UNIT-1 GST [CONTINUATION]

a) Clearances exempt from the excise duty:

Clearances, which are exempt from the whole of the excise duty
leviable thereon (other than an exemption based on quantity or
value of clearance) under any other notification or on which no
excise duty is payable for any other reason.

b) Clearances bearing the brand name or trade name of another

person:
Clearances bearing the brand name or trade name of another
person, which are ineligible for the grant of this exemption.

c) Clearances of intermediate goods/ goods captively consumed in

case the final products is eligible for SSI exemption:
Clearances of the specified goods which are used as inputs for the
further manufactures of any specified goods within the factory of
production of the specified goods. Here specified goods are those
goods, which are eligible for SSI exemption.
D] export clearances :
Clearances meant for export
4) Determining the aggregate value of clearances for home
consumption of Rs.400 Lakh.

1
For the purpose of determining the aggregate value of clearances
of all excisable goods for home consumption, i.e. Rs.400 Lakh, the
following clearances shall not be taken into account:
Points which merit consideration.

1. Export to Nepal and Bhutan is not considered as exports. It is

taken as clearance for home consumption. Thus, export turnover of
Nepal and Bhutan shall be included for determining the limit of Rs.
150 Lakh as well as Rs. 400 Lakh.

2. For computing the turnover of Rs. 150 Lakh, the clearances of

goods exempted under any other notification is to be excluded. It is
important to note here that while computing the limit of Rs. 400
Lakh, turnover of goods exempted under any other notification (
except clearances to FTZ, SEZ, 100% EOU, EHTP/STP, UN, etc. and
specific job work notifications) has to be included.

6) Declaration to be filed on reaching specified limit.

a) SSI units whose turnover are more specified limit (at present
Rs.90 Lakh) but less than exemption limit (i.e. Rs.150 Lakh) have to
file a declarationin the prescribed form.
b) Such declaration has to be filed only once in the lifetime of the
assessee (and not every year).

2
7) Registration

SSI units whose turnover is <Rs.150 Lakh are exempted from

registration. Once the exemption limit exceeds, the unit shall
compulsory gets registered with the central Excise authorities.

Introduction to custom duties, Types, Calculation and related

issues

Every good has a predefined rate of duty that is determined based

on various factors, including where such good was acquired, where
such goods were made, and what these goods is made of. Also,
anything that you bring into India for the first time should be
declared as per the customs rules. For instance, you need to
declare the items purchased in a foreign country and any gifts
which you acquire outside India.

Types of custom duties

Customs duties are charged almost universally on every good
which are imported into a country. These are divided into:

 Basic Customs Duty (BCD)

 Countervailing Duty (CVD)
 Additional Customs Duty or
 Special CVD

3
  Protective Duty,
 Anti-dumping Duty
 Education Cess on Custom Duty

How is the customs duty computed?

Customs duties are computed on a specific or ad valorem basis. In

other words, it is calculated on the value of goods. Such value is
determined as per the rules laid down in the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007. If there
are doubts regarding the truth or accuracy of the value of goods,
valuation of such item is done through the following method:

• Rule 4 & 5: Comparative value method that compares the

transaction value of identical or similar items
• Rule 7: deductive value method that uses sale price of such good
in the importing country
• Rule 8: Computed value

method that employs costs related to materials, fabrication, and

profit in the country of production

• Rule 9: The Fallback method that is based on previous methods

with an element of higher flexibility.

4
Payment of custom duty

One can pay customs duty online with a few simple steps:

• Login into the e-payment portal of ICEGATE

• Enter the import or export code or simply key in the login
credentials provided by ICEGATE
• Now, click on the e-payment button
• You would be able to check all e- challans which under your name
• You could then choose the challan that you wish to pay and select
the payment method and you would be then redirected to the
payment gateway
• Once the payment is done, you would be redirected back to the
ICEGATE portal
Finally, click on the print button and save your payment copy.
e-Sanchit

In recent years, India witnessed major reforms in the taxation

system via digitalization. From Income Tax to GST, most of the
things are now available online. To ensure ease of doing business,
the CBIC (Central Board of Indirect taxes and Customs), has
launched e-SANCHIT, which enables registered persons to file their
customs related documents online. The e- SANCHIT initiative is

5
made mandatory from March 15th this year. Only the ICEGATE
registered users can use the e-SANCHIT application by accessing e-
SANCHIT link.
Under this new scheme, hard copies of the uploaded documents
are not required to be produced to the assessing officers. The
objective here is to minimize the physical interface between the
customs agencies and trade and to maximize the pace of clearance.

------------------------------------unit-1--------------------------------------------

6
 UNIT-3 [GST]

Constitutional Amendment, Features of GST

The Constitution (115th Amendment) Bill, 2011 proposed to give
powers to both, the center and the states to make laws with
respect to GST. The Bill was a necessity because, presently, the
Union cannot impose excise duty beyond the manufacturing stage
and states cannot levy a tax on services. It sought to decide on tax
rates, exemptions and threshold limits. It will also make
recommendations on taxes, cesses and surcharges by the center,
states and local bodies, which may be subsumed in GST.

Constitution (122nd Amendment) Bill, 2014

The Union Government in third week of December, 2014 (19
December, 2014) introduced Constitution (122nd Amendment) Bill,
2014 in Parliament which when passed shall pave the way for
introduction of proposed Goods and Service Tax (GST) in India. This
is an improvised version of lapsed 115th Amendment Bill of 2011.
Contrary to the general perception amongst many quarters that
this Bill itself is a GST Bill, let it be very clearly understood that this
is not a GST Bill. In fact, GST Bill is not in sight at all at this point in
time. What has been introduced is only the Constitutional
Amendment Bill enabling or empowering the union Government to
levy a tax to be called GST which it cannot levy under the present
Constitution. The Bill on passage would enable the Central
Government and the State Governments to levy GST. This tax (GST)
shall be levied concurrently by various states as well as Union
7
Government. Once this is passed by two-third majority in the
Parliament, at least 50 per cent of the states will have to pass it.
Once this amendment is through, the road will be clear for GST Bill
(and then Act), given the political will. Eventually, we will then have
the following taxes –
• National level GST [Central GST (CGST) and Inter-state GST (IGST)]
• State Level GST (SGST)

SALIENT FEATURE OF Constitution (One Hundred AND TWENTY

SECOND AMENDMENT) BILL,2014
The Constitution (One Hundred and Twenty-Second Amendment)
Bill, 2014 was introduced in the Lok Sabha on December 19, 2014.
The following is the gist of amendments proposed by this Bill:
1. The Bill seeks to amend the Constitution to introduce the goods
and services tax (GST). Consequently, the GST subsumes various
central indirect taxes including the Central Excise Duty, Additional
Excise Duties, Service Tax, Additional Customs Duty (CVD) and
Special Additional Duty of Customs (SAD), etc. It also subsumes
state Value Added Tax (VAT)/Sales Tax, Central Sales Tax,
Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury
Tax, etc.
2. Concurrent powers for GST: The Bill inserts a new Article 246A in
the Constitution to give the central and state governments the
concurrent power to make laws on the taxation of goods and
services

8
3. Integrated GST (IGST): However, only the centre may levy and
collect GST on supplies in the course of inter-state trade or
commerce. The tax collected would be divided between the centre
and the states in a manner to be provided by Parliament, by law,
on the recommendations of the GST Council.
4. GST Council: The President must constitute a Goods and Services
Tax Council within sixty days of this Act coming into force. The GST
Council aim to develop a harmonized national market of goods and
services.
5. GST council examines issues relating to goods, services tax and
make recommendations to the Union, and the States on
parameters like rates, exemption list and threshold limits. The
Council shall function under the Chairmanship of the Union Finance
Minister and will have the Union Minister of State in charge of
Revenue or Finance as member, along with the Minister in-charge
of Finance or Taxation or any other Minister nominated by each
state Government.
6. Composition of the GST Council: The GST Council is to comprise
of the following three members / class of members:
7. the Union Finance Minister (as Chairman),
8. the Union Minister of State in charge of Revenue or Finance, and
9. the Minister in charge of Finance or Taxation or any other,
nominated by each state government.
10. Functions of the GST Council: these include making
recommendations on:

9
  Taxes, cess and surcharges levied by the centre, states and
local bodies which may be subsumed in the GST;
 Goods and services which may be subjected to or exempted
from GST;
⚫ model GST laws, principles of levy, apportionment of IGST and
principles that govern the place of supply;
⚫ the threshold limit of turnover below which goods and services
may be exempted from GST;
⚫ rates including floor rates with bands of GST;
 special rates to raise additional resources during any natural
calamity;

• special provision with respect to Arunachal Pradesh, Jammu and

Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh Uttarakhand; and and
• Any other matters relating to the goods and services tax, as the
Council may decide.
11. The Goods and Service Tax Council shall recommend the date
from which the goods and service tax be levied on petroleum
crude, high speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel.
12. Resolution of disputes: The GST Council may decide upon the
modalities for the resolution of disputes arising arising out of its
recommendation.

