1

Dedicated to lord Bhootnath

Volume 1

GOODS
&
SERVICES TAX
APPLICABLE FOR Jan /May _ 2025

10TH EDITION

GST _V1 CA VIKRAM BIYANI

 2

Copyright and publication rights are with CA Vikram Biyani. All right reserved. No
part of this module may be reproduced or distributed in any manner prior written
permission of the publisher
.

1ST edition : 2017

10TH edition : 2024

Every effort has been made to avoid errors or omission in this publication .In spite ,error may
creep in .Any mistake ,error or discrepancy noted may be bought to our notice which shall be
taken care of in the next edition .It is notified that neither the publisher nor the author or seller
will be responsible for any damage or loss of action to any one , of any kind ,in any manner,
therefrom .It is suggested that to avoid any doubt the reader should cross check all the facts ,law
and content of the publication with original Government publication or notification

GST _V1 CA VIKRAM BIYANI

 3

CONTENTS
TOPIC PAGE
INTRODUCTION 5- 13

DEFINITION 14-56

SUPPLY 57-124

LEVY & COLLECTION 125-147

COMPOSITION SCHEME 148-183

TIME OF SUPPLY 184-210

TRANSACTION VALUE 211-243

PLACE OF SUPPLY 244-263

GST _V1 CA VIKRAM BIYANI

 4

GST _V1 CA VIKRAM BIYANI

 5

INTRODUCTION
Direct and Indirect Taxes

Features of indirect taxes

Genesis of GST in india

Concept of GST
GST in India

Need for GST in India

Framework of GST as introduced in India

Benefits of GST

Constitutional provisions

GST _V1 CA VIKRAM BIYANI

 6

TAX

INDIRECT TAX
DIRECT TAX
* The person paying the tax to the Government
* The person paying the tax to the collects the same from the ultimate consumer.
Government directly bears the incidence Thus, incidnece of the tax is shifted to the other
of the tax. person.
* Progressive in nature - high rate of taxes * Regressive in nature - All the consumers
for people having higher ability to pay. equally bear the burden, irrespective of their
ability to pay.

Burden of tax borne by the person Burden of tax shifted to another person
himself

GST _V1 CA VIKRAM BIYANI

 7

Goods and Services Tax

Major direct and indirect taxes

Indirect taxes

Customs Duty

Direct taxes Income tax

GST _V1 CA VIKRAM BIYANI

 8

WHAT IS GST

● Goods and services tax means a tax on supply of goods or services, or both, except taxes on
supply of alcoholic liquor for human consumption (Article 366 (12A) of Constitution of India).

● GST is a value added tax levy on sale or service or both.

● GST is a destination based consumption tax.

● GST offers comprehensive and continuous chain of tax credit.

● GST where burden borne by final consumer.

● GST eliminate cascading effect of tax.

● GST brings uniform tax structure all over India.

GST _V1 CA VIKRAM BIYANI

 9

Existing Taxes that are subsumed under GST

GST would replace the following taxes levied and collected by the -

Central Government State Government

(a) Central Excise duty (a) State VAT

(b) Duties of Excise (Medicinal and Toilet (b) Central Sales Tax
Preparations)
(c) Luxury Tax
(c) Additional Duties of Excise (Goods of
(d) Entry Tax (all forms)
Special Importance)
(e) Entertainment and Amusement Tax (except
(d) Additional Duties of Excise (Textiles and
when levied by the local bodies)
Textile Products)
(f) Taxes on advertisements
(e) Additional Duties of Customs (commonly
known as CVD) (g) Purchase Tax
(f) Special Additional Duty of Customs (SAD) (h) Taxes on lotteries, betting and gambling
(g) Service Tax, Central Surcharges and (i) State Surcharges and Cesses so far as they
Cesses so far as they relate to supply of relate to supply of Goods and Services.
Goods and Services.

Note: The GST Council an upper body formed to regulate the GST in India, shall make
recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre,
the States and the local bodies which may be subsumed in the GST.

Coverage of GST on Transactions

As a result of Introduction of GST, following are the transactions in which CGST/ SGST/ IGST
will be applicable-
• Central GST will replace the existing Central Excise Duty and Service Tax. CGST would
also cover Sale transactions.
• State GST will replace State VAT, Entry tax, Octroi, Luxury tax, Entertainment tax etc.
SGST would be levied on Services as well.
• Integrated GST (equal to CGST + SGST) will be levied on all supplies of goods and/or
services in the course of inter-state trade or commerce. IGST would be applicable to Import
of Goods or Services also.

