INPUT TAX AND INPUT TAX CREDIT (ITC):

GST has revolutionized the world of Indian indirect taxation and Input Tax and Input Tax
Credit are its key features which help in eliminating cascading effect of taxes. When one buys
raw materials as inputs to create and sell product.
he has to pay tax on the material/input. So when one is required to pay tax on the finished
good/ output, he can reduce the tax that he already paid and now has to just pay the remaining
tax liability.
Meaning of the terms: Under GST law, the term 'input' denotes goods except
capital goods used by a supplier during his business to make outward supplies. This term,
with reference to services, denotes any service used by a supplier during his business to
generate supplies outwards. 'Input tax' is a tax imposed on the person when he receives
supply of goods and services which are used for his business.
Taxpayer is allowed to take credit of taxes paid on inputs, as self-assessed, in his
return. Input Tax Credit means at the time of paying tax on output, you can reduce the tax
you have already paid on inputs.
Say, an assessee is a manufacturer –
Tax payable on output (final product) is Rs 45,000

Tax paid on input (purchases) is Rs 30,000

One can claim Input Tax Credit of Rs 30,000 and only need to pay/deposit Rs
15,000 as GST.

GST Rule 36(4) is amended to remove 5% additional ITC over and above ITC appearing in
GSTR-2B. From 1st January 2022, businesses can avail ITC only if it is reported by the
supplier in GSTR-1/FF and it appears in GSTR- 2B.

Illustration 3:

GST Supply chain example (assuming GST rate of 12%)

Input Costs Sale Price
Supply of GST collected
GST Flow (excluding (excluding
Goods (Rs.)
GST) (Rs.) GST) (Rs.)
A weavers'
Union sells
superfine fabric
The weavers'
to a readymade 1,000 120
Union pays Zero
garments
GST of Rs. 120
manufacturer @
Rs. 1,120 per
metre
The The 1,000 2,500 180
manufacturer manufacturer
sells readymade pays GST of Rs.
 180 (after Input
shirts to a Tax Credit of
retailer's shop Rs. 120 and the
@ Rs. 2,800 per Weavers' Union
piece will also claim
ITC of Rs. 120)
The retailer
pays GST of Rs.
The retailer 300(after Input
sells the Tax Credit of
2,500 5,000 300
readymade shirt Rs. 300 and the
@Rs. 5,600 manufacturer
claims ITC
of Rs. 180)
No Input Tax
The customer
Credit is
purchases the
available to the Not Applicable Not Applicable Total Rs. 600
shirt for Rs.
ultimate
5,600
consumer.

(1) Conditions for claiming Input Tax Credit:

1. The claimant must have been registered as a taxable person under GST
[Section 16(1)]
2. Goods & services, on which a claimant wants to claim ITC, should have been
used only for business purposes
3. ITC can be claimed on taxable & 'zero rated supplies' (exports).
4. If the constitution of registered taxable person changes due to sale, merger or
transfer of business, then unused ITC shall be transferred to the sold, merged
or transferred business
5. The claimant can get credit of ITC in Electronic Credit Ledger on the common
portal in a provisional manner as prescribed in the GST law.
6. To claim ITC, supporting documents like tax invoice, debit note,
supplementary invoice, etc. must be presented.
7. One can claim ITC, if he has actually received some goods & services.
8. To claim ITC, the 'Input Tax' must have been paid through electronic cash
ledger or electronic credit ledger.
9. It is mandatory to file all the applicable GST returns under section 27.
10. For goods which are received in lots, ITC can be claimed only after the
claimant has received the final lot.

(2) ITC is not available (i.e. can't be claimed) in the following cases [U/s 16(9):
1. ITC cannot be claimed for goods & services used for personal purposes.
2. If one has acquired goods & services under a contract which results in
contraction of immovable property other than plant & machinery.
3. If one has paid tax on goods & services under GST Composition Scheme.
 4. If goods & services have been used to build immovable property other than
plant & machinery & such property is not transferred.
5. Such goods & services which have been used by employees for their personal
consumption.
6. If depreciation has been claimed on the cost of capital goods, then they are not
eligible for Input Tax credit.

(3) Reversal of Input Tax credit :

The benefit of 'Input Tax credit is available in respect of Goods and Services for
business purpose only. It cannot be used for exempted 'goods and services' and 'goods and
services' for non -business or personal use.
(1) Where a recipient fails to pay to the supplier of goods or services or both within a
period of 180 days from the date of issue of invoice by the supplier the benefit
availed (for ITC) will be reversed.
(2) If the input service distributor has received 'Credit Note' from the supplier; the
benefit availed (for ITC) will be reversed.
(3) Proportionate amount of ITC will be reversed if the supplies are partly used for
personal purpose also.
(4) Similarly proportionate amount of ITC will be reversed in case of party exempted
capital goods used for personal purposes also.
(5) Re-availment of input tax credit after reversal Us 16 (2) is also provided.

(4) Time Limit for Availing GST Input Tax Credit in India:
A registered taxable person can get ITC in the prescribed time and manner.
Following table narrates different situations in which ITC can be claimed for stock
or semi-finished goods, or finished goods.
i. Prescribed Day on which ITC can be claimed for stock, semi-finished goods or
finished goods (held on immediately preceding day):
Situation Details Day on which ITC can be
claimed for stock, SFG or FG
(held on immediately
preceding day)
1. If a person is liable to registration, The day from which he becomes
or applied for registration, or is liable to pay tax
granted registration
2. If a person takes voluntary The day of registration
registration

3. A registered taxable person who The day from which he becomes

stops liable to tax normally (u/s 7)
paying tax under composition levy
scheme
(ii) Other conditions:
1. ITC mentioned for above situations can be claimed only within one year from the date
of issue of tax invoice relating to supply.
2. In any other case, the last date to claim ITC is earlier of the two:
 Before filing of valid return for the month of September (under section 27)
following the end of F.Y. to which such invoice is related, or
 Before filing of the annual return. As per section 30, the last date for filing of
annual return is 31st December following the end of the financial year.
(iii) How is Input Tax Credit Used?
The order for utilization of tax credit has been provided under section 49(5) of the
CGST Act.

IGST Credit CGST Credit SGST/UTGST Credit

(Total of Input (Total of Input (Total of Input Tax Credit)
Tax Credit) Tax Credit)

Sequence of Its Sequence of its Sequence of its

Utilization (Set-off) Utilization (Set-off) Utilization (Set-off)
(1) IGST Liability (1) CGST Liability
(2) CGST Liability (2) IGST Liability (1) SGST/UTGST
(3) SGST / UTGST Liability
Liability (2) IGST Liability
(Note: It cannot be used
Summary: to settle CGST)
1. IGST credit should be fully utilised first.
2. In case of CGST liability, CGST credit is to be utilised first and then IGST credit.
However, one must take into consideration that no IGST credit is pending.
3. In case of SGST liability, SGST credit is to be utilised first and then IGST credit.
However, one must take into consideration that no IGST credit is pending.
4. CGST credit cannot be utilised against setting off SGST liability and vice versa,
SGST credit cannot be utilised to set off CGST liability.
5. The main aim while setting off input tax credit against tax liability is to have
minimum tax pay-out after complying with all provisions of the Act.
Amendment made with effect from July, 2019:
From July, 2019 onwards following mode of Utilization of ITC has been made available.

Liability of → IGST CGST SGST

Priority for Utilization of ITC
 IGST 1 2* 3
Not permitted
CGST 2 1
Not permitted
SGST 2 1

* The order of utilization of IGST credit post off-set to IGST liability can be in any order
or proportion between CGST/SGST but the only pre-condition is exhausting IGST
liability completely before using other credits.
Hence, from the above table for new rules, it can be concluded that any taxpayer must
begin with set-off process starting with ITC of IGST and utilise it completely before
proceeding to utilise the ITC of CGST or ITC of SGST.
Let us take an example to understand the above new provision of utilization of ITC
(credit).
Suppose, surplus of ITC from IGST is Rs. 15,000 and liabilities of CGST and SGST
are Rs. 8,500 each. Now, the surplus of ITC from IGST may be used to set off CGST
liability of Rs. 8,500 in full and the balance of Rs. 6,500 may be used to set-off SGST
liability partly. OR ITC from IGST may be used to set-off SGST liability of Rs. 8,500 in
full and the balance of Rs. 6,500 may be used to set-off CGST liability partly. OR ITC
from IGST may be used to set- off both the liabilities equally Rs. 7,500 each (or in any
proportion as decided by the assessee).