10
• Restrictions on imposition of tax: The Constitution imposes
certain restrictions on states on the imposition of tax on the sale or
purchase of goods. The Bill amends this provision to restrict the
imposition of tax on the supply of goods and services and not on its
sale.
• Additional Tax on supply of goods: An additional tax (not to
exceed 1%) on the supply of goods in the course of inter-state
trade or commerce would be levied and collected by the centre.
Such additional tax shall be assigned to the states for two years, or
as recommended by the GST Council.
• The net proceeds of additional tax on supply of goods in any
financial year, except the proceeds attributable to the Union
territories, shall not form part of the Consolidated Fund of India
and be deemed to have been assigned to the States from where
the supply originates.
• Compensation to states: Parliament may by law provide for
compensation to states for revenue losses arising out of the
implementation of the GST, on the GST Council's
recommendations. This would be up to a five-year period.
• The Government of India may where it considers necessary in the
public interest, exempt such goods from the levy of tax.

• Both Centre and States will simultaneously levy GST across the
value chain. Centre would levy and collect Central Goods and
Services Tax (CGST), and States would levy and collect the State
Goods

11
• The Centre would levy and collect the Integrated Goods and
Services Tax (IGST) on all inter-State supply of goods and services.
There will be seamless flow of input tax credit from one State to
another. Proceeds of IGST will be apportioned among the States.
• GST will be a destination-based tax. All SGST on the final product
will ordinarily accrue to the consuming State.

Importance and Benefits of GST

Introduction of GST is considered to be a significant step in the

reform of indirect taxation in India. Amalgamating several Central
and State taxes into a single tax would help mitigate the double
taxation, leading to a common national market. From the
consumer's point of view, the advantage is in terms of a reduction
in the overall tax burden on goods, which was estimated at 25%-
30%. (Source: Wikipedia)

The other importance include :

• Reduction in prices: Manufacturers or traders would not have to
include taxes as a part of their cost of production, which would
lead to reduction in prices.
• Lower compliance and procedural cost: There would be reduction
in the load to maintain compliance. Also keeping record of CGST,
SGST and IGST separately would not be required.

12
• Move towards a Unified GST: Although India is adopting dual GST,
it is still a good move towards a Unified GST which is regarded as
the best method of Indirect Taxes.
• GST rollout can help boost India's GDP growth by 100-200 bps or
(1 to 2%) as this will help faster and cheaper movement of goods
across the country with a uniform taxation structure.
• GST's successful implementation would give a strong signal to the
foreign investors about India's ability to support business.
ability to support business.
• GST will be beneficial with more transparency, efficient
compliance, ramp up in GDP growth to the Centre, states,
industrialists, manufacturers, the common man and the country at
large.

Advantages of GST
• GST eliminates the cascading effect of tax
 Higher threshold for registration
 Composition scheme for small businesses
 Simple and easy online procedure
 The number of compliances is lesser
 Defined treatment for E-commerce operators
 Improved efficiency of logistics
 Unorganized sector is regulated under GST

13
 Disadvantages of GST

• Increased costs due to software purchase

 Being GST-compliant

• GST will mean an increase in operational costs • GST came

into effect in the middle of the financial year
• GST is an online taxation system
 SMEs will have a higher tax burden

Some of the Hits of GST:

1. GST council plays principled diplomacy & the thestatesmanship
shown by the members is surely a hit!
2. Technological Support to the Structure of GST law: The new GST
system runs under a canopy of strong technological support and
we can expect more GST services to be digitalised in the months to
come.
3. GST -A boon to Micro, Small & Medium Enterprises: MSMEs are
now less dependent on tax experts when compared to the earlier
regime, due to a simplified return filing system in place.
Rationalisation of the composition scheme and introduction of
quarterly filing option for taxpayers having turnover below Rs 1.5
crores was a wise decision.

14
Few Misses of GST: Need of recovery:

1. Delayed IGST refund has hit Exporters and caused a slowdown:

Although efforts are being made by the department towards timely
sanctioning of refund, yet over a few months, we can expect a
slowdown in the Export sector in India.

2. Sentiments around claiming of Input Tax Credit: admission of ITC

is currently being allowed on a provisional basis to the recipient of
the credit. Authorities are in process of reconciliation between
Different GST returns and hence, many taxpayers are receiving
mismatch notices for ITC claimed as per GSTR- 3B and allowed as
per GSTR-2A supplier data. Development of recon. tools on the GST
portal will help a buyer be cautioned before claiming any wrong
ITC, thus avoiding the interest or penalties that follow.

Difference between GST and other Tax

• Every commodity passes through different stages of production

and distribution before finally reaching the consumer. At each
stage of the production, a value addition is made in the distribution
chain. And Value Added Tax (VAT) is a tax on this value addition at
each stage.

A dealer under VAT collects tax on his sales, retains the tax paid on
his purchase and pays the balance to the government. Value Added
15
Tax is a consumption based tax, because it is borne ultimately by
the final consumer.

• Goods and Service Taxwhich was introduced as a new league in

indirect taxation system replaced all most all Indirect Taxes in India.
The act which came into effect on 1 st July 2017 is a
comprehensive, multi stage, destination based tax that is levied on
every value addition.
Under GST, the tax is levied at every point of sale. In case of inter-
state sales, Integrated GST will be levied and in case of intra state
supplies, CGST and SGST will be charged.

The main differences between VAT and GST could be understood

from the following table

Point of difference VAT GST

TAXABLE EVENT Is on sale of goods Is on every supply
and supply includes
goods and services.
Rates of Taxes and  Different VAT  Uniformed tax
Laws in each state rates in each rates across
state. India
 Different VAT  For States we
laws for each have State GST
state. Act (SGST), for
center we have
Central GST Act

16
 (CGST) and for
supplies made
between the
states we have
Integrated GST
Act (IGST) and
for Union
territories
involved in a
supply
transaction we
have Union
Territory GST
Act (UGST).
Authority over taxes  Is a levy  Whereas
collected by Goods and
respective Service Tax is
state collected under
governments SGST and CGST
for every sale
 Here the state from same
government s state.
have authority
over the tax  The
proceeds corresponding
collected by center and
such levy. state amount
then gets
bifurcated.
Input tax credit  Taxpayers can  GST is a tax
claim the credit levy on Goods

17
 of tax by and services as
netting the VAT well. A
liability with taxpayer can
input VAT on claim the credit
goods on supplies
purchased and (Goods and
from output Services)
VAT on goods received by
sold. him to be used
 .The or intended to
corresponding be used in
center and furtherance of
state amount business
then gets operations
bifurcated.  Subsuming of
taxes into one
pot of GST
have made
available the
usage of credits
at one place to
be used in the
returns.
compliances Movement of Movement of
goods: goods:

 Different set of ⚫Unified set of

compliances compliances for
for movement movement of goods
of goods between states

18
 between • Preparation of one
states. e way bill which is
valid across India.
 Preparation of
various forms Simplified
for moving the Returns: Only three
goods from one monthly returns.
state to other. One for outward
[return;] supply (GSTR1),
 Different other for inward
returns in supply (GSTR2)
different (Note: This return
states. So many is an auto populated
annexure one.
returns to be This provision was
prepared. not there under VAT
 Concept of act) and the last
auto populated return is a
return for consolidated return.
inward supplies (GSTR3)
as in GST was
absent under
VAT law.
Because there
was no
technology and
ideology which
is present
today in GST
act present
back then.

