Introduction of

Chapter-1 GST

Table of Contents

S.N. Description Pg.No. No. Illus.

1 Goods and Services Tax 2 12
2 Goods and Services Tax 4 7
Total No. of Illustrations 19

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Notes GOODS & SERVICES TAX
Question
1





What is GST (Goods and Service Tax)?
Chap. 1 Introduction of GST 1.1

Answer
GST is a destination based tax and levied at a single point at the time of consumption of goods or services
by the ultimate consumer. GST is based on the principle of value added tax. GST law emphasizes on
voluntary compliance and on accounts based reporting and monitoring system. It is a comprehensive levy
and envisages tax collection on both goods and services at the same rate.
Internationally, GST was first introduced in France and now more than 160 countries have introduced
GST. Most of the countries, depending on their own socio-economic formation, have introduced National
level GST or Dual GST.

Question
2





List the taxes to be subsumed in GST? (MTP –ICAI)
Answer :
Central levies to be subsumed State levies to subsumed
• Central Excise Duty & Additional Excise Duties • State surcharges and cesses in so far as they
• Service Tax relate to supply of goods & services
• Excise Duty under Medicinal & Toilet Preparation Act • Entertainment Tax (except those levied by local
bodies)
• CVD & Special CVD
• Tax on lottery, betting and gambling
• Central Sales Tax
• Entry Tax (All Forms) & Purchase Tax
• Surcharges and Cesses in so far as they relate to
supply of goods & services • VAT/ Sales tax
• Luxury Tax
• Taxes on advertisements

Question
3





What are the taxes that will continue post GST?
Answer :
The taxes that will continue after GST are
a. Basic Customs Duty b. Export Duties
c. Stamp Duties d. Electricity Duties
e.Taxes on professions, trades, callings and employments

Question
4





Explain the concept of 'Dual GST' (Nov 17 – CA final)
Answer :
India has adopted a dual GST which is imposed concurrently by the Centre and States, i.e. Centre and
States simultaneously tax goods and services. Centre has the power to tax intra-State sales &States are
empowered to tax services. GST extends to whole of India including the State of Jammu and Kashmir.

Question
5





What does CGST/SGST/IGST mean?
Answer :
CGST : CGST stands for Central Goods & Service tax, it is levied & collected by the central government.
SGST : SGST stands for State Goods & Service tax, it is levied & collected by the state government.
IGST : IGST stands for Integrated Goods & Service tax, it is levied & collected both by the central
government & state government of respective states. It is basically charged on inter-state supply
of goods or services.

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Question
6





Notes
Is it required to distinguish whether a particular supply involves supply of goods or services or
both?
Answer

Chap. 1 Introduction of GST 1.2

Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of
services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of
supply of services respectively; similarly separate provisions have been specified for ascertaining place of
supply of goods and place of supply of services. Further, the rate of tax applicable to supply of goods and
supply of services may be different.

Question
7





What exactly is the concept of destination based tax on consumption?
Answer
The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is
also termed as place of supply.

Question
8





Which are the commodities kept outside the purview of GST?
Answer
i) Supply of alcoholic liquor for human consumption
ii) Petroleum products: - petroleum crude, motor spirit (petrol), high speed diesel
iii) Natural gas
iv) Aviation turbine fuel & v) Electricity

Question
9





Who will decide rates for levy of GST?
Answer
The CGST & SGST would be levied at rates to be jointly decided by the Centre & States. The rates would
be notified on the recommendations of the GST Council.

Question
10





Write a short note on Goods and Services Tax Council. (RTP – ICAI)
Answer
Article 279A of the Constitution empowers the President to constitute a joint forum of the Centre and
States namely, Goods & Services Tax Council (GST Council).
Ü The provisions relating to GST Council came into force on 12th September, 2016. President
constituted the GST Council on 15th September, 2016.
Ü The Union Finance Minister is the Chairman of this Council and
Ministers in charge of Finance/Taxation or any other Minister nominated by each of the States &
UTs with Legislatures are its members.
Besides, the Union Minister of State in charge of Revenue or Finance is also its member.
Ü The function of the Council is to make recommendations to the Union and the States on important
issues like tax rates, exemptions, threshold limits, dispute resolution etc. The GST Council has
decided the threshold exemption, composition threshold, GST rates, GST legislations including rules
and notifications.

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Question
11





Notes
What is the guiding principle of GST council?
Answer
Chap. 1 Introduction of GST 1.3

The mechanism of GST council would ensure the following:-

Ø Harmonization of different aspects of GST between Centre & the State as well as among states
Ø Discharge of various functions
Ø Make recommendations on various aspects of GST
Ø Development of harmonized national market for goods & services

Question
12





Mention the various components under GST act?
Answer
Ü Central Goods & Service Tax Act 2017
Ü State Goods & Service Tax Act 2017
Ü Integrated Goods & Service Tax Act 2017
Ü Union Territory Goods & Service Tax Act 2017

GOODS & SERVICES TAX

Question
13
What would be the rate structure under GST?
Answer
The rate structure consists for goods & services will be 5, 12, 18, 28 and 28 per cent + cess besides goods
which are taxed at nil rate (fully exempt). GST Tariff may be referred to, to know tax rate for respective
goods and services.

Question
14
What is GSTN?
Answer
GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN
has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and
services to Central and State Governments, tax payers and other stakeholders for implementation of
GST.

Question
15
What are the functions performed by the GSTN?
Answer
Ü Facilitating registration
Ü Forwarding the returns to Central & State authorities
Ü Computation & settlement of IGST
Ü Matching of tax payment details with banking network
Ü Providing various MIS reports to the Central & the State Governments based on the taxpayer return
information
Ü Providing analysis of taxpayers profile
Ü Running the matching engine for matching, reversal & reclaim of input tax credit

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Question
16 Notes
Which states have been categorized as special category states under GST?
Answer

Chap. 1 Introduction of GST 1.4

Special provision in GST have been made with respect to states of Arunachal Pradesh, Assam, Jammu
and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakhand.