[5] FEW DEFINITIONS:

(1) 'Goods':
Section 2(52) of the CGST Act defines "goods" thus:
"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 the contract of supply."
Explanation: Any "moveable property" is 'goods'. Intagible assets like copyright,
trademark, royalty on mining lease, carbon credit, electricity are also considered 'goods'.
Article 366(12) of the Constitution of India gives an inclusive definition of 'goods' which
says that 'Goods' includes all materials, commodities and articles;
Here, once again the definition uses the expressions: "Goods" means". It, therefore,
means that the definition is not inclusive but exhaustive. In other words, the 'goods' could be
of various types of movable property and could not encompass any other item or things
within its fold except what is specifically mentioned in the definition itself.
 In order to decide as to whether a particular transaction shall be eligible to GST, it should
either be "goods" or "service". That is why one needs to understand the meaning, scope and
intent the word "goods".
(2) 'Services' [section 2 (102)]:
After having understood the meaning of "goods", let us understand the meaning of the
word "Service". Basically, 'service' means any economic activity resulting in 'value addition'.
Another feature of 'service' is that it is instantly perishable, and it cannot be stored.
Remember that service provided/availed cannot be 'returned' to service provider or
transferred to another.
Under the Finance Act, 1994, section 65 deals with the definition of various "taxable
service". Under the old law. i.e. Finance Act, 1994, the levy of service tax was attracted when
a taxable service was provided by a defined service provider to a defined service receiver.
Unless a service was to be regarded as being taxable and being provided by a defined service
provider to a defined service receiver, it would not be taxed.
As per Section 2 (102) of the Central Goods and Service Act (CGST), '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.
(3) 'Aggregate Turnover’:
Aggregate turnover means the aggregate value of -
(a) all taxable supplies pertaining to intra State/Inter State activates;
(b) exempted supplies; and-
(c) exports of goods and/or services or both.
Aggregate turnover is required to be computed on PAN-India basis for the person having
the same Permanent Account Number. It includes value of stock transfers/branch transfer.
However it does not include the following -
(a) the value of inward supplies on which tax is payable by a person on reverse charge
basis, and
(b) CGST, SGST, UTGST, IGST and GST compensation cess.
(4) "Person" [Section 2(84)] :
"person" includes-
(a) an individual;
(b) Hindu Undivided Family;
(c) company (including government company).
(d) firm;
(e) 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 clause (45) of section 2 of the Companies Act,
2013;
(h) any 'body corporate' incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above.
(5) Taxable Person :
Under the GST law, a 'taxable person' is a person who carries on any business at any
place in India and who is registered or required to be registered under the GST Act. Any
person who engages in economic activity including trade and commerce is treated as taxable
person.
'Person' here includes individuals, HUF, company, firm, LLP, an AOP/BOL, any
corporation or Government Company, body corporate incorporated under laws of foreign
country, co-operative society, local authority, government, trust and artificial juridical person.
(6) Business and Place of Business:
"Business" includes -
(a) Any trade, commerce, manufacture, profession, vocation or any other similar activity,
whether or not it is for a pecuniary benefit;
(b) Any activity or transaction in connection with or incidental or ancillary to (a) above;
(c) Any activity or transaction in the nature of (a) above, whether or not there is volume,
frequency, continuity or regularity of such transaction;
(d) Supply or acquisition of goods including capital assets and services in connection
with commencement or closure of business;
(e) Provision by a club, association, society, or any such body (for a subscription or any
other consideration) of the facilities or benefits to its members, as the case may be:
(f) Admission, for a consideration, of persons to any premises; and 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;
(g) Any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public authorities
shall be deemed to be business."
"Place of Business" includes -
 (a) a place from where the business is ordinarily carried on, and includes a warehouse,
a.godown or any other place where a taxable person stores his goods, supplies or
receives goods or services or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever
name called.
(7) Supply, Composite supply, Mixed Supply, Taxable Supply, Exempted Supply and
Non-Taxable Supply :
"Supply" means a supply of goods or services or both which is leviable to tax under this
Act; '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.
Important points to be noted:

1. Business includes any trade, commerce, manufacture, etc.; regardless of the fact
whether such activities are undertaken regularly or occasionally (volume, frequency
or continuity are not taken into consideration).
2. Wager is included in the definition of business (betting is covered by GST).
3. Education service is covered.
4. Acquisition of goods / capital goods in connection with commencement of business
is covered. Likewise, supply of goods after closer of business is also covered.
5. A social club providing services to its member is covered in the definition of
business.
6. Clause (d) may require understanding of employment as differentiated from
profession. If a practicing chartered accountant / cost accountant provides
independent director services, it is treated as business.

Elements that constitute Supply:

In order to constitute a 'Supply', the following elements are required to be satisfied, -
(1) The activity involves supply of Goods or Services or both.
(2) The supply is for a consideration unless otherwise specifically provided for.
(3) The supply is made in the course or furtherance of business.
(4) It is made in the taxable territory.
(5) The supply is a taxable supply, and
(6) It is made by a taxable person.
"Composite Supply" has been defined to include any combination of services and/ or
goods provided in the course of furtherance of business. It means-
(a) a supply made by a taxable person
(b) to a recipient consisting of two or more taxable supplies of goods or services or both,
or any combination thereof,
(c) which are naturally bundled and supplied in conjunction with each other in the
ordinary course of business, one of which is a principal supply.
 Examples: (1) Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite supply and supply of goods
is a principal supply.
(2) Similarly, 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 service are ancillary.
"Mixed Supply" means two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable person for a single
price where such supply does not constitute a composite supply.
Examples:
(1) A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each
of these items can be supplied separately and is not dependent on any other. It shall not
be a mixed supply if these items are supplied separately.
(2) A shopkeeper is selling storage water bottles along with refrigerator. Bottles and the
refrigerator can easily be priced and sold separately. Thus, it is also considered 'mixed
supply'.

(8) Taxable Territory and Non-Taxable Territory, Output Tax:

"Taxable Territory": As per Section 2 (109) of Central Goods and Service Act, 2017,
"taxable territory" means the territory to which the provisions of this Act apply;
"Non-Taxable Territory": As per Section 2 (79) of Central Goods and Service Act,
2017, "Non-taxable Territory" means the territory which is outside the taxable territory;
"Output Tax": As per Section 2 (82) of Central Goods and Service Act, 2017, "Output
Tax", in relation to a taxable person, means the tax chargeable under this Act on taxable
supply of goods or services or both made by him or by his agent but excludes tax payable by
him on reverse charge basis.
(9) Reverse Charge:
Generally, the supplier of goods or services is liable to pay GST. However, in specified
cases like imports and other notified supplies, the liability may be cast on the recipient under
the reverse charge mechanism. Reverse charge means the liability to pay tax is on the
recipient of supply of goods or services instead of the supplier of such goods or services in
respect of notified categories of supply.
There are two type of reverse charge scenarios provided in law:
1. First is dependent on the nature of supply and/or nature of supplier.
2. Second scenario relates to taxable supplies by any unregistered person to a
registered person.
The Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid on reverse
charge basis by the recipient of such goods or services or both and all the provisions of this
Act shall apply to such recipient as if he is the person liable for paying the tax in relation to
the supply of such goods or services or both.
(10) Work Contracts: Work contracts have been defined to mean an agreement for
carrying out for cash, deffered payment or other valuable consideration, building
construction, fabrication, erection, installation, fitting out, improvement, modification, repair,
renovation or commisssioning of any moveable or immovable property. Deeming of work
contracts as services should simplify taxation of work contracts. However, whether a
particualar contracting structure qualifies as work contracts, is a determination that the tax-
payer would need to undertake.
[6] COMPOSITION LEVY (Section 10), LEVY AND COLLECTION
(a) Composition Levy: Composition scheme under the law is for small businesses /
service provider. This is to bring relief to such units so that they need not be burdened with
the compliance provisions under the law. Thus, an option has been provided where they can
opt to pay a fixed percentage of turnovers as fees in lieu of tax and be relieved from the
detailed compliance of the provisions of law. Composition levy would be generally opted by
persons who are supplying goods & services or both to the end consumer.
(i) Eligibity (Who can opt for this scheme ?): Notwithstanding anything to the contrary
contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a
registered person, whose aggregate turnover in the preceding financial year did not exceed
Rs. 1.5 crore, in case of North-Eastern States and Himachal Pradesh did not exceed Rs. 75
lakhs may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as
may be prescribed, but not exceeding, Manufacturers and Traders opting for composition
scheme are also allowed to provided services provided that the value of such services should
not exceed
1. 10% of turnover in a State or Union territory in the preceding financialyear OR
2. Rs. 5,00,000 - whichever is higher
However, the value of exempt supply of services provided by way of extending deposits
loans or advances in so far as the consideration is represented by way of interest or discount
shall not be taken into account for determining the value of turnover in a State or Union
territory.
(ii) Rates for Composition Levy for Supplier of Goods and Restaurant Services
Sr. No. Particulars Rate
1. Manufacturers other than manufacturers of 1% (0.5% CGST +0.5% SGST)
ice-cream, pan masala, tobacco and aerated
water

