) None of the above
5. A supplier takes deduction of depreciation on the GST component of the cost of
capital goods as per Income- tax Act, 1961. The supplier can-
(a) avail only 50% of the said tax component as ITC
(b) not avail ITC on the said tax component
(c) avail 100% ITC of the said tax component
(d) avail only 25% of the said tax component as ITC
6. Which of the following inward supplies are not eligible for ITC in case of a
company manufacturing shoes?
(a) Food and beverages
(b) Outdoor catering
(c) Health services
(d) All of the above
7. If there is a mis-match of supplier’s outward supply and recipient’s claim for ITC
on the same transaction (tax paid is claimed to be more by the recipient than
the tax shown as payable in the invoice of the supplier)-
(a) The disputed amount shall be added as output tax liability in the return of
the recipient
(b) The disputed amount shall be reduced from the ITC of the recipient
(c) The disputed amount shall be increased in the outward supply of the supplier
(d) A demand notice will be issued on the recipient for the disputed amount
8. Which of the following statement is true for a composition tax payer?
(a) A composition tax payer can avail only 50% of ITC on capital goods.
(b) A composition tax payer can avail 100% ITC on inputs.
(c) ITC is not available on inward supplies made by a composition tax payer.
(d) Composition tax will be available as ITC to the recipient only if the tax is
mentioned separately in the invoice raised by the composition tax payer.
9. What is input tax?
10. What are the conditions necessary for obtaining ITC?
11. Can a person take ITC without payment of consideration for the supply along
with tax to the supplier?
12. What is the time limit for taking ITC and reasons therefor?
13. What is the ITC entitlement of a newly registered person?
14. What is the tax implication of supply of capital goods by a registered person who
had taken ITC on such capital goods?
15. What happens where the details of inward supplies furnished by the recipient do
not match with the outward supply details furnished by the supplier in his valid
return?
16. A flying school imports an aircraft for use in its training activity, and takes ITC
of the IGST paid on the import. The departmental audit raises an objection that
aircrafts fall within the definition of “conveyance” in section 2(34) of the Act and
that ITC is not allowed on conveyances. Offer your comments.
20. Mr. A, a registered person was paying tax under Composition Scheme up to 30th
July. However, w.e.f. 31st July, Mr. A becomes liable to pay tax under regular
scheme. Is he eligible for ITC?
9. ANSWERS/HINTS
1. (c) 2. (c) 3. (b) 4. (c) 5. (b) 6. (d) 7. (a) 8. (c)
9. Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST)
or Union territory tax (UTGST) charged on supply of goods or services or both
made to a registered person. It also includes tax paid on reverse charge basis
and integrated goods and services tax charged on import of goods. It does not
include tax paid under composition levy.
10. Following four conditions are to be satisfied by the registered taxable person
for obtaining ITC:
(a) he is in possession of tax invoice or debit note or such other tax paying
documents as may be prescribed;
(b) he has received the goods or services or both;
(c) the supplier has actually paid the tax charged in respect of the supply to
the Government; and
(d) he has furnished the return under section 39.
11. Yes, the recipient can take ITC. However, he is required to pay the
consideration along with tax within 180 days from the date of issue of invoice.
This condition is not applicable where tax is payable on reverse charge basis.
12. Refer point (vi) “Time limit for availing ITC: Due date of filing return for the
month of September of succeeding financial year or date of filing of annual
return, whichever is earlier” under Heading No. 3 “Eligibility and Conditions for
Taking Input Tax Credit [Section 16]”.
13. A person applying for registration can take input tax credit of inputs held in
stock and inputs contained in semi- finished or finished goods held in stock on
the day immediately preceding the date of grant of registration. If the person
was liable to take registration and he has applied for registration within thirty
days from the date on which he became liable to registration, then ITC of inputs
held in stock and inputs contained in semi- finished or finished goods held in
stock on the day immediately preceding the date on which he became liable
to pay tax can be taken.
14. 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 5% per quarter
or part thereof from the date of invoice or the tax on the transaction value of
such capital goods, whichever is higher.
However, in case of refractory bricks, moulds and dies, jigs and fixtures when
these are supplied as scrap, the person can pay tax on the transaction value.
15. In case of mismatch, the communication is made to the both the parties. If the
mismatch is not rectified, then the amount will be added to the output tax
liability of recipient in the return for the month succeeding the month in which
discrepancy is communicated.
16. Under section 17(5)(a)(i)(C) of the CGST Act, ITC is allowed on aircraft if they
are used to make the taxable supply of imparting training on flying an aircraft.
Therefore, the credit is correctly taken.
17. No. As per section 17(5)(a), ITC on motor vehicles can be availed only if the
taxable person is in the business of transport of passengers or is providing the
Paper 4
Taxation
Section B : Indirect Taxes
Module ‐ 2
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
Paper 4
Taxation
Section B : Indirect Taxes
Module ‐ 2
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
This Study Material has been prepared by the faculty of the Board of Studies. The
objective of the Study Material is to provide teaching material to the students to enable
them to obtain knowledge in the subject. In case students need any clarification or
have any suggestion for further improvement of the material contained herein, they
may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner useful
for the students. However, the Study Material has not been specifically discussed by the
Council of the Institute or any of its Committees and the views expressed herein may
not be taken to necessarily represent the views of the Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this material.
Website : www.icai.org
E-mail : bosnoida@icai.in
CONTENTS
CHAPTER-7: REGISTRATION
1. Introduction............................................................................................................................. .7.2
2. Relevant Definitions .............................................................................................................. 7.4
3. Persons Liable for Registration [Section 22] ................................................................ 7.7
4. Compulsory Registration in Certain Cases [Section 24] ........................................ 7.12
5. Persons Not Liable for Registration [Section 23] ..................................................... 7.15
6. Procedure for Registration [Sections 25, 26 & 27] .................................................. 7.16
7. Amendment of Registration [Section 28] ................................................................... 7.32
8. Cancellation of Registration and Revocation of
Cancellation [Sections 29 & 30]...................................................................................... 7.36
9. Let Us Recapitulate .............................................................................................................. 7.44
10. Test Your Understanding ................................................................................................. 7.50
11. Answers/Hints........................................................................................................................ 7.52
1. Introduction............................................................................................................................. .8.2
2. Relevant Definitions .............................................................................................................. 8.5
3. Tax Invoice [Section 31] ....................................................................................................... 8.6
4. Credit and Debit Notes [Section 34] ............................................................................. 8.31
5. Prohibition of Unauthorized Collection of Tax [Section 32] ................................ 8.34
6. Amount of Tax to be Indicated in Tax Invoice
and other documents [Section 33] ................................................................................ 8.34
7. Let Us Recapitulate .............................................................................................................. 8.35
1. Introduction............................................................................................................................. .9.2
2. Relevant Definitions .............................................................................................................. 9.3
3. Payment of Tax, Interest, Penalty and Other
Amounts [Section 49] ........................................................................................................... 9.7
4. Interest on Delayed Payment of Tax [Section 50].................................................... 9.25
5. Tax Wrongfully Collected and Paid to Central Government
or State Government [Section 19 of IGST Act].......................................................... 9.27
6. Let Us Recapitulate ............................................................................................................. 9.27
7. Test Your Knowledge .......................................................................................................... 9.35
8. Answers/Hints........................................................................................................................ 9.38
1. Introduction............................................................................................................................ 10.3
2. Relevant Definitions ............................................................................................................ 10.6
3. Furnishing Details of Outward Supplies [Section 37] ............................................. 10.8
4. Furnishing Details of Inward Supplies [Section 38] .............................................. 10.24
5. Furnishing of Returns [Section 39] ............................................................................. 10.35
6. Special Returns................................................................................................................... 10.49
7. First Return [Section 40] ................................................................................................. 10.57
8. Claim of Input Tax Credit and Provisional
Acceptance thereof [Section 41] ................................................................................. 10.58
9. Matching Reversal and Reclaim of Input
Tax Credit [Section 42] .................................................................................................... 10.59
10. Matching, Reversal and Reclaim of Reduction in
Output Tax Liability [Section 43] ................................................................................. 10.76
REGISTRATION
LEARNING OUTCOMES
8.2
The section numbers referred to in the Chapter pertain to CGST Act, 2017 and rule
numbers pertain to CGST Rules, 2017 unless otherwise specified.
Amendment of registration
Cancellation of registration
1. INTRODUCTION
Under any
taxation system,
registration is the
most fundamental
requirement for
identification of
tax payers
ensuring tax
compliance in the
economy. Under
indirect tax
regime, without
registration, a
person can neither
collect tax from his customers nor claim any credit of tax paid by him.
Registration legally recognizes a person as supplier of goods or services and
legally authorizes him to collect taxes from his customers and pass on the
8.4
Registration under GST is not tax specific, which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cesses.
Chapter VI - Registration [Sections 22 to 30] of the CGST Act stipulates the
provisions relating to registration. State GST laws also prescribe identical
provisions in relation to Registration.
2. RELEVANT DEFINITIONS
1
Section 107 contains the provisions relating to ‘Appeals to Appellate Authority’. The same
shall be discussed in detail at final level.
8.6
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager
or any other similar activity, whether or not it is for a pecuniary benefit;
(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or
vocation;
(h) services provided by a race club by way of totalisator or a licence to book
maker in such club
(i) any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities.
Fixed establishment: means a place (other than the registered place of
business) which is characterised by a sufficient degree of permanence and
suitable structure in terms of human and technical resources to supply
services, or to receive and use services for its own needs [Section 2(50)].
Principal place of business: means the place of business specified as the
principal place of business in the certificate of registration [Section 2(89)].
Proper officer: in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned
that function by the Commissioner in the Board [Section 2(91)].
Registered person: means a person who is registered under section 25,
but does not include a person having a Unique Identity Number [Section
2(94)].
Tax period: means the period for which the return is required to be
furnished [Section 2(106)].
Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108)].
Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109)].
Taxable person: means a person who is registered or liable to be
registered under section 22 or section 24 [The concept of taxable person
has been discussed in detail in subsequent paras] [Section 2(107)].
STATUTORY PROVISIONS
Sub-section Particulars
8.8
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.
ANALYSIS
(i) Threshold limit for registration
Every supplier of goods or services or both is required to obtain
registration
in the State or the Union territory from where he makes the taxable
supply
if his aggregate turnover exceeds ` 20 lakh in a FY.
Aggregate turnover
8.10
(A) Aggregate turnover to include total turnover of all branches with
same PAN
A dealer ‘X’ has two offices – one in Delhi and another in
Haryana. In order to determine whether ‘X’ is liable for
registration, turnover of both the offices would be taken into
account and only if the same exceeds ` 20 lakh, X is liable for
registration.
8.12
Taxpayer obtains
Completes
Provisional id and Taxpayer logins
enrolment
password from to GST Common
process and
“www.aces.gov.in Portal,
uploads
” or State VAT “www.gst.gov.in”
documents
Authorities
Taxpayer obtains
Gets Application
provisional GSTIN
Reference
on appointed
Number
date
STATUTORY PROVISIONS
Sub-section Particulars
ANALYSIS
Following category of persons are mandatorily required to obtain the registration
under GST irrespective of their turnover:
8.14
Casual taxable person
who does not have a A person receiving
Persons making any fixed place of business in supplies on which tax is
inter-State taxable supply the State or Union payable by recipient on
Territory from where he reverse charge basis
wants to make supply
Those ecommerce
Non-resident taxable
operators who are Persons who are required
persons who do not have
notified as liable for GST to deduct tax under
a fixed place of business
payment under section section 51 (TDS)
in India
9(5)
Input Service
Every person supplying online Distributor,
information and database access whether or not
or retrieval services from a place separately
outside India to a person in India registered under
other than a registered person this Act
*Note: The provisions relating to tax deduction at source under section 51,
collection of tax at source under section 52, Input Service Distributors and online
information and database access or retrieval services have been discussed at the
Final Level. Further, detailed provisions relating to electronic commerce operators
have been discussed at Final Level.
STATUTORY PROVISIONS
Sub-section Particulars
8.16
ANALYSIS
Person engaged exclusively in Person engaged exclusively in
supplying goods/services/both not supplying goods/services/both
liable to tax wholly exempt from tax
Persons not liable
for registration
Agriculturist to the extent of supply Specified category of persons
of produce out of cultivation of land notified by the Government**
STATUTORY PROVISIONS
Sub-section Particulars
(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.
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.
(2) A person seeking registration under this Act shall be granted a
single registration in a State or Union territory.
8.18
(a) any specialised 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,
shall be granted a Unique Identity Number in such manner and
for such purposes, including refund of taxes on the notified
supplies of goods or services or both received by them, as may
be prescribed.
(10) The registration or the Unique Identity Number shall be
granted or rejected after due verification in such manner and
within such period as may be prescribed
(11) A certificate of registration shall be issued in such form and
with effect from such date as may be prescribed
(12) A registration or a Unique Identity Number shall be deemed to
have been granted after the expiry of the period prescribed
under sub-section (10), if no deficiency has been
communicated to the applicant within that period
Section 26 Deemed registration
(1) The grant of registration or the Unique Identity Number under
the State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act shall be deemed to be a grant of
registration or the Unique Identity Number under this Act
subject to the condition that the application for registration or
the Unique Identity Number has not been rejected under this
Act within the time specified in sub-section (10) of section 25.
(2) Notwithstanding anything contained in sub-section (10) of
section 25, any rejection of application for registration or the
Unique Identity Number under the State Goods and Services
Tax Act or the Union Territory Goods and Services Tax Act shall
be deemed to be a rejection of application for registration
under this Act.
ANALYSIS
Procedure for registration is governed by section 25 of the CGST Act read with
Chapter III - Registration of Central Goods and Services Tax (CGST) Rules, 2017.
Relevant provisions of CGST Rules, 2017 have been incorporated at the relevant
places. Further, special provisions have been provided for registration of casual
taxable person and non-resident taxable person under section 27. Concept of
deemed registration has been elaborated under section 26.
Under GST, the application for registration has to be submitted electronically at
the GST Common Portal – www.gst.gov.in, duly signed or verified through
Electronic Verification Code (EVC) [Aadhar OTP].