Question
17





What does Inward Supply mean in GST?
Answer
Inward Supply in relation to a person shall mean receipt of goods or services or both whether by purchase,
acquisition or both whether by purchase, acquisition or any other means with or without consideration.

Question
18





What does Outward Supply mean in GST?
Answer
Outward supply in relation to a taxable person, means supply of goods or services or both, whether by
sale, transfer, barter, exchange, licence, rental, lease, or disposal or any other mode, made or agreed to
be made by such person in the course or furtherance of business.

Question
19





Bring out the salient features of cross utilization of Input Tax Credit (ITC) under the GST law? (Nov
17 – CA final)
Answer
Input Tax Credit (ITC) of CGST and SGST/UTGST is available throughout the supply chain,
Ü but cross utilization of credit of CGST and SGST/UTGST is not possible, i.e. CGST credit cannot be
utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of
CGST.
Ü However, cross utilization is allowed between CGST/SGST/UTGST and IGST, i.e. credit of IGST can
be utilized for the payment of CGST/SGST/UTGST and viceversa.

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Students
 Charge of Tax & Application
Chapter-2 of CGST & IGST Laws

Table of Contents

S.N. Description Pg.No. No. Illus.

1 Applicability of GST Law 8 3
2 Levy of GST - Sec 9(cgst) & Sec 5 (igst) 8 7
3 Sec 7 : Supply - Meaning 10 7
4 Person, Supplier & Recipient 12 5
5 Supply in the Course or Furtherance Business 13 4
6 Goods or Service Under GST 15 3
7 Works Contract Under GST 16 4
8 Consideration for Supply 18 4
9 Schedule - I : Deemed supply without consideration 19 1
10 Transfer of Business Asset 20 1
11 Supply to related person or Distinct person 20 4
12 Supply between principle and Agent 21 1
13 Schedule II : Activity to be treated as supply of goods or supply of services 21 4
14 Schedule III : Activity not treated as Supply 23 3
15 Import of Services 24 4
16 Composite and Mixed Supply 25 4
Total No. of Illustrations 59

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Notes APPLICABILITY OF GST LAW

Question
1





Explain the applicability of CGST & IGST Act? Whether the act also extends to the state of Jammu
2.1

& Kashmir?
Chap. 2 Charge of Tax

Answer
CGST & IGST Act 2017 is applicable to whole of India. Initially it was not applicable to State of Jammu &
Kashmir but by special ordinance it was made applicable to the State of Jammu & Kashmir from 8th July
2017.

Question 2





Define Taxable territory & Non-taxable Territory?
Answer
As per section 2(109), Taxable territory means the territory to which the provisions of the CGST act
applies i.e. whole of territory of India.
Whereas a Non-taxable territory has been defined under section 2(79) of CGST act as a “non-taxable
territory” means the territory which is outside the taxable territory

Question 3
CASE
STUDY




Nitin Ltd. provided services to Jagat Oil Corporation from vessels located in the continental shelf
of India for the purposes of prospecting natural gas, State briefly whether goods & service tax will
be levied in this case.
Answer
Charging Section 7 of CGST, inter alia , provides that goods & service tax shall be levied on the services
provided in the taxable territory by registered person to another.
As per section 2(109), Taxable territory means the territory to which the provisions of the CGST act
applies i.e. whole of territory of India. The vessels located in the continental shelf of India for the purpose of
prospecting natural gas fall within the ambit of definition of 'India'.
Since in the present case, Nitin Ltd. provided services to Jagat Oil Corporation from vessels located in the
continental shelf of India for the purposes of prospecting natural gas, it implies that services have been
provided in taxable territory by one person to another for consideration. Thus, goods & service tax is
leviable on such services.

LEVY OF GST - SEC 9(CGST) & SEC 5 (IGST)

Question
4





What is a taxable event under GST? (ICAI Material)
Answer
As per section 9 of CGST Act & section 5 of IGST 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.

Question
5





Supply of all goods and/or services is taxable under GST. Discuss the validity of the statement.
(ICAI Material)
Answer
The statement is incorrect. Supplies of all goods and services are taxable except alcoholic liquor for
human consumption. Supply of petroleum crude, high speed diesel, motor spirit (commonly known as
petrol), natural gas and aviation turbine fuel shall be taxable with effect from a future date. This date would
be notified by the Government on the recommendations of the GST Council.

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Question
6





Mention the commodities kept outside the purview of GST? (MTP – ICAI)
Notes
Answer

Chap. 2 Charge of Tax 2.2

Goods and Services tax (GST) is a tax on supply of goods or services or both, except supply of alcoholic
liquor for human consumption. So, alcohol for human consumption is kept out of GST by way of definition
of GST on constitution.
Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which
they shall be included in GST.

Question
7





What do you mean by Intra State & Inter State supply? (CA Final-Nov.17)
Answer
As per section 8 of IGST Act,2017, where the location of supplier and the place of supply are in the same
State or same Union territory it shall be treated as an 'Intra State supply'.
As per section 7 of IGST Act,2017, where the location of supplier and the place of supply are in
Ü two different States or
Ü two different Union territories or
Ü a State & a Union Territory
it shall be treated as an 'Inter State supply'.

Question
8
CASE
STUDY




India wines has registered place of business in Pune, it is engaged in sale of wine & beer from its
outlet to various dealers across Pune. Whether GST is applicable on such supply?
Answer
As per section 9(1) of CGST Act, Supply of alcoholic liquor for human consumption is not leviable to
GST, Thus for above case no GST shall be charged on value of supply.