2. Traders or any other supplier 1% (0.5% CGST + 0.5% SGST)

3. Restaurant services 5% (2.5% CGST +2.5% SGST)

1. (i) Threshold Limit for Registration under Composition Scheme for Supplier of
Services: The GST Council has extended the scope for applicability of composition
scheme to the service providers other than provider of restaurant services who have
annual turnover of Rs. 50,00,000 in the preceding financial year.
(ii) Rates for Composition Levy for supplier of services
Under this, the service providers shall be liable to pay GST at the rate of 6% (3% CGST +
3% SGST).
Option to come under composition levy can be exercised on fulfilment of certain
prescribed conditions and restrictions.
Note: Provided that the Government may, by notification, increase the said limit further to
such higher amount, as may be recommended by the GST Council.
(iii) The conditions for opting Composition scheme under GST are as follows:
1. No Input Tax Credit can be claimed by a dealer opting for composition scheme
2. The taxpayer can only make intra-state supply (sell in the same state), i.e. no inter-state
supply of goods
3. The dealer cannot supply GST exempted goods
4. Taxpayer has to pay tax at normal rates for transactions under Reverse Charge
Mechanism
5. If a taxable person has different segments of businesses (such as textile, electronic
accessories, groceries, etc.) under the same PAN, they must register all such businesses
under the scheme collectively or opt out of the scheme
6. The taxpayer has to mention the words 'composition taxable person' on every notice or
signboard displayed prominently at their place of business
7. The taxpayer has to mention the words 'composition taxable person' on every bill of
supply issued by him. He can not issue a tax invoice.
Note: As per the CGST (Amendment) Act, 2018, a manufacturer or a trader can now also
supply services to an extent of ten per cent of turnover or Rs. 50 lakhs, whichever is higher.
This amendment is applicable from the 1st of Feb., 2019.
The following people cannot opt for the scheme:
1. Supplier of services other than restaurant related services
2. Manufacturer of ice-cream, pan masala, or tobacco
3. Casual taxable person or a non-resident taxable person
4. Businesses which supply goods through an e-commerce operator
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 unless all such registered persons opt to
pay tax under that sub-section.
 (a) 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).
(b) 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.
(c) 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
Note: Salient features of the Composition Scheme recommendations by the GST Council
in its 23rd GST Council Meeting:
1. Uniform rate of tax @ 1% under composition scheme for manufacturers and traders (for
traders, turnover will be counted only for the supply of taxable goods). No change in rates
for composition scheme for restaurants under composition scheme (presently at taxes at
5%)
2. Supply of services by Composition taxpayer upto Rs 5 lakhs per annum will be allowed by
exempting the same.
3. Annual turnover eligibility for composition scheme will be increased to Rs 2 crores from
the present limit of rupees 1 crore under the law. Thereafter, eligibility for composition
will be increased to Rs. 1.5 crore per annum.
4. Necessary amendments to the CGST Act and SGST Acts are being carried out in due
course.

(c) Alternative, Composition Scheme :

As per the recommendation of GST Council (in its 32nd meeting) the Finance (No. 2)
Act, 2019 has inserted sub-section (2A) in section 10 of CGST Act for this purpose.
Salient features of this scheme are as under :
(1) The scheme is applicable w.e.f. April 1, 2019.
(2) The scheme is applicable for Intra-State supply of goods or services or both.
(3) It is available to registered persons whose "aggregate turnover" in the preceding financial
year is Rs. 50 lakhs or less.
(4) This scheme is not available to a registered person if he is eligible for Composition
Scheme.
(5) GST is payable under the Alternative Composition Scheme @ 6% (i.e.,
(6) CGST: 3% + SGST : 3%).
(7) This special rate is applicable for the first supply of goods or services or both upto an
aggregate turnover of Rs. 50 lakhs made on or after April 1 in any financial year by a
registered person.
(d) Basis of charge of GST:
GST is applicable on supply of goods or services or both.
Different taxes under GST are as under :
(1) Inter-State Supply: (i.e., supply from one State / Union Territory to another State /
Union Territory) :
For an example
- Supply from Gujarat to Madhya Pradesh.
- Supply from Chandigarh to Karnataka.
- Supply from Telangana to Andaman.
- Supply from Lakshadweep to Kerala.
In such cases, GST is levied as per IGST Act.
(2) Intra-State Supply: (i.e., supply within a State or Union Territory):
For an example -
Supply from a trader in Gujarat to another person in Gujarat.
Intra-State Supply (i.e., supply within a Union Territory) :
For an example -
Supply from a supplier in Chandigarh to another person in Chandigarh.
In such cases, GST is levied as per SGST Act + CGST Act.
Six different rates have been notified for the purpose of charging tax on supply of
goods under IGST Act, CGST Act, SGST Act and UTGST Act.
For the purpose of levying GST all supplies of good have been covered under six
Schedules. Given below is a summary chart of such rates :
Different Rates On On Intra-State Supply of Goods
Inter –
State CGST SGST/ GST
Supply UTGST (i.e. CGST + SGST/
IGST UTGST)

Schedule-1- 5% 5% 2.5% 2.5% = 5%

Schedule-II-12% 12% 6% 6% =12%

Schedule-III - 18% 9% 9% =18%

18%

Schedule-IV - 28% 14% 14% = 28%

28%

Schedule-V- 3% 3% 1.5% 1.5% = 3%

(on gold)
 Schedule-VI- 0.25% 0.125% 0.125% = 0.25%
0.25% (on rough
precious
and semi-precious
stones)

Four different GST rates have been notified for the purpose of charging tax on supply
of services under IGST Act, CGST Act, SGST Act and UTGST Act as follows:
Different Rate Inter- Intra-State Supply GST
State
Supply (i.e. CGST +
SGST/UTGST)
IGST CGST SGST/
UTGS
T

Category-I :5% 5% 2.5% 2.5% 5%

Category-II: 12% 12% 6% 6% 12%

Category-III: 18% 18% 9% 9% 18%

Category-IV 28% 28% 14% 14% 28%

(e) Levy and Collection (Section 9):

(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the
central goods and services tax on all intra-State supplies of goods or services or both,
except on the supply of alcoholic liquor for human consumption, on the value
determined under Section 15 and at such rates, not exceeding twenty per cent., as may
be notified by the Government on the recommendations of the Council and collected
in such manner as may be prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), and natural gas and aviation turbine fuel shall be levied
with effect from such date as may be notified by the Government on the
recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by notification,
specify categories of supply of goods or services or both, the tax on which shall be
paid on reverse charge basis by the recipient of such goods or services or both and all
the provisions of this Act shall apply to such recipient as if he is the person liable for
paying the tax in relation to the supply of such goods or services or both.
(4) The Government may, on the recommendations of the Council by notification, specify
a class of registered persons who shall, in respect of supply of specified categories of
goods or services or both received from an unregistered supplier, pay the tax on
 'Reverse Charge' basis as the recepient of such supply of goods or services or both,
and all the provisions of this Act shall apply to such recepient as if he is the person
liable for paying the tax in relation to such supply of goods or services or both.
(5) The Government may, on the recommendations of the Council, by notification,
specify categories of services the tax on intra-State supplies of which shall be paid by
the electronic commerce operator if such services are supplied through it, and all the
provisions of this Act shall apply to such electronic commerce operator as if he is the
supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in
the taxable territory, any person representing such electronic commerce operator for any
purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical
presence in the taxable territory and also he does not have a representative in the said
territory, such electronic commerce operator shall appoint a person in the taxable territory for
the purpose of paying tax and such person shall be liable to pay tax.