8.20
Around 30 forms/formats have been prescribed in the CGST Rules, 2017. For every
process in the registration chain such as application for registration,
acknowledgment, query, rejection, registration certificate, show cause notice for
cancellation, reply, cancellation, amendment, field visit report etc., there are
standard formats. This makes the process uniform all over the country. The
decision-making process will also be fast. Strict time lines have been stipulated
for completion of different stages of registration process.
(i) Where and by when to apply for registration? [Section 25(1)]
8.22
(iii) Voluntary registration [Section 25(3)]
A person who is not liable to be registered under section 22 or section 24
may get himself registered voluntarily. In case of voluntary registration,
all provisions of this Act, as are applicable to a registered person, shall
apply to voluntarily registered person.
Voluntary registration is advantageous for the persons which supply of
goods or services or both to registered persons. The reason for the same
is that by virtue of section 9(4) of the CGST Act, in case of supplies
received from unregistered supplier
by registered recipient, recipient has
to pay the tax under reverse charge. Voluntary Registration
Therefore, business units would
prefer receiving supplies from the
registered persons only. Thus, voluntary registration enables a supplier
of goods or services or both to enhance its B2B [Business to Business]
transactions.
However, once a person obtains voluntary registration, he has to pay tax
even though his aggregate turnover does not exceed ` 20 lakh/` 10 lakh.
(iv) Distinct Persons/ establishments of distinct persons [Section 25(4) &(5)]
A person who has obtained/ is required to obtain more than one
registration, whether in one State/ Union territory or more than one
State/Union territory shall, in respect of each such registration, be
treated as distinct persons.
Further, 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.
Mohan, a Chartered Accountant, has a registered head office
in Delhi. He has also obtained registration in the State of
West Bengal in respect of his newly opened branch office.
Mohan shall be treated as distinct persons in respect of
registrations in West Bengal and Delhi.
(v) PAN must for obtaining registration [Section 25(6) & (7)]
A Permanent Account Number is mandatory to be eligible for grant of
registration.
8.24
In case (ii), if the Appellate Authority upholds the liability to registration,
application for registration shall be submitted within 30 days from the date of
issuance of such order of the Appellate Tribunal.
Provisions relating to verification and issue of registration certificate [as
contained in rules 9 and 10] [discussed in subsequent paras] shall, mutatis
mutandis, apply to such application submitted by the person granted
temporary registration. GSTIN thereafter granted shall be effective from the
date of order of proper officer granting temporary registration.
(viii) Procedure for registration [Section 25 read with rules 8, 9 & 10]
Provisions relating to procedure for application for registration, verification of
the application and approval & issue of registration certificate are contained
in the rules 8, 9 and 10 of the CGST Rules, 2017 respectively. The same have
to be read in conjunction with section 25 provisions. However, procedure so
laid down will not apply to:
Non-resident taxable person
A person required to deduct tax at source under section 51
A person required to collect tax at source under section 52
A person supplying online information and database access or retrieval
services from a place outside India to a non-taxable online recipient
referred to in section 14 of IGST Act who is liable to be registered under
section 25(1)
Thus, procedure for registration prescribed under rules 8, 9 and 10 are also
applicable to a person paying tax under composition levy, every person
seeking voluntary registration under section 25(3) as well as a casual taxable
person. Such persons shall apply for registration in Form GST REG 01. The
application for registration in GST Form REG 01 is divided into two parts –
Part A and Part B.
In order to cater to the needs of tax payers who are not IT savvy, Facilitation
centres have been established which help the taxpayer in submitting the
application for registration, amending the registration certificate, submitting
application for cancellation of registration, revocation of cancellation of
8.26
Procedure for registration
Part I
Every person liable to get registered and person seeking voluntary registration
shall, before applying for registration, declare his Permanent Account Number
(PAN), mobile number, e-mail address, State/UT in Part A of FORM GST REG-
01 on GST Common Portal.
Part II
Proper Officer examines the application and
accompanying documents.
Proper Officer issues notice
electronically, within 3 working
If same are found in order? No days from application date
thereby seeking clarification**,
information or documents from
the applicant.
Yes
8.28
Information required while filing application for registration
GSTIN format
State Code PAN Entity Check sum
Code character
Display of registration certificate and GSTIN on the name board [Rule 18]
Every registered person shall display his registration certificate in a prominent
location at his PPoB and at every APoB. Further, his GSTIN also has to be
displayed on the name board exhibited at the entry of his PPoB and at every
APoB.
(ix) Effective date of registration [Rule 10]
within 30 days from the date the date on which he becomes liable
he becomes liable to to registration
registration
8.30
(x) Special provisions for grant of registration in case of Non-Resident
Taxable Person (NRTP) and Casual Taxable Person (CTP) [Sections 25 &
27 read with rules 13 & 15]
Before going into nuances of the registration provisions of CTP and NRTP, let
us first understand the two terms. The two terms have been defined in the
CGST Act as follows:
Casual Taxable Person: means a person who occasionally undertakes
transactions involving supply of goods or services or both in the course or
furtherance of business, whether as principal, agent or in any other capacity,
in a State/UT where he has no fixed place of business [Section 2(20)].
Non-Resident Taxable Person: means any person who occasionally
undertakes transactions involving supply of goods or services or both,
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India [Section 2(77)].
Based on the aforesaid definitions, following points merit consideration:
• A CTP does not have a fixed place of business in the State/UT where he
undertakes supply though he might be registered with regard to his fixed
place of business in some other State/UT, while a NRTP does not have
fixed place of business/residence in India at all.
• A CTP has to undertake transactions in the course or furtherance of
business whereas the business test is absent in the definition of NRTP.
The special registration provisions pertaining to CTP and NRTP are as
follows:
(A) Both CRTP and NRTP have to compulsorily get registered under GST
irrespective of the threshold limit, at least 5 days prior to
commencement of business.
(B) As per section 25(6), every person must have a PAN to be eligible for
registration. Since NRTP will generally not have a PAN of India, he
may be granted registration on the basis of other prescribed
documents.
He has to submit a self-attested copy of his valid passport along with
the application signed by his authorized signatory who is an Indian
Resident having valid PAN. However, in case of a business entity
incorporated or established outside India, the application for registration
shall be submitted along with its tax identification number or unique
8.32
Grant of registration/UIN under any SGST Act/ UTGST Act is deemed to be
registration/UIN granted under CGST Act provided application for
registration has not been rejected under CGST Act.
Further, rejection of application for registration/UIN under SGST Act/UTGST
Act is deemed to be rejection of application for registration under CGST Act.
STATUTORY PROVISIONS
Sub-section Particulars
ANALYSIS
8.34
Addition, deletion or
Legal name of Address of retirement of partners or
business PPoB/APoB directors, Karta, Managing
Committee, Board of
Trustees, Chief Executive
Officer or equivalent,
responsible for day to day
affairs of the business
Mobile no./e-mail
address of authorised
signatory can be
amended only after
online verification
through GST Portal.
Submission of GST
application within 15 Common Portal
days of change
Registered
Person/ UIN
holder
Core areas
Permission to be
granted within next 15
Registration certificate Proper Officer (PO)
days
amended
Yes
No
If reply is satisfactory? Yes
8.36
STATUTORY PROVISIONS
Section 29 Particulars
(c) the taxable person, other than the person registered under
sub-section (3) of section 25, is no longer liable to be
registered under section 22 or section 24
(2) The proper officer may cancel the registration of a person from
such date, including any retrospective date, as he may deem fit,
where,––
Provided that the proper officer shall not cancel the registration
without giving the person an opportunity of being heard.
(3) The cancellation of registration under this section shall not affect
the liability of the person to pay tax and other dues under this Act
or to discharge any obligation under this Act or the rules made
thereunder for any period prior to the date of cancellation
whether or not such tax and other dues are determined before or
after the date of cancellation.
8.38
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.
(2) The proper officer may, in such manner and within such period as
may be prescribed, by order, either revoke cancellation of the
registration or reject the application.
Provided that the application for revocation of cancellation of
registration shall not be rejected unless the applicant has been
given an opportunity of being heard.
ANALYSIS
The provisions relating to cancellation of registration and its revocation are
contained in sections 29 & 30 respectively read with rules 20 to 23 of the CGST
Rules, 2017:
Where the
Voluntary registration registered person no
more requires it
Cancellation of
registration
Where the Proper
Officer considers the
Suo-motu registration registration liable for
cancellation in view
of certain defaults
8.40
B. Circumstances when the proper officer can cancel registration on his
own
In the following cases, registration can be cancelled by the proper officer
from such date, including any retrospective date, as he may deem fit:
Following
contraventions done by
the registered person:
A registered
(i) He does not conduct person has
any business from the not filed Voluntarily
declared place of returns for registered Registration
business, or continuous 6 person has was obtained
(ii) He issues invoice/bill months*. not by means of
without supply of *3 commenced fraud, wilful
goods/services in consecutive the business misstatement
violation of the tax periods in within 6 or
provisions of this Act, case of a months from suppression
or the rules made person who the date of of facts
thereunder. opted for registration
(iii) If he violates the composition
provisions of section levy
171 of the CGST Act.*
* Section 171 of the CGST Act, 2017 contains provisions relating to anti-
profeetering measure 1.
(ii) Procedure for cancellation of registration
A registered person seeking cancellation of registration shall electronically
submit the application for cancellation of registration in prescribed form
within 30 days of occurrence of the event warranting cancellation.
He is required to furnish in the application the details of inputs held in
stock or inputs contained in semi-finished/finished goods held in stock
and of capital goods held in stock on the date from which cancellation of
registration is sought, liability thereon, details of the payment, if any,
made against such liability and may furnish relevant documents thereof.
1
Anti-profeetering measure shall be discussed at Final Level.
8.42
The manner of determination of amount of credit to be reversed is prescribed
under rule 44 of the CGST Rules, 2017. On conjoint reading of section 29(5)
and rule 44, it can be inferred as follows:
Amount of credit to be reversed in respect of INPUTS:
ITC on inputs
ITC in respect computed
of inputs proportionately on
calculated in the basis of
accordance corresponding
with rule 44 invoices** on which
of the CGST credit had been whichever is
Rules, 2017* availed on such higher
inputs.
A voluntarily
registered person A person to whom a
cannot seek UIN has been granted
cancellation before the under rule 17 cannot
expiry of a period of 1 apply for cancellation
year from the effective of registration [Rule
date of registration 20]
[Proviso to rule 20]
The cancellation of
registration will not The cancellation of
affect liability of registration under
registered person to either SGST Act/UTGST
pay tax and other dues Act shall be deemed to
under the Act for any be a cancellation of
period prior to the date registration under CGST
of cancellation [Section Act [Section 29(4)].
29(3)]
8.44
However, in case registration was cancelled for failure of registered
person to furnish returns, before applying for revocation the person has
to make good the defaults (by filing all pending returns, making payment
of all dues in terms of such returns alongwith interest, penalty, late fee,
etc.) for which the registration was cancelled by the officer.
If the proper officer is satisfied that there are sufficient grounds for
revokation of cancellation, he may revoke the cancellation of registration,
by an order within 30 days of receipt of application and communicate
the same to applicant.
Otherwise, he may reject the revocation application. However, before
rejecting the application, he has to first issue SCN to the applicant who
shall furnish the clarification within 7 working days of service of SCN.
The proper officer shall dipose the application (accept/reject the same)
within 30 days of receipt of clarification.
The revocation of cancellation of registration under the SGST Act/ UTGST
Act, as the case may be, shall be deemed to be a revocation of
cancellation of registration under CGST Act
9. LET US RECAPITULATE
1. Nature of registration
The registration in GST is PAN based and State specific.
Registration under GST is not tax specific, i.e. single registration for all
the taxes i.e. CGST, SGST/UTGST, IGST and cesses.
8.46
4. Persons not liable for registration
Application submitted
within 30 days of the •Effective date is the date on which he
applicant becoming liable becomes liable to registration
to registration
Application submitted
after 30 days of the •Effective date is date of grant of
applicant becoming liable registration
to registration
Part A
Temporary Reference
PAN Mobile No. Email id Number
8.48
Yes No
Yes
Deficient?
No
GST law prescribes special procedure for registration, as also for extension of the
operation period of such Casual or Non-Resident taxable persons.
They have to apply for registration at least 5 days in advance before making any
supply.
Except for the changes in some core information in the registration application,
a taxable person shall be able to make amendments without requiring any
specific approval from the tax authority.
In case the change is for legal name of the business, or the State of place of
business or additional place of business, the taxable person will apply for
amendment within 15 days of the event necessitating the change.
The Proper Officer, then, will approve the amendment within the next 15 days.
For other changes like the name of day-to-day functionaries, e-mail IDs,
mobile numbers etc. no approval of the Proper Officer is required, and the
amendment can be affected by the taxable person on his own on the common
portal.
8.50
10. TEST YOUR UNDERSTANDING
1. Mr. A has started supply of goods in Delhi. He is required to obtain registration
if his aggregate turnover exceeds ____________ during a financial year.
(a) ` 10 lakh
(b) ` 20 lakh
(c) ` 30 lakh
(d) ` 50 lakh
2. Aggregate turnover includes:
(a) Taxable supplies
(b) Exempt supplies
(c) Exports
(d) All of the above
3. Which of the following persons are compulsorily required to obtain registration?
(a) Persons making any inter-State taxable supply
(b) Non-resident taxable persons making taxable supply
(c) Casual taxable persons making taxable supply
(d) All of the above
4. Which of the following persons are not liable for registration?
(a) Any person engaged exclusivley in supplying services wholly exempt from
tax
(b) Casual Taxable Person
(c) Both (a) and (b)
(d) None of the above
5. Rohan Toys is a registered supplier of goods in Delhi. It intends to attend a 7 days’
Business Fair organised in Mumbai (next month) where it does not have a fixed
place of business. Examine which of the following statements are true for Rohan
Toys:
(a) Rohan Toys is not required to obtain registration in Mumbai for attending
a 7 days’ Business Fair.
(b) Rohan Toys has to obtain registration as a casual taxable person for
attending the Business Fair.
(c) Rohan Toys has to obtain a Unique Identification Number for attending
the Business Fair.
(d) None of the above
6. Determine the effective date of registration in following cases:
(a) The aggregate turnover of Dhampur Industries of Delhi has exceeded ` 20
lakh on 1st September. It submits the application for registration on 20th
September. Registration certificate is granted to it on 25th September.