Question
9
CASE
STUDY




Mr R a businessman located in Mumbai (Maharashtra) procures goods from a trader located in
Nagpur (Maharashtra).
Determine the nature of supply & GST applicable on such supply?
Answer
Location of Supplier – Nagpur(Maharashtra)
Place of supply - Mumbai (Maharashtra)
Nature of supply – Intra state supply (as within state)
GST applicable - CGST + SGST (MH)
Question
10




Are exports and supplies to SEZ units/Developers out of the ambit of GST?
Answer
No, They are leviable under IGST Act, 2017. However, the tax burden on the same will be neutralized by
granting refunds to persons making such supplies u/s 16 of IGST Act as Zero rated Supplies subject to
such safeguards, conditions and procedures as may be prescribed.

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Notes SEC 7 : SUPPLY - MEANING
Question
11



When does a particular activity attract GST? Explain the scope?
2.3

Answer
As per section 9 of CGST act, GST is leviable on supply of goods / services or both
Chap. 2 Charge of Tax

As per section 7 of CGST act, supply includes

(1) All forms of supply of goods or services or both
Ü such as sale, transfer, barter, exchange, licence, rental, lease, or disposal
Ü made or agreed to be made for a consideration by a person
Ü in the course or furtherance of business
(2) import of services for a consideration whether or not in course or furtherance of business
(3) the activities specified in Schedule I, made or agreed to be made without a consideration &
(4) the activities to be treated as supply of goods or supply of services as referred in Schedule II
Thus, all the activities specified above falling under the scope of supply shall attract GST excluding those
activities as specified in Schedule III.

Question
12





Mention the necessary elements that shall constitute supply under CGST Act?
Answer
For any activity to qualify as a 'supply', the following elements are required to be satisfied, i.e. –
i) the activity involves supply of goods or services or both
ii) the supply is for a consideration unless otherwise specifically provided under Schedule I
iii) the supply is made in the course or furtherance of business
iv) the supply is made in the taxable territory

Question
13





Whether transfer of title and/or possession is necessary for a transaction to constitute supply of
goods? (ICAI Material)
Answer
Title as well as possession both have to be transferred for a transaction to be considered as a supply of
goods. In case title is not transferred, the transaction would be treated as supply of service in terms of
Schedule II(1)(b) of the CGST Act. In some cases, possession may be transferred immediately but title
may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement.
Such transactions will also be termed as supply of goods.

Question
14





State the types of supplies under the GST law?
Answer
The different types of supplies under GST law are as follows:-
i) Taxable & exempt supplies
ii) Inter-state & Intra-state supplies
iii) Composite & mixed supplies
iv) Zero rated supplies

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Question
15





Differentiate between a taxable supply & non-taxable supply under GST? Notes
Answer
2.1

Chap. 2 Charge of Tax 2.4

Taxable Supply Non-Taxable Supply
As per section 2(108) of CGST Act, means As per section 2(78) of CGST Act, means
supply of goods or services or both which is supply of goods or services or both which is
leviable to GST under this act not leviable to GST under this act or under
Integrated Goods & Service Tax Act.
Falls under the purview of 'Supply' as per section Does not fall under the purview of 'Supply' as
7 of CGST Act. per section 7 of CGST act.
For eg:- Supply of Gold jewellery or Silver Articles For eg:- Supply of Petrol or Diesel

Question
16





What is the difference in between 'Nil rated', 'taxable at 0%' supply of goods and services?
Answer
There exist a difference between a Nil rated supply and a Zero rated supply as per GST law 'Nil rated
supply' means a supply of Goods or Services which has Nil rate in tariff or exempt by notification.
'Zero rated supplies' means a supply of Goods or Services for export or to SEZ units [Sec 16 of IGST]

Question
17





Discuss whether the following activities constitute 'Supply' in accordance with section 7 of CGST
Act
(i) Mr. Raj sold electronic gadgets to XYZ Co.
(ii) Arya pvt. ltd. entered into a hire purchase agreement with AB pvt. ltd. for supply of a machine unit.
(iii) Asha purchase an LED TV of 24 inch from Sony electronics store and in return gave away her old
TV.
(iv) VB associates a CA firm appointed Mr. Urja as an interior decorator to design it's office outlet in
exchange for such service, VB associates rendered tax compliance services to Mr. Urja.
(v) M/s Bharat electronics disposed scrap part of electric unit to a scrap dealer.
Answer
i) Yes, as term sale is included in the expression supply
ii) Yes, as hire purchase involves transfer of title in goods as per Schedule II of section 7, shall be
classified as supply of goods
iii) Yes, as the above supply falls under barter transaction which is also included under the scope of
supply
iv) Yes, it is a form of exchange which is included under the scope of supply
v) If the disposal is in course or furtherance of business of M/s Bharat electronics then it shall be
considered as a supply.

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Notes PERSON, SUPPLIER & RECIPIENT
Question
18





. Define the following terms
2.5

I) Person ii) Supplier iii) Recipient

Chap. 2 Charge of Tax

Answer
(i) As per section 2(84) of CGST Act, 2017 , “person” includes—
(a) an individual (b) a Hindu Undivided Family (c) a company
(d) a firm (e) a Limited Liability Partnership
(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government
company as defined in 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
ii) As per section As per section 2(105) of CGST Act, the term 'Supplier' in relation to any goods or
services or both, shall mean the person supplying the said goods or services or both and shall
include an agent acting as such on behalf of such supplier in relation to the goods or services or
both supplied

iii)As per section 2(93) of CGST Act, “recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable
to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are
delivered or made available, or to whom possession or use of the goods is given or made available;
and (c) where no consideration is payable for the supply of a service, the person to whom the service
is rendered
And any reference to a person to whom a supply is made shall be construed as a reference to the recipient
of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or
services or both supplied.