[7] GST REGISTRATION

:
A person without GST registration can neither collect GST from his customers nor can
claim any input tax credit of GST paid by him.
1. Based on Aggregate Turnover [Sec. 22(1)]: Every supplier shall be liable to be
registered in the State or Union Territory (other than special category States) from where
he makes supply of goods or services or both, if his aggregate turnover in a financial year
exceeds Rs. 20 lakhs (for special category state exceeds Rs. 10 lakhs). With effect from
1st April, 2019 these limits have been raised to Rs. 40 lakhs and 20 lakhs respectively.
Where the application for registration has been submitted within prescribed days from
the date on which the person becomes liable to registration, the effective date of
registration shall be the date on which he became liable for registration.
Where an application for registration has been submitted by the applicant after thirty
days from the date of his becoming liable to registration, the effective date of registration
shall be the date of grant of registration.
In case of a person taking registration voluntarily while being within the threshold
exemption limit for paying tax, the effective date of registration shall be the date of order
of registration.
2. ITC Benefit: A registered person is entitled to take credit of input tax charged on
supply of goods or services or both to him which are used or intended to be used in the
course or furtherance of business, subject to other conditions and restrictions.
Registration under Goods and Service Tax (GST) regime confers the following
advantages to the business:
1. Legally recognized as supplier of goods or services.
 2. 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.
3. 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.
4. Getting eligible to avail various other benefits and privileges rendered under the
GST laws.
[8] GST COUNCIL :

As per Article 279A (1) of the amended Constitution, the GST Council has been
constituted by the President. The notification for bringing into force Article 279A with
effect from 12th September, 2016 was issued on 10th September 2016.
As per Article 279A of the amended Constitution, the GST Council which is a joint
forum of the Centre and the States which consists of the following members:
1. Union Finance Minister - Chairperson
2. Union Minister of State, in-charge of Revenue of Finance –Member
3. Minister in-charge of finance or taxation or any other Minister nominated by each
State Government Members
Note:
(i) The Secretary of Revenue Department will work as Ex-Officio Secretary to the GST
Council.
(ii) The Chairperson of the Central Board of Excise and Custom will be the permanent
invitee in all the proceedings of the GST Council who will not have voting rights.
(1) The Goods and Services Tax Council shall make recommendations to the Central
Government and the Governments of States/Union Territories on-
(a) the taxes, cesses and surcharges levied by the Union, the States and the local
bodies which may be subsumed in the goods and services tax;
(b) the goods and services that may be subjected to, or exempted from the goods and
services Tax.
(c) 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;
(d) the threshold limit of turnover below which goods and services may be exempted
from goods and services tax;
(e) the rates including floor rates with bands of goods and services tax; (f) any special
rate or rates for a specified period, to raise additional resources during any natural
calamity or disaster;
(f) 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
(g) any other matter relating to the goods and services tax, as the Council may decide.
 (2) 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.
3. While discharging the functions conferred by this Article, the Goods and Services Tax
Council shall be guided by the need for a harmonized structure of goods and services
tax and for the development of a harmonized national market for goods and services.
4. One half of the total number of Members of the Goods and Services Tax Council shall
constitute the quorum at its meetings.
5. The Goods and Services Tax Council shall determine the procedure in the
performance of its functions.
6. 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:-
(a) the vote of the Central Government shall have a weightage of one- third of the
total votes cast, and
(b) the votes of all the State Governments taken together shall have a weightage
of two-thirds of the total votes cast in that meeting.
7. No act or proceedings of the Goods and Services Tax Council shall be invalid merely
by reason of -
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a member of the Council; or
(c) any procedural irregularity of the Council not affecting the merits of the case.
8. The Goods and Services Tax Council shall establish a mechanism to adjudicate any
dispute-
(a) between the Government of India and one or more States, or
(b) between the Government of India and any State or States on one side and one
or more other States on the other side, or
(c) between two or more States, arising out of the recommendations of the
Council or implementation thereof.
GST Network :
The Goods and Service Tax Network (GSTN) is a non-profit, non-government
organisation or company which manages the entire IT system of the GST portal. It provides
shared IT infrastructure and service to both Central and State Government including tax-
payers and other stakeholders. The services of registrations, returns and payment to all tax-
payers are provided by GSTN. It is the interface between the Government and the tax-payers.
The Indian Government uses GSTN portal to:
i. Track every financial transactions
ii. Provide taxpayers with all GST related services - from registration to filling
taxes and maintaining all tax details.

Its features and benefits are :

(1) Trusted and Reliable
(2) Security First
(3) No added overheads
 The GST system project is a unique and complex IT initiative. Currently, the Centre
mand States indirect tax administrations work under different laws, regulations, procedures
and formats and consequently the IT systems work as indepedent sites. Integrating them for
GST implementations is complex since it requires the entire indirect tax eco-system so as to
bring all the tax administrations (Centre, States and Union Territories) to the same level.
GSTN system is working very efficiently although sometime it faces minor problems
which are also being solved in due course of time.
A very effective and quick information technology network is required for
administration of GST to ensure proper complaince and avoid misuse of input tax credit.
Administration of GST will be predominantly based on Information Technology. Almost all
procedures relating to registration, payment of GST, record of input tax credit and periodic
returns will be done electronically.
There is controlling role of IT in administration and management of GST.
Invoice-wise matching of input tax credit is also done. Such matching on such a mass
scale has nowhere else been tried in the world.

GST Service Providers :

A GSP is a service provider who helps the tax-payers to comply with the provisions
of the GST law through its web platform. Goods and Service Tax Network (GSTN) receives
the 'returns' filed by companies through GST Suvidha Provider.
GSP is reckoned as a facilitator for the businesses in India to comply with the rules
and provisions of the GST Laws through the GST software.
GSP is a private non-profit entity in which the Central and State Governments
together hold 49.5% stake. GST has created an agenda for providing GST Suvidha Provider
licences to third party applications who can become Application Service Provider (ASP) by
building software that connects to any interface like desktops, mobiles devices etcs.
The GSPS and ASPs together are expected to provide simple and innovative methods
to interact with the GST systems right from the time of registration to uploading the invoice
to the filing of tax. It is in time with the Digital India initiative of creating a paperless tax
system and making it simple to do business.
The tax-payer can choose one or more ASP or GSP of their choice, i.e. they can
register with one provider and pay their tax with another GSP.

[9] EXEMPTION UNDER GST :

Understanding the taxability also involves knowing whether an item is exempted or

not under GST, Due to the scope of taxable supplies being widened under GST. GST
exemptions have clearly been defined. Not just knowing the exemption list, but also
understanding the implication of item being exempted is important as certain conditions are
attached to it like reversing the ITC.
Also, what can be Nil-rated today may become charged to a higher tax rate in the
future. Hence, clearly demarking the various terms as (1) Nil rated (ii) Exempted (iii) Zero
rated, and (iv) Non-GST supplies under GST is important.
1. Exempted Supplies :
Exempted supplies comprise the following three types of supplies:
1. Absolute Exemption: Supplies taxable at a 'Nil' rate of tax (0% tax); For an
example, salt, grains, jaggery etc.
2. Supplies that are wholly or partially exempted from CGST or IGST; e.g. Fresh
milk, fresh fruits, curd, bread etc.
3. Non-taxable supplies as defined under Section 2(78) - supplies that are not taxable
under the Act (for an example, Alcholic liquior for human consumption). Tax need
not be paid on these supplies. Input Tax Credit attributable to exempted supplies
will not be available for utilization/set-off.
*Zero rated supplies such as exports would not be treated as supplies taxable at 'Nil'
rate of tax. For an example, supplies made to SEZ or SEZ developers.
2. Conditions for granting exemption :
1. Such exemption should be in public interest.
2. Issue of notification is necessary.
3. GST Council must have recommended it.
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 also be granted in
exceptional circumstances.
6. Registered person supplying the goods and /or services is not entitled to collect tax,
where the supply enjoys an absolute exemption.
3. Classification of Exemptions:
i. Supplier may be exempted - Exemption to person making supplies. i.e.
supplier regardless of the nature of outward supply.
For an example: Services by Securities and Exchange Board of India, Services
by Charitable entities."
ii.Certain supplies may be exempted - Certain supplies due to their nature and
type are exempted from GST.
For an example: Services by way of sponsorship of sporting events.
4. Types of Exemptions :
i. Unconditional/absolute exemption: Exemption without any conditions.
For an example: Transmission or distribution of electricity by an electricity
transmission or distribution utility; Services by Reserve Bank of India.
ii. Conditional exemption: Exemption subject to certain conditions. For an example:
Services by a hotel, inn, guest house, club or campsite by whatever name called, for
residential or lodging purpose, having declared tariff of a unit of accommodation less
 than Rs. 1,000 per day. The GST rate for room tariffs of Rs. 7,500 and above is 18%
and between Rs. 1,000 and Rs. 7,499 it is 12%.
iii. 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 Rs.
5,000 in a day.