GST _V1 CA VIKRAM BIYANI

 10

Existing Taxes that will continue even after the introduction of GST
1. Central Excise Duty levied on manufacture/ production of Tobacco, Petroleum Crude, Diesel,
Petrol, ATF and Natural Gas.
2. State Excise Duty levied on manufacture/ production of Alcoholic Liquor, Opium, Indian Hemp
and Narcotics.
3. VAT levied on Intra-State sale of Petroleum Crude, Diesel, Petrol, ATF, Natural Gas and
Alcoholic Liquor.

GST _V1 CA VIKRAM BIYANI

 11

GST COUNCIL

1. Constitution of Article 279A of the Constitution empowers the President of India to

GST Council constitute a joint forum of the Centre and States namely, Goods &
Services Tax Council (GST Council). The provisions relating to GST
Council came into force on 12-09-2016. The President constituted the
GST Council on 15-09-2016.

2. Members of the The GST Council shall consist of the following members, namely: — (a)
GST Council the Union Finance Minister Chairperson;
(b) the Union Minister of State in charge of Revenue or Finance Member;
(c) the Minister in charge of Finance or Taxation or any other Minister
nominated by each State Government Members.

3. Vice-Chairperson The State Finance Minister's shall choose one amongst themselves as
Vice- Chairperson of the Council for such period as they may decide.

4. Role of GST The GST Council shall make recommendations to the Union and the
Council States 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 GST 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;
(g) 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
(h) any other matter relating to the GST, as the Council may decide.

5. Effective date of The GST Council shall recommend the date on which the goods and
levy of GST on services tax be levied on petroleum crude, high speed diesel, motor spirit
petroleum (commonly known as petrol), natural gas and aviation turbine fuel.
products

GST _V1 CA VIKRAM BIYANI

 12

6. Guiding principles While discharging the functions conferred by this article, the Goods and
for GST Council Services Tax Council shall be guided by the need —
(a) for a harmonised structure of goods and services tax, and
(b) for the development of a harmonised national market for goods and
services.

7. Quorum One-half of the total number of Members of the Goods and Services
Tax Council shall constitute the quorum at its meetings.

8. Procedure The Goods and Services Tax Council shall determine the procedure in
the performance of its functions.

9. Decisions to be Every decision of the Goods and Services Tax Council shall be taken at a
taken by GST meeting, by a majority of not less than 3/4* of the weighted votes of the
Council members present and voting, in accordance with the following principles,
namely: —
(a) the vote of the Central Government shall have a weightage of l/3rd of
the total votes cast, and
(b) the votes of all the State Governments taken together shall have a
weightage of 2/ 3rd of the total votes cast, in that meeting.

10. Vacancy etc. not No act or proceedings of the Goods and Services Tax Council shall be
to invalidate invalid merely by reason of—
proceedings (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.

11. Settlement of The Goods and Services Tax Council shall establish a mechanism to adjudicate
disputes any dispute —
(i) between the Government of India and one or more States; or
(ii) between the Government of India and any State or States on one side and
one or more other States on the other side; or
(iii) between two or more States,
arising out of the recommendations of the Council or implementation thereof.

GST _V1 CA VIKRAM BIYANI

 13

Outside GST !

Alcohol for human consumption Power to tax remains with the State

Five petroleum products — crude oil, GST Council to decide the date from which GST will
diesel, petrol, natural gas and ATF be applicable

Tobacco Part of GST but power to levy additional excise duty

with Central Government

Entertainment tax levied by local Power to tax remains with local bodies
bodies

GST _V1 CA VIKRAM BIYANI

 14

GST _V1 CA VIKRAM BIYANI

 15

Sec 2- Definitions

Sec 2(1) “Actionable claim”

Shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 2282;

Analysis

Sec 2 read with Sch III

Shall have the meaning assigned to it in section 3 of the Transfer of
of CGST Act 2022 Property Act, 1882. [Section 20)]
According to Section 3 of Transfer of Property Act, 1882, 'Actionable claim'
means a claim to—
(i) any debt, other than a debt secured by mortgage of immovable property
or by hypothecation or pledge of movable property; or
(ii) any beneficial interest in movable property not in the possession, either
actual or constructive, of the claimant, which the Civil Courts recognize as
affording grounds for relief,
whether such debt or beneficial interest be existent, accruing, conditional or
contingent.
Examples of actionable claims are—
(a) Unsecured debts;
(b) Right to participate in the draw to be held in a lottery.
It must be noted that 'Actionable Claim' is specifically included in the
definition of Goods. Transactions of Actionable claims, other than
specified actionable claims1 shall be treated neither as a supply of goods
nor a supply of services as per Para 6 of Schedule III of CGST Act, 2017.