Question
19

CASE
STUDY



If Mr A pays consideration to Mr.Yash and Mr.Yash performs surgical operations on Mr R,
determine the supplier & recipient for the given case in accordance with GST law? Would your
answer differ if consideration is paid by Mr. A on the behalf of Mr. R
Answer :
Ü As per section 2(93) of CGST Act, where a consideration is payable for the supply of goods or
services or both, the person who is liable to pay that consideration
so in given case Service Recipient is Mr A
Ü However, if consideration is payable by Mr R but same is paid by Mr A on behalf of Mr R then,
service recipient – Mr R.
Ü As per section 2(105) of CGST Act, Supplier – MrYash

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Question
20





Notes
Explain the term of 'Deemed Distinct Person’
Answer

Chap. 2 Charge of Tax 2.6

The term has not been specifically defined under GST but as per clause (4) & clause (5) of section 25 of
CGST Act, has categorized certain person who shall be treated as distinct persons which states that:-
Ü A person who has obtained or is required to obtain more than one registration,
F whether in one State or Union territory or
F more than one State or Union territory shall,
F in respect of each such registration,
be treated as distinct persons for the purposes of this Act.
Ü Where a person who has obtained or is required to obtain registration in a State or Union territory in
respect of an establishment, has an establishment in another State or Union territory, then such
establishments shall be treated as establishments of distinct persons for the purposes of this Act.
Question
21
CASE
STUDY




Smart pvt ltd has head office located in Bangalore (Karnataka). However, the branch of Smart pvt
ltd is located in state of Gujarat. Will they fall under the ambit of deemed distinct person under GST
Act?
Answer
As per clause (4) of section 25 of CGST Act, Smart pvt ltd shall be required to obtain a separate
registration in State of Karnataka & Gujarat in respect of its head office & branch respectively. Thus, head
office & branch shall be treated as distinct persons.

Question
22
CASE
STUDY




Shreya ltd is having an establishment in Goa. It has another establishment in the Union Territory of
Chandigarh. Will they be treated as establishments of distinct persons under GST Act?
Answer
As per clause (5) of section 25 of CGST Act, Shreya ltd shall be required to obtain separate registration
in Goa & Chandigarh in respect of both the establishments & shall be treated as distinct establishments.
Supply in the course or Furtherance Business
Question
23





Define the term 'Business' under CGST Act.
Answer
As per section 2(17) of CGST Act, 'business' includes-
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager 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 sub-clause (a)
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency,
continuity or regularity of such transaction
(d) supply or acquisition of goods including capital goods 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
(f) admission, for a consideration, of persons to any premises
(g) services supplied by a person as the holder of an office which has been accepted by him in the course
or furtherance of his trade, profession or vocation
(h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities

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Notes Question
24





Determine whether the following activities fall under the scope of business?
i) M/s X pvt ltd is engaged in the manufacture of auto parts for industrial purposes
2.7

ii) M/s ABC ltd acquired capital goods lying in stock of M/s S ltd as on takeover of business of M/s S ltd.
iii) ETA Star adventure club provides a free trekking camp to members of the club
Chap. 2 Charge of Tax

iv) Adlabs Imagica charges ` 1500 as an entry fee into the park to its customers
Answer
i) Yes, the given activity of manufacture has been included in the definition of business.
ii) Yes, as per the definition of business, supply or acquisition of goods including capital goods and
services in connection with commencement or closure of business.
iii) No, as per the definition of business, provision of services to members as in return for subscription
fee, thus in the given case as free trekking camp is organized for non-members.
iv) Yes, as per definition of business, admission, for a consideration, of persons to any premises as in the
given case the entry fee is charged for admission into the park.

Question
25
CASE
STUDY




Ms Shreya buys a Mobile for her personal use and after a year sells it to a Mobile dealer. Will it
constitute 'supply' & is GST leviable on such supply?
Answer
Legal Provision:- As per sec 7 (1)(a) When any Sale, Transfer, barter etc is made for a consideration in
the course or furtherance of business then it would be treated as supply & liable to GST.
In the given case sale of mobile by Ms Shreya to a Mobile dealer shall not be considered as supply, As such
sale is not in course or furtherance of business of Ms Shreya. Hence, not treated as supply & no GST is
payable.

Question
26
CASE
STUDY




An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction
be a supply in terms of CGST/SGST Act? Give reasons fo the answer. (CBEC FAQ)
Answer
No, because supply is not made by the individual in the course of furtherance of business further, no input
tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

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Goods or Service Under GST
Notes
Question
27





Define the following term as in accordance with GST

Chap. 2 Charge of Tax 2.8

I) Goods ii) Services
Answer
As per section 2(52) of CGST Act, 2017 as under:-
I) Goods:- “Goods” means every kind of movable property –
Ü Other than –
F money &
F securities
Ü but includes –
F actionable claim,
F growing crops, grass and things attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply.
ii) As per section 2(102) of CGST Act, 2017 “services” means
Ü anything other than goods, money and securities
Ü 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.

Question
28





State whether the following activities will be considered as a supply of service in relation to 'Money' in
accordance with GST Act
i) Mr A borrows an amount of ` 1, 50,000 from one of his relative Mr Q and agrees to repay the entire
amount after a year
ii) M/s Raj enterprises applied for loan from SBI Bank against which a processing fees and interest is
charged by the bank
iii) Mr H exchanged INR against purchase of US $ for which a commission was charged
Answer
I) No, the activity of borrowing from a relative is without any charge of interest and hence it will be
considered as merely a transaction in money
ii) Yes, the activity of borrowing loan amount for which a consideration in form of processing fee has been
charged by SBI shall be considered as a supply of service.
iII) Yes, the activity of exchange of currency for which a commission is charged will be considered as
supply of service.