(b) Mehta Teleservices is an internet service provider in Lucknow. Its
th
aggregate turnover exceeds ` 20 lakh on 25 October. It submits the
application for registration on 27th November. Registration certificate is
granted to it on 5th December.
7. State the time-period within which registration needs to be obtained in each of the
following independent cases:
(a) Casual taxable person
(b) Person making inter-State taxable supply
8. In order to be eligible for grant of registration, a person must have a Permanent
Account Number issued under the Income- tax Act, 1961. State one exception to
it.
9. State which of the following suppliers are liable to be registered:
(a) Agent supplying goods on behalf of some other taxable person and its
aggregate turnover does not exceed ` 20 lakh during the financial year.
(b) An agriculturist who is only engaged in supply of produce out of
cultivation of land.
10. What are the advantage of taking registration in GST?
11. Can a person without GST registration collect GST and claim ITC?
12. If a person is operating in different States, with the same PAN number, can he
operate with a single registration?
13. Can a person having multiple business verticals in a State obtain separate
registrations for each business vertical?
14. Is there a provision for a person to get himself voluntarily registered though he
may not be liable to pay GST?
8.52
15. Can the Department, through the proper officer, suo-moto proceed to register of a
person?
16. Whether the registration granted to any person is permanent?
17. Is it necessary for the UN bodies to get registration under GST?
18. What is the responsibility of the taxable person making supplies to UN bodies?
19. What is the validity period of the registration certificate issued to a casual taxable
person and non- resident taxable person?
20. What happens when the registration is obtained by means of willful mis-
statement, fraud or suppression of facts?
21. Is there an option to take centralized registration for services under GST Law?
22. What could be the liabilities (in so far as registration is concerned) on transfer of a
business?
23. At the time of registration, will the assessee have to declare all his places of
business?
24. What will be the time limit for the decision on the on-line registration application?
25. What will be the time of response by the applicant if any query is raised in the
online application?
26. Does cancellation of registration impose any tax obligations on the person whose
registration is so cancelled?
11. ANSWERS/HINTS
1. (b) 2. (d) 3. (d) 4. (a) 5. (b)
6. (a) Every supplier becomes liable to registration if his turnover exceeds ` 20
lakh [in a State/UT other than Special Category States] in a finacial year
[Section 22]. Since in the given case, the turnover of Dhampur Industries
exceeded ` 20 lakh on 1st September, it becomes liable to registration on
said date.
Further, since the application for registration has been submitted within
30 days from such date, the registration shall be effective from the date
on which the person becomes liable to registration [Section 25 read with
rule 10 of the Chapter III - Registration of CGST Rules, 2017]. Therefore,
the effective date of registration is 1st September.
(b) Since in the given case, the turnover of Mehta Teleservices exceeds ` 20
lakh on 25th October, it becomes liable to registration on said date.
Further, since the application for registration has been submitted after 30
days from the date such person becomes liable to registration, the
registration shall be effective from the date of grant of registration.
Therefore, the effective date of registration is 5th December.
7. Section 25(1) of the CGST Act stipulates the time-period within which
registration needs to be obtained in various cases. It provides the following
time-limits:
8.54
year.
(b) As per section 23, an agriculturist who is only engaged in supply of
produce out of cultivation of land is not required to obtain registration.
10. Registration will confer following advantages to the business:
• Legally recognized as supplier of goods or services.
• Proper accounting of taxes paid on the input goods or services which can be
utilized for payment of GST due on supply of goods or services or both by
the business.
• Legally authorized to collect tax from his purchasers and pass on the credit
of the taxes paid on the goods or services supplied to purchasers or
recipients.
• Become eligible to avail various other benefits and privileges rendered
under the GST laws.
11. No, a person without GST registration can neither collect GST from his
customers nor can claim any input tax credit of GST paid by him.
12. No. Every person who is liable to take a registration will have to get
registered separately for each of the States where he has a business
operation (and is liable to pay GST)
13. Yes. In terms of the proviso to sub-section (2) of section 25, a person having
multiple business verticals in a State may obtain a separate registration for
each business vertical, subject to such conditions as may be prescribed.
14. Yes. In terms of sub-section (3) of section 25, a person, though not liable to
be registered under sections 22 or 24 may get himself registered voluntarily,
and all provisions of this Act, as are applicable to a registered taxable person,
shall apply to such person.
15. Yes. In terms of sub-section (8) of section 25, where a person who is liable to
be registered under GST law fails to obtain registration, the proper officer
may, without prejudice to any action which may be taken under CGST Act, or
under any other law for the time being in force, proceed to register such
person in the manner as is prescribed in the CGST Rules, 2017.
16. Yes, the registration certificate once granted is permanent unless
surrendered, cancelled, suspended or revoked.
17. Yes. In terms of section 25(9) of the CGST Act, all notified UN bodies,
Consulate or Embassy of foreign countries and any other class of persons so
8.56
from the date when the taxable person communicates removal of
deficiencies. In case no response is given by the proper officer within the said
time line, the portal shall automatically generate the registration.
25. If during the process of verification, one of the tax authorities raises some
query or notices some error, the same shall be communicated to the appli
cant and to the other tax authority through the GST Common Portal within 3
common working days. The applicant will reply to the query/rectify the error/
answer the query within a period of 7 days from the date of receipt of
deficiency intimation.
On receipt of additional document or clarification, the relevant tax authority
will respond within 7 common working days from the date of receipt of
clarification
26. Yes, as per section 29(5) of the CGST Act, every registered taxable person
whose registration is cancelled shall pay an amount, by way of debit in the
electronic cash ledger, equivalent to the credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods
held in stock or capital goods or plant and machinery on the day immediately
preceding the date of such cancellation or the output tax payable on such
goods, whichever is higher.
CHAPTER 8
LEARNING OUTCOMES
Revised Tax
Invoice
Consolidated Tax
Invoice
Tax Invoice, Credit and Debit Notes
Bill of Supply
Payment
Credit and Debit notes
Voucher
1. INTRODUCTION
An invoice is a commercial instrument
issued by a supplier of goods/services
to a recipient. It identifies both the
parties involved, and lists, describes the
items sold/services supplied, quantifies
the items sold, shows the date of
shipment and mode of transport, prices
and discounts, if any, and the delivery
and payment terms (in case of supply of
goods).
Invoice
Supplier Recipient
Details of such
Details of such
invoice furnished
invoice furnished
in Statement of
in Statement of
Inward Supplies
Outward Supplies
Match
Under the GST regime, an “invoice” or “tax invoice” means the tax invoice
referred to in section 31 of the CGST Act, 2017. This section mandates the
issuance of an invoice or a bill of supply for every supply of goods or services. It
is not necessary that only a person supplying goods or services needs to issue an
invoice. The GST law mandates that any registered person buying goods or
services from an unregistered person also needs to issue a payment voucher as
well as a tax invoice. The type of invoice to be issued depends upon the category
of registered person making the supply.
The provisions relating to tax invoices, debit and credit notes are contained in
Chapter VI - Tax Invoice, Credit and Debit Notes [Sections 31 to 34] of the CGST
Act. State GST laws also prescribe identical provisions in relation to Tax Invoice,
Credit and Debit Notes.
Provisions of Tax invoice, Credit and Debit Notes under CGST Act have
also been made applicable to IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the provisions of Tax Invoice, Credit and Debit
Notes, let us first go through few relevant definitions.
2. RELEVANT DEFINITIONS
for which the supplier invoices the recipient on a regular or periodic basis
and
includes supply of such goods as the Government may, subject to such
conditions, as it may, by notification, specify
STATUTORY PROVISIONS
Sub-section Particulars
Explanation.––For the purposes of this section, the expression “tax invoice” shall
include any revised invoice issued by the supplier in respect of a supply made
earlier.
ANALYSIS
The provisions relating to Tax Invoice are provided under section
31 of the CGST Act as well as Chapter-VI: Tax Invoice, Credit and
Debit Notes of Central Goods and Services (CGST) Rules, 2017.
The provisions contained in these rules have been incorporated at
the relevant places.
There is no format prescribed for the Tax Invoice. Only certain fields have been
prescribed as mandatory fields. Further, invoices may be issued manually or
electronically. Issuance of electronic invoices is not mandatory.
Invoice shall be issued Invoice shall be issued before or after the provision
before or at the time of service, but within a period of 30 days* from the
of,— date of supply of service.
(k) Rate of tax (central tax, State tax, integrated tax, Union territory
tax or cess);
(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;
3. AT >` 5 crores 4
Above provisions are also applicable to Bill of Supply [The concept of Bill of
Supply is discussed in subsequent paras].
(vi) Manner of issuing the invoice [Sections 31(1) & (2) read with rule 48]
Duplicate
Triplicate
Duplicate copy
Duplicate copy
Triplicate copy
The serial number of invoices issued during a tax period shall be furnished
electronically [through the Common Portal – www.gst.gov.in], in FORM
GSTR-1 [Details of outward Supplies of goods or services].
4. In order to keep the compliance burden low for the small tax payers,
taxpayers with annual turnover of `1.5 crores need not mention the HSN
code of the goods in the invoices.
Sample Tax Invoice
B. SPECIAL CASES
(i) Revised Tax Invoice [Section 31(3)(a) read with rule 53]
When issued?
Every registered person who has been
For the purposes of this
granted registration with effect from a
section, the expression “tax
date earlier than the date of issuance of
invoice” shall include any
certificate of registration to him, may issue
revised invoice issued by the
Revised Tax Invoices. Such invoices shall
supplier in respect of a supply
be issued against the i invoices already
made earlier [Explanation to
issued during said period.
section 32].
Revised Tax Invoices shall be issued within
1 month from the date of issuance of
certificate of registration.
Supplies between date of grant of certificate of registration & effective date of registration
(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/debited to the recipient
Note: Particulars of the Debit and Credit Notes are also same as revised tax
invoices.
SOLUTION
In the given illustration, Jain & Sons can issue a Consolidated Tax Invoice only
with respect to supplies made to Oberoi Orphanage [worth ` 188] and
Aaradhya [worth ` 158] as the value of goods supplied to these recipients is
less than ` 200 as also these recipients are unregistered and don’t require a
tax invoice.
As regards the supply made to Raghav Traders, although the value of goods
supplied to it is less than ` 200, Raghav Traders is registered under GST. So,
Consolidated Tax Invoice cannot be issued.
Consolidated Tax Invoice can also not be issued for supplies of goods made to
Dhruv Enterprises and Gaurav although both of them are unregistered. The
reason for the same is that the value of goods supplied is not less than ` 200.
(iii) Bill of Supply [Section 31(3)(c) read with rule 49]
A registered person supplying exempted goods or services or both or paying
tax under composition levy shall issue a bill of supply instead of a tax invoice.
Supplying
exempted
goods or
services or both
Tax Invoice Bill of Supply
Paying tax
Registered
under
Person
composition
levy
(g) Rate of tax (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;
(i) rate of tax is not tax shall be paid at the rate of 18%
determinable
Receipt Voucher
Supply
Tax Invoice
Supplier
Refund Voucher Recipient
(h) Rate of tax (central tax, State tax, integrated tax, Union territory
tax or cess)
Payment Voucher
Invoice
Recipient shall
issue Invoice
Recipient may issue a
consolidated invoice
at the end of the
Where aggregate
month
value of supplies in a
day from any/ all the
unregistered
suppliers > ` 5,000,
(g) Rate of tax (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; and
issue any other document in lieu of tax invoice, by whatever name called:
Signature
Original copy
Duplicate copy
Triplicate copy
1
The concept of E-Way Bill has been deferred for the time being. Till such time as an E-way
bill system is developed and approved by the GST Council, the Government may, by
notification, specify the documents that the person in charge of a conveyance carrying any
consignment of goods shall carry while the goods are in movement or in transit storage.
(b) the supplier shall issue a delivery challan for each of the subsequent
consignments, giving reference of the invoice;
(c) Copies of the corresponding delivery challan shall accompany each
consignment 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.
STATUTORY PROVISIONS
Sub-section Particulars
(1) 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 exceed the taxable value or tax payable in
respect of such supply, or where the goods supplied are
returned by the recipient, or where goods or services or both
supplied are found to be deficient, the registered person, who
has supplied such goods or services or both, may issue to the
recipient a credit note containing such particulars as may be
prescribed
(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.
ANALYSIS
(i) Issuance of Credit Note
Where a tax invoice has been issued for supply of any goods or services or
both
Registered Supplier
of goods or services may issue Credit Note
or both
Registered Supplier
of goods or services shall issue Debit Note
or both
permitted, if the incidence of tax and interest on such supply has been
passed on to any other person.
II. Debit Note:
Any registered person who issues a
debit note in relation to a supply of
goods or services or both shall Debit note shall include a
declare the details of such debit note supplementary invoice.
in the return for the month during
which such debit note has been
issued.
The tax liability shall be adjusted in such manner as may be prescribed.
Particulars of the Debit and Credit Notes are same as the particulars of
revised tax invoices.
7. LET US RECAPITULATE
Registered Person
Taxable
supply
Goods Services
Name &
Consecutive GSTIN of
GSTIN of address of
Serial Number recipient, if HSN
supplier recipient, if not
& date of issue registered
registered
Tax rate –
Description of Central tax &
Quantity in Total Value of Taxable Value
goods or State tax or
case of goods supply of supply
services Integrated tax,
cess
Address of
Tax payable on Signature of
Amount of tax delivery where
Place of supply reverse charge authorised
charged different than
basis signatory
place of supply
Triplicate Duplicate
Particulars of the Debit and Credit Notes are also same as revised tax invoices
Consolidated Tax
Value of supply < `200 Invoice shall be
to be issued
7. Bill of Supply
or both
Tax Invoice Bill of Supply
8. Receipt Voucher
Advance payment
Supplier Recipient
Receipt Voucher
Where at the time of receipt of advance, rate of tax/ nature of supply is not
determinable
(i) rate of tax is not determinable tax shall be paid at the rate of 18%
9. Refund Voucher
Advance payment
Receipt Voucher
Supplier Supply Recipient
Tax Invoice
Refund Voucher
Payment Voucher
Invoice
Recipient shall
issue Invoice
Where a tax invoice has been issued for supply of any goods or services or both
Registered Supplier
Recipient of goods or
of goods or services may issue Credit Note services or both
or both
Where a tax invoice has been issued for supply of any goods or services or both
Registered Supplier
of goods or services shall issue Debit Note
or both
14. What is the time period within which invoice has to be issued in a case
involving continuous supply of goods?