19
Migration to GST

Provisional Registration
 On enrollment, the taxpayer will get a provisional certificate of
registration in FORM GST REG-25, which will have the GSTIN
 If the taxpayer has had multiple registrations under the
previous law on the basis of a single PAN, he will now be
granted only one provisional registration under GST
 A person with centralized registration under service tax will
be granted only one GST provisional registration in the State
which he is registered under the service tax

Final Registration

• If the person is liable to register under GST (or wishes to

voluntarily register under GST), then he will submit an application
electronically in FORM GST REG-26. Any information must be
furnished within a period of three months
• If the information is correct and complete, the final GST
registration will be given in FORM GST REG-06
• If the information is not correct, then the officer will issue a show
cause notice in FORM GST REG- 27. A reasonable opportunity of
being heard will be given, after which the provisional registration
will be cancelled in FORM GST REG- 28
• If the applicant's reply is satisfactory, the show cause notice
issued can be nullified by issuing an order in FORM GST REG-20
20
Cancel Provisional Registration
• If a person who is registered under any of the existing laws, is not
liable to be registered under GST then can cancel his provisional
registration within 30 days from the appointed day
• He has to submit an application electronically in FORM GST REG-
29 at the Common Portal for cancellation of the registration
granted to him
• The officer will then cancel the registration after conducting an
enquiry

Note: EVC is Electronic Verification Code, a new mode of electronic

verification based on Aadhar card. All forms uploaded on GST
Portal must either be signed or verified through EVC.

What Will happen if an Existing Person is Required to Migrate to

GST but Does Not Do So?

Then he will not be eligible to claim the input tax credit of excise &
VAT paid on stock. If he does not register under GST (even though
he is liable to), then he has committed an offence, and will be liable
to a penalty.

21
Migration to GST-Summary

[drawing from site]

Registration of Dealers under GST, Exempted List

The GST Network that controls and monitors GST returns filings has
further simplified the registration process for filings under the new
indirect tax regime. Earlier, traders had complained that they were
still facing some issues related to GST and returns sunder it.

So, the authorities took it upon themselves and started educating

the trader Knowing GST rules and community. Knowing GST
methods of filing returns under it are very important. This write-up
explains in detail GST registration for new dealers.

Step by step guide

Here is a step-by-step guide that will further simplify for new
dealers to understand the method for registration under the
regime.

1- New dealers are required to fill and submit online a single

application form to get themselves registered for GST transactions.

22
2- A PAN-based registration will serve the purpose of the Centre
and the states.
3- A unified application to both tax authorities, in this case, the
central and the state authorities.
4- Each dealer will get or to be given a unique identification that is
known as GSTIN.
5- Users will get a deemed approval within three days.
6- Post registration verification in risk based cases only.

GST Exempted List

Exempt supplies comprise the following three types of supplies:
1. Supplies taxable at a 'NIL' rate of tax* (0% tax);
2. Supplies that are wholly or partially exempted from CGST or
IGST, by way of a notification amending Section 11 of CGST Act or
Section 6 of IGST Act;
3. Non-taxable supplies as defined under Section 2(78) - supplies
that are not taxable under the Act (For Example Alcoholic liquor for
human consumption.

Central or the State Governments are empowered to grant

exemptions from GST.
Conditions are:
1. Exemption should be in public interest 2. By way of issue of
notification

23
3. Must be recommended by the GST Council
4. Absolute exemption or conditional exemption may be for any
goods and/or services of any specified description.
5. Exemption by way of special order (not notification) may be
granted exceptional circumstances.
6. Registered person supplying the goods and / or services is not
entitled to collect tax higher than the effective rate, where the
supply enjoys an absolute exemption.

Types of Exemptions:
Absolute exemption: Exemption without any conditions.

Ex: Transmission or distribution of electricity by an electricity

transmission or distribution utility, Services by Reserve Bank of
India.

Conditional Exemption: Exemption subject to certain conditions.

Ex: Services by a hotel, inn, guest house, club or campsite, by
whatever name called, for residential or lodging purposes, having
declared tariff of a unit of accommodation less than 1000/- per
day".

24
Conditional or partial exemption:
Intra-State supplies of goods and/or services received from an
unregistered person by a registered person is exempted from
payment of tax under reverse charge provided the aggregate value
of such supplies received by a registered person from all or any of
the suppliers does not exceed 5000/- in a day.

Rate structure under GST

GST has been structured in a way that essential services and food
items are placed in the lower tax brackets, while luxury services
and products have been placed in the higher tax bracket.

The GST council has fitted over 1300 goods and 500 services under
four tax slabs of 5%, 12%, 18% and 28% under GST. This is aside the
tax on gold that is kept at 3% and rough precious and semi-
precious stones that are placed at a special rate of 0.25% under
GST.
A total of 81% of all the goods and services fall below or in the 18%
tax slab. This means 7% of the items come under the exempted list,
14% of the items attract a 5% tax, 17% of the items attract a 12%
tax, and 43% of the items attract an 18 % tax slab, while only 19%
of the items fall under the highest slab of 28% in the new regime.
Below is a list of some of the products that will be a part of the
respective slabs:

25
Exempted GST Rate Slab (No Tax)
7% goods and services fall under this category. Some of these that
are of regular consumption include fresh fruits and vegetables,
milk, butter milk, curd, natural honey, flour, besan, bread, all kinds
of salt, jaggery, hulled cereal grains, fresh meat, fish, chicken, eggs,
along with bindi, sindoor, kajal, bangles, drawing and coloring
books, stamps, judicial papers, printed books, newspapers, jute and
handloom, hotels and lodges with tariff below INR 1000 and so on.

5% GST Rate Slab

14% goods and services fall under this category. Some of these
include apparel below INR 1000 and footwear below INR 500,
packaged food items, cream, skimmed milk powder, branded
paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk,
sabudana, cashew nut, cashew nut in shell, raisin, ice, fish fillet,
kerosene, coal, medicine, agarbatti (incense sticks), postage or
revenue stamps, fertilizers, rail and economy class air tickets, small
restaurants, and so on.

12% GST Rate Slab

Edibles like frozen meat products, butter, cheese, ghee, dry fruits in
packaged form, animal fat, sausages, fruit juices, namkeen, ketchup
& sauces, ayurvedic medicines, all diagnostic kits and reagents,
cellphones, spoons, forks, tooth powder, umbrella, sewing
machine, spectacles, indoor games like playing cards, chess board,
carom board, ludo, apparels above INR 1000, non-AC restaurants,
business class air ticket, state- run lottery, work contracts and so
26
on attract a 12% GST. 17% of goods and services fall under this
category.

18% GST Rate Slab

43% of goods and services fall under this category. Pasta, biscuits,
cornflakes, pastries and cakes, preserved vegetables, jams, soups,
ice cream, mayonnaise, mixed condiments and seasonings, mineral
water, footwear costing more than INR 500, camera, speakers,
monitors, printers, electrical transformer, optical fiber, tissues,
sanitary napkins, notebooks, steel products, headgear and its parts,
aluminum foil, bamboo furniture, AC restaurants that serve liquor,
restaurants in five-star and luxury hotels, telecom services, IT
services, branded garments and financial services and so on attract
an 18% GST.

28% GST Rate Slab

19% of goods and services fall under this category. The rest of
edibles like chewing gum, bidi, molasses, chocolate not containing
cocoa, waffles and wafers coated with chocolate, pan masala,
aerated water, personal care items like deodorants, shaving
creams, after shave, hair shampoo, dye, sunscreen, paint, water
heater, dishwasher, weighing machine, washing machine, vacuum
cleaner, automobiles, motorcycles, 5-star hotel stays, race club
betting, private lottery and movie tickets above INR 100 etc. have
been clubbed together under the 28% GST slab.

27
Some other items that will get costlier also include:
• Courier services, mobile phone tariffs, Mobile bills, tuition fees,
salon visits, insurance premiums, banking charges, broadband
services will get costlier by 3%. These were earlier charged a 15%
service tax, and will now fall under 18% tax slab.
• Taxes on aerated drinks, tobacco and luxury goods will now come
under the 28 percent tax bracket under GST, so it will get costlier.
• Real Estate will also get expensive as it will now attract a GST of
12% as opposed to 6%.