specified actionable claims Means the actionable claim involved in or

by way of—
(i) betting;
(ii) casinos;
(iii) gambling;
(iv) horse racing;
(v) lottery; or
(vi) online money gaming. [Section 2(102A)]3

GST _V1 CA VIKRAM BIYANI

 16

SEC 2( 5) “Agent”

means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioner
or any other mercantile agent, by whatever name called, who carries on the business of supply or
receipt of goods or services or both on behalf of another;

SEC 2( 6) “Aggregate tur nover”

means the aggregate value of

 All taxable supplies (excluding the value of inward supplies on which tax is payable by a
person on reverse charge basis),
 Exempt supplies;
 Exports of goods OR services OR both AND
 Inter-state supplies of persons having the same Permanent Account Number to be computed
on all India basis
 But excludes central tax, State tax, Union territory tax, integrated tax and cess.
Analysis

“Aggregate turnover” 1. Presently Tax rates are 0%, 5%, 12%, 22%, 28%.
(CGST+SGST)
2. Composition Scheme can also be taken if Aggregate
Turnover in P.Y< Rs1.5 crore/ 75 lakh (75 lakh in case of
Find mention in Sec 10 & 22 Some states), then Rate of CGST- 2.5%, 0.5%, 0.5% for
Restaurant, manufacturer. Trader Respectively (Refer Sec
10)
3. As per sec 22, Every Supplier is liable to be Registered in
State if his Aggregate Turnover exceeds Rs20 lac (10lac for
Special Category States)
4. Hence Aggregate turnover is relevant to determine:
Threshold limit to take registration: if Aggregate Turnover
exceeds 20 lakhs (10 Lakhs for Special Category States in a
financial year).
Threshold limit to opt for composition scheme: a registered
person, whose aggregate turnover in the preceding F.Y did
not exceed Rs1 crore in a financial year; (Rs75 lakh for
some states) may opt for composition scheme).

GST _V1 CA VIKRAM BIYANI

 17

Aggregate T.O= Value of [Taxable Supply+ Exempt Supply(Nil

Rated+ Wholly Exempt+ Non-Taxable) + Exports + inter-state
Supply)- Taxes

Note- Sec 2(47)- Exempt supply includes Nil Rated, Wholly Exempt
or Non- Taxable

Note- Value of inward Supply where tax is paid by recipient under

reverse charges will not be included in Aggregate Turnover of
Recipient.

OUTWARD SUPPLIES ON WHICH TAX IS PAID ON REVERSE CHARGE

BASIS BY THE RECIPIENT WILL BE INCLUDED IN AGGREGATE TURNOVER
OF SUPPLIER.

Note- Turnover of all the persons having same PAN will be

included.

(i) Inter-State supplies between units of a person with the

same PAN treated as Distinct Person as Per Sec 25. It will
be included in Aggregate turnover.
(ii) Explanation to Sec 22- In case of agent, the supplies made
by him on behalf of all his principals will be included in the
Value of Agent.
(iii) Explanation to Sec 22- In case of job-worker, the following
supplies will not be included in ‘aggregate turnover’ of Job-
Worker:

(a) Goods returned to the principal

(b) Goods sent to another job worker on the instruction
of the principal
(c) Goods sold by the principal from the Registered job
worker’s premises
These will be included in the ‘aggregate turnover’ of the principal.