15. What is the time period within which invoice has to be issued in a case
involving continuous supply of services?
16. What is the time period within which invoice has to be issued where the goods
being sent or taken on approval for sale?
9. ANSWERS/HINTS
1. (a) 2. (b) 3. (b) 4. (a) 5. (c)
6. As per the provisions of section 31, invoice shall be issued before or at the
time of removal of goods for supply to the recipient, where the supply
involves movement of goods. Accordingly, in the given case, the invoice
must be issued on or before 29th September.
7. Continuous supply of service means, inter alia, supply of any service which is
provided, or agreed to be provided continuously or on recurrent basis, under
a contract, for a period exceeding 3 months with the periodic payment
obligations.
Therefore, the given situation is a case of continuous supply of service as
repair and maintenance services have been provided by MBM Caretakers on a
quarterly basis, under a contract, for a period of one year with the obligation
for quarterly payment.
In terms of section 31, in case of continuous supply of service, where due
date of payment is ascertainable from the contract (as in the given case),
invoice shall be issued on or before the due date of payment.
Therefore, in the given case, MBM Caretakers should issue quarterly invoices
on or before April 1, July 1, October 1, and January 1.
8. As per section 25 read with CGST Rules, 2017, where an applicant submits
application for registration within 30 days from the date he becomes liable to
registration, effective date of registration is the date on which he becomes
liable to registration. Since, Sangri Services Ltd.’s turnover exceeded ` 20
lakh on 12th August, it became liable to registration on same day. Further, it
applied for registration within 30 days of so becoming liable to registration,
the effective date of registration is the date on which he becomes liable to
registration, i.e. 12th August.
As per section 31 read with CGST Rules, 2017, 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.
Revised Tax Invoices shall be issued within 1 month from the date of issuance
of certificate of registration. Revised Tax Invoices shall be issued within 1
month from the date of issuance of registration 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.
Therefore, in the given case, Sangri Services Ltd. has to issue the Revised Tax
Invoices in respect of taxable supplies effected during the period starting
from the effective date of registration (12th August) till the date of issuance of
certificate of registration (6th September) within 1 month from the date of
issuance of certificate of registration, i.e. on or before 6th October.
9. A registered person paying tax under the provisions of section 10
[composition levy] shall issue, instead of a tax invoice, a bill of supply
containing such particulars and in such manner as may be prescribed [Section
31(3)(c) read with CGST Rules, 2017].
Therefore, in the given case, Shyam Fabrics cannot issue tax invoice. Instead,
it shall issue a Bill of Supply.
10. Refer Para 3.
11. Refer Para 3.
12. Refer Para 4.
13. Refer Para 3.
14. Refer Para 3.
15. Refer Para 3.
16. Refer Para 3.
CHAPTER 9
PAYMENT OF TAX
LEARNING OUTCOMES
Relevant Definitions
1. INTRODUCTION
In the GST regime, for any intra-state supply, taxes to be paid are the Central GST
(CGST), going into the account of the Central Government and the State/UTGST
(SGST), going into the account of the concerned State Government. For any inter-
state supply, tax to be paid is Integrated GST (IGST)
which will have components of both CGST and SGST.
In addition, certain categories of registered persons
will be required to pay to the government account Tax
Deducted at Source (TDS) and Tax Collected at Source
(TCS) 1. In addition, wherever applicable, interest, penalty, fees and any other
payment will also be required to be made.
The introduction of E-ledgers is a unique feature under the GST regime. Electronic
Ledgers or E-Ledgers are statements of cash and input tax credit in respect of each
registered taxpayer. In addition, each taxpayer shall also have an electronic tax
liability register. Once a taxpayer is registered on common portal (GSTN), two e-
ledgers (Cash & Input Tax Credit ledger) and an electronic tax liability register will
be automatically opened and displayed on his dash board at all times.
Chapter X of the CGST Act prescribes the provisions relating to payment of tax
containing sections 49 to 53. While section 49 discusses the three ledgers namely
the electronic cash ledger, electronic credit ledger and electronic liability register,
section 50 discusses about the interest on delayed payment of tax. Section 51 lays
down the circumstances in which tax deduction at source (TDS) becomes
mandatory. Section 52 deals with the circumstances when tax is to be collected at
source (TCS) by the Electronic Commerce Operator. Further, the manner of
utilization of ITC is laid down in section 53.
Chapter IX of CGST Rules deals with provisions relating to payment of tax.
Provisions of payment of tax under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the provisions of section 49, 50, 53 & the relevant
rules, let us first go through few relevant definitions.
2. RELEVANT DEFINITIONS
1
It may be noted that sections 52 & 53 dealing with provisions relating to TDS & TCS will be
dealt in detail at Final Level.
Electronic Credit ledger means the electronic credit ledger referred to in sub-
section (2) of section 49 [Section 2(46)].
Integrated tax means the integrated goods and services tax levied under the
Integrated Goods and Services Tax Act [Section 2(58)].
Input tax in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or services
or both made to him and includes—
the integrated goods and services tax charged on import of goods;
the tax payable under the provisions of sub-sections (3) and (4) of section
9;
the tax payable under the provisions of sub-section (3) and (4) of section 5 of
the IGST Act;
the tax payable under the provisions of sub-section (3) and sub-section (4)
of section 9 of the respective State Goods and Services Tax Act; or
the tax payable under the provisions of sub-section (3) and sub-section (4)
of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy [Section 2(62)].
Input Tax Credit means the credit of input tax [Section 2(63)].
local authority means-
a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
a “Municipality” as defined in clause (e) of article 243P of the Constitution;
a Municipal Committee, a Zilla Parishad, a District Board, and any other
authority legally entitled to, or entrusted by the Central Government or any
State Government with the control or management of a municipal or local
fund;
a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
a Regional Council or District Council constituted under the Sixth Schedule to
the Constitution;
a Development Board constituted under article 371 of the Constitution; or
a Regional Council constituted under article 371A of the Constitution. [Section
2(69)].
(c) where no consideration is payable for the supply of a service, the person
to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed
as a reference to the recipient of the supply and shall include an agent
acting as such on behalf of the recipient in relation to the goods or services
or both supplied [Section 2(93)].
State Tax means the tax levied under any State Goods and Services Tax Act
[Section2(104)].
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied [Section 2(105)].
Taxable person means a person who is registered or liable to be registered under
Section 22 or section 24 [Section 2(107)].
Valid return means a return furnished under sub-section (1) of section 39 on
which self-assessed tax has been paid in full [Section 2(117)].
After going through the various definitions relevant to this Chapter, let us discuss
the provisions of Chapter X of the CGST Act.
STATUTORY PROVISIONS
(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
(3) The amount available in the electronic cash ledger may be used for
making any payment towards tax, interest, penalty, fees or any other
amount payable under the provisions of this Act or the rules made
there under in such manner and subject to such conditions and
within such time as may be prescribed.
(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.
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(b) the central tax shall first be utilised towards payment of central
tax and the amount remaining, if any, may be utilised towards
the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax
and the amount remaining, if any, may be utilised towards
payment of integrated tax;
(d) the Union territory tax shall first be utilised towards payment
of Union territory tax and the amount remaining, if any, may
be utilised towards payment of integrated tax;
(e) the central tax shall not be utilised towards payment of State
tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised towards
payment of central tax.
(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.
(7) All liabilities of a taxable person under this Act shall be recorded and
maintained in an electronic liability register in such manner as may
be prescribed.
(8) Every taxable person shall discharge his tax and other dues under
this Act or the rules made thereunder in the following order, namely:–
–
(b) self-assessed tax, and other dues related to the return of the
current tax period;
(c) any other amount payable under this Act or the rules made
thereunder including the demand determined under section 73
or section 74;
(9) Every person who has paid the tax on goods or services or both under
this Act shall, unless the contrary is proved by him, be deemed to
have passed on the full incidence of such tax to the recipient of such
goods or services or both.
(i) “tax dues” means the tax payable under this Act and does
not include interest, fee and penalty; and
(1) The electronic liability register specified under sub- section (7) of
section 49 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) 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;
(d) any amount of interest that may accrue from time to time.
(4) The amount deducted under section 51, or the amount collected
under section 52, or the amount payable on reverse charge basis,
or the amount payable under section 10, any amount payable
towards interest, penalty, fee or any other amount under the Act
shall be paid by debiting the electronic cash ledger maintained as
per rule 87 and the electronic liability register shall be credited
accordingly.
(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.
(1) The electronic cash ledger under sub-section (1) of section 49 shall
be maintained in FORM GST PMT-05 for each person, liable to pay
tax, interest, penalty, late fee or any other amount, on the common
portal for crediting the amount deposited and debiting the
payment therefrom towards tax, interest, penalty, fee or any other
amount.
(3) The deposit under sub-rule (2) shall be made through any of the
following modes, namely:-
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.
Provided that the mandate form shall be valid for a period of fifteen
days from the date of generation of challan.
(8) Where the bank account of the person concerned, or the person
making the deposit on his behalf, is debited but no Challan
Identification Number is generated or generated but not
communicated to the common portal, the said person may
represent electronically in FORM GST PMT-07 through the
common portal to the bank or electronic gateway through which
the deposit was initiated.
(10) Where a person has claimed refund of any amount from the
electronic cash ledger, the said amount shall be debited to the
electronic cash ledger.
(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 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.
ANALYSIS
The Electronic Cash Ledger contains a summary of all the deposits/payments made
by a taxpayer. Electronic Cash Ledger is maintained on the GST Portal. The
Electronic Cash Ledger has to be maintained in prescribed form on the common
portal by a person liable to pay tax.
Payment by Challan
E- challan validity is for 15 days. The commission for making payment through e-
challan has to be borne by the person making the payment.
Any unregistered person has to make payment on the Validity of
basis of temporary identification number generated challan-15 days
through common portal.
The mandate form obtained after making NEFT/RTGS
payment has to be submitted in the Bank. The validity of the mandate form is 15
days.
On successful credit of amount in the concerned (Central/State) Government
Account maintained in the authorized bank, a Challan Identification Number (CIN)
will be generated by the collecting bank which will be indicated in the challan.
The ‘deposit’ made by one of the modes and in the prescribed manner will be
credited to the Electronic Cash Ledger of the taxable person.
On receipt of the CIN from the collecting bank, the said amount is credited into
the electronic cash ledger of the person on whose behalf the deposit is made and
the common portal will generate a receipt to this effect.
If CIN is not generated even after making payment and submission of mandate
form or when after generation, it has not reflected in the common portal, the
person making the deposit or the person on whose behalf the deposit has been
made, can make a representation in prescribed form through the common portal
or e-gateway through which the payment has been made.
Date of credit into the treasury of the State Government/Central Government is
deemed to be the date of deposit and not the actual date of debit to the amount
of the taxable person.
In case any discrepancy is noticed in electronic cash ledger, the registered person
shall communicate the same to the officer exercising jurisdiction in the matter,
through the common portal in prescribed form.
IGST Tax
CGST Interest
Penalty
SGST/UTGST
Fee
CESS
Others
How can the cash available in the Electronic Cash Ledger be utilised? Can a
taxpayer utilise the amount available in any minor head of a major head for
any other minor head of the same major head?
The amount available in the Electronic Cash Ledger can be utilised for
payment of any liability for the respective major and minor heads. For
example, liability for the tax under SGST/UTGST can be settled only from the
available amount of cash under SGST/UTGST Major head.
The protocol to avail and utilize the credit of CGST, SGST/UTGST and IGST can be
better understood with the help of following diagram:
ITC of
ITC of ITC of
SGST/
IGST CGST
CGST UTGST SGST/UTGST
IGST
SGST/UTGST
ITC of
ITC of
SGST/
CGST
UTGST
SGST/UTGST CGST
What happens if the taxable person files the return but does not make
payment of tax?
In such cases, the return is not considered as a valid return. Section 2(117)
defines a valid return to mean a return furnished under sub-section (1) of
section 39 on which self-assessed tax has been paid in full. It is only the valid
return that would be used for allowing input tax credit (ITC) to the recipient. In
other words, unless the supplier has paid the entire self-assessed tax and filed
his return and the recipient has filed his return, the ITC of the recipient would
not be confirmed.
under the CGST Act, then the taxable person is deemed to have passed on the
incidence of such payment of CGST to the recipient. This is subject to the
contrary being proved.
Chapter IX of CGST Rules provide the following:
(I) Debit to electronic liability register:
all amounts payable towards tax, interest, late fee and any other amount
as per return filed;
all amounts payable towards tax, interest, penalty and any other amount
determined in a proceeding by an Assessing authority or as ascertained
by the taxable person;
the amount of tax and interest as a result of mismatch.
any interest amount that may accrue from time to time.
(II) Debit to Electronic Credit/Cash ledger:
2
It may be noted that sections 52 & 53 dealing with provisions relating to TDS & TCS respectively
have not been made effective as of now. The same will be dealt in detail at Final Level.
How do the new payment systems benefit the taxpayer and the Commercial
Tax Department?
No more queues and waiting for making payments as payments can be made
online 24 X 7.
Instant online receipts for payments made online.
Tax Consultants can make payments on behalf of the clients.
Single Challan form to be created online, replacing the three or four copy
Challan.
Revenue will come earlier into the Government Treasury as compared to the
old system.
Greater transparency.
Online payments made after 8 pm will be credited to the taxpayer’s account
on the same day.
STATUTORY PROVISIONS
Sub-section Particulars
(1) Every person who is liable to pay tax in accordance with the
provisions of this Act or the rules made thereunder, but fails to pay
the tax or any part thereof to the Government within the period
prescribed, shall for the period for which the tax or any part thereof
remains unpaid, pay, on his own, interest at such rate, not
exceeding eighteen per cent., as may be notified by the
Government on the recommendations of the Council.
(3) A taxable person who makes an undue or excess claim of input tax
credit under sub-section (10) of section 42 or undue or excess
reduction in output tax liability under sub-section (10) of section
43, shall pay interest on such undue or excess claim or on such
undue or excess reduction, as the case may be, at such rate not
exceeding twenty-four per cent., as may be notified by the
Government on the recommendations of the Council.