Procedure for obtaining Registration Certificate

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

• Self-attested copy of the PAN Card of the Proprietor or Company

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

28
  Any other Photo-identity card issued by the Central
Government, State Government or Public Sector Undertaking.

• Address proof for the address submitted along with proof of

ownership, lease or rent agreement, allotment letter from
Government.
• No Objection Certificate from the legal owner.
• Bank Account Details
• Memorandum of Association (For Company)
• Articles of Association [FOR Company)
Company)
• List of Directors (For Company)
• Authorisation by the Board of Directors/Partners/Proprietor for
the person filing the application.
• Business transaction numbers obtained from other Government
departments or agencies such as Customs Registration No. (BIN
No), Import Export Code (IEC) number, State Sales Tax Number
(VAT), Central Sales Tax Number, Company Index Number (CIN)
which have been issued prior to the filing of the service tax
registration application.

Procedure for Applying for Service Tax Registration

To obtain service tax registration, the applicant can file the ST-1
application for service tax through the Automation of Central

29
Excise and Service Tax (ACES) website. The documents listed above
along with the requisite information must be submitted online.

On filing the ST-1 service tax registration application online, the

applicant must submit a self attested copy of the above documents
by registered post/speed Post to the concerned Division, within 7
days for the purposes of verification.
If the documents and information submitted are acceptable,
service tax registration would be granted within 2 days of filing ST-
1 online - based on trust. The service tax applicant can use the
electronic service tax registration certificate as proof of registration
and begin electronic payment of taxes.

In case there is a need for verification of the premises or

documents submitted, the same can be requested by an authorised
Service Tax Officer. Further, under the following circumstances, the
service tax registration certificate may be revoked by the service
tax department:
1. The premises are found to be nonexistent or not in possession of
the assessee.
2. No documents are received within 15 days of the date of filing
the registration application.
3. The documents are found to be incomplete or incorrect in any
respect.

30
Concept of IGST, CGST, SGST and its calculation

To determine whether Central Goods & Services Tax (CGST), State

Goods & Services Tax (SGST) or Integrated Goods & Services Tax
(IGST) will be applicable in a taxable transaction, it is important to
first know if the transaction is an Intra State or an Inter- State
supply.
• Intra-State supply of goods or services is when the location of the
supplier and the place of supply i.e., location of the buyer are in the
same state. In Intra-State transactions, a seller has to collect both
CGST and SGST from the buyer. The CGST gets deposited with
Central Government and SGST gets deposited with State
Government.
• Inter-State supply of goods or services is when the location of the
supplier and the place of supply are in different states. Also, in
cases of export or import of goods or services or when the supply
of goods or services is made to or by a SEZ unit, the transaction is
assumed to be Inter-State. In an Inter-State transaction, a seller has
to collect IGST from the buyer.

CGST
Under GST, CGST is a tax levied on Intra State supplies of both
goods and services by the Central Government and will be
governed by the CGST Act. SGST will also be levied on the same
Intra State supply but will be governed by the State Government.

31
This implies that both the Central and the State governments will
agree on combining their levies with an appropriate proportion for
revenue sharing between them. However, it is clearly mentioned in
Section 8 of the GST Act that the taxes be levied on all Intra-State
supplies of goods and/or services but the rate of tax shall not be
exceeding 14%, each.

State Goods and Services Tax (SGST)

Under GST, SGST is a tax levied on Intra State supplies of both
goods and services by the State Government and will be governed
by the SGST Act. As explained above, CGST will also be levied on
the same Intra State supply but will be governed by the Central
Government.
Note: Any tax liability obtained under SGST can be set off against
SGST or IGST input tax credit only.

An example for CGST and SGST:

Let's suppose Rajesh is a dealer in Maharashtra who sold goods to
Anand in Maharashtra worth Rs. 10,000. The GST rate is 18%
comprising of CGST rate of 9% and SGST rate of 9%. In such case,
the dealer collects Rs. 1800 of which Rs. 900 will go to the Central
Government and Rs. 900 will go to the Maharashtra Government.

32
Integrated Goods and Services Tax (IGST)
Under GST, IGST is a tax levied on all Inter- State supplies of goods
and/or services and will be governed by the IGST Act. IGST will be
applicable on any supply of goods and/or services in both cases of
import into India and export from India.
Note: Under IGST,

 Exports would be zero-rated.

 •Tax will be shared between the Central and State
Government.

An example for IGST:

Consider that a businessman Rajesh from Maharashtra had sold
goods to Anand from Gujarat worth Rs. 1,00,000. The GST rate is
18% comprised of 18% IGST. In such case, the dealer has to charge
Rs. 18,000 as IGST. This IGST will go to the Centre.

----------------------------------------unit-3-------------------------------------

33
 UNIT-4
GST council, its Members, Composition, its role

Goods & Services Tax Council is a constitutional body for making

recommendations to the Union and State Government on issues
related to Goods and Service Tax. The GST Council is chaired by the
Union Finance Minister and other members are the Union State
Minister of Revenue or Finance and Ministers in-charge of Finance
or Taxation of all the States.
The Constitution (One Hundred and Twenty-Second Amendment)
Bill, 2016, for introduction of Goods and Services tax in the country
was introduced in the Parliament and passed by Rajya Sabha on 3rd
August, 2016 and by Lok Sabha on 8th August, 2016. Consequent
upon this, the Hon'ble President of India accorded assent on 8th
September, 2016, and the same was notified as the Constitution
(One Hundred and First Amendment) Act, 2016. As per Article 279A
(1) of the amended Constitution, the GST Council has to be
constituted by the President within 60 days of the of Article 279A.
The commencement of Article notification for bringing into force
Article 279A with effect from 12th September, 2016 was issued on
10thSeptember, 2016.
As per Article 279A of the amended Constitution, the GST Council
which will be a joint forum of the Centre and the States, shall
consist of the following members: -
1. The Union Finance Minister..... Chairperson;
2. The Union Minister of State in charge of Revenue or Finance.....
Member;
34
3. The Minister in charge of Finance or Taxation or any other
Minister nominated by each State Government..... Members.
As per Article 279A (4), the Council will make recommendations to
the Union and the States on important issues related to GST, like
the goods and services that may be subjected or exempted from
GST, model GST Laws, principles that govern Place of Supply,
threshold limits, GST rates including the floor rates with bands,
special rates for raising additional resources during natural
calamities/disasters, special provisions for certain States, etc.

The Union Cabinet in its meeting held on 12th September, 2016

approved setting-up of GST Council and setting up its Secretariat.
The Cabinet inter alia took decisions for the following:
1. Creation of the GST Council as per Article 279A of the amended
Constitution;
2. Creation of the GST Council Secretariat, with its office at New
Delhi;
3. Appointment of the Secretary (Revenue) as the Ex-Officio
Secretary to the GST Council;
4. Inclusion of the Chairperson, Central Board of Excise and
Customs (CBEC), as a permanent invitee (non-voting) to all
proceedings of the GST Council;
5. Create one post of Additional Secretary to the GST Council in the
GST Council Secretariat (at the level of Additional Secretary to the
Government of India), and four posts of Commissioner in the GST

35
Council Secretariat (at the level of Joint Secretary to the
Government of India).
The Cabinet also decided to provide for adequate funds for
meeting the recurring and non-recurring expenses of the GST
Council Secretariat, the entire cost for which shall be borne by the
Central Government. The GST Council Secretariat shall be manned
by officers taken on deputation from both the Central and State
Governments.
The provisions of Article 279A of the Constitution of India with
respect to constitution of GST Council and its mandate are as
below:

GST COUNCIL

Mandate of GST Council

1. (279A.) The President shall, within sixty days from the date of
commencement of the Constitution (One Hundred and First
Amendment) Act, 2016, by order, constitute a Council to be called
the Goods and Services Tax Council.
2. The Goods and Services Tax Council shall consist of the following
members, namely: -
I. the Union Finance Minister..... Chairperson;
II. the Union Minister of State in charge of Revenue
Finance..... Member; or Minister in charge of

36
3. The Members of the Goods and Services Tax Council referred to
in sub-clause (c) of clause (2) shall, as soon as may be, choose one
amongst themselves to be the Vice- Chairperson of the Council for
such period as they may decide.
4. The Goods and Services Tax Council shall make
recommendations to the Union and the States on:
 The goods and services that may be subjected to, or exempted
from the goods and services tax;
 Model Goods and Services Tax Laws, principles of levy,
apportionment of Goods and Services Tax levied on supplies in
the course of inter-State trade or commerce under article
269A and the principles that govern the place of supply;
 The threshold limit of turnover which goods and below which
services may be exempted from goods and services tax;
 The rates including floor rates with bands of goods and
services tax;
 Any special rate or rates for a specified period, to raise
additional resources during any natural calamity or disaster;
 Special provision with respect to the States of Arunachal
Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakhand; and
 Any other matter relating to the goods and services tax, as
the Council may decide.