5. Non-taxable supply:
'Non-taxable supply' means a supply of goods or services or both which is not leviable to
tax under CGST Act or under the IGST Act.
A transaction must be a 'supply' as defined under the GST law to qualify as a non-taxable
supply under the GST.
Note: Only those supplies that are excluded from the scope of taxation under GST are
covered by this definition - i.e. alcoholic liquor for human consumption, articles listed in
section 9(2) or in schedule III.
It must also be noted that the following items are not out of scope of GST. That means
GST rate has not yet been announced or notified for them.
(i) petroleum crude, (ii) high-speed diesel, (iii) motor spirit (commonly known as petrol),
(iv) natural gas, and (v) aviation turbine fuel.
6. Negative list under GST :
i. Services by employee to employer in the course / relation to employment
ii. Services of funeral, burial, crematorium or mortuary
iii. Sale of land
iv. Sale of completed buildings
v. Actionable claims (other than lottery, betting and gambling)
vi. Services by any Court or Tribunal
vii. Functions performed by the MPs, MLAs, etc
viii. Duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity.
ix. Supply from non-taxable territory to another non-taxable territory.
x. Supply of warehouse goods to any person before clearance for home consumption.
xi. Liquor licence.

[10] BROAD IDEA ABOUT RATES OF GOODS AND SERVICE TAX:

The GST Council, the apex decision-making body for the new tax, has fixed the tax
framework under the Goods and Services Tax (GST) which is rolled out on July 1, 2017. Tax
rates have been finalised (subject to changes as per GST Council's decisions) - various items
with a majority of items being kept under the 18 per cent slab.
GST Tax Rates on some common items
 Tax Rates Products

5% Household necesssities such as edible oil, sugar, spices, tea, and coffee
(except instant) are included. Coal, Mishti/Mithai (Indian Sweets) and life-
saving drugs are also covered under this GST slab.

12% This includes computers and processed food

18% Hair oil, toothpaste and soaps, capital goods and industrial intermediaries
are covered in this slab.

28% Luxury items such as small cars, consumer durables like AC and
refrigerators, premium cars, cigarettes and aerated drinks, high-end
motorcycles are included here.

Though edible items like sugar, tea and coffee are included in the 5% slab, milk does
not attract any tax under the new GST regime. The idea behind this is to ensure that basic
food items are available for everyone but instant food is kept out of this category.
1. Basic household items like toothpaste and hair oil, which currently attract 28% tax, will
be taxed at 18% only.
2. Sweets will also be taxable at 5%.
3. Tax rates on coal has also been reduced to just 5% in order to relieve the pressure on
power industries.
4. GST also gives a major push to domestic industries as they will be able to procure
seamless input credit for capital goods. 'Make in India' campaign is set to flourish after
this reform.
Time of Supply: Time of supply is a relevant measure under the GST law for every
transaction enered into by the supplier of goods and services. It means the point in time when
goods have been deemed to be supplied or services have been deemed to be provided for
determining when the taxpayer is liable to pay taxes.
The time of supply is the point when the supply is liable to GST. One of the factors
relevant for determining time of supply is the person who is liable to pay tax. In reverse
charge, the recipient is liable to pay GST.
In case of supply of goods, time of supply is earliest of:
(a) date of receipt of goods; or
(b) date of payment as per books of account or date of debit in bank account, whichever is
earlier; or
(c) the date immediately following thirty days from the date of issue of invoice or similar
other document.
In case of supply of services, time of supply is earliest of:
(a) date of payment as per books of account or date of debit in bank account, whichever is
earlier; or
 (b) the date immediately following sixty days from the date of issue of invoice or similar
other document.
Illustration 4:

On 4-12-2022, V. R. Mehman a famous music composer, received Rs. 3 crores of

consideration from Zilmil Music Co. Ltd. for sale of copyright of his original music allbum.
He finished his work & made available the CD to the music company on 20-10-2022 and
raised the invoice on 24-10-2022.
What will be the time of supply as per CGST Act, 2017 ?
Note: Above service is taxable under reverse charge basis.
(C. A., Inter, May, 2018)
Solution :

Time of supply shall be earlier of the following dates :

(i) Date of payment 4-12-2022
(ii) Date of immediately following:
60 days from the date of issue of invoice (i. e. 24-10-2022) 24-12-2022
Time of supply shall be 4-12-2022

Illustration 5:

Mr. Ajay, a registered supplier of goods, pays GST under regular scheme and
provides the following information for the month of May, 2022.
Particulars Rs.

i. Inter-State taxable supply of goods 10,00,000

ii. Intra-State taxable supply of goods 2,00,000
iii. Intra-State purchase of taxable goods 5,00,000

He has the following Input tax credit at the beginning of May, 2022
Nature ITC Amount in (Rs.)
CGST 20,000
SGST 30,000
IGST 25,000

Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
Both inward and outward supplies are exclusive of taxes wherever applicable.
 All the conditions necessary for availing the ITC have been fulfilled. Compute the net
GST payable by Mr. Ajay for the month of May, 2022.
(C. A., May, 2018 - Modified)

Solution :

Computation of GST payable by Mr. Ajay on outward supply

Particulars Rs. GST (Rs.)
(i) Intra-State Supply of Goods :
CGST @ 9% on Rs. 2,00,000 18,000
SGST @9% on Rs. 2,00,000 18,000 36,000
(ii) Inter-State Supply of Goods :
IGST @ 18% on Rs. 10,00,000 1,80,000
Total GST Payable 2,16,000

Computation of total ITC

Particulars CGST SGST IGST
@ 9% @ 9% @18%
Opening ITC 20,000 30,000 25,000
Add: ITC on Intra-State purchase
(Rs. 5,00,000) 45,000 45,000 -
65,000 75,000 25,000

Computation of GST Payable

Particulars CGST SGST IGST
(Rs.) (Rs.) (Rs.)
Total ITC available 65,000 75,000 25.000
Less : GST Payable 18,000 18,000 1,80,000
Balance ITC. available 47,000 57,000 (-)1,55,000
Less: Utilised for IGST 47,000 57,000 1,04,000
GST payable - - 51,000

Illustration 6:

Fun Pharma Private Limited, a registered supplier is engaged in the manufacture of

taxable goods. The company provides the following information of GST paid on the
purchases made/input services availed by it during the month of May, 2022
 Particulars GST paid (Rs.)

(i) On purchases of cabs used for the transportation of its 3,30,000

employees
(ii) On inputs consisting of three lots, out of which first lot was 1,25,000
received during the month
(iii On Capital Goods (out of three items, invoice for one item 2,50,000
) was missing and GST paid on that item was Rs. 25,000)
(iv) On outdoor catering service availed on Women's Day 72,000

Determine the amount of Input Tax Credit available with M/s Fun Pharma Private
Limited for the month of May, 2022 by giving necessary explanation for treatment of various
items. All the conditions necessary for availing the input tax credit have been fulfilled.
(C. A. May, 2018 - Modified)

Solution:

Particulars ITC
(i) Purchase of cabs used for transportation of its employees [No ITC is -
available on motor vehicles except when these are used for making
taxable supply or for transporation of goods.]
(ii) Input consisting of three lots, out of which first lot was received -
during the month
[Where the goods against an invoice are received in lots or
istallments, the registered person shall be entitled to take credit on
receipt of last lot or instalment.]