ANALYSIS
When interest is payable ?
Interest is payable in following 3 circumstances:-
Delay in payment of tax, in full or in part within the prescribed period
Undue or excess claim of input tax credit under section 42(10)
Undue or excess reduction in output tax liability under section 43(10)
Rate of interest
The rate of interest shall be notified by the Government on the basis of
recommendation of the Council. However, such rate to be notified shall not
exceed-
(a) 18% in case of belated payment of tax i.e. on failure to pay tax (or part of
tax) to the Government’s account. Notification No. 13/2017 CT dated
28.06.2017 has notified the rate of interest as 18% per annum.
(b) 24% on undue or excess claim of ITC or on such undue or excess reduction
in output tax liability. Notification No. 13/2017 CT dated 28.06.2017 has
notified the rate of interest as 24% per annum.
6. LET US RECAPITULATE
The provisions relating to payment of tax, interest and other amounts have been
summarised by way of table and diagrams to help students remember and retain
the provisions in a better and effective manner:-
Output
Tax
tax
means excludes payable
on
reverse
CGST on taxable charge
supply of goods and
b
/or services
by by agent
taxable of taxable
person person
Taxable
Person
means
a person
liable to be
who is registered
registered
IGST to be paid,
For Inter-state supply having components of
both CGST & SGST
Interest, penalty,
fees and any other
Wherever applicable
amount also to be
paid
Electronic Cash
Ledger
Electronic
Ledgers
Electronic Electronic Credit
Liability Register Ledger
CGST
IGST
SGST NO CGST
IGST
UTGST NO CGST
IGST
3. All dues
including
2. All dues demand
related to determined
current tax under section
period 73 and 74
1. All dues
related to
previous tax
period
E-Ledgers
•It will reflect all deposits made in cash, and TDS/TCS
made on account of the tax payer.
Electronic Cash
Ledger •This ledger can be used for making ANY PAYMENT
towards tax, interest, penalty, fees or any other
amount on account of GST.
•It will reflect Input Tax Credit as self-assessed in
Electronic Credit monthly returns.
Ledger •The credit in this ledger can be used to make
payment of TAX ONLY i.e. output tax and not other
amounts such as interest, penalty, fees etc.
•Electronic Liability Register will reflect the total tax
Electronic Liability liability of a taxpayer (after netting) for the particular
Register month.
Interest Rates
18. ABC limited filed the return for GST under section 39(1) for the month of November
on 20th, December showing self assessed tax of Rs. 2,50,000 which was not paid.
Explain what are the implications for ABC limited as per relevant provisions?
8. ANSWERS/HINTS
1. (d) 2. (c) 3. (b) 4. (a) 5. (b) 6. (d) 7. (d) 8. (b) 9. (a)
10. (a) 11. (c)
12. (a) Electronic cash ledger
(b) Electronic credit ledger
(c) Electronic liability register
13. Refer para-Electronic Liability Register
14. Refer para-Electronic Cash Ledger
15. No, as per Section 49 (4) of the CGST Act, 2017 the amount available in the
electronic credit ledger may be used for making any payment towards ‘output tax’.
As per Section 2 (82) of the CGST Act, 2017, output tax means, the CGST/SGST
chargeable under this Act on taxable supply of goods and/or services made by
him or by his agent and excludes tax payable by him on reverse charge basis.
Therefore, input tax credit cannot be used for payment of interest, penalty, and
payment under reverse charge.
16. Yes, as per Section 49 (9) of the CGST Act, 2017 every person who has paid the tax
on goods or services or both under this Act shall, unless the contrary is proved by
him, be deemed to have passed on the full incidence of such tax to the recipient
of such goods or services or both.
17. IGST. IGST, CGST, SGST, UTGST i.e. all input tax credit can be availed against output
tax liability known as IGST.
18. As per section 2(117) of CGST Act, “valid return” means a return furnished under
sub-section (1) of section 39 on which self-assessed tax has been paid in full.
Hence, in such a case, the return is not considered as a valid return and also input
tax credit will not be allowed to the recipient of supplies.
RETURNS
For the sake of brevity, the term input tax credit has been referred to as ITC in this Chapter. The
section numbers referred to in the Chapter pertain to CGST Act, unless otherwise specified.
LEARNING OUTCOMES
This Chapter will equip you to –
enlist the various types of statements and returns to be filed by a
registered taxpayer
identify the persons eligible to file various statements/returns as
also the forms prescribed therefor and explain the periodicity for
filing such statements/returns
comprehend and describe the contents of the various
statements/returns
understand and explain the process flow involved in filing of
statements of outward and inward supplies and the consolidated
monthly return
comprehend and explain the matching concept
understand the consequences in case of default in filing of return
apply the above concepts in problem solving
explain the provisions relating to GST practitioner
Special returns
Annual Return
Final Return
Notice to return
defaulters
Default in furnishing return
Levy of late fee
1. INTRODUCTION
The term “return” ordinarily means statement of information (facts) furnished by the
taxpayer, to tax administrators, at regular intervals. The information to be furnished in
the return generally comprises of the details pertaining to the nature of
activities/business operations forming the subject matter of taxation; the measure of
taxation such as sale price, turnover, or value; deductions and exemptions; and
determination and discharge of tax liability for a given period.
In any tax law, “filing of returns” constitutes the most important compliance procedure
which enables the Government/ tax administrator to estimate the tax collection for a
particular period and determine the correctness and completeness of the tax
compliance of the taxpayers.
The returns serve the following purposes:
a) Mode for transfer of information to tax
administration;
b) Compliance verification program of tax
administration;
c) Finalization of the tax liabilities of the taxpayer
within stipulated period of limitation;
d) Providing necessary inputs for taking policy decision;
e) Management of audit and anti-evasion
programs of tax administration
The taxpayer is generally required to furnish
the return in a specific statutory format. Filing of GST returns helps in
These formats are, therefore, designed to determination of tax liability
take care of all the provisions of the law that of the return filer and at the
have a bearing on computation of tax same time it also has a huge
liability of a taxpayer. Hence, a study of bearing on determination of
various fields contained in the form of return tax liability of other persons
vis-à-vis the relevant corresponding with whom the former has
provisions of the tax law, can facilitate overall entered into taxable
understanding of the tax law in a better activities.
manner.
Under the GST laws, the correct and timely filing of returns is of utmost importance
because of two reasons. Firstly, under GST laws, a taxpayer is required to estimate his
Provisions of returns, other than late fee, under CGST Act have also been
made applicable to IGST Act vide section 20 of the IGST Act.
All the returns under GST laws are to be filed electronically. Taxpayers can file
the statements and returns by various modes. Firstly, they can file their statement
and returns directly on the GST common portal online. However, this may be
tedious and time consuming for taxpayers with large number of invoices. For such
taxpayers, offline utilities have been provided by GSTN that can be used for
preparing the statements offline after downloading the auto populated details and
uploading them on the common portal. GSTN has also developed an ecosystem of
GST Suvidha Providers (GSP) that will integrate with the common portal.
The details furnished by the taxpayer in the form of returns shall be consolidated
and stored at the common portal which will be common for both, i.e. Central
Government and State Governments.
2. RELEVANT DEFINITIONS
Common portal means the common goods and services tax electronic portal
referred to in section 146 [Section 2(26)].
Credit note means a document issued by a registered person under sub-
section (1) of section 34 [Section 2(37)].
Debit note means a document issued by a registered person under sub-section
(3) of section 34 [Section 2(38)].
Electronic cash ledger means the electronic cash ledger referred to in sub-
section (1) of section 49 [Section 2(43)].
Electronic credit ledger means the electronic credit ledger referred to in sub-
section (2) of section 49 [Section 2(46)].
Exempt supply means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act, and includes non-
taxable supply [Section 2(47)].
Goods and services tax practitioner means any person who has been
approved under section 48 to act as such practitioner [Section 2(55)].
Invoice or tax invoice means the tax invoice referred to in section 31
[Section 66].
Inward supply in relation to a person, shall mean receipt of goods or services
or both whether by purchase, acquisition or any other means with or without
consideration [Section 2(67)].
Non-resident taxable person means any person who occasionally undertakes
transactions involving supply of goods or services or both, whether as principal
or agent or in any other capacity, but who has no fixed place of business or
residence in India [Section 2(77)].
Outward supply in relation to a taxable person, means supply of goods or
services or both, whether by sale, transfer, barter, exchange, licence, rental,
lease or disposal or any other mode, made or agreed to be made by such person
in the course or furtherance of business [Section 2(83)].
Prescribed means prescribed by rules made under this Act on the
recommendations of the Council [section 2(87)].
Proper officer in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].
Quarter shall mean a period comprising three consecutive calendar months,
ending on the last day of March, June, September and December of a calendar
year [Section 2(92)].
Recipient of supply of goods or services or both, means—
(3) or sub- section (4) of section 5 of the Integrated Goods and Services Tax Act
[Section 2(98)].
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied [Section 2(105)].
Tax period means the period for which the return is required to be furnished
[Section 106].
Taxable person means a person who is registered or liable to be registered
under section 22 or section 24 [Section 2(107)].
Taxable supply means a supply of goods or services or both which is leviable
to tax under this Act [Section 2(108)].
Valid return means a return furnished under sub-section (1) of section 39 on
which self-assessed tax has been paid in full [Section 2(117)].
STATUTORY PROVISIONS
(2) Every registered person who has been communicated the details
under sub-section (3) of section 38 or the details pertaining to inward
supplies of Input Service Distributor under sub-section (4) of section
38, shall either accept or reject the details so communicated, on or
before the seventeenth day, but not before the fifteenth day, of the
month succeeding the tax period and the details furnished by him
under sub-section (1) shall stand amended accordingly.
(3) Any registered person, who has furnished the details under sub-
section (1) for any tax period and which have remained unmatched
under section 42 or section 43, shall, upon discovery of any error or
omission therein, rectify such error or omission in such manner as
may be prescribed, and shall pay the tax and interest, if any, in case
there is a short payment of tax on account of such error or omission,
in the return to be furnished for such tax period:
ANALYSIS
(i) Who is required to furnish details of outward supplies? [Section
37(1) read with rule 59(1) of CGST Rules]
The details of outward supplies (see definition) of both goods and services are
required to be furnished by every registered person including casual registered
person except the following:
input service distributor (ISD)*
non-resident taxable person
person paying tax under composition scheme
person deducting tax at source*
person collecting tax at source i.e., e-commerce operator (ECO), not being
an agent*
a supplier of online information and database access or retrieval services
(OIDAR)*
* Note: Provisions for filing of returns by an input service distributor, a person
deducting tax at source, a person collecting tax at source and a supplier of online
information and database access or retrieval services (OIDAR) will be discussed
at the Final level.
♦ ISD
All registered ♦ Non-resident taxable
persons person
Persons
including ♦ Composition taxpayer
required to casual ♦ Tax deductor
file GSTR-1 registered ♦ ECO
person
♦ Supplier of OIDAR
service
A taxpayer cannot file GSTR-1 before the end of the current tax
period.
However, following are the exceptions to this rule:
a. Casual taxpayers, after the closure of their business
b. Cancellation of GSTIN of a normal taxpayer
A taxpayer who has applied for cancellation of registration will be
allowed to file GSTR-1 after confirming receipt of the application.
GSTR-1 cannot
be filed
betweeen 11th
and 15th day
of the next
month
It can be seen from the above table that uploading of invoices depends on
whether the supply is B2B or B2C plus whether the supply is intra-State or inter-
State.
For B2B 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.
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 ` 2.5 lakh in inter-State B2C supplies will
have to be uploaded. For inter-State invoices below ` 2.5 lakh, State wise
summary will be sufficient and for all intra-State invoices, only consolidated
details will have to be given.
The provisions relating to uploading of invoices have been explained by way
of a diagram given at the next page.
Invoices can be uploaded at any time during the tax period and not just at the
time of filing.
For the month of October, the taxpayer can upload invoices from 1st
October to 10th November. In case of late filing of GSTR-1, invoices
can be uploaded after 15th November.
Outward Taxable
Supplies
Inter-state Intra-state
Inter-state Intra-state supplies
supplies
supplies supplies
Consolidated
Invoices > Invoices ≤ details of all
supplies to be
Invoice-wise ` 2,50,000 ` 2,50,000 uploaded
details of all
supplies to be
uploaded
The details of inward supplies added, corrected or deleted by the recipient in Form
GSTR-2/Form GSTR-4 (quarterly return for registered person opting for composition
levy) 1 are made available to the supplier electronically in Form GSTR-1A through
the common portal. The supplier may either accept or reject the modifications
made by the recipient between 15th day and 17th day of that month. If supplier
accepts the modifications made by the recipient, GSTR-1 furnished earlier by him
gets amended accordingly.
The process flow involved in filing of GSTR-1, auto population of GSTR-2 and filing
of GSTR-3 thereafter can be better understood with the help of the diagram given
below and at the next page.
GSTR-2 and GSTR-3 have been explained exhaustively in the subsequent pages of
this chapter.
Taxpayer Taxpayer
GSTR-1 GSTR-2
(Signifies Tax liability) (Signifies ITC availability)
Taxpayer
GSTR-3
(Cash to be paid = Tax Liability - ITC Available)
1
Quarterly return in Form GSTR-4 for a registered person paying tax under composition scheme
has been discussed in detail in subsequent pages of this Chapter.
CONTENTS OF GSTR- 1
Details of Outward
Basic & Other Details
Supplies
•GSTIN •B2B
•Legal name and Trade name •B2C
•Aggregate turnover in •Zero rated and Deemed
previous year exports
•Tax period •Debit/ Credit notes issued
•HSN-wise summary of •Nil rated/ Exempted/ Non
outward supplies GST
•Details of documents issued •Amendments for prior period
•Advances received/advances
adjusted
The details relating to outward supplies which are liable to tax under
reverse charge basis, are used in matching the inward supplies
shown by the recipient in GSTR-2 against inward supplies attracting
reverse charge.
2
Principles determining the place of supply of goods and place of supply of service are contained
in section 10 and 12 of IGST Act. These will be discussed at the Final Level.
3
Form GSTR-2 has been discussed in detail in subsequent pages of this Chapter.