37
5. The Goods and Services Tax Council shall recommend the date
on which the goods and services tax be levied on petroleum crude,
high speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel.
6. While discharging the functions conferred by this article, the
Goods and Services Tax Council shall be guided by the the need for
a harmonized structure of goods and services tax and for the
development of a harmonized national market for goods and
services.
7. One-half of the total number of Members of the Goods and
Services Tax Council shall constitute the quorum at its meetings.
8. The Goods and Services Tax Council shall determine the
procedure in the performance of its functions.
9. Every decision of the Goods and Services Tax Council shall be
taken at a meeting, by a majority of not less than three-fourths of
the weighted votes of the members present and voting, in
accordance with the following principles, namely:
1. The vote of the Central Government shall have weightage of one
third of the total votes cast, and
2. The votes of all the State Governments taken together shall have
a weightage of two- thirds of the total votes cast, in that meeting
• No act or proceedings of the Goods and Services Tax Council shall
be invalid merely by reason of:
1. Any vacancy in, or any defect in, the constitution of the Council;
or

38
2. Any defect in the appointment of a person as a Member of the
Council; or
3. Any procedural irregularity of the Council not affecting the
merits of the case.
• The Goods and Services Tax Council shall establish a mechanism
to adjudicate any dispute:
1. Between the Government of India and one or more States; or.
2. Between the Government of India and any State or States on one
side and one or more other States on the other side; or

GST infrastructure, impact of GST on Business

Passage of the Goods and Services Tax (GST) has been one of the
most important tax reforms of modern India. Ever since its
introduction on July 1, 2017, the issue of compliance has been in
the limelight, as GST's success. depends on timely compliance

GST calls for digital transformation. Hence, technology, specifically

tax automation, has been a key factor to meet compliance
requirements. The main advantage of a technology-driven system
is that it is easier to detect the anomaly earlier.
GST requires a host of compliances from passing accounting
entries, to GST computation, to return filing. Apart from invoice
matching, businesses need to ensure that not only do they file their
own returns and pay their own taxes on time, but that any other

39
firms with which they do business do so as well. If other firms fail
to file or make payments on time, payments such as input tax
credits will not be available to the businesses, and both firms could
incur substantial financial losses.
Numerous extensions were filed in 2018 due to painstaking
procedures and issues with online utilities. Many of the
requirements for filing returns were not clear, which also led to
confusion for businesses.
THE NEW RETURN FILING SYSTEM
The GST Council has approved sweeping changes to the tax return
filing system, with a simplified returns format expected to be rolled
out in April 2019. This may be delayed, however, due to general
elections as well as extensive testing procedures to ensure the
system performs as expected.
The draft plan of the new return filing system calls for first
releasing a prototype of the software, which will be connected to a
small server, followed by the release of a beta version. This beta
version will be available to certain industry bodies and tax
practitioners who can test the software in real world applications
and look for any bugs. Many people felt that a major downfall of
the previous return filing system was that it had only been tested
in-house, never in an actual working environment. The GST
Network (GSTN), the return filing system and IT backbone of the
gigantic tax reform, was required to process as many as 3.5 billion
invoices each month. Although the GST Council knew there would
be a large number of transactions, the server was still not prepared
to take such an overwhelming number of returns. As a result, the
load and the system collapsed several times.
40
With new leadership in the GSTN authority, businesses throughout
India are anticipating an improved IT infrastructure in 2019 that
will allow for more efficient GST compliance.

Under the new system, it is likely that taxpayers with an annual

turnover of more than INR 5 crore will need to file only one
monthly return. Those with an annual turnover of less than INR 5
crore can opt for quarterly filing in either regular quarterly returns
or the GSTR Sugam or GSTR Sahaj return.

Furthermore, the new system will require HSN details, which were
not mandated until now. With this information, the government
will be in a better position to analyze data and pinpoint industries
where they have a very huge supply input but are not
proportionately showing production output.

Invoice matching
GST had been perceived as a remedy for tax evasion. However,
since invoice matching was put on hold, this purpose has not been
realized so far. To date, return filing in GST has been confined to
summary returns (GSTR 3B) and details of outward supply
(GSTR 1).

The new return filing system as envisaged is simple, with two main
tables: one for reporting outward supplies, and one for availing

41
input tax credit based on invoices uploaded by the supplier.
Invoices can be uploaded by the seller at any time during the
month. These invoices can be viewed and locked by the buyer in
order to avail the input tax credit. Once the invoice is locked by the
buyer, it will become the confirmed liability of the seller. This
mechanism will ensure that a large part of the return is
automatically filled in with information from the invoices
previously uploaded by the buyer and seller, thereby making the
entire process less cumbersome. Once invoice matching is
established in the coming year with the new GST system, tax
evasion can perhaps be taken care of.

Accounting

Businesses will need to adopt robust technology solutions to meet

their end-to- end GST requirements. The process- oriented system
of GST requires businesses place an emphasis on updating their
accounting systems, as proper recording of transactions and
uploading invoices on time and accurately will be key to
compliance under GST. Because specialized software will be
required, adopting new accounting technology upgrading
accounting or systems might become a costly issue, depending on
the size of the business. Businesses will need to invest in software
that facilitates direct integration of data, as seamless integration
with GSTN for information upload and download will be
imperative. Currently, the emphasis is more on application service
providers, ERPs, or accounting software that can take this challenge
head on and make the process smoother. GST has opened avenues
42
for companies that provide accounting solutions, and we are likely
to see more such companies competing in 2019.

Change in refund filing

The government has announced that it has cleared GST refunds
amounting to INR 0.91 trillion, which is almost 94% of the total
refunds claimed. With the new GST refund filing system being
introduced on a pilot basis in April 1, 2019, officials insist that new
IT infrastructure will be superior and the refund processing will be
even faster.

Compliance rating system

In 2019 we can expect the compliance rating system to finally kick
in. A good GST rating is something every business will endeavour to
achieve, as it will enable businesses to take advantage of various
benefits including faster refunds and less scrutiny. We can
anticipate that the technological setup for ratings will finally be in
place in 2019.

Objectives to be achieved in 2019

The main objective for the introduction of GST was to reduce tax
evasion and simplify tax compliance, with Information Technology
being the mainstay of GST. GST, so far, has been a failure on both
the counts. Just like the quote, "a little knowledge is a dangerous
thing," similarly, semi complete technological compliance creates
conflict of interest and increases mistrust. With the extensive

43
changes taking place in IT, we can hope that 2019 will provide us
with better GST system.

Going forward, it will be essential for businesses to explore the use

of technology to ensure timely and effective compliances.
Presently, many companies are providing cloud-based GST
compliance software. Businesses should recognize their needs and
accordingly select a software that is best suitable for them.
GST is a single tax on the supply of goods and services, which will
make India a unified common market. GST will replace all current
indirect taxes with a multi point consumption tax
The introduction of a GST is certainly going to have a huge impact
on the nation as a whole, which will include small and medium
businesses (SMBs) and startups, as well as big enterprises. All these
will, in turn, create an additional market for IT and ERP providers.

Impact on small & medium enterprises

A larger portion of small and medium enterprises will be covered
by GST, as the exemption limit proposed has been fixed at Rs 20
lakhs for all India, except for northeastern states, where the
threshold limit has been fixed even lower, at RS 10 lakhs.
There is relief, however, for the SME sector in that jurisdiction.
Businesses with a turnover of Rs. 1.5 crore and below would solely
be assessed by the states, while for those above, it would be jointly
assessed with the central and state governments.

44
How SMEs will be effected by GST
• Wider base of SMEs: In the excise arena, the minimum exemption
limit was Rs.1.5 crores for the manufacturers, which has been
substantially reduced to Rs. 20 lakhs to cover a major portion of
SMEs in the GST bracket.
 Increase in customer base: Currently, SMEs restrict their trade
to local purchases and sales, as they have to bear the tax
burden on interstate sales for which they cannot avail the
input set-off, thereby increasing their cost of production. This
will no longer be the case under the new GST. Also, in the new
GST regime, tax credits will be transferred irrespective of
buyers' and sellers' location, which will allow the SMEs to
expand beyond their local tax district.