GST _V1 CA VIKRAM BIYANI

 18

Aggregate Turnover Sec 2(6)

Question Calculate aggregate turnover

(i) For Composition scheme

(ii) Threshold limit for obtaining Registration
Particulars Amount

1) Taxable supply Intrastate 1,00,000

2) Taxable supply Interstate 2,00,000

3) Supply having Nil Rate of tax 3,00,000

4) Supply that are- wholly exempt under CGST, UTGST, IGST 4,00,000

5) Alcoholic Liquor (supply not taxable) 1,20,000

Export of goods 2,00,000

Export of Service 3,50,000

Interstate supply of one Registered unit to another Registered unit of same person. 1,50,000

Goods sent to jobworker 2,50,000

Goods supplied from jobworker premise by the Principal manufacturer 3,00,000

Inward supply from unregistered person on which tax is payable under reverse charge 5,50,000

CGST, SGST, UGST, IGST, Compensation Cess, included in the above supplies 1,00,000

GST _V1 CA VIKRAM BIYANI

 19

Answer: Calculation of Aggregate turnover

Particulars Amount

(1)Taxable supply Interstate [Note- 1] 1,00,000

(2)Taxable supply Interstate [Note- 1] 2,00,000

(3)Supply having Nil Rate of Tax [Note- 1] 3,00,000

(4)Supply that are wholly exempt under CGST, UTGST, IGST [Note- 1] 4,00,000

(5)Alcoholic Liquor (supply not taxable) [Note- 1] 1,20,000

(6)Export of goods [Note- 1] 2,00,000

(7)Export of Service [Note- 1] 3,50,000

(8)Interstate supply of one Registered unit to another Registered unit of 1,50,000

same person [Note- 2]

(9)Goods sent to jobworker ------------

(10)Goods supplied from jobworker premise by the Principal manufacturer 3,00,000

(11)Inward supply from unregistered person on which tax is payable under ------------
reverse charge

(12)CGST, SGST, UTGST, IGST, Compensation Cess, included in the (1,00,000)

above supplies

Aggregate Turnover 20,20,000

Note 1- Value of [Taxable Supply whether intra or interstate, Exempt Supply (whether Nil Rated,
Wholly Exempt or Non—Taxable), Exports of goods or services are included in aggregate
Turnover.- Sec 2(6)
Note 2- Supplies of persons having Same PAN will also be included in Aggregate Turnover.-
Sec 2(6)
Note 3- As per Explanation to sec 22, Goods supplied from jobworker premises by Principal
will be included in the Turnover of the Principal.
Note 4- CGST, SGST, UTGST, IGST, Compensation Cess will be excluded- Sec 2(6)

GST _V1 CA VIKRAM BIYANI

 20

Question. Calculate Aggregate Turnover for Job-worker.

Particulars Amount

(1) Goods returned to Principal 1,00,000

(2) Goods sent to another Jobworker on instruction of Principal 2,00,000

(3) Goods directly supplied from jobworker premises by the principal 3,00,000

Answer: Calculation of Aggregate turnover

Particulars Amount

(1) Goods returned to Principal

(2) Goods sent to another Job worker on instruction of Principal

(3) Goods directly supplied from job worker premises by the principal

Note- Explanation to Sec 22- In case of job-worker, the following supplies will not be included in
‘aggregate turnover’ of Job-Worker:

(a) Goods returned to Principal

(b) Goods sent to another Job worker on instruction of Principal
(c) Goods sold by the principal from the Registered job worker’s premises
These will be included in the ‘aggregate turnover’ of the principal.

Question. Agent supplies goods on behalf of Principal of Rs5 Lac, in whose taxable value it will
be included. Whether Agent Registration is Required?

Answer. It will be included in the value of Agent. But Agent is required to take compulsory
Registration irrespective of it turnover as per Sec 24 of CGST Act.

GST _V1 CA VIKRAM BIYANI

 21

Section 10 (5)

Aggregate turnover includes exempt supply .However aggregate turnover

does not include exempt supply of services provided by way of extending
deposit , loans or advances where consideration represented by way of
interest or discount

GST _V1 CA VIKRAM BIYANI

 22

SEC 2(22) “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 vacation;
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;

GST _V1 CA VIKRAM BIYANI

 23

Analysis

Why definition of (i)GST is leviable on Supply of Goods or Service or both.

Business to be
understood (ii)As per Section 7(1)(a) of GST Law “supply” includes all forms of
supply of goods or services or both by a person in the course or
furtherance of business

(iii)Hence it is necessary to understand the definition of business.

Trade As per Cambridge Dictionary: the activity of buying and selling, or

exchanging, goods and/or services between people or countries

Commerce As per Business Dictionary: Exchange of goods or services for

money or in kind usually on a scale large enough to require
transportation from place to place or across city, state or national
boundaries.

Manufacture Sec 2(72)- Manufacture means processing of raw material or inputs

in any manner that results in emergence of a new product having a
distinct name, character and use

Profession As per Business Dictionary: Occupation, practice, or vocation

requiring mastery of a complex set of knowledge and skills through
formal education and/or practical experience. Every organized
profession (accounting, law, medicine, etc.) is governed by its
respective professional body.