(iii) Capital Goods [Rs. 2,50,000 - Rs. 25,000] 2,25,000

[No registered person shall be entitled to the credit of input tax is
respect of any supply unless he is in possession of a tax invoice]
(iv) Outdoor catering -
[No ITC is available on-outdoor catering]
2,25,000

Illustration 7:
Mr. Nirmit, a supplier of goods, pays GST under regular scheme. He is not eligible
for any threshold exemption. He has made the following outward taxable supplies in the
month of April, 2022.
Rs.
Intra-State supplies of goods 6,00,000
Inter-State supplies of goods 2,00,000
 He has also furnished following information in respect of purchases made by him
from registered dealers during April, 2022.
Rs.
Intra-State purchase of goods 4,00,000
Inter-State supplies of goods 50,000

Balance of ITC available at the beginning of April, 2022

Rs.
CGST 15,000
SGST 35,000
IGST 20,000

Notes:
i. Rates of CGST, SGST and IGST to be 9%, 9% and 18% respectively, on both inward
and outward supplies.
ii. Both inward and outward supplies given above 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. Nirmit for the month of April, 2022.
[C.A. May, 2018 - modified]
Solution :

Calculation of outward GST Payable

Particulars Intra-State Inter-State
Outward Supply (Rs.) 6,00,000 2,00,000
Rate 9% 18%
CGST 54,000 -
SGST 54,000 -
IGST - 36,000

Calculation of ITC available for the month of April, 2022

Inward Rate Intra-State Inter-State
Supply (Rs.) CGST (Rs.) SGST (Rs.) IGST
(Rs.)
4,00,000 9% +9% 36,000 36,000 -
50,000 18% - - 9,000
36,000 36,000 9,000

Statement of utilization of ITC and tax payable

(A) Total ITC available :
 Particulars CGST SGST IGST
(Rs.) (Rs.) (Rs.)
ITC b/f 15,000 35,000 20,000
Add: Availed during the month 36,000 36,000 9,000
Total 51,000 71,000 29,000

(B) Adjustment of ITC and Tax Payable in Cash

On outward Input Tax Credit Tax Payable
Supply (Rs.) Adjustment in Cash
CGST (Rs.) SGST (Rs.) IGST (Rs.) (Rs.)
CGST 54,000 51,000* - - 3,000
SGST 54,000 - 54,000: - -
IGST 36,000 - 7,000 29,000 -
1,44,000 51,000 61,000 29,000 3,000

(C) ITC Adjustment & Credit:

Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)
Total 51,000 74,000 29,000
Adjusted (51,000) 57,000 (29,000)
Balance - 17,000 -
Adjusted in IGST - 7,000
Balance - 10,000 -

EXERCISES

[A] THEORY

1. What is Goods and Service Tax (GST)?

2. Explain concept of GST and explain its advantages and disadvantages.
3. Explain GST Registration Process.
4. What principles were adopted for subsuming the erstwhile indirect taxes under GST?
5. Which are the commodities kept outside the purview of GST?
6. Describe the types of GST.
7. Explain the term GST. Why is Dual GST required?
8. Which authority is empowered to levy and administer different types of GST?
9. Give definitions and explain: (1) Goods (2) Services under GST.
10. How a particular transaction of goods and services would be taxed simultaneously
under Central GST (CGST) and State GST (SGST)?
11. What are the benefits from GST?
12. What is IGST?
13. What is the scope of composition scheme under GST?
14. What is the taxable event under GST?
15. What are the 'composite supply' and 'mixed supply'? How are these two different from
each other?
16. What is the threshold for opting to pay tax under the composition scheme?
17. What are the rates of tax for composition scheme?
18. What is 'Reverse Charge'?
19. Write short-notes on :
(a) Taxable person
(b) Taxable territory
(c) Composite supply
(d) Place of business
(e) Exemptions
(f) Taxable Supplies
20. GST Council and its formation
21. Broad idea about rates of Goods and Services
22. What are the functions of GST Council?
23. Explain the following:
(i) Definitions of 'Goods' and 'Business'
(ii) GST Council
(iii) Time limit for availing 'Input Tax Credit' (iv) 'Business Place.'
(v) Input Tax Credit
(vi) Supply
(vii) GST Council and its functions.
(viii) Non-Taxable Supply.
24. Choose the correct option:
(1) The maximum rate of GST in India ______.
(a) 28%
(b) 18%
(c) 12%
(d) None of these
(2) The term 'Goods' does not include _______ .
(a) Movable property
(b) Immovable property
(c) Money
(d) None of these
(3) Which of the following tax is applicable when supply of goods take place
from Gujarat to Madhya Pradesh?
(a) IGST
(b) SGST
 (c) UTGST
(d) None of these
(4) The registration under GST is compulsory whose turnover is-
(a) Rs. 20 lakhs or more
(b) Rs. 15 lakhs or more
(c) Rs. 50 lakhs or more
(d) None of these
(5) GST is payable based on ________.
(a) Supply
(b) cash collected
(c) (a) and (b) both
(d) None of these
[Ans.(1) (a); (2) (c); (3) (a); (4) (a)*; (5) (a).]
* Exemption limit for GST is hiked to Rs. 40 lakhs from Rs. 20 lakhs (w.e.f. 1-4-2019)
25. M/s Rajesh & Sons, an eligible registered dealer in goods making intra- State supplies
within the State of Gujarat, has reported an aggregate turnover of Rs. 89 lakhs in the
preceding financial year.
You have to determine whether Rajesh & Sons will be eligible for
'Composition Levy'? What would be your answer if in the above scenario M/s Rajesh
& Sons is making intra-State supply within Jammu and Kashmir ?
[Ans. As the aggregate turnover does not exceed Rs. 1 crore (w.e.f. 1-4-2019 raised to
Rs. 1.50 crore), the firm is eligible for 'Composition Levy'.
Note: A registered person, whose aggregate turnover in the preceding financial year
does not exceed Rs. 1.50 crore, shall be eligible for opting 'Composition Scheme'. In
case of 'Notified States' (Arunachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura and Uttarakhand) the turnover limit is Rs. 75 lakhs.
Even for Jammu and Kashmir, the limit for composition scheme eligibility is Rs. 1.50
crore and not Rs. 75 lakhs.]

(B) OBJECTIVE QUESTIONS

1. In the following questions, more than one answer is given, of which only one
answer is correct. Select the correct answer supported by necessary
explanation / working note.