• Dual tax rate: GST will operate as a dual tax rate (CGST & SGST)
for local supplies, which will increase the intricacies of maintaining
books of accounts and lead to additional audits from tax
authorities.

India for startups in GST regime:

Before GST, new businesses had to contend with tax bureaucracy
earlier, which restricted the ease of doing business. The GST regime
is likely to be friendlier for startups, due to the following measures:
• Single-point registration: Currently, new enterprises must register
with VAT Authorities, Service Tax Authorities, and other local
bodies, which increase the burden of tax compliance for startups.

45
As a single-point registration tax, GST will eliminate multiple points
of registration. The GST registration procedure will be
standardized, making it easier to start a business in India.
• Integration of multiple taxes: GST will simplify the current
taxation scheme, as only one tax (GST) will prevail for all indirect
taxes. This will directly lead to lower and standard tax compliances
resulting in simplifying the Tax procedures.

• No separate distinction in sales & service: GST is calculated on

total value: there is no distinction between sales and services,
eliminating complex WCT calculations necessary under the old
regime.
• Input tax credit: Upon registration for the GST, new startups will
immediately be eligible for input tax credits on all purchases, both
in-state and out-of-state. This will lead to expansion of cross border
business and reducing the cascading effect of tax. Full credit on
capital goods is claimed in one installment under the GST regime,
which will have a direct impact on the cash flow of new companies,
as full input credits will be available to discharge GST payments.

New IT systems to address challenges:

GSTN at Macro Level
The GST system depends on online matching of supplier GST
liabilities to buyers' input GST credit claims.

46
In order to have a seamless system of matching credits, GSTN will
provide an online generation mechanism for er tax invoices, which
will:
• Eliminate the need for data entry by buyers. This will leave no
need for reconciliation/matching of the output GST database with
the input credit claims database.
• Relieve the purchaser from the burden of entering supplier bill
data, as well as from following up with suppliers for unmatched
credits.
• Make documentation easy and automatic by using uniform
software

ERP UPDATION FOR BIG ENTERPRISES

Upgrading Enterprise Resource Planning (ERP) software will be one
of the main ways corporations adapt to GST. ERP plays a major role
in managing & monitoring the transactions for an origination which
includes all the support models for business functions and
integrate them in one package.

Migrations are obvious to happen due to the complexities that will

come along with GST. Every business's ERP must have strong
features and easy adaptability, which will help companies migrate
from the present regime to the GST regime.

47
Possible reasons for required updates to ERPs will be:
Change in master data with respect to registration details of
vendors, customers as all of them will be required to obtain GSTIN.
• Legal compliance with respect to return filing will undergo a huge
change due to new return formats under GST.
• Matching of ledgers will be another complicated job, requiring
up-to- date transactional data.
• MIS reporting will undergo a substantial change, as information
required will be on real-time basis, requiring on accurate and
complete information.
To summarize, GST is bringing along major changes for Indian
businesses. Beneath all the excitement is the fear of unknown,
which needs to be resolved by indirect tax automation providers
who understand and handle GST globally and can handle the
impact of changing taxes.

Salient features of GST Model

1. The GST would be applicable on the supply of goods or services
as against the present concept of tax on the manufacture or sale of
goods or provision of services. It would be a destination based
consumption tax. This means that tax would accrue to the State or
the Union Territory where the consumption takes place. It would
be a dual GST with the Centre and States simultaneously levying tax
on a common tax base. The GST to be levied by the Centre on intra-
State supply of goods or services would be called the Central tax

48
(CGST) and that to be levied by the States including Union
territories with legislature/Union Territories without legislature
would be called the State tax (SGST)/ Union territory tax (UTGST)
respectively.
2. The GST would apply to all goods other than alcoholic liquor for
human consumption and five petroleum products, viz. petroleum
crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel. It would apply to all services barring a few to
be specified. The GST would replace the following taxes currently
levied and collected by the Centre:
3. Central Excise Duty
b.Duties of Excise (Medicinal and Toilet Preparations)
c. Additional Duties of excise (Goods of Special Importance)
d. Additional Duties of Excise (Textiles and Textile Products)
e. Additional Duties of Customs (commonly known as CVD)
f. Special Additional duty of Customs (SAD)
g. Service Tax
h. Central Surcharges and Cesses so far as they relate to supply of
goods and services
4. State taxes that would be subsumed under the GST are:
5. State VAT
b.Central Sales Tax
c. Luxury Tax
d. Entry Tax (all forms)

49
e. Entertainment and Amusement Tax (except when levied by the
local bodies)
f. Taxes on advertisements
g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. State Surcharges and Cesses so far as they relate to supply of
goods and services
6. The list of exempted goods and services would be common for
the Centre and the States.
7. Threshold Exemption: Taxpayers with an aggregate turnover in a
financial year up to Rs.20 lakhs would be exempt from tax.
Aggregate turnover shall be computed on all India basis. For eleven
Special Category States, like those in the North-East and the hilly
States, the exemption threshold shall be Rest. 10 lakhs. All
taxpayers eligible for threshold exemption will have the option of
paying tax with input tax credit (ITC) benefits. Taxpayers making
inter-State supplies or paying tax on reverse charge basis shall not
be eligible for threshold exemption.
8. Composition levy: Small taxpayers with an aggregate turnover in
a financial year up to Rest. 50 lakhs shall be eligible for composition
levy. Under the scheme, a taxpayer shall pay tax as a percentage of
his turnover during the year without the benefit of ITC. The rate of
tax for CGST and SGST/UTGST each shall not exceed -

-2.5% in case of restaurants etc

50
- 1% of the turnover in a state/ UT in case of a manufacturer
-0.5% of the turnover in state/UT in case of other suppliers
A taxpayer opting for composition levy shall not collect any tax
from his customers nor shall he be entitled to claim any input tax
credit. The composition scheme is optional. Taxpayers making
inter-State supplies shall not be eligible for composition scheme.
The government, may, on the recommendation of GST Council,
increase the threshold for the scheme to up to rupees one crore.

7. An Integrated tax (IGST) would be levied and collected by the

Centre on inter-State supply of goods and services. Accounts would
be settled periodically between the Centre and the States to
ensure that the SGST/UTGST portion of IGST is transferred to the
destination State where the goods or services are eventually
consumed.
8. Use of Input Tax Credit: Taxpayers shall be allowed to take credit
of taxes paid on inputs (input tax credit) and utilize the same for
payment of output tax. However, no input tax credit on account of
CGST shall be utilized towards payment of SGST/UTGST and vice
versa. The credit of IGST would be permitted to be utilized for
payment of IGST, CGST and SGST/UTGST in that order.
9. HSN (Harmonised System of Nomenclature) code shall be used
for classifying the goods under the GST regime. Taxpayers whose
turnover is above Rs 1.5 crore but below Rs. 5 crore shall use 2-
digit code and the taxpayers whose turnover is Rs 5 crore and
above shall use 4-digit code. Taxpayers whose turnover is below Rs
1.5 crore are not required to mention HSN Code in their invoices.

51
10. Exports and supplies to SEZ shall be treated as zero-rated
supplies. The exporter shall have an option to either pay output tax
and claim its refund or export under bond without tax and claim
refund of Input Tax Credit.
11. Import of goods and services would be treated as inter-State
supplies and would be subject to IGST in addition to the applicable
customs duties. The IGST paid shall be available as ITC for further
transaction

How to file refund under GST

GST is all about a smooth flow of funds and compliances till the
end. To facilitate such a smooth flow, it is imperative for the
Government to provide for a hassle-free refund process. The
current tax structure is cumbersome, and it takes months and
sometimes years to get refunds from the Government's kitty.

GST provides for a clearer and efficient invoice based tracking

system, verifying the transactions on an individual basis, thus,
allowing systematic checking of the same. It comes as a huge relief
for manufacturers or exporters, especially those in a 100% EOU or
Special Economic Zone, whose working capital gets tied up in this
cumbersome refund process.
In this article, we've covered the GST refund process in detail to
make your life easy.