Vocation As per Cambridge Dictionary: a type of work that you feel you are
suited to doing and to which you should give all your time and
energy, or the feeling that a type of work suits you in this way

Adventure As per Business Dictionary: Undertaking that involves exposure to

known and unknown risks.

Wager A wager is a contract by which two or more parties agree that a

certain sum of money or other thing shall be paid or delivered to one
of them on the happening of an uncertain event. Wager is included in
the definition of business to impose GST on betting transactions;

Incidental or ancillary INCIDENTAL ACTIVITY IS NOT BUSINESS IF MAIN ACTIVITY IS

to sub-clause (a); NOT BUSINESS. Sai Publication Fund sells books etc. to spread its
message. (i.e. Main Activity of running Temple is not business).
Publication for the purpose of spreading message is incidental to the
main activity which the Trust does not carry as business. [Sai

GST _V1 CA VIKRAM BIYANI

 24

Publication Fund, (2002) SC

Occasional any activity or transaction in the nature of trade, commerce,

Transaction manufacture profession etc., whether or not there is volume,
frequency, continuity or regularity of such transaction

For example- A trader of Goods has given one time consultancy of

interior decoration or Management consultancy to any other Person.

Example 2- Amount paid in cases where people at large are invited to

contribute to open software development (e.g. Linux) and getting an
amount if their contribution is finally accepted. Though it is occasional
Transaction. Still it is Business.

Commencement of Closing Stock of Goods or Fixed Asset sold after closure

closure of business

Club to member Some of the clubs sale Vegetable, Fruits and other goods from their
shop to its member or provide services of Zym, Swimming Pool,
Security guard, Banquet hall, Electricity etc. to its Members. It will be
covered in definition of Business.

Admission to any Admission to entertainment event, Circus, dance, ballet, Cinema Hall,
Premises drama, concert, pageant, award show etc is covered in definition of
Business.

Holder of an office if a CA in practice Appointed as Independent Director or Chief

Financial officer, the service Provided by him as holding office in the
course or furtherance of his Profession. Hence it is covered in
definition of business.

Totalisator Totalisator is a system (e.g Computer or Machine) by means of which

bets are accepted and aggregated and dividends are calculated,
declared and paid on promotional basis dependent on a result of
Horse Race.

A Totalisator Operator is a Person licensed by the Authority to

operate as Totalisator at RACE COURSE or Approved PLACE in
accordance with the Rules of Totalisator approved by the Authority.

Transaction by Govt. as i. As per Section 7(1)(a) of GST Law, “supply” includes all forms
public authorities of supply of goods or services or both by a person in the
course or furtherance of business.
ii. As per Sec 7(2)(b) of CGST Act- Activities notified by
Government shall be treated as neither supply of goods not
supply of service.
iii. As per Notification No. 14/2022- CGST & 11/2022- IGST- the

GST _V1 CA VIKRAM BIYANI

 25

following activity, shall be treated neither as a supply of goods

nor a supply of service, namely:-
“Services by way of any activity in relation to a function entrusted to a
Panchayat under article 243G of the Constitution”.
iv. In view of the above, it is clear that apart from the activity or
transaction notified by the Government, all other activities or
transactions will be termed as business transactions and will
be covered under GST.

GST _V1 CA VIKRAM BIYANI

 26

GST _V1 CA VIKRAM BIYANI

 27

Question - Whether following are covered in definition of business

1. Sale of Laptop by Mr. A

2. Sale of computers after Assembling various Parts like HDD,RAM, Mother Board, Keyboard
etc.

3. Audit of a Company By a Chartered Accountant

4. A steel Manufacturer sold his old car used in his business

5. Sale of old machinery, Furniture and scrap by Steel manufacturer

6. Sale of hypothecated/ pledged goods by Bank;

7. Sale of repossessed goods (e.g Car, Truck) by insurance Company in Auction

8. Orissa Road Transport undertaking Sold unserviceable buses, motor- parts and scrap material
including electrical goods by auction

9. Goods sold in the store maintained by the company for the welfare of the employees

10. Sale of Laddu by Triupathi devasthanam

11. Sai Publication Fund sells books etc. to spread its message

12. Partner Give Motor car and 1 Laptop at the time of Admission to Partnership Firm as Capital
contribution

13. At the Time of Dissolution of Partnership Firm, Computer/Car is distributed by the firm to its
partners

14. Rs500000p.m charged by a club to its member for (1) Restaurant facility, (2) Banquet Hall or
open ground; (3) facility of swimming pool (4) Sports facilities for playing table tennis, cricket
etc. (5) Library; (6) Conference room etc.