Question
29





CBC ltd, an NBFC transfers a secured debt to Sam pvt ltd. Does it qualify as supply?
Answer
Actionable claims are covered in the definition of goods. However, Schedule III of CGST Act excludes
actionable claims other than lottery, gambling and betting from the scope of supply but as secured debts
do not fall under the definition of actionable claim. The same will constitute transaction in money. However,
if a service fee or processing fee or any other charges are collected in the course of such transfer of debt
then the same will be a supply leviable to GST.

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Notes Works Contract Under GST
2.9

Question
30





Define the term 'Works Contract’
Chap. 2 Charge of Tax

Answer
As per section 2(119) of CGST Act, “works contract” means a contract for building, construction,
fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance,
renovation, alteration or commissioning
Ü of any immovable property
Ü wherein transfer of property in goods (whether as goods or in some other form) is
involved in the execution of such contract

Question
31
CASE
STUDY




Aspire Ltd enters into contract with Beta Ltd for execution of works contract for ` 50,00,000
excluding taxes for following activities pertaining to construction of a complex. Determine
whether the following activities fall under the ambit of 'works contract'
i) Erection & installation of structural designs to the complex which involved material.
ii) Fabrication works relating to the structure of complex no material is involved.
iii) Assembling of units pertaining to movable property which involved material and goods.
iv) Tiling & painting work of the entire building which involved material.
Answer
As per section 2(119) of CGST Act, defining the term works contract. Only if the activities fall under the
definition it shall be considered as a works contract.
i) Yes, the given activity is in relation to an immovable property thus qualifies as a works contract
ii) No, eventhough the given activity of fabrication is in relation to immovable property thus it does not
qualifies as works contract because material is not involved.
iii) No, the activity of assembling units will not qualify as works contract as it is relation to a movable
property.
iv) Yes, the given activity is in relation to building which is immovable property & thus qualifies as works
contract.

16
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Question
32





Students
Shambhu Pvt. Ltd. was awarded contract in Nov.2018 for moving flooring & wall tiling services in Notes
resptect of building located in Delhi by Nath Ltd. As per terms of contract, Shambhu Pvt. Ltd. was
to provide all the required material for execution of contract. Following are the particulars given by

Chap. 2 Charge of Tax 2.10

Shambhu Pvt. Ltd.?

Description Inward Supply Outward Supply

Value Rate Value Rate
Granite used 3,00,000 28% 4,00,000 28%
Cement used 5,00,000 28% 6,00,000 28%
Other material 4,00,000 18% 5,00,000 18%
Labour & other services 6,00,000 --- 7,00,000 18%

Determine GST Liability of Shambhu Pvt. Ltd. if

(i) Separate charges made for supply of material services
(ii) Supplied as works contract.@18%

Calculation of GST liability if Separate charges is made for supplier, material & Service
Tax (`)
Particular Value
CGST SGST
Granite used 4,00,000 56,000 56,000
Cement used 6,00,000 84,000 84,000
Other material 5,00,000 45,000 45,000
Labour & other services 7,00,000 63,000 63,000
Total GST payable (a) 2,48,000 2,48,000
Less ITC on Inward Supplier - - -
Granite used 3,00,000 42,000 42,000
Cement used 5,00,000 70,000 70,000
Other material 4,00,000 36,000 36,000
Labour & other services 6,00,000 - -
Total ITC payable (b) 1,48,000 1,48,000
Net GST payable (a) - (b) 1,00,000 1,00,000

Calculation of GST liability if supplied as a works contract

Tax (`)
Particular Value
CGST SGST
Works Contract @ 18% 22,00,000 1,98,000 1,98,000
Total GST payable (a) 1,98,000 1,98,000
Less ITC on Inward Supplier - - -
Granite used 3,00,000 42,000 42,000
Cement used 5,00,000 70,000 70,000
Other material 4,00,000 36,000 36,000
Labour & other services 6,00,000 - -
Total ITC payable (b) 1,48,000 1,48,000
Net GST payable (a) - (b) 50,000 50,000

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 Students Question
33





Notes Vasavi Pvt. Ltd. in Calcutta receives advance of ` 10,000 (excluding tax) from Pioneer Electronics
in Calcutta for an order of 2 Software. On this advance of ` 10,000, Vasavi Pvt. Ltd. should charge
tax @ 18%, which is the GST rate applicable to software.
2.11

Answer
Ü As per Sec 7(1)(a) of CGST Act supply made or agreed to be made for consideration in the
Chap. 2 Charge of Tax

course of business is liable to GST. Thus, any advance received by supplier is also liable to GST.
As per section 31(3)(d) of CGST Act, on receipt of advance payment with respect to any supply
of goods or services or both, a registered person shall issue a receipt voucher evidencing receipt of
such payment.
Ü The nature of supply in the given case is 'Intra state supply' as within Calcutta, the taxes to be charged
are CGST + SGST
also if at the time of advance tax rate cannot be determined then 18 % GST shall be levied.

Consideration for Supply

Question
34





Explain the term consideration?
Answer
As per section 2(31) of CGST Act, 2017, “consideration” in relation to the supply of goods or
services or both includes––
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for
the inducement of, the supply of goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the
supply of goods or services or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered
as payment made for such supply unless the supplier applies such deposit as consideration for the said
supply

Question
35





Determine whether the following terms fall under the ambit of 'Consideration’
i) Reliance JIO offers free mobile handset on payment of security deposit worth ` 1500/- which is fully
refundable.
ii) Isha a customer purchases a gold necklace weighing 275 gms from PN gadgil jewel showroom in
exchange sells her old gold articles weighing 200 gms and pays differential amount in cash.
iii) RC cricket association Chennai, gifts a motor bike to Rahul as inducement to join their cricket club.
iv) XYZ ltd is manufacturing fertilizers used for agriculture purpose. State govt. has given 30% subsidy on
sale of such fertilizer.
v) ABC and Co. a trading concern , has supplied the product X to Mr. Y at subsidize rate of ` 30,000 (Open
market value of such goods is ` 45,000). The supplier of ABC and Co. has given the subsidy to it to
compensate for the price difference.
Answer
i) No, As the amount of deposit in the given case is not applied by the supplier towards the mobile handset
provided. No levy of GST
ii) In this case there exist two forms of supply i.e.
Ü Sale of gold necklace by jeweler to the customer – This falls under the ambit of supply as such
sale by the jeweler is in course of his business, thus the consideration here is partly in kind & in
money for differential gms i.e. 75 gms paid by customer. GST shall be levied on the value
determined as per open market value for 275 gms of gold necklace.