52
There are certain events where refund arises. Let us check out the
transactions in details.
• In case of exports (including deemed exports), where there is a
cumulative balance of input credit arising out of such exports or
under a claim of rebate.
• Where there is an excessive payment of tax due to an inadvertent
mistake.
• When there is an accumulation of credit resulting due to the
output tax being nil or exempted from tax.
• A refund may arise after a provisional assessment.
• Where an appeal is for a respondent, then the amount made as a
deposit towards holding such appeal shall be refunded to the
appellant • Refund after investigation or findings by an
adjudicating officer.
• Refund can be provided to foreign embassies or bodies of United
Nations when the purchases are made by them.
• When there is an accumulation of credit resulting due to the
output tax being of a lesser rate than the input.
 Suppliers receiving discounts or credits through the issuance
of credit notes.
• GST paid by foreign or international tourists are subjected to
refund.
The Government will not just give away the pending amount as a
refund. The taxpayers have to make an application and follow the
correct procedure for fetching the refund amounts in their bank
accounts.
53
Refund Application Process Under GST
The refund application has to be made in Form RFD-01 (to be
certified by a Chartered Accountant) within a period of 2 years
from the "relevant date." This relevant date is different for
different scenarios.
1. When the goods are exported through air or sea, then relevant
date shall be the date on which such ship or aircraft leaves India.
2. When the goods are carried by a land vehicle, then relevant date
shall be the date when the goods cross the land frontier of the
country
3. When goods are sent through post, then relevant date shall be
the date of despatch of goods from the Post Office.
4. When the supply includes services, and when the same is
completed before receipt of payment, then relevant date shall be
the payment receipt date.
5. Similarly, when the services are performed after receipt of an
advance, then relevant date shall be the invoice date.
6. Where refund claim is made for excess input tax credit left
unutilised, then relevant date shall be the end of the financial year
for which such refund claim is being made.
7. Where the goods are supplied for deemed exports, i.e. supply to
SEZ or 100% EOU, the relevant date shall be the return filing date
related to such deemed exports was filed.
8. Where refund arises due to an order passed in favour of the
appellant, then relevant date shall be the date of such order.

54
9. Where tax was paid following a provisional assessment and
refund now arises, then relevant date shall be date at which such
tax was adjusted.
• When the person claiming refund is not the supplier, then
relevant date shall be the date at which the goods are received by
such person.
• For all other cases, relevant date shall be the date of payment of
tax.
It is mandatory to keep in mind these relevant dates as failure to
file refund applications within mentioned time can lead to blockage
of credit.

Once the application made, an acknowledgement in Form RFD-02

will be auto-generated for future references and sent across
through an email and an SMS. In case the system finds some
deficiencies in the refund application, then Form RFD- 03 shall be
sent to the taxpayer to correct his application. Moreover, there are
certain documents that must be enclosed along with the electronic
refund application. Where the refund application is below Rs. 5
lakhs, then a declaration shall be made by the taxpayer indicating
that the amount of refund has not been utilised by or transferred
to any other person. Where such application exceeds Rs. 5 lakhs,
then apart from the declaration above, a document evidencing that
the amount was paid by the taxpayer shall also be attached.
When the person filing refund claim is a United Nations' body,
Consulate or a foreign embassy, then the application for refund has
to be filed within 90 days from the end of the quarter for which the

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goods or services were procured. The application should be made
in Form RFD-10.

SCRUTINY OF THEE REFUND APPLICATION

As per norms, it would take about 30 days to process a refund
application. Where the refund claim exceeds a prescribed amount,
then the same shall be subjected to an audit process. If the same
qualifies for a refund, then an order shall be passed to that extent,
or if it meets the criterion for being "unjustly enriching" the
taxpayer, then the amount shall be transferred to the Consumer
Welfare Fund. The above declaration may be required to be
certified by a Chartered Accountant.

Refund Order
When the taxpayer claims refund of monies arising out of exports
of goods or services, then an authorised officer can issue a
provisional refund order in Form RFD-04 of an amount of 90% of
the refund claim. Such a provisional refund can be made when the
taxpayer:
• Has not been prosecuted for evading taxes for an amount
exceeding Rs. 250 lakhs over a period of 5 years.
• Has a GST compliance rating of more than 5 out of 10.
• Has no appeal or review pending with respect to refunds.

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Where the authorised officer feels that documents are in
consonance with law, then he may pass a final order to that effect
The Government shall maintain a cash ledger for the taxpayer. It
will be constantly updated with the figures as mentioned or
declared in the returns. The credit must match with the ledger or
else the credit cannot be availed. It is similar in lines of Form 26AS
in case of Income Tax, where the amount of TDS and TCS matches
with the Form.

In all other cases, the refund application shall be processed within

60 days from the application date. Once the authorised officer
adjudges the refund to be true, then he will issue a final order in
Form RFD-05within a period of 60 days from the application date. If
the officer fails to pass an order within the said 60 days, then the
taxpayer shall receive an interest @ 6% p.a. for the period
exceeding the expiry of 60 days until the receipt of refund.
When the refund has to be adjusted against the taxable amount,
then Form RFD-06 shall be passed.
Other forms that are important for refund claims:
• RFD-07: this is a show cause notice for complete rejection of a
refund application
• RFD-08: Payment advice

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Refund of Input Tax Credit

There are 3 cases against which a refund claim can be made with
respect to input tax credit. All the above scenarios covered refund
emanating from certain specified transactions.

1. Input tax credit left unutilized when the goods or services being
supplied are zero rated or exempted from GST.
2. When input goods or services have a higher rate of tax and the
same goods or services have a lesser output tax, then the
accumulated input tax credit can be claimed as refund.
3. In case of a partial reverse charge, where the input tax credit
cannot be used completely against the output tax.
Furthermore, no refund against unutilized input tax credit can be
given when:
 Input arises out of GST paid against goods exported out of
India, that were taxable to excise duty
• The supplier has already availed the benefit of duty drawback
paid with respect to excise duty.

The process is very thorough in itself and once followed properly,

then availing refund can become very smooth and hassle free. It
will change the face of the long drawn refund process and give a
boost to the manufacturing or export industry. Those refunds,
which usually took years to pass can now be taken in just 60 days.

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The strong IT system and forward thinking of the GSTN have
enabled this initiative.

Transfer of input tax credit and its related issues

Input credit means at the time of paying tax on output, you can
reduce the tax you have already paid on inputs and pay the balance
amount.
Here's how:
When you buy a product/service from a registered dealer you pay
taxes on the purchase. On selling, you collect the tax. You adjust
the taxes paid at the time of purchase with the amount of output
tax (tax on sales) and balance liability of tax (tax on sales minus tax
on purchase) has to be paid to the government. This mechanism is
called utilization of input tax credit.
For example- you are a manufacturer: a. Tax payable on output
(FINAL PRODUCT) is Rs 450 b. Tax paid on input (PURCHASES) is Rs
300 c. You can claim INPUT CREDIT of Rs 300 and you only need to
deposit Rs 150 in taxes.

Who can claim ITC?

ITC can be claimed by a person registered under GST only if he

fulfills ALL the conditions as prescribed.
1. The dealer should be in possession of tax invoice
2. The said goods/services have been received
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3. Returns have been filed.
4. The tax charged has been paid to the government by the
supplier.
5. When goods are received in installments ITC can be claimed only
when the last lot is received.

REVERSAL OF INPUT TAX CREDIT

ITC can be availed only on goods and services for business
purposes. If they are used for non-business (personal) purposes, or
for making exempt supplies ITC cannot be claimed. Apart from
these, there are certain other situations where ITC will be reversed.
ITC will be reversed in the following cases:
1) Non-payment of invoices in 180 days: ITC will be reversed for
invoices which were not paid within 180 days of issue.
2) Credit note issued to ISD by seller: This is for ISD. If a credit note
was issued by the seller to the HO then the ITC subse reduced will
be reversed.
3) Inputs partly for business purpose and partly for exempted
supplies or for personal use: This is for businesses which use inputs
for both business and non- business (personal) purpose. ITC used in
the portion of input goods/services used for the personal purpose
must be reversed proportionately.

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4) Capital goods partly for business and partly for exempted
supplies or for personal use: This is similar to above except that it
concerns capital goods.
5) ITC reversed is less than required: This is calculated after the
annual return is furnished. If total ITC on inputs of exempted/non-
business purpose is more than the ITC actually reversed during the
year then the difference amount will be added to output liability.
Interest will be applicable.