4
Concept of matching and mismatch reports etc. have been dealt in detail in subsequent pages
of this Chapter.
The supplier has to rectify the said errors in GSTR-1 for the month
of October, 2017 (due date of submission of which is 10th
November, 2017). If there is any tax liability because of the said
amendment/rectification, it will be automatically calculated in his return u/s 39
for the month of October, 2017.
(c) Time limit for rectification
Suppose for some reason, supplier could not make correction at the time of
filing of GSTR-1 for the month of October, 2017 then he can make such
amendments in the subsequent periods.
However, the maximum time limit within which such amendments are
permissible is earlier of the following dates:
Date of filing of monthly return u/s 39 for the month of September
following the end of the financial year to which such details pertain or
Date of filing of the relevant annual return
In the above example, the last return in which a supplier can make
amendments/ corrections pertaining to financial year 2017-18 will
be GSTR-1 for the month of September, 2018 or the annual return
for the financial year 2017-18 if the same is filed before 20th October, 2018.
Thus, if the supplier, files his return for September, 2018 on 20th October, 2018
(and annual return for financial year 2017-2018 after 20th October, 2018), he
can rectify errors discovered in the month of October, 2017 in any of the GSTR-
1s till the month of September, 2018.
However, if the supplier files his annual return for the year 2017-18, before filing
of GSTR-1 for September 2018, (say on 4th October, 2018), he cannot make any
amendment relating to financial year 2017-18 in his GSTR-1 for the month of
September, 2018.
In other words, once annual return for financial year 2017-18 is filed before the
filing of return for the month of September, 2018, no amendments relating to
financial year 2017-18 will be permitted thereafter and in such case, mismatch
will become permanent and liability to that extent will be fastened on the
receiver.
An entity has furnished the annual return for the year 2017-18
on August 15, 2018. An error is discovered in respect of a
transaction pertaining to November, 2017. The entity has filed
the returns for the month of September, 2018 on October 20,
2018. In this case, the rectification of the error pertaining to the transaction in
November, 2017 cannot be rectified beyond August 15, 2018.
✪ 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.
STATUTORY PROVISIONS
(3) The details of supplies modified, deleted or included by the recipient and
furnished under sub-section (2) shall be communicated to the supplier
concerned in such manner and within such time as may be prescribed.
(5) Any registered person, who has furnished the details under sub-
section (2) for any tax period and which have remained unmatched
under section 42 or section 43, shall, upon discovery of any error or
omission therein, rectify such error or omission in the tax period
during which such error or omission is noticed in such manner as may
be prescribed, and shall pay the tax and interest, if any, in case there
is a short payment of tax on account of such error or omission, in the
return to be furnished for such tax period:
ANALYSIS
(i) Who is required to furnish details of inward supplies? [Section
38(2) read with rule 60(1) of CGST Rules]
The details of inward supplies (see definition) of both goods and services and
credit or debit notes received are required to be furnished by every registered
person except the following:
ISD
non-resident taxable person
composition taxpayer
Persons Persons
required to required to
file details file details
of outward of inward
supplies supplies
After 10th
day but by
Due date of 15th day of
monthly next month
GSTR-2
Debit/cre
dit notes
received
Import
of goods
and
services Invoice wise
details of ALL
kinds of
inward
supplies
(vi)Contents of GSTR-2
The contents of GSTR-2 have been presented in a diagram given at the
next page.
(a) Auto-populated and non-auto populated information
The information in GSTR-2 with respect to inward supply is broadly
divided into 2 Parts. The first part deals with particulars which are
auto-populated (to the extent they are accepted/modified in GSTR-
2A) namely,
(i) Inward supplies received from registered persons including
inward supplies taxable under reverse charge,
(ii) Amendments to details of inward supplies received in earlier tax
periods,
(iii) Details of credit/debit notes
(iv) Amendment to details of credit/debit notes of earlier tax periods
The second part deals with particulars which are not auto-populated.
Few examples of such type of particulars are:
(i) Outward supplies which are not entered by the supplier in his
GSTR-1
(ii) Details relating to claim of ITC, which the recipient has to decide
on the basis of his self-assessment
(iii) Goods/services imported from out of India which attract IGST.
These details are to be entered by the importer manually.
CONTENTS OF GSTR- 2
Advances paid/adjusted
As per sections 12 and 13, in case of supplies taxable under
reverse charge, if the date on which the recipient makes the
payment precedes the date of actual receipt of goods or as the
case may be 30 days (in case of goods)/ 60 days (in case of
services) from the date of issue of invoice by the supplier, the time
of supply is the date of payment.
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
(vii) How are the details of inward supply furnished in prior periods
amended? [Section 38(5)]
In case any error or omission is discovered in GSTR-2 during matching under
sections 42 and 43, rectification of the same will be effected in the GSTR-2 of
the month in which such error/omission is discovered. Like GSTR-1, in GSTR-2
also, there are Amendment Tables viz., Table 6, Table 10(II) & Table 11B which
entitle the recipient to make amendments/rectification in the particulars
furnished in GSTR-2 filed by him for the prior periods.
can be amended
Particulars furnished
in GSTR-2 of prior
periods by way of Amendment
Tables given in GSTR-2 of
subsequent periods
processing of the return. Tax and interest, if any, arising out of such
rectification will be paid by the person responsible for filing the return of
inward supplies.
Time limit for amendment
The maximum time limit within which such rectification is permissible is earlier
of the following dates:
Date of filing of monthly return u/s 39 for the month of September
following the end of the financial year to which such details pertain or
Date of filing of the relevant annual return.
Maximum time limit for
rectification
(i) Date of filing GSTR-3
To be rectified in for the month of
Error/omission in the tax period September following the
GSTR-2 when the same end of the financial year
communicated in are to which such details
mismatch report communicated pertain
OR
(ii) Date of filing annual
return
WHICHEVER IS EARLIER
GSTR 1 GSTR-2/2A
MODIFY/
ADD ACCEPT
GSTR 1A
ACCEPT
NO
REJECT MISMATCH
MISMATCH
* NRTP – Non-resident taxable person
STATUTORY PROVISIONS
(10) A registered person shall not be allowed to furnish a return for a tax
period if the return for any of the previous tax periods has not been
furnished by him.
ANALYSIS
(i) Persons liable to file returns, forms, periodicity and due dates of
furnishing returns [Section 39 read with rules 61, 62 and 63 of
CGST Rules]
Section 39 read with rules 61, 62 & 63 provides for form, periodicity and due
dates of filing of returns by various categories of persons as under:
supplies have
been
effected
during a
quarter, a nil
return is
required to
be filed
mandatorily.
Note: Returns under S. Nos. 2 and 3 have been discussed in detail under Heading
No. 5 “Special Returns”.
*Extension of due date
The due date of filing of the returns mentioned in the above table may be
extended by the Commissioner/Commissioner of State GST/Commissioner of
UTGST for a class of taxable persons by way of a notification.
GSTR-3
GSTR-4
GSTR-5
i.e., the last dates (due dates) of filing such returns are also the due dates for
payment of tax in respect of persons required to file such returns.
In respect of taxpayers filing GSTR-3, due date of payment of tax for
the month of October is 20th November. Similarly, for composition
taxpayers, due date for payment of tax for the quarter ended
September is 18th October.
However, non-resident taxable persons or casual taxable persons are required
to make advance deposit of tax of an amount equivalent to the estimated tax
liability of such person for a period for which registration is sought or extension
of registration is sought in terms of section 27(2).
Exception
It is important to note that section 39(9) does not permit rectification of error
or omission discovered on account of scrutiny, audit, inspection or
enforcement activities by tax authorities.
Hence, assesse may not be able to pass on the ITC to the receiver in respect of
tax payments made by him in pursuance of account of any of the
aforementioned situations.
Time limit for making rectification
The maximum time limit within which the rectification of errors/omissions is
permissible is earlier of the following dates:
Due date of filing of return for the month of September/ quarter ending
September following the end of the financial year [i.e., 20th October of next
financial year] or
Actual date of filing of the relevant annual return
The last date of filing of annual return is 31st December of next financial year.
Hence, if annual return for the year 2017-18 is filed before 20th October 2018,
then no rectification of errors/omissions in returns pertaining to FY 2017-18
would be permitted thereafter.
Revision
of return
Rectification on
account of
Rectificati scrutiny, audit,
on in inspection or
subseque enforcement
nt return activities
(iv)Contents of GSTR-3
GSTR-3 is generated only when GSTR-1 and GSTR-
2 for the same tax period is filed. Electronic
liability register, electronic cash ledger and
electronic credit ledger are updated on generation GSTR-3
of GSTR-3. The return is divided into 2 parts,
namely Part A and Part B.
PART A
1 GSTIN
3 Turnover
4 Outward supplies
8A On outward supplies
10 Interest liability
11 Late fee
Table Particulars
No.
PART B
13 Interest, late fee and any other amount (other than tax)
payable and paid
The registered person will discharge his liability towards tax, interest, penalty, fees
and other amounts by debiting electronic cash ledger and/or electronic credit
ledger and include the details in Part B of GSTR-3 in terms of rule 61(3). GSTR-3
filed without discharging complete liability will not be treated as valid return.
Refund of any balance in the electronic cash ledger can be claimed in Part B of
GSTR-3. Such return will be deemed to be an application filed under section 54 5.
(v) GSTR-3B [Sub rules (5) and (6) of rule 61 of CGST Rules]
FORM GSTR-3B is notified as the form for return by
the Commissioner when the due dates for furnishing
GSTR-1 and GSTR-2 get extended.
GSTR-3B is a simple return containing summary of GSTR-3B
outward and inward supplies liable to reverse charge,
eligible ITC, payment of tax etc. Thus, GSTR-3B does
not require invoice-wise data of outward supplies.
GSTR-3B can be submitted electronically through
the common portal, either directly or through a notified Facilitation Centre.
Where GSTR-3B is furnished, after the due date for furnishing GSTR-2—
(a) Part A of GSTR-3 is auto populated on the basis of information furnished
through GSTR-1, GSTR-2 and based on other liabilities of preceding tax
periods. Part B of the GSTR-3 is electronically generated on the basis of
the return in GSTR-3B furnished in respect of the tax period;
(b) the registered person can modify Part B of GSTR-3 based on the
discrepancies, if any, between GSTR-3B and GSTR-3 and discharge his tax
5
Provisions of refund of tax as contained in section 54 will be discussed at the Final level.
GSTR-3 would show the amount that will be credited/debited to the ITC ledger of
the taxpayer. The taxpayer will fill in the details of ITC that he intends to utilise for
payment of taxes. Any balance amount will have to be paid by the taxpayer as cash.
The return would also show the late fee and interest payable, if any.
Step 6: Payment of taxes and submission of GSTR-3
Any payment made through challan gets credited to the electronic cash ledger and
does not automatically get offset against any tax liability. Payment of taxes has to
be done by debiting the electronic cash ledger and the taxpayer can opt to debit
the electronic cash ledger while submitting the return.
The taxpayer will submit the return with the payment of the amount of cash payable
as per the return. The two activities can also be done separately and the taxpayer
can make the payment in advance and credit his electronic cash ledger.
Auto-population of
Filing of GSTR-1
GSTR-2A
Reconciliation of
Finalisation and
outward and inward
filing of GSTR-2
supplies
The various dates involved in filing of statements of outward and inward supplies
and consolidated return have been depicted by way of the following diagram:
10th day
To be filed by
10th day of the 11th - 15th day
next month
Modifications/deletions/additions
made by recipient made available
to supplier for
acceptance/rejection between 20th day
15th day and 17th day of the next
month
To be filed by 20th
day of the next
month
6. SPECIAL RETURNS
As discussed above, a regular taxpayer has to Regular taxpayers
file GSTR-1, GSTR-2 and GSTR-3. However,
there are certain specified category of
taxpayers for whom a simplified return is
specified owing to the nature of their activities.
They are taxpayers under composition scheme
and non-resident taxable persons.
These Special Returns are discussed below.
(i) Filing of returns by composition supplier [Section 39(2) read
with rule 62 of CGST Rules]
(a) Person eligible to file return, periodicity and form of return
Every registered person paying tax under section 10 i.e., composition
supplier will file a quarterly return in FORM
GSTR-4 electronically through the common
portal either directly or through a notified
Facilitation Centre.
(b) Due date for filing GSTR-4
GSTR-4 should be furnished by 18th of the month
succeeding the relevant quarter.
CONTENTS OF GSTR- 4
Inward supplies
Forward charge supply
Reverse charge supply
Reverse charge supply
COMPOSITION SUPPLIER
Inward supplies
Auto population of to be furnished
inward supplies in manually
GSTR-4A
Outward supplies
No auto
population in
recipient’s ♦ Registered person
GSTR-2A (No ♦ Unregistered person
matching)
◪ Tax liability
The tax liability of the composition supplier is broadly divided into 2 parts,
namely tax payable for previous tax periods and tax payable as per current
tax period. Tax payable under the previous tax period is on account of
amendment tables (in case of outward supplies) or mismatch errors in
cases involving reverse charge mechanism. Since a composition supplier
is not eligible to take ITC, he will discharge his liability only by debiting
electronic cash ledger.
The form also provides for furnishing details like TDS credit received, tax
paid and refund claimed.
(e) Statements/returns for the period prior to opting for composition
scheme
If a registered person opts for composition scheme from the beginning of
a financial year, he will, where required, furnish GSTRs-1, 2 and 3 relating
to the period prior to opting for composition levy till the
due date of furnishing the return for the month of September of the
succeeding financial year, or
furnishing of annual return of the preceding financial year,
whichever is earlier.
The composition supplier will not be eligible to avail of ITC on receipt of
invoices or debit notes from the supplier for the period prior to his opting
for the composition scheme.
(f) GSTR-4 for the period prior to exiting from composition scheme
A registered person opting to withdraw from the composition scheme at
his own motion or where option is withdrawn at the instance of the proper
officer will, where required, furnish GSTR-4 relating to the period prior to
his exiting from composition levy till the
due date of furnishing the return for the quarter ending September of
the succeeding financial year, or
furnishing of annual return of the preceding financial year,
whichever is earlier.