18
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 Students
Ü Sale of old gold articles by customer to jeweler – This falls out of purview of supply as the sale by
customer is not in course of business.Thus, does not fall under the ambit of consideration hence no Notes
GST
iii)Yes, as supply of motorbike is in response to an offer to join the cricket club. GST shall be levied

2.12
iv) As per section 2(31) of CGST Act, pertaining to 'consideration' clearly excludes the value of subsidy
received from the Central Government or State Government. Thus in the given case the amount of

Chap. 2 Charge of Tax

subsidy shall be excluded from the value of consideration.
v) As per section 2(31) of CGST Act, pertaining to 'consideration' clearly excludes the value of subsidy
received from the Central Government or State Government. But in given case subsidy is given by
the supplier and not by Govt. hence subsidy is treated as consideration.

Question
36





Venus music world charged a late fee as a penalty for late return of a DVD compact disc to its
customer. Will the late fee charged to its customer be considered as a part of consideration?
Answer
As per sec 2(102) Service means anything other than goods, money & securities
Also as per Schedule II para 5 of CGST Act, refraining from an act or to tolerate an act is called as supply
of service.
Hence, late fee, fine, penalty charged by the supplier for any reason would be treated as supply of service
for consideration & liable to GST.
Question
37





Will GST be applicable on any interest charged for payment after the credit period?
Answer
As per sec 2(102) Service means anything other than goods, money or securities.
Hence, Interest charged for the following activities are liable to GST:
(1) Interest for use of money (i.e. loan, advances, deposits)
(2) Interest for delay payment of consideration (i.e. interest from debtors, receivables)
Interest on loan advances or deposit is subject to exemption but any interest, late fee or penalty for delay
payment of consideration is liable to GST.

Schedule - I : Deemed supply without consideration

Question
38





Whether supply of goods or services without consideration is liable to tax?
Answer
Normally as per Sec 7(1)(a) supply of goods or services for consideration is liable to GST. The activities
enumerated in Schedule I will qualify as supply even if made without consideration. Accordingly, such
supplies in the absence of consideration are liable to tax. To illustrate, following are the activities which will
qualify as supply in the absence of consideration and eventually would be liable to tax:
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such
assets.
2. Supply of goods or services or both between related persons or between distinct persons as specified
in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding
fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as
supply of goods or services or both.
3. Supply of goods—
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the
principal.
4. Import of services by a taxable person from a related person or from any of his other establishments
outside India, in the course or furtherance of business.

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Notes Transfer of Business Asset

Question
39





VB associates & Co a CA firm donated old laptops to charitable schools on account of renovation
2.13

of office. The firm had taken input tax credit on the laptops so donated. Does it qualify as a supply?
Answer
Chap. 2 Charge of Tax

As per section 7(1)(c) read with Schedule I of CGST Act,2017, Permanent transfer or disposal of
business assets where input tax credit has been availed shall be treated as supply even if made without
consideration. Hence donation of old laptops to charitable schools shall qualify as supply since ITC has
been availed by VB associates & co.

Supply to related person or Distinct person

Question
40





Whether transfer of goods to another branch located outside the State is taxable? What would be
your opinion on taxability of goods are transfer to another branch of same state.
Answer
In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration
for every branch located in different state or union territory and shall be treated as distinct persons.
Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as
supply liable to tax in terms of para 2 to Schedule I of the CGST Act, 2017.
Further, it is important to note that, supply of goods to a branch / unit located within the same State is not
liable to GST if such branch is not separately registered.
In case branch in a same state having separate registration then it would also be liable to tax since both
such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).

Question
41





Whether gifts given by employer to employee will also qualify as supply?
Answer
As per definition of related person it includes employer & employee as related person.
As per Sch I [Sec 7 (1) (c)] para 2 any supply of goods or services to related person shall qualify as a
supply when it is made in the course or furtherance of business.
Also as per proviso the gift value not exceeding ` 50,000 in a financial year by an employer to employee
shall be treated as supply.

Question
42





Daksh gold pvt ltd. On occasion of Diwali distributes gift hamper to its employee worth ` 3, 00,000.
Does it qualify as supply? Would your answer be different if gifts of ` 42,000 have been given to a
employee?
Answer
As per section 7(1) (c) read with Schedule I of CGST Act, 2017, Supply of goods or services between
related persons id treated as supply even if it is without consideration. As per explanation to section 15 of
CGST Act 2017, persons shall be deemed to be as “related persons” if such persons are employer and
employee. Thus, Diwali gifts to employee worth ` 3,00,000, will qualify as supply and such supply would
be leviable to GST.
If gift of ` 42,000 is given instead of ` 3,00,000 , the same will not qualify as supply since it has been
specifically provided that gifts not exceeding ` 50,000 in value in a financial year by an employer to an
employee shall not be treated as supply of goods or services or both.

20
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Question
43





Students
VS ltd. Provides tax consultancy services without any consideration to SK ltd in which VS ltd Notes
holds 30% shares. The said consultancy has been provided for the benefit of entire group. Does it
qualify as a supply?