1. What of the following taxes is applicable in the case of supply of goods from
Gujarat to Assam ?
(i.) CGST
(ii.) SGST
 (iii.) UTGST
(iv.) IGST
2. Which of the following taxes is applicable in the case of supply of services from
Bihar to Rajasthan ?
(i.) CGST,
(ii.) SGST;
(iii.) UTGST;
(iv.) IGST
3. Which of the following commodities is not kept outside the perview of GST ?
(i.) High Speed Diesel;
(ii.) Natural Gas;
(iii.) Supply of liquor for human consumption;
(iv.) Aviation turbine fuel.
4. Which of the following statements is incorrect?
(i.) Central excise duty is an indirect tax;
(ii.) In the case of inter-state sales, the Central Government charges CGST, but it is
retained by the States;
(iii.) Central Government has exclusive powers to make laws where the supply of
goods, or of services, or both take place in the course of inter-state trade or
commerce;
(iv.) GST is expected to decrease the cost of collection of tax revenues, and will
therefore, lead to higher revenue efficiency.
5. Which one of the following is not considered 'a necessary element that would
constitute supply' under (GST / SGST Act) ?
(i.) The activity should have involved supply of goods or services or both;
(ii.) The supply should have been made in any territory of India;
(iii.) The supply should have been made in the course of furtherance of business;
(iv.) The supply should have been made by a taxable person.
6. Which one of the following statements is not correct?
(i.) A registered person, whose aggregate turnover in the preceding financial year
did not exceed Rs. 1 crore, may opt to pay composition levey;
(ii.) Where more than one registered persons are having the same Permanent
Account Number (issued under the I. T. Act, 1961), any one of them may opt
to pay composition levy and others may pay GST at normal rates;
(iii.) Input tax credit is not available to a registered person who has opted for
composition levy;
(iv.) A registered person shall not be entitled to take input tax credit 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.
7. Which one of the following statements is not correct?
(i.) 'Goods' means every kind of movable property; except money and securities;
(ii.) 'Goods' does include money and securities;
(iii.) 'Goods' includes growing crops which are agreed to be severed before supply
or under a contract of supply;
(iv.) 'Goods' includes actionable claims (subject to certain exceptions U/s 7 and
Schedule III).
8. Which one of the following statements is not correct?
(i.) Aggregate turnover shall include the aggregate value of all types of supplies;
(ii.) GST is based on the principle of destination based consumption taxation as
against the old principle of origin based taxation;
(iii.) GST council is a federal forum with both Central Government and States in
India on board;
(iv.) The decisions of the GST Council are made by three-fourth majority of the
votes cast.
9. Which one of the following statements is correct?
(i.) All citizens of India are considered 'Taxable Persons' as per GST Act;
(ii.) '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;
(iii.) 'Place of business' means a place where the taxable person has his perment
residence
(iv.) The 'time of supply' is the point when the supplier and the recepient enter into
an agreement.
10. Which of the following statements are correct? Select the correct option:
1) A person who is required to pay GST under reverse charges has to compulsorily
get registration under the Act;
2) Persons enngaged in supply of handicraft goods making inter State supply have
been exempted from registration for GST
3) A person (who is not otherwise required to get registration) may get himself
registered voluntarily. In such a case, all GST provisions as are applicable to a
registered person, shall also apply to him;
4) A registered person under 'composition scheme' can withdraw (by submitting
his application in prescribed manner) from the scheme.
Options:
(i.) Statement Nos. (1), (2) and (3) are correct;
(ii.) Statement Nos. (1), (2) and (4) are correct;
(iii.) Statement Nos. (1), (3) and (4) are correct;
(iv.) Statement Nos. (2), (3) and (4) are correct;
11. Which of the following condition or conditions must be satisfied by a person to
avail the benefit of ITC ?
(i.) He is a registered person under GST;
(ii.) The goods and/or services or both are used or intended to be used in the course
of furtherance of his business;
(iii.) Conditions prescribed U/s 16(2) are satisfied;
(iv.) All the above conditions are satisfied.
12. If goods are received in pre-agreed lots/instalments -
(i.) ITC can be availed proportionately on receipt of each lot instalment;
(ii.) 100% ITC can be availed on receipt of first lot;
(iii.) 100% ITC can be availed only upon receipt of last lot;
 (iv.) 50% ITC can be taken on receipt of first instalment and balance 50% on
receipt of last lot.
13. What will be the criterion of allowability of input tax credit where goods and/or
services or both are used by the registered person partly for his business purpose
and partly for other purposes?
(i.) No ITC will be allowed;
(ii.) ITC will be allowed in full;
(iii.) ITC will be allowed in proportion to use of goods and/or services for business
purpose;
(iv.) ITC will be allowed to the extent of 50% only.
14. Which of the following inward supplies are eligible for ITC in case of a
manufacturing company?
(i.) Motor vehicles and other conveyances;
(ii.) Motor vechicles and other conveyance when used for transport of goods;
(iii.) Motor vehicles and other conveyances when used for employees;
(iv.) None of the above.
[Answers: Multiple Choice Questions (Selection of Correct Answer/Option)
1. (iv); [Note: Supply of goods from one state or Union Territory to another State or
Union Territory is inter-State supply and IGST is payable to Central Government.]
2. (iv); [Note: IGST is also levied in case of inter-State supply of services.]
3. (iii); [Note: Supply of liquor for human consumption is chargeable to GST.]
4. (ii); [Note: In the case of inter-State sales, the central Government imposes IGST and
also collects it. It shall be apportioned between the Central Government and the State
Government in the manner prescribed the Act.]
5. (ii); [Note: The supply made in the taxable territory (and not any territory of India) is
one of the essential elements that constitute supply under GST Act.]
6. (ii); [Note: Where more than one registered persons are having the same PAN all of
them are required to opt jointly to pay composition levy.]
7. (ii); [Note: 'Goods' means every kind of movable property other than money, and
securities.]
8. (i); [Note: Aggregate turnover shall include the aggregate value of all taxable and
non-taxable / non - GST supplies, exempt / 'Nil' rated supplies and exports of goods /
services and excludes taxes under GST.]
9. (ii);[Note: As per section 2(102) of CGST, it is correctly defined.]
10. (iii); [Note: Statement No. 2 is incorrect as exemption from registration is given to
such persons not having turnover in excess of the threshhold limit.]
11. (iv);
12. (iii);
13. (iii);
14. (ii);
2. In the following questions, more than one answer is given, of which only one
answer is correct. Select the correct answer supported by necessary
explanation / working note.
.
1. Which of the following taxes have been subsumed in GST ?
(i.) Central Sales Tax;
(ii.) Central Excise Duty and Service Tax;
(iii.) Value Added Tax;
(iv.) All of the above.
2. GST is levied on supply of all goods and services except -
(i.) Alcoholic liquor for human consumption;
(ii.) Tobacco;
(iii.) Legal services;
(iv.) All of the above.
3. Who shall be empowered to levy and collect GST on supplies in the course of
Inter-State transactions of trade or commerce ?
(i.) Central Government;
(ii.) State Governments;
(iii.) Union Territories;
(iv.) All of the above.
4. Any job work carried out by a labour contractor on another person's goods shall
be treated as -
(i.) Supply of goods;
(ii.) Supply of services;
(iii.) Supply of services provided job-work is carried out without any material;
(iv.) Supply of services whether the job work is carried out with or without any
material.
5. Which of the following supplies is / are naturally bundled ?
(i.) Rent deed executed for renting of two different floors of a building - one for
residential and another for commercial purpose to same tenant;
(ii.) Pack of tie, belt and scarf;
(iii.) Package consisting of canned food, sweets, chocolates, cakes, dryfruits etc;
(iv.) None of the above.
6. Which of the following is/are essential elements of a composite supply?
(i.) Supply is made by a taxable person to a recipient;
(ii.) Supply consists of two or more taxable supplies of goods or services or both or
any combination thereof which are naturally bundled and supplied in the
ordinary course of business;
(iii.) One of the components of the supplies is a principal or main supply;
(iv.) All of the above.
7. What is the threshold limit of aggregate turnover (after 13-2-2017) for opting to
pay tax under 'composition scheme' ?
(i.) Rs. 50 lakhs;
(ii.) Rs. 75 lakhs;
(iii.) Rs. 1 crore;
(iv.) Rs. 75 lakhs in case of special category States and Rs. 1.50 crore for any other
State.
8. The rate prescribed for payment of GST in case of a registered person being a
manufacturer who has opted for 'composition scheme' is –
(i.) 1% of the turnover as CGST and 1% of the turnover as SGST / UTGST;
 (ii.) 0.5% of the turnover as CGST and 0.5% of the turnover as SGST / UTGST;
(iii.) 2.5% of the turnover as CGST and 2.5% of the turnover as SGST / UTGST;
(iv.) None of the above.
9. Can a person who opts for 'composition scheme' collect any tax from the
recepient of goods or services or both?
(i.) Yes;
(ii.) No;
(iii.) Yes, provided the recipient is a registered person;
(iv.) Yes, provided the recipient of goods or services is an unregistered person.
10. Which one of the following statements is correct in case of a tax-payer who
adopts 'composition scheme' ?
(i.) He can avial 'Input Tax Credit' on capital goods only;
(ii.) He can avail 'Input Tax Credit' on all inputs except on capital goods;
(iii.) 'Input Tax Credit' is not available on inward supplies;
(iv.) 'Input Tax Credit' is not available on inward supplies if tax is mentioned
separately in the invoice of such supplies.
11. If an entity has multiple branches within the same State, it requires
(i.) registration for each branch separately;
(ii.) single registration for all the branches;
(iii.) multiple registrations or single registration at the option of the assessee;
(iv.) registration for each branch separately, if the turnover of each branch exceeds
Rs. 1.5 crore.
12. "Aggregate turnover" means the aggregate value of -
(i.) taxable supplies;
(ii.) exempted supplies;
(iii.) Inter-state supplies and export of goods or services or both;
(iv.) All of the above.
[Ans. (1) (iv); (2) (i); (3) (i); (4) (iv); (5) (iv); (6) (iv); (7) (iv); (8) (i); (9) (ii); (10)
(iii); (11) (ii) (12) (iv).]