Reconciliation of ITC
ITC claimed by the person has to match with the details specified
by his supplier in his GST return. In case of any mismatch, the
supplier and recipient would be communicated regarding
discrepancies after the filling of GSTR 3. Please read our article on
the detailed explanation of the reasons for mismatch of ITC and
procedure to be followed to apply for re-claim of ITC.

DOCUMENT REQUIRED FOR CLAIMING ITC

The following documents are required for claiming ITC: 1. Invoice
issued by the supplier of goods/services 2. The debit note issued by
the supplier to the recipient (if any) 3. Bill of entry 4. An invoice
issued under certain circumstances like the bill of supply issued
instead of tax invoice if the amount is less than Rs 200 or in
situations where the reverse charge is applicable as per GST law. 5.
An invoice or credit note issued by the Input Service
Distributor(ISD) as per the invoice rules under GST. 6. A bill of
supply issued by the supplier of goods and services or both.
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All these documents are to furnished at the time of filing form
GSTR-2.

Special cases of ITC

A. ITC for Capital Goods
ITC is available for capital goods under GST.
However, ITC is not available for- i. Capital Goods used exclusively
for making exempted goods ii. Capital Goods used exclusively for
non-business (personal) purposes.
Note: No ITC will be allowed if depreciation has been claimed on
tax component of capital goods.

Penalties and appeals under GST

Offences
There are 21 offenses under GST. We have mentioned a few here.
For the entire list of 21 offenses please go to our main article on
offenses.
The major offenses under GST are:
• Not registering under GST, even though required by law. (Read
our article for the list of those who have to register mandatorily
under GST)

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  Supply of any goods/services without any invoice or issuing
false invoice
• The issue of invoices by a taxable person using the GSTIN of
another bona fide taxpayer
• Submission of false information while registering under GST
• Submission of fake financial records/documents or files, or fake
returns to evade tax
 Obtaining refunds by fraud
• Deliberate suppression of sales to evade tax
 Opting for composition scheme even though a taxpayer is
ineligible

Penalty
If any of the offenses are committed then a penalty will have to be
paid under GST. The principles on which these penalties are based
are also mentioned by law.

For late filing

Late filing attracts penalty called late fee. The late fee is Rs. 100 per
day per Act. So it is 100 under CGST & 100 under SGST. Total will be
Rs. 200/day*. The maximum is Rs. 5,000. There is no late fee on
IGST in case of delayed filing.

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Along with late fee, interest has to be paid at 18% per annum. It
has to be calculated by the taxpayer on the tax to be paid. The time
period will be from the next day of filing to the date of payment.

For not filing

If you don't file any GST return then subsequent returns cannot be
filed. For example, if GSTR-2 return of August is not filed then the
next return GSTR-3 and subsequent returns of September cannot
be filed. Hence, late filing of GST return will have a cascading effect
leading to heavy fines and penalty (see below).
For the 21 offenses with no intention of fraud or tax evasion
An offender not paying tax or making short payments must pay a
penalty of 10% of the tax amount due subject to a minimum of Rs.
10,000.
Consider in case tax has not been paid or a short payment is made,
a minimum penalty of Rs 10,000 has to be paid. The maximum
penalty is 10% of the tax unpaid.
For the 21 offenses with the intention of fraud or tax evasion
An offender has to pay a penalty amount of tax evaded/short
deducted etc., i.e., 100% penalty, subject to a minimum of Rs.
10,000.
Additional penalties as follows-
TAX AMOUNT 100-200 LAKH 200-500 LAKH ABOVE 500
INVOLVED LAKHS
JAIL TERM UPTO 1 YEAR UPTO 3 YEAR UPTO 5 YEar

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FINE In all three
cases

Cases of fraud also

face penalties, prosecution, and arrest.

Inspection Under GST

The Joint Commissioner of SGST/CGST (or a higher officer) may
have reasons to believe that in order to evade tax, a person has
suppressed any transaction or claimed excess input tax credit etc.
Then the Joint Commissioner can authorize any other officer of
CGST/SGST (in writing) to inspect places of business of the
suspected evader.

Search & Seizure Under GST

The Joint Commissioner of SGST/CGST can order for a search. He
will order a search on the basis of results of inspection (or other
reason) if he has reasons to believe:
• There are goods which might be confiscated
 Any documents or books or other things which are hidden
somewhere. Such items can be useful during proceedings
Such incriminating goods and documents can be seized.

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Goods in Transit
The person in charge of a vehicle carrying goods exceeding Rs.
50,000 is required to carry the following documents:
• Invoice or bill of supply or delivery challan
• Copy of e-way bill (hard copy or via RFID)
The proper officer has the power to intercept goods in transit and
inspect the goods and the documents.
If the goods are in contravention of the GST Act then the goods,
related documents, and the vehicle carrying them will be seized.
The goods will be released only on payment of tax and penalty.
Before confiscating the goods, the tax officer shall give an option of
paying a fine instead of confiscation.

Compounding of Offences Under GST

Compounding of offenses is a shortcut method to avoid litigation.

In case of prosecution for an offense in a criminal court, the
accused has to appear before the Magistrate at every hearing
through an advocate. This becomes expensive and time-
consuming.
In compounding, the accused is not required to appear personally
and can be discharged on payment of compounding fee which
cannot be more than the maximum fine as applicable under GST.

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Compounding will save time and money. However, compounding
under GST is not available for cases where the value involved
exceeds 1 crore.

Prosecution Under GST

The prosecution is conducting legal proceedings against someone

in respect of a criminal charge.
A person committing an offense with the deliberate intention of
fraud, becomes liable to prosecution under GST, i.e., face criminal
charges. A few examples of these offenses are:
1. Issue of an invoice without supplying any goods/services- thus
taking input credit or refund by fraud
2. Obtaining refund of any CGST/SGST by fraud
3. Submitting fake financial records/documents or files, and fake
returns to evade tax

4. Helping another person to commit fraud under GST

Arrest Under GST

If the Commissioner of CGST/SGST believes a person has

committed a certain offense he can be arrested under GST by any

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authorized CGST/SGST officer (click here for the list of offenses for
which one can be arrested).
The arrested person will be informed of the grounds for his arrest.
He will appear before the magistrate within 24 hours in case of a
cognizable offense (Cognizable offenses are those where the police
can arrest a person without an arrest warrant. They are serious
crimes like murder, robbery, counterfeiting).

Appeals

A person unhappy with any decision or order passed against him

under GST can appeal against such decision.
The first appeal against an order by an adjudicating authority goes
to the First Appellate Authority.
If the taxpayer is not happy with the decision of the First Appellate
Authority they can appeal to the National Appellate Tribunal, then
to the High Court, and finally to the Supreme Court.
To avoid the long process of appeal and litigation, a taxpayer may
request for the advance ruling under GST. The taxpayer asks for
clarification from GST authorities on GST treatment before starting
the proposed activity. The tax authority gives a written decision
(called advance ruling) to the applicant on the query.

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Future of GST in INDIA

In the long-term, GST would be simplified even more. Globally,

countries that have benefitted from GST implementation typically
deploy two- or three- rates, as compared to the five-rate structure
in India. As the cascading effect disappears, inflation will reduce,
thus leading to a positive consumer outlook. As the tax revenue
rises, the fiscal deficit would improve.

The international business community has welcomed this changing

landscape of Indian business, and noted that the GST has helped
improve the ease of doing business in India. This is expected to
attract more FDI investments and help growth in exports.

Upcoming initiatives need to focus on capacity-building and

digital adoption
As immediate next steps, the government needs to address
capacity-building and digital adoption among the SMEs and MSMEs
in India. The overall compliance cost needs to be lowered and
technology is a great enabler here. Shifting a pen-and- paper
economy like India to a completely digital platform is a good start.
However, there has to be considerable investment both from the
government as well as the industry in this direction. Counseling
services and hand-holding guidance to file returns will be
important.

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 In hindsight, the GST has been a step in to the right direction. It
will have a long-term impact on the country's GDP growth, ease of
doing business, expansion of trade and industry, and the 'Make in
India' initiative. Most importantly, it will be significant in
establishing and promoting honest business practices, which will
propel India towards becoming a significant economic power.

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