15. If X wants to hire a premises but the same is already hired to Y. Now Y agrees to vacate on
payment of Rs5 Lac to him which is popularly called “Pagadi”.

16. Admission to any Entertainment event of Justin Bieber of Rs1 Lac

22. Sale of Ticket for entry into amusement park or gaming event for Rs2000.

22. Sale of Ticket for entry into Movie Hall

19. Directors of A company impressed by A Practicing CA due to his GST expertise and Business
ideas appoint him as an independent director of a company for 1 Lac p.m. Whether
Independent Director carrying Business

20. Service provided by Hyderabad Race Club for Horse Race collected Rs20 Lac through
Licensed Book Market or totalizator

GST _V1 CA VIKRAM BIYANI

 28

Answer

1. Sale of Laptop by Mr. A is TRADING and hence covered by definition of business.

2. When a New Product emerges. It is termed as MANUFACTURE. Assembling various Parts like
HDD, RAM, Mother Board, and Keyboard etc. results into computer which is a new product and
therefore it is manufacture. Business includes Manufacture. Hence it is business.

3. Business includes PROFESSION/VOCATION. Audit of a Company by a CA is covered in

Business.

4. Old car Sold is covered in definition of business because it is an activity IN CONNECTION

WITH OR INCIDENTAL TO MAIN BUSINESS of Steel.

5. Sale of old machinery and scrap by manufacturer is incidental to his business- Steel Authority
of India Ltd. (2011)(Ori HC). It is an activity IN CONNECTION WITH OR INCIDENTAL TO
MAIN BUSINESS.

6. Sale of pledged goods by Bank is in the course of banking business- Federal Bank Ltd. v. State
of Kerala (2007) SC). It is an activity IN CONNECTION WITH OR INCIDENTAL TO MAIN
BUSINESS.

7. Sale of repossessed goods (e.g Car, Truck) by insurance Company in Auction. It is an activity
IN CONNECTION WITH OR INCIDENTAL TO MAIN BUSINESS.

8. Orissa Road Transport Co. Ltd. 1997 (SC), it was held that state transport undertaking is liable
to tax on sale of its un-serviceable, old and obsolete parts. Since it is INCIDENTAL TO HIS
BUSINESS.

9. Turnover of goods sold in the store maintained by the company for the welfare of the
employees was held to be INCIDENTAL TO MAIN BUSINESS- State of Tamil Nadu vs. Binny
Ltd., 49 STC 22- Supreme Court

10. Incidental activity is not business if main activity is not business. Sale of Laddu by Tirupathi
Devasthanam cannot be business, since main activity of temples is not business. [Triumalai
Tirupathi Devasthanam Vs (1972) Madras

11. INCIDENTAL ACTIVITY IS NOT BUSINESS IF MAIN ACTIVITY IS NOT BUSINESS. Sai
Publication Fund sells books etc. to spread its message is not business [Sai Publication Fund,
(2002) SC]

12. Business includes supply of goods including Capital goods and services IN CONNECTION
WITH COMMENCEMENT OR CLOSURE OF BUSINESS. Hence, Partner Give Motor car and
1 Laptop at the time of Admission is business.

13. Business includes supply of goods including Capital goods and services IN CONNECTION
WITH COMMENCEMENT OR CLOSURE OF BUSINESS. Hence, Computer/ Car is distributed
by the firm to its partners at time of dissolution is business.

GST _V1 CA VIKRAM BIYANI

 29

14. Provision by a club, society etc of facilities to its members is covered in definition of Business.

15. Business includes ADMISSION TO ANY PREMISES FOR CONSIDERATION. Now Y receiving
payment of Rs5 Lac for allowing to premises is covered in definition of business.

16. Admission to any Entertainment event of Justin Bieber for Rs1 Lac is covered in definition of
business.

22. Admission for consideration to any premises of person is included in definition of business.
Hence, Sale of Ticket for entry into amusement park or gaming event for Rs2000 is business.