(C) PRACTICAL QUESTIONS

1. X has a sum of Rs. 5,40,000 on account of input credit of CGST in the Electronic
Credit Ledger on 1-1-'23. He has to pay the following tax liabilities:
Rs.
(i) IGST payable for the month of Juanry, 2023 1,95,000
(ii) CGST payable for the month of January, 2023 2,58,000
(iii) SGST payable for the month of January, 2023 81,000

Determine, how would you utilise ITC on account of CGST.available in the

Electronic Credit Ledger.
[Ans.: Rs. 2,58,000 for CGST and Rs. 1,95,000 for IGST.
 Note: Balance of input tax credit of CGST (Rs. 87,000) is not available to adjust the
SGST liability payable. ITC credit on account of CGST will be carried forward.]
2. Y has a sum of Rs. 4,60,000 on account of input credit of SGST in the Electronic
Credit Ledger on 1-2-'23. He has to pay the following tax liabilities:
Rs.
(i) CGST payable for the month of February, 2023 2,40,000
(ii) IGST payable for the month of February, 2023 3,15,000
(iii) SGST payable for the month of February, 2023 99,000

Determine, how would you utilise ITC on account of SGST available in the Electronic
Credit Ledger.
[Ans.: Rs. 99,000 for SGST and Rs. 3,15,000 for IGST.
Note: Balance of input tax credit of SGST (Rs. 46,000) is not available to adjust the
CGST liability payable. ITC credit on account of SGST will be carried forward.]
3. Z has a sum of Rs. 5,25,000 on account of input credit of IGST in the Electronic
Credit Ledger on 1-6-'22. He has to pay the following tax liabilities:
Rs.
(i) IGST payable for the month of June, 2022 3,75,000
(ii) CGST payable for the month of June, 2022 95,000
(iii) SGST payable for the month of June, 2022 1,83,000
Determine, how would you utilise ITC on account of IGST available in the Electronic
Credit Ledger.
[Ans.: Rs. 3,75,000 for IGST, Rs. 95,000 for CSGT and balance of Rs. 55,000 for
SGST.
Note: Alternatively, Z is entitled to use ITC surplus of IGST (Rs. 5,25,000 - Rs.
3,75,000) Rs. 1,50,000 fully to adjust SGST liability and nothing towards CGST
liability. This surplus of Rs. 1,50,000 can be utilised in any proportion against CGST
and SGST liabilities.]
4. Ramesh agrees to supply taxable goods worth Rs. 16,00,000 to Jayesh (a trader), in
the following lots:
Value of Goods
On 13-11-2022 First Lot Rs. 4,00,000
On 24-12-2022 Second Lot Rs. 5,00,000
On 15-1-2023 Third Lot Rs. 7,00,000
Assume the rate of GST is 18%. When and for what amount Jayesh will be able to
take input tax credit ?
[Ans. On 15-1-2023 being the date of getting last lot of taxable goods; Total GST is
Rs. 2,80,000.]
5. Balram of Rajkot is recipient of specified goods from Nirmal of Ahmedabad. He
submits the following information :
 Date of invoice 8-11-2022

Rs.
Value of specified goods 13,50,000
CGST (@ 9%) 1,21,500
SGST (@9%) 1,21,500
Total 15,93,000
Balram makes the payment of Rs. 15,93,000 on 15-3-2023
Determine how much amount of input tax credit will be considered towards the
output-tax liability of the financial year 2022-23.
[Ans.: Rs. 2,43,000.]
6. Mr. Thiraj, a registered supplier of service in Bangalore (Karnataka State) has
provided the following information for the month of Novermber, 2022
Particulars Rs.
(i) Intra-State taxable supply of service 5,20,000
(ii) Legal fee paid to a lawyer located within the State 20,000
(iii) Rent paid to the State Govt. for his office building 30,000
(iv) Received for services towards conduct of exams to 16,000
Loveall University, Pune (recognised by law), being
an inter-State transaction
Compute the total GST liabiity (CGST, SGST or IGST ignoring ITC paid on Reverse
Charge Basis) of Mr. Thiraj for the month of November, 2022. Rates of CGST, SGST
and IGST are 9%, 9% and 18% respectively. All the amounts given above are
exclusive of taxes.
[C. A. Inter, Novermber, 2018 - Modified]
[Ans. Total Output Tax: IGST (@ 18% of Rs. 16,000) Rs. 2,880; CGST: (@9% of
Rs. 5,20,000+ Rs. 20,000 + 30,000) Rs. 51,300; SGST : (@9% of Rs. 5,20,000+ Rs.
20,000+ Rs. 30,000) Rs. 51,300.]
7. From the following information, compute the Net GST payable for the month of
December, 2022:
Output GST Opening ITC as per Credit Ledger
(Rs.) (Rs.)
CGST 2,000 Nil
SGST 15,000 1,000
ISGT 24,000 37,000
[C. A. Inter, Novermber, 2018]
[Ans. (1) IGST: Opening balance of ITC Rs. 37,000- Output GST payable Rs. 24,000
Rs. 13,000 Surplus of ITC adjusted as per assessee's discretion Rs. 13,000 = Balance
GST Payable Nil; (2) CGST: Op. balance of ITC Nil - Output GST payable Rs.
2,000-Rs. 2,000-Utilised from surplus of IGST Rs. 2,000 = Balance GST Payable
Nil; (3) SGST: Opening balance of ITC Rs. 1,000- Output GST Payable Rs. 15,000 =
=- Rs. 14,000 - Utilised balance of surplus of IGST Rs. 11,000 = Net GST Payable
 Rs. 3,000; (4) Surplus of IGST (Credit balance of ITC) has to be utilised as per the
choice of the assessee as per section 49.).]
8. Mr. Himanshu, a registered supplier of chemcials, pays GST under regular scheme.
He is not eligible for any threshold exemption. He has made the following outward
taxable supplies for the month of September, 2022:
(i) Intra-State supply of goods Rs. 25,00,000
(ii) Inter-State supply of goods Rs. 5,00,000
He has also made the following inward supply:
(i) Intra-State purchase of goods from Rs. 14,00,000
Registered Dealer
(ii) Intra-State purchase of goods from Rs. 2,00,000
Unregistered Dealer
(iii) Inter-State purchase of goods from Rs. 3,00,000
Registered Dealer
Balance of ITC at the beginning of September, 2022:
CGST Rs. 75,000
SGST Rs. 60,000
IGST Rs. 50,000

Notes:
(i.) Rates of CGST, SGST and IGST to be 9%, 9% and 18% respectively.
(ii.) Both inward and outward supplies given above are exclusive of taxes,
wherever applicable.
(iii.) All the conditions necessary for availing of ITC have been fulfilled.
Compute the net CGST, SGST and IGST payable by Mr. Himanshu for the month
of September, 2022.
[C.A., Inter, May, 2019 - Modified]
[Ans.: (1) IGST : Op. Balance of ITC Rs. 50,000+ Input credit available on Inter-
State purchase of goods (Rs. 3,00,000 x 18%) Rs. 54,000 = Rs. 1,04,000 Output tax
payable (on Rs. 5,00,000 of Inter-State supply of goods @ 18%)
Rs. 90,000 = Balance Rs. 14,000 CGST payable adjusted to the extent of Rs. 14,000
= Balance Payable Nil; (2) CGST: Op. Balance of ITC Rs. 75,000 + Input Credit
available on Intra-State purchase of goods from registered dealer (Rs. 14,00,000 × 9%
) Rs. 1,26,000 = Rs. 2,01,000-CGST payable (Rs. 25,00,000 Rs. 2,25,000 adjusted to
the extent of R. 14,000) Rs. 2,11,000= Balance Payable Rs. 10,000; (3) SGST: Op.
Balance of ITC Rs. 60,000 + Input credit available on intra-State purchase of goods
from registered dealer (Rs. 14,00,000 × 9%) Rs. 1,26,000 Rs. 1,86,000 (on intra-State
supply of goods of Rs. 25,00,000 × 9%) Rs. 2,25,000 = Balance of SGST Payable
Rs. 39,000; (4) No ITC shall be allowed in case of purchase of goods from
unregistered dealer.]
 9. M/s. Grey, a registered taxable person under regular scheme provides the following
information in respect of supplies made by it during the month of January, 2023:
Rs.
(i) Inter-State supply of goods 1,00,000
(ii) Inra-State supply of 500 packets of detergent @400 2,00,000
each
(iii) Supply of online educational journals to M/s. 50,000
Pinnacle private coaching centre providing tuitions to
students of Class X-XII. being intra-State supply
M/s. Grey has also received the following inward supplies :
(i) Inter-State supply of goods 50,000
(ii) Repairing of bus with seating capacity of 20 50,000
passengers used to transport its employees from their
residence, being intra-State supply
Following additional information is provided :
a. Rate of GST in respect of all inward and outward supplies is 18%, i.e. CGST
and SGST @ 9% and IGST @ 18%.
b. All figures mentioned above are exclusive of taxes.
[C. A. Inter, November, 2019 - modified]
[Ans. : Total IGST payable (on inter-State supply of goods @ 18% of Rs. 1,00,000) Rs.
18,000; Total CGST payable (on intra-State supply of goods (@9% on Rs. 2,00,000 and on
supply of services @ 9% on Rs. 50,000) Rs. 22,500; Total SGST payable (on intra-State
supply of goods (@ 9% on Rs. 2,00,000 and on supply of services @ 9% on Rs. 2,00,000)
Rs. 22,500; Total GST Payable Rs. 63,000.]