The provisions explained in points (e) and (f) above have been explained
by way of a diagram given at the next page.
till
♦ due date of furnishing the return for the
month of September /quarter ending
September of the succeeding financial
year
OR
♦ furnishing of annual return of the
preceding financial year
WHICHEVER IS EARLIER
What are the precautions that a taxpayer is required to take for a hassle free
compliance under GST?
One of the most important things under GST is the
timely uploading of the details of outward supplies Timely uploading of
in GSTR-1 by 10th of next month. How best this can
the details of
be ensured will depend on the number of B2B
invoices that the taxpayer issues. If the number is
outward supplies in
small, the taxpayer can upload all the information in Form GSTR-1
one go. However, if the number of invoices is large,
the invoices (or debit/ credit notes) should be
uploaded on a regular basis.
GST common portal allows regular uploading of invoices even on a real time basis. Till
the statement is actually submitted, the system also allows the
Regular taxpayer to modify the uploaded invoices. Therefore, it would
always be beneficial for the taxpayers to regularly upload the
uploading of
invoices. Last minute rush makes uploading difficult and comes
invoices with higher risk of possible failure and default.
The second thing would be to
ensure that taxpayers follow up on uploading the
invoices of their inward supplies by their suppliers. This
Follow up with
would be helpful in ensuring that the ITC is available
suppliers to upload
without any hassle and delay. Recipients can also
the invoices of
encourage their suppliers to upload their invoices on a
inward supplies
regular basis instead of doing it on or close to the due
date. The system would allow recipients to see if their
suppliers have uploaded invoices pertaining to them.
(ii) Filing of Returns by Non-Resident Taxable Persons [Section
39(5) read with rule 63 of CGST Rules]
Non-Resident Taxable Persons (NRTPs) are those
suppliers who do not have a business establishment
in India and have come for a short period to make
supplies in India. They would normally import their
products into India and make local supplies. The
concept of Non-Resident Taxable Person has been
discussed in detail in Chapter 7 – Registration.
A NRTP is not
required to file
annual return.
B. UIN issued for purposes other than refund of taxes paid: Such person
shall furnish the details of inward supplies of taxable goods and/or services
as may be required by the proper officer in Form GSTR-11.
STATUTORY PROVISIONS
Sub-section Particulars
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.
ANALYSIS
When a person becomes liable to registration after his turnover crossing the
threshold limit of ` 20 lakh (` 10 lakh in case of Special Category States), he may
apply for registration within 30 days of so becoming liable. Thus, there might be a
time lag between a person becoming liable to registration and grant of registration
certificate.
During the intervening period, such person might have made the outward supplies,
i.e. after becoming liable to registration but before grant of the certificate of
registration.
Now, in order to enable such registered person to declare the taxable supplies
made by him for the period between the date on which he became liable to
registration till the date on which registration has been granted so that ITC can be
availed by the recipient on such supplies, firstly, the registered person may issue
Revised Tax Invoices against the invoices already issued during said period within
1 month from the date of issuance of certificate of registration [Section 31(3)(a)
read with rule 53 of CGST Rules, 2017 – Discussed in detail in Chapter-8: Tax Invoice,
Credit and Debit Notes]. Further, section 40 provides that registered person shall
declare his out ward supplies made during said period in the first return furnished
by him after grant of registration. The format for this return is the same as that for
regular return.
Details of outward
supplies, after Details of outward
becoming liable to supplies made in first
registration but before tax period after grant
grant of the certificate of the certificate of
of registration registration
First Return
STATUTORY PROVISIONS
Sub-section Particulars
(2) The credit referred to in sub-section (1) shall be utilised only for
payment of self-assessed output tax as per the return referred to in
the said sub-section.
ANALYSIS
Every registered person is entitled to take credit of the input taxes self-
assessed in his Return. ITC shall be credited provisionally in the Electronic
Credit Ledger of the registered person.
One of the conditions for taking ITC by the recipient of the supply is that “the
tax charged in respect of such supply has actually been paid to the Government,
either in cash or through utilization of ITC admissible in respect of the said
supply” [Section 16(2)(c)].
For this reason, the statute provides that the ITC will first be taken provisionally
in the electronic credit ledger, then after filing of GSTR 3, ITC be matched with
the available information of tax payment in respect of that supply.
ITC taken on provisional basis can be utilised for payment of self-assessed
output tax declared in his return. Therefore, even before the ITC claim of the
taxpayer is matched and finally allowed, it can be availed for payment of taxes
in the return. However, the taxpayer cannot utilize such provisional credit for
payment of any other liability like demand created as a result of audit, payment
of interest, penalties etc.
STATUTORY PROVISIONS
Sub-section Particulars
(b) with the integrated goods and services tax paid under
section 3 of the Customs Tariff Act, 1975 in respect of goods
imported by him; and
(2) The claim of input tax credit in respect of invoices or debit notes
relating to inward supply that match with the details of
corresponding outward supply or with the integrated goods and
services tax paid under section 3 of the Customs Tariff Act, 1975 in
respect of goods imported by him shall be finally accepted and such
acceptance shall be communicated, in such manner as may be
prescribed, to the recipient.
(6) The amount claimed as input tax credit 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.
(7) The recipient shall be eligible to reduce, from his output tax liability,
the amount added under sub-section (5), if the supplier declares the
details of the invoice or debit note in his valid return within the time
specified in sub-section (9) of section 39.
(8) A recipient in whose output tax liability any amount has been added
under sub- section (5) or sub-section (6), shall be liable to pay
interest at the rate specified under sub- section (1) of section 50 on
the amount so added from the date of availing of credit till the
corresponding additions are made under the said sub-sections.
(9) Where any reduction in output tax liability is accepted under sub-
section (7), the interest paid under sub-section (8) shall be refunded
to the recipient by crediting the amount in the corresponding head
of his electronic cash ledger in such manner as may be prescribed.
Provided that the amount of interest to be credited in any case shall
not exceed the amount of interest paid by the supplier.
(10) The amount reduced from the output tax liability in contravention
of the provisions of sub-section (7) shall be added to the output tax
liability of the recipient in his return for the month in which such
contravention takes place and such recipient shall be liable to pay
interest on the amount so added at the rate specified in sub-section
(3) of section 50.
ANALYSIS
Matching of ITC
Matching of ITC is one of the core features of GST. The primary reason for having
this feature arises from the fact that one of the most important design specification
of GST is that it should allow full credit of taxes paid across State boundaries,
making it a truly national tax while keeping the federal structure intact.
communicated to the recipient. Failure to file valid return by the supplier may
lead to denial of ITC in hands of the recipient.
2. If the details, except tax amount, match, and the tax amount in the ITC claim
is less than or equal to the tax amount declared by the corresponding
supplier, the ITC claim will be finally accepted and final acceptance of the credit
will be communicated to the recipient.
Cases where there is discrepancy in ITC claim:
1. Duplication of invoices: Where there is duplication of ITC claimed by the
recipient, the recipient shall be intimated. If the claim of ITC is found to be
duplicate, an amount equal to the ITC claimed on account of the duplicate
claim will be added to the output liability of the recipient in the return of month
in which such discrepancy is communicated and shall become payable with
interest.
2. Mismatch of ITC claim: In case the ITC claimed by the recipient is in excess of
the tax declared by the supplier or where the details of outward supply are not
declared by the supplier in his valid returns, the discrepancy shall be
communicated to both the supplier and the recipient.
This might happen in a case where the recipient has furnished the details of an
invoice [inward supply] that has not been declared by the corresponding
supplier in his GSTR-1 for the month or if he has modified the details of an
inward supply auto-populated in his GSTR-2 to claim more credit than the tax
declared by the corresponding supplier.
If supplier accepts the liability in his next return, in such a case, in the next
cycle, the ITC claim shall match with the invoice for corresponding outward
supply and the ITC claim of the recipient shall get accepted. However, in case
the supplier has not rectified the discrepancy communicated in his valid returns
for the month in which the discrepancy is communicated, then such excess ITC
as claimed by the recipient shall be added to the output tax liability of the
recipient in succeeding month and shall become payable with interest.
Reclaim of reversal:
Once claim of ITC on an invoice has been reversed, the recipient cannot claim it
again unless the supplier uploads details of that invoice in his return after reversal
at any stage, but before the due date of filing of the return for the month of
September of the succeeding financial year or the actual filing of the relevant
annual return, whichever is earlier.
Once the supplier uploads the details of invoice for corresponding outward supply,
the invoice shall automatically appear in the return of the recipient and the
recipient shall be eligible to claim ITC on that invoice.
The interest paid by the recipient on reversal shall also be credited back to his cash
ledger. However, if any taxpayer claims ITC on an invoice that has been auto-
reversed in the past without the corresponding supplier uploading details of that
invoice, such ITC shall be auto-reversed in the next month itself and a higher
interest shall be payable on such auto-reversal.
In the above paras, the process of matching, reversal
and reclaim of ITC for invoices is outlined. The same
process would apply for debit notes as well. Debit Matching, reclaim
notes are in the nature of increase in value of supply and reversal of
and therefore increase the tax payable for supplies ITC under section
and increase the ITC available with the recipient which, 42 applies to
in effect, is same as that in case of invoices. Therefore, Debit notes also
wherever there is a mismatch, in both cases, the ITC of
recipient is subjected to auto-reversal.
The process of matching, reversal and reclaim of input tax credit has been
elaborated in detail in subsequent paras:
(i) Time of matching [Section 42(1) read with rule 69]
The details relating to claim of ITC which has been taken provisionally under
section 41 shall be matched under section 42.
Such matching will be done after the due date for furnishing the return in Form
GSTR-3 [i.e. after 20th of the month following the month to which return
relates].
However, where the time limit for furnishing Form GSTR-1 and Form GSTR-2
has been extended, the date of matching of ITC claim shall also be extended
accordingly.
Further, the Commissioner may, on the recommendations of the Council, by
order, extend the date of matching of ITC to such date as may be specified
therein.
(ii) Details to be matched [Section 42(1) read with rule 69]
Under ITC matching, details of inward supplies including imports, furnished by
the recipient is matched with:
GSTIN of
the
supplier
GSTIN of
Tax
the
amount
Details recipient
to be
matche
Invoice/
Invoice/
debit
debit
note
note Date
Number
(iii) ITC claim matched, accepted and communicated [Section 42(2) read
with rules 69 and 70(1)]
A. When the claim of ITC be considered as matched?
The claim of ITC be considered as matched provided:
(a) Invoices and debit notes in FORM GSTR-2 were accepted by the
recipient on the basis of FORM GSTR-2A without amendment
provided the corresponding supplier has furnished a valid return.
(b) Where the amount of input tax credit claimed ≤ Output tax paid on
such tax invoice/debit note by the corresponding supplier.
Shri Fabrics supplied readymade clothes to Manavi
Garments. Shri Fabrics has shown GST paid on his outward
supply of `1,000 in his GSTR-1 for July. If Manavi Garments
has claimed an ITC of `1,000 or less (say `990) in his GSTR-
2 for July, ITC shall be treated as “MATCHED”.
Recipient
(iv) Discrepancy in ITC claim [Section 42(3), (5) read with rules 70(2) and 71]
A. Discrepancy in ITC claim [Section 42(3)]
Discrepancy in ITC claim implies mismatch of ITC claim in respect of any
tax period.
ITC claim is considered as mismatched in the following two cases:
Where ITC claimed by a recipient in respect of an inward supply > Tax
declared by the supplier for the same supply by the supplier in his
valid returns or
Where the outward supply is not declared by the supplier in his valid
returns.
B. Communication of discrepancy to supplier and recipient [Rule 71(1)]
Any discrepancy in ITC claim shall be communicated to recipient and
supplier electronically through the common portal on/before the last date
of the month in which the matching has been carried out.
Forms in which recipient and supplier shall be communicated:
Note:
*Supplier shall pay tax and interest on such rectification of error/omission,
if any, in case there is a short payment of tax on account of such
error/omission, in the return to be furnished for such tax period [Section
37(3)].
**Recipient shall pay tax and interest on such rectification of
error/omission, if any, in case there is a short payment of tax on account of
such error/omission, in the return to be furnished for such tax period [Section
38(5)].
Ramnath supplies goods to Harikishan for on which GST paid is
`5,680 available as ITC to Harikishan. Ramnath – the supplier -
furnishes Form GSTR-1 pertaining to July on 10th August.
Harikishan – the recipient - furnishes Form GSTR-2 pertaining
to July on 15th August and mistakenly claims the ITC of ` 5,700. Both the
parties furnish their return GSTR-3 pertaining to July on 20th August. The
mismatch report is generated and discrepancy to the effect that Harikishan
has claimed excess tax credit of ` 20 is communicated to Ramnath and
Harikishan in Form GST MIS-2 and Form GST MIS-1 respectively in August
end.
In this case, since discrepancy is communicated in the month of August,
same has to rectified by the recipient – Harikishan - in his Statement of
Inward Supplies GSTR-2 to be furnished for the month of August.
D. Communication of ITC matched after rectification of discrepancy
[Rule 70(2)]
Where the discrepancy in ITC claim has been rectified by the supplier or
recipient and resultantly ITC claim matches, ITC claim shall be finally
accepted. Recipient shall be communicated electronically in Form GST
MIS-1 through GST common portal.
E. Non-rectification of discrepancy, addition of amount of discrepancy
to output tax liability of recipient and communication thereof
[Section 42(5) read with rule 71(1) and (4)]
However, where the discrepancy in ITC claim is not so rectified as
mentioned in the preceding paras, an amount to the extent of discrepancy
shall be added to the output tax liability of the recipient in his return to be
furnished in FORM GSTR-3 for the month succeeding the month in which
the discrepancy is made available/communicated.
The details of output tax liability to be added on account of continuation
of such discrepancy, shall be made available to the recipient making such
claim electronically in FORM GST MIS-1 and to the supplier electronically
in FORM GST MIS-2 through the common portal on/before the last date
of the month in which such matching has been carried out.
(vi) Interest payable on amount added to the output tax liability of the
recipient [Section 42(8)]
Where any discrepancy (ITC mismatch) communicated in ITC claim is not
rectified, an amount to the extent of discrepancy is added to the output
tax liability of the recipient in his GSTR-3 return to be furnished for the
month succeeding the month in which the discrepancy is made available
[Sub-section (5)] [Refer point (iv).E.].
Further, amount claimed as ITC which is 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 [Sub-
section (6)] [Refer point (v).B.].