2.14
Answer
As per section 7(1)(c) read with Schedule I of CGST Act 2017, Supply of goods or services between

Chap. 2 Charge of Tax

related persons is treated as supply even if it is without consideration. As per explanation to section 15 of
CGST Act 2017, persons shall be deemed to be as “related persons” if any person directly or indirectly
owns, controls, the other.
Normally if any person holds more than 50% shareholding in another then control is proved between both
of them. In the given case merely holding 30% of share by VS ltd in SK ltd cannot be treated as related
person.
Hence we can say that service is provided without consideration & it does not qualify as supply u/s 7 of
CGST Act.

Supply between principle and Agent

Question
44





Disha Automobiles pvt ltd. Engages AS motors ltd , as an agent to sell cars on its behalf. For the
purpose, Disha Automobiles pvt ltd has supplied 150 cars to the showroom of AS motors ltd.
Located in Gujarat. Does it qualify as supply?
Answer
As per section 7(1)(c) read with Schedule I CGST Act, 2017, Supply of goods by a principal to his agent
where the agent undertakes to supply such goods on behalf of the principal shall be treated as supply even
if made without consideration. In view of the same supply of cars by Disha Automobiles pvt ltd. to AS
motors ltd to Disha Automobiles will qualify as supply.

Schedule II : Activity to be treated as supply of goods or supply of services

Question
45





Is it important to distinguish between supply of goods and services?
Answer
Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of
services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of
supply of services respectively; similarly separate provisions have been specified for ascertaining place of
supply of goods and place of supply of services.
Further, the rate of tax applicable to supply of goods and supply of services may be different. Accordingly, it
is important to distinguish whether a particular transaction involves supply of goods or supply of services.

Question
46





Mr S is the owner of a truck valued at ` 7, 00,000/- , He transfers the right to operate the truck to Mr Y
for a consideration but the ownership of the truck is not transferred. Determine whether it will be
considered as a supply?
Answer
As per section 7(1)(d) read with Schedule II of CGST Act,2017, Any transfer of rights in goods without
transfer of title thereof shall be classified as supply of service.

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Notes Question
47





Classify following activities as a supply of goods or services as per Schedule- II
i) Mr Suraj enters into a contract with Mr Vishal to rent out his property for commercial purpose
2.15

ii) M/s Swadh enterprises provides catering services on occasions such as party, seminars,
conference etc..
Chap. 2 Charge of Tax

iii) M/s XYZ pvt ltd transferred stock of raw materials from its unit in Pune to one of its branch located in
Nagpur
iv) Mr X provided transportation facility for a deceased person in relation to performance of funeral
rights
v) M/s Nirmitee developers undertakes a contract of fabrication works in office of a complex building
Answer
The above activities are in relation to goods or services or both but in order to be classified as a 'Supply' it
must be included in the scope of supply as per section 7 of CGST Act.
i) Yes it is a supply, As per section 7(1)(d) read with Schedule II of CGST Act, Renting of immovable
property has been classified as a 'supply of service'.
ii) Yes it is a supply, As per section 7(1)(d) read with Schedule II of CGST Act, Supply of food or any
other article for human consumption where it is for a consideration is classified as a 'Composite
Supply'.
iii) No, if goods are transferred from one unit to another unit in the same state of same business entity
having same registration number, then it would not be considered as supply under section 7 of
CGST Act.
iv) No, As per section 7(2)(a) read with Schedule III of CGST Act, Services of funeral, burial,
crematorium or mortuary including transportation of deceased shall neither be treated as 'supply of
goods' nor a 'supply of services'
v) Yes it is a supply, As per section 7(1) (d) read with Schedule II & definition of 'Works Contract' under
section 2(119) of CGST Act fabrication works relating to an immovable property shall be classified as
a 'supply of service'.

Question
48





Mr Raju & Mr Aditya are running a partnership firm and having goods S & T in stock. Mr Raju & Mr
Aditya decide to dissolve the partnership and the goods S & T are taken over by Mr Raju & Mr
Aditya respectively. The business is not continued further. Whether such takeover of stock be
considered as supply?
Answer
As per section 7(1)(d) read with clause 4(c) of Schedule II of CGST Act, the clause provides that where
any person ceases to be a taxable person, any goods forming a part of asset of any business shall be
deemed to be supplied by him in the course or furtherance of business.
Provided that it shall not be treated as supply if it falls under the following exceptions:
i) the business is transferred as a going concern to another person or
ii) the business is carried on by a personal representative who is deemed to be a taxable person
In both the above cases, the business is continued. Therefore, it will not be considered as supply of goods.
In the given case partnership firm is dissolved & ceases to be taxable person also, the business is not
continued further hence stock of S & T is to be treated as supply & liable to GST.

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Schedule III : Activity not treated as Supply Notes
Question
49

2.16
Enumerate the activities or transactions which shall be treated neither as a supply of goods nor a
supply of services. (MTP – ICAI)

Chap. 2 Charge of Tax

Answer
Schedule III in the CGST Act is akin to the negative list under the service tax regime. This schedule
specifies transactions/ activities which shall be neither treated as supply of goods nor a supply of services.
1. Services by an employee to the employer in the course of or in relation to his employment.
2. Services by any court or Tribunal established under any law for the time being in force.
3. (a) Functions performed by the Members of Parliament, Members of State Legislature, Members of
Panchayats, Members of Municipalities and Members of other local authorities
(b) Duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity; or
(c) Duties performed by any person as a Chairperson or a Member or a Director in a body established by
the Central Government or a State Government or local authority and who is not deemed as an
employee before the commencement of this clause.
4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
5. Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and gambling.