In both the above cases, the recipient shall be liable to pay interest on the
amount so added.
such error/omission, in the return to be furnished for such tax period [Section
37(3)].
B. Refund of interest [Section 42(9) read with rule 77]
Where any reduction in output tax liability is accepted under sub-section
(7), the interest paid under sub-section (8) shall be refunded.
Such amount shall be refunded to the recipient by crediting the amount in
the corresponding head of his Electronic Cash Ledger. The interest to be
so refunded shall be claimed by the recipient in his return in Form GSTR-3
However, the amount of interest to be credited in any case shall not exceed
the amount of interest paid by the supplier.
Amount of Amount of
interest to be interest paid
refunded by supplier
(ii) 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’.
C. Reduction of output tax liability in contravention of provisions
[Section 42(10)]
However, where any reduction in output tax liability is in contravention of
the provisions of section 42(7), such amount shall again be added to the
output tax liability of the recipient in his return for the month in which
such contravention takes place.
The above discussion with respect to matching, reversal and reclaim of ITC
claim has been summarized in a diagram on the subsequent page.
A B
Acceptance shall be
Amount to the extent of discrepancy
communicated to recipient in
shall be added to output tax liability of
Form GST MIS 1
recipient in GSTR-3 for Month ‘X+1’
STATUTORY PROVISIONS
Sub-section Particulars
(1) The details of every credit note relating to outward supply furnished
by a registered person (hereafter in this section referred to as the
“supplier”) for a tax period shall, in such manner and within such
time as may be prescribed, be matched––
(a) with the corresponding reduction in the claim for input tax
credit by the corresponding registered person (hereafter in this
section referred to as the “recipient”) in his valid return for the
same tax period or any subsequent tax period; and
(2) The claim for reduction in output tax liability by the supplier that
matches with the corresponding reduction in the claim for input tax
credit by the recipient shall be finally accepted and communicated,
in such manner as may be prescribed, to the supplier.
(4) The duplication of claims for reduction in output tax liability shall be
communicated to the supplier in such manner as may be prescribed.
(6) The amount in respect of any reduction in output tax liability that is
found to be on account of duplication of claims shall be added to the
output tax liability of the supplier in his return for the month in which
such duplication is communicated.
(7) The supplier shall be eligible to reduce, from his output tax liability,
the amount added under sub-section (5) if the recipient declares the
details of the credit note in his valid return within the time specified
in sub-section (9) of section 39.
(8) A supplier in whose output tax liability any amount has been added
under sub-section (5) or sub-section (6), shall be liable to pay interest
at the rate specified under sub- section (1) of section 50 in respect of
the amount so added from the date of such claim for reduction in the
output tax liability till the corresponding additions are made under
the said sub-sections.
(9) Where any reduction in output tax liability is accepted under sub-
section (7), the interest paid under sub-section (8) shall be refunded
to the supplier by crediting the amount in the corresponding head of
his electronic cash ledger in such manner as may be prescribed.
Provided that the amount of interest to be credited in any case shall
not exceed the amount of interest paid by the recipient.
(10) The amount reduced from output tax liability in contravention of the
provisions of sub-section (7) shall be added to the output tax liability
of the supplier in his return for the month in which such
contravention takes place and such supplier shall be liable to pay
interest on the amount so added at the rate specified in sub-section
(3) of section 50.
ANALYSIS
Where a tax invoice has been issued for supply of any goods and/or services and
the taxable value/tax charged in that tax invoice is found to exceed the taxable
value/tax payable in respect of such supply, or where the goods supplied are
returned by the recipient, or where goods or services or both supplied are found
to be deficient, supplier may issue to the recipient a credit note. The output tax
liability of the supplier would reduce due to issuance of credit notes.
Supplier issuing a credit note shall declare the details of such credit note in the
return for the month during which such credit note has been issued, but not later
than September following the end of the financial year in which such supply was
made, or the date of furnishing of the relevant annual return, whichever is earlier,
and the tax liability shall be adjusted.
However, no reduction in output tax liability of the supplier shall be permitted, if
the incidence of tax and interest on such supply has been passed on to any other
person.
This section elaborates matching, reversal and reclaim of reduction in output
tax liability of the supplier. The detailed provisions are contained hereunder:
(i) Time of matching [Section 43(1) read with rule 73]
The details relating to claim of reduction in output tax liability shall be matched
under section 43. Such matching will be done after the due date for furnishing
the return in Form GSTR-3 [i.e. 20th of the month following the month to which
return relates].
However, where the time limit for furnishing Form GSTR-1 and Form GSTR-2
has been extended, the date of matching of claim of reduction in the output
tax liability shall also be extended accordingly.
Further, the Commissioner may, on the recommendations of the Council, by
order, extend the date of matching relating to claim of reduction in output tax
liability to such date as may be specified therein.
(ii) Details to be matched [Section 43(1) read with rule 73]
Under matching of details relating to claim of reduction in output tax liability,
details of every credit note relating to outward supply furnished by the supplier
for a tax period is matched with:
GSTIN of
the
supplier
GSTIN of
Tax
the
amount Details recipient
to be
matche
Credit Credit
Note Note
Date Number
Claim for
reduction in
GST MIS-1
output tax liability
accepted
Supplier
(iv) Discrepancy in reduction in output tax liability [Section 43(3), (5) read
with rules 74(2) and 75]
A. Discrepancy in reduction in claim for output tax liability [Section
43(3)]
Discrepancy in claim for reduction in output tax liability implies
mismatch of claim for reduction in output tax liability in respect of any tax
period.
Claim for reduction in output tax liability is considered as mismatched in
the following two cases:
Where reduction in output tax liability in respect of outward supplies >
Corresponding reduction in ITC claim by recipient in his valid return or
Where the corresponding credit note is not declared by the recipient in his
valid returns.
In both the above cases, the supplier shall be liable to pay interest on the
amount so added.
Rate of interest: Rate specified under section 50(1).
Notification No. 13/2017 CT dated 28.06.2017 has notified
18% as the rate of interest for the purpose of section 50(1).
Time period: Interest shall be computed from the date of availing such claim
for reduction in the output tax liability till the corresponding additions are
made under the aforesaid sub-sections.
(vii) Reduction in the output tax liability [Section 43(7), (9) and (10) read
with rule 77]
A. Reduction of output tax liability [Section 43(7) read with section
39(9)]
As we have seen earlier, where any
discrepancy in claim for reduction in output
tax liability is not rectified, an amount to the Amount to be
extent of discrepancy is added to the output
reduced from
tax liability of the supplier in his GSTR-3 return
output tax
to be furnished for the month succeeding the
month in which the discrepancy is made liability
available/ communicated.
However, subsequently, the recipient may
declare the details of the credit note in his valid return within the specified
time. In that case, the supplier shall be eligible to reduce, from his output
tax liability, the amount to the extent of discrepancy [earlier added under
sub-section (5) of section 43].
The recipient needs to declare the details of the credit note in his valid
return** within the time specified in section 39(9). Time stipulated under
section 39(9) is as follows:
(i) Due date of filing return for the month of September/second quarter
following the end of the financial year to which such details pertain
STATUTORY PROVISIONS
Sub-section Particulars
(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.
ANALYSIS
(i) Who are required to furnish Annual Return and what is the due date?
[Section 44(1) read with rule 80]
All taxpayers filing return in GSTR-1 to GSTR-3, are required to file an annual
return. However, following persons are not required to file annual return:
(i) Casual Taxable Persons.
(ii) Non- resident taxable person
(iii) Input Service Distributors 1 and
(iv) Persons authorized to deduct/collect tax at source under section 51/52 2.
This return needs to be filed by 31st December of the next Financial Year.
(ii) What is the prescribed form for Annual Return? [Section 44(1) read with
rule 80(1)]
Annual Return is to be filed electronically in Form GSTR-9
GSTR-9 through the common portal. GSTR-9A
Composition scheme supplier: A person paying tax
under composition scheme is required to file the
Annual Return in Form GSTR-9A.
(iii) Who is required to furnish a Reconciliation
Statement? [Section 44(2) read with section 35(5) and rule 80(3)]
Section 35 contains the provisions relating to Accounts and Records 3.
Sub-section (5) of section 35 read alongwith section 44(2) and rule 80 of the
CGST Rules, 2017 stipulates as follows:
(i) Every registered person must get his accounts audited by a Chartered
Accountant or a Cost Accountant if his aggregate turnover during a FY
exceeds `2 crores.
1
The concept of Input Service Distributor will be discussed at Final Level.
2
The concept of TDS deductor/ TCS collector will be discussed at Final Level.
3
The provisions relating to ‘Accounts and Records’ will be discussed at Final Level.
STATUTORY PROVISIONS
Sub-section Particulars
Every registered person who is required to furnish a return under sub-section (1) of
section 39 and whose registration has been cancelled shall furnish a final return
within three months of the date of cancellation or date of order of cancellation,
whichever is later, in such form and manner as may be prescribed.
ANALYSIS
(i) Who are required to furnish Final Return? [Section 45 read with rule 81]
Every registered person who is required to furnish
return u/s 39(1) and whose registration has been
surrendered or cancelled shall file a Final Return GSTR-10
electronically in Form GSTR-10 through the
common portal.
(ii) What is the time-limit for furnishing Final Return? [Section 45]
Final Return has to be filed within 3 months of the:
(i) date of cancellation
or
(ii) date of order of cancellation
whichever is later.
STATUTORY PROVISIONS
Sub-section Particulars
Sub-section Particulars
(1) Any registered person who fails to furnish the details of outward or
inward supplies required under section 37 or section 38 or returns
(2) Any registered person who fails to furnish the return required under
section 44 by the due date shall be liable to pay a late fee of one
hundred rupees for every day during which such failure continues
subject to a maximum of an amount calculated at a quarter per cent.
of his turnover in the State or Union territory.
ANALYSIS
(i) Notice to return defaulters [Section 46 read with section 52 and rule 68]
A notice in prescribed form shall be issued,
electronically, to a registered person who fails to
furnish return under section 39 [Normal Return]
or section 44 [Annual Return] or section 45 [Final
Return] or section 52 [TCS Statement]. Such
notice shall require such registered person him to
furnish such return within 15 days.
(ii) Late fees levied for delay in filing return [Section 47(1)]
Any registered person who fails to furnish following by the due date:
(A) Statement of Outward Supplies [Section 37]
(B) Statement of Inward Supplies [Section 38]
(C) Returns [Section 39]
(D) Final Return [Section 45],
shall pay a late fee.
`5,000
(ii) Late fees levied for delay in filing annual return [Section 47(2)]
Any registered person who fails to furnish the Annual Return by the due date
shall be liable to pay a late fee.
Quantum of late fee
STATUTORY PROVISIONS
Sub-section Particulars
ANALYSIS
A GSTP enrolled in any State or Union Territory shall be treated as enrolled in the
other States/Union territories.
(i) What is the eligibility criteria for GSTP?
Indian citizen
Person of sound
mind
A
person
who is Not adjudicated as
insolvent
Thus, the responsibility for correctness of any particulars furnished in the return
or other details filed by the GST practitioners shall continue to rest with the
registered person on whose behalf such return and details are furnished.
The registered person before confirming, should ensure that the facts
mentioned in the return are true and correct before signature. However, failure
to respond to request for confirmation shall be treated as deemed
confirmation.
(iii) Other points
Any registered person may give consent and authorise a GST practitioner
in the prescribed form by listing the authorised activities in which he
intends to authorise the GST practitioner.
The registered person authorising a GSTP shall have to authorise in the
prescribed form and the GST practitioner will have to accept the
authorisation in Part B of the same form.
The GST practitioner shall be allowed to undertake only such tasks as
indicated in the prescribed form. The registered person may, at any time,
withdraw such authorisation in the prescribed form.
Any statement furnished by the GST practitioner shall be made available
to the registered person on the GST Common Portal. For every statement
furnished by the GST practitioner, a confirmation shall be sought from the
registered person over email or SMS.
The GST practitioner shall prepare all statements with due diligence and
affix his digital signature on the statements prepared by him or
electronically verify using his credentials.
6. Annual Return
Annual Return
GSTR-1 GSTR-2
8. Revision of Returns
The process of ITC Matching begins after the due date for filing of the return (20th
of every month). This is carried out by GSTN.
The details of every inward supply furnished by “recipient” in form GSTR-2 shall be
matched with corresponding details of outward supply furnished by
corresponding “supplier” in his valid return.
A return may be considered to be a valid return only when the appropriate GST
has been paid in full by the taxable person, as shown in such return for a given tax
period.
In case the details match, then ITC claimed by recipient in his valid returns shall be
considered as finally accepted and such acceptance shall be communicated to
recipient.
Failure to file valid return by the supplier may lead to denial of ITC in the hands of
the recipient.
In case the ITC claimed by the recipient is in excess of the tax declared by
the supplier or where the details of outward supply are not declared by the
supplier in his valid returns,
Similarly, in case, there is duplication of
the discrepancy shall be communicated
claim of ITC, the same shall be
to both the supplier and the recipient.
communicated to the recipient.
The recipient will be asked to rectify the discrepancy of excess claim of ITC and
in case the supplier has not rectified the discrepancy communicated in his
valid returns for the month in which the discrepancy is communicated then such
excess ITC as claimed by the recipient shall be added to output tax liability of
recipient in the succeeding month.
Similarly, duplication of ITC claimed by the recipient shall be added to output tax
liability of recipient in the month in which such duplication is communicated.
The recipient shall be liable to pay interest on the excess ITC or duplicate
ITC added back to output tax liability of recipient from the date of availing of ITC
till the corresponding additions are made in their returns.
Re-claim of ITC refers to taking back the ITC reversed in the Electronic
Credit Ledger of the recipient by way of reducing the output tax liability.
Such re-claim can be made by recipient In such case, interest paid by recipient
only if supplier declares details of the shall be refunded to him by way of
Invoice and/or Debit Notes in his valid crediting the amount to his Electronic
return within prescribed timeframe. Cash Ledger.
17. ANSWERS/HINTS
1. (d) 2. (c) 3. (a) 4. (a) 5. (b) 6. (b) 7. (c) 8. (d) 9. (d)
10. (b) 11. (c)
12. The basic features of the return mechanism in GST include electronic filing of
returns, uploading of invoice level information and auto-population of