Question
50
CASE
STUDY




Employer provides bus service, meal coupon, telephone at residence, gives vehicle for official
and personal use, uniform and shoes, to employee. Explain implication of GST?
Answer
As per Sec 7(2) of CGST Act read with Sch III any service provided by an employee to employer in the
course of or in relation to employment then it is not called as supply.
Also as per Schedule I para 2 any gift given by the employer to an employee upto ` 50,000 in a financial
year does not qualify as a supply.
In given case bus, service, meal coupon etc are provided by the employer in course or in relation to
employment then no GST is payable, But if it is provided as a gift & not as a part of employment then GST is
payable for any value in excess of ` 50,000 in a financial year.

Question
51
CASE
STUDY




Determine whether the following activities fall under the purview of supply as per section 7 of
CGST Act, 2017:-
i) Mr Raj hires an ambulance for transport facility of a deceased person for performing funeral
rituals
ii) Mr S enters into an agreement for sale of land to Mr R for a consideration
iii) M/s ABC developers sold fully furnished building to MrSagar for a valuable consideration

Answer
I) As per section 7 read with Schedule III para 4 of CGST Act, Services of funeral including transportation
of the deceased are out of scope of supply. Thus there shall be no levy of GST on such activity.
ii) As per section 7 read with Schedule III para 5 of CGST Act, Sale of land is out of scope of supply and
hence there shall be no levy of GST on such activity.
iii) As per section 7 read with Schedule III para 5 of CGST Act, Sale of building is out of scope of supply
and hence there shall be no levy of GST on such activity.

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Notes Import of Services

Question
52





2.17

Discuss the taxability of import of services under GST. (RTP – ICAI)

Answer
Chap. 2 Charge of Tax

As per section 7(1)(b) of CGST Act, 2017 supply includes the importation of services for a
consideration whether or not in the course or furtherance of business. Thus, import of services with
consideration is taxable in both of the following situations:
in course or furtherance of business
not in course or furtherance of business
Further, Schedule I of CGST Act, inter alia, stipulates that import of services by a taxable person from a
related person or from his establishments located outside India is treated as “supply” even if made without
consideration if it is provided in the course or furtherance of business.

Question
53





Shreya a student of engineering plans to pursue her higher education in US. He receives career
consultancy services from a US based consultant for ` 2, 50,000. Does it qualify as a supply?
Answer
Yes, As per section 7(1)(b) of CGST Act, 2017, Supply includes import of services for a consideration
whether or not in the course or furtherance of business. Hence, in the above case it will be treated as a
supply.

Question
54





John Ltd, USA is the holding company of VB Ltd. imports Business Consultancy Service from
John Ltd. without consideration in September, 2017, does it qualify as a supply.
Answer
Yes, As per para 4 of Schedule -I import of services by taxable person from related person outside India
in the course or furtherance of business without consideration would be treated as supply.
In given case import of business consultancy service by V.B. Ltd. from John Ltd. without consideration
qualify as supply.

Question
55





ABC Associate received legal consultancy services from its head office located in Malaysia. The
head office has rendered such services free of cost to its branch office, does it qualify the supply?
Answer
Yes, As per para 4 of Schedule -I import of services by taxable person from any of his other
establishment outside India in the course or furtherance of business without consideration would be
treated as supply.
Since ABC Associates and the branch office are related persons, services received by ABC Associates will
qualify as supply even though the head office has not charged anything from it.

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Composite & Mixed Supply Notes
Question : 56

2.18
Define the following terms as in accordance with GST Act:-
i) Composite supply

Chap. 2 Charge of Tax

ii) Mixed supply
Answer:
As per section 2(30) of CGST Act, “composite supply” means a supply made by a taxable person to a
recipient consisting of two or more taxable supplies of goods or services or both, or any combination
thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of
business, one of which is a principal supply;
Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a principal supply;
As per section 2 (74) “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.
Illustration — A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can
be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are
supplied separately.

Question
57





Determine whether the following supplies amount to composite supplies:
(a) A hotel provides 4 days-3 nights package wherein the facility of breakfast and dinner is
provided along with the room accommodation.
(b) A toothpaste company has offered the scheme of free toothbrush along with the toothpaste.
(ICAI Material
Answer
Under composite supply, two or more taxable supplies of goods or services or both, or any combination
thereof, are naturally bundled and supplied inconjunction with each other, in the ordinary course of
business, one of which is a principal supply [Section 2(30) of the CGST Act]. In view of the same,
(a) since, supply of breakfast and dinner with the accommodation in the hotel are naturally bundled,
said supplies qualify as ‘composite supply’.
(b) since supply of toothbrush alongwith the toothpaste are not naturally bundled, said supplies do not
qualify as ‘composite supply’.

Question
58





Nirvana Manufacturers entered into a contract with XYZ Ltd. for supply of readymade shirts
packed in designer boxes at XYZ Ltd.’ outlet. Further, Nirvana Manufactures would also get them
insured during transit. Determine nature of supply?
Answer
In this case, supply of goods, packing materials, transport & insurance is a composite supply wherein
supply of goods is principal supply. In this case, entire transaction would be taxed as ‘supply of goods’.

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Question
59





Notes
Sagar Ltd. supplying a kit which contains a tie (12%), a watch(28%), a wallet (28%), and a pen
(12%), as a combo, for ` 4,500. Tie, watch, wallet, and pen are bundled as a kit. The kit is supplied
for a single price. Determine nature of supply?
2.19

Answer
Chap. 2 Charge of Tax

Each of the goods in the package have individal identity and can be supplied separately, but are
deliberately supplied conjointly for a single conjointly for a single consolidated price. Hence, the supply
would constitute a mixed supply, as per section 2(74).
The supply of a tie does not naturally necessitate the supply of other elements (watch, wallet, pen) and
vice versa.
As per section 8(b), tax rates applicable in case of mixed supply would be the rate of tax attributable to
that one supply (goods, or services) which suffers the highest rate of tax from amongst the supplies
forming part of the mixed supply. Therefore, entire package will be chargeable to 28% GST.

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