22. Sale of Ticket for entry into Movie Hall is for admission to any premises. Hence it is business.

19. Services supplied by Holder of office which was accepted by him in course of profession is
business. Hence Practicing CA getting Rs1 Lac p.m. is in course of Business.

20. Services provided by a Race Club are covered in business.

GST _V1 CA VIKRAM BIYANI

 30

SEC 2(10) “Causal taxable person”

means a person who occasionally undertakes transactions involving-

 Supply of goods or services OR both

 In the course or furtherance of business,
 Whether as principal, agent or in any other capacity,
 In a state or a union territory where he has no fixed place of business;
“casual taxable person” (i)Sec 24 A casual taxable persons has to take compulsory
Registration irrespective of his Turnover
(ii)Sec 25- A casual taxable person shall apply for
Find mention in Sec24, 25, 27, 44 registration at least 5 days prior to the commencement of
business.
(iii)Sec 27- The certificate of registration shall be valid for
the period specified in the application for registration or 90
days from the effective date of registration, whichever is
earlier and such person shall make taxable supplies only
after the issuance of the certificate of registration:
Provided that the proper officer may, extend the said period
of 90 days by a further period not exceeding 90 days.
He shall, at the time of application for registration, make an
advance deposit of tax equivalent to the estimated tax
liability of such person for the period for which the
registration is sought:
If extension of Period is sought then pay additional
estimated tax liability.
(iv)Sec 44- Casual Taxable Person is not required to file
Annual Return.

GST _V1 CA VIKRAM BIYANI

 31

SEC 2(31) “Considera tion”

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;

GST _V1 CA VIKRAM BIYANI

 32

CONSIDERATION

Payment in money or
Monetary value of any act
otherwise for the supply
or forbearance for the
supply

By recipient or any
other person

Deposit to be considered as
payment

ONLY
Excluding subsidy given by
Central/State Governments

When the supplier applies such

deposit as consideration for the
said supply

GST _V1 CA VIKRAM BIYANI

 33

Consideration

PAYMENT IN MONEY

1. A modeling agency contracts with a beauty parlor for beauty treatment of say, 20 models. The
modeling agency is the receiver of the service pay 5 lac, but the service is rendered to the
models, who are receiving the beauty treatment service on behalf of the modeling agency.

Ans. GST leviable on Rs5 Lac.

PAYMENT made by Person other Than Recipient

2. A modeling agency contracts with a beauty parlor for beauty treatment of say, 20 models. The
modeling agency asks Producer of Movie to Pay to Beauty Parlor Rs5 Lac.

Ans. GST leviable on Rs5 Lac.

PAYMENT IN MONEY OR OTHERWISE

3. VB of DELHI provides service of taking transition Registration to Pooja Publisher of Delhi for Rs1
lakh and in return Pooja Publisher supplied Books & Software of Rs70000 and a Cheque of
Rs30000 to VB.

Ans. VB Will Pay GST on Rs1 Lakh and Publisher will also pay GST on Rs70000, if leviable.

PAYMENT FOR INDUCEMENT OF SUPPLY OF SERVICE

4. A company gives 5% extra Commission to Selling Agents who will achieve the Target Sale of 10
lac.

Ans. GST will be leviable on 5% Extra Commission

SUBSIDY BY CENTRAL GOVERNMENT OR STATE GOVERNMENT- Not Considered as Consideration.

5. A Fertilizer supplier selling Fertilizer Rs10 Per Kg. Central Govt gives subsidy Rs5 Per Kg to
Fertilizer Supplier.

Ans. Rs10 will be leviable to GST. No GST on subsidy from Government.

FORBEARANCE /TOLERATE/REFRAIN FROM an ACT

6. (i) Non compete fee of Rs1 crore Received by A software Developer on his retirement that he
will not start his company or not join business of Competitor Company

(REFRAIN FROM an ACT)- GST LEVIABLE ON Rs1 crore.

GST _V1 CA VIKRAM BIYANI

 34

(ii)Penalty for early termination of agreement

(iii)Seller has to Deliver 50 computer within 15 days. Late delivery charges of Rs1 lac recovered
by buyer. (Situation Tolerated by Buyer)- GST LEVIABLE ON Rs1 lakh.

(iv)Prepayment charges Rs1 lakh on early payment of Loan installment.

(Forbearance/ Tolerate of Act by Bank)- GST LEVIABLE ON Rs1lakh.

(v)Demurrage charges paid to the port authorities Rs2 lakh for not clearing the goods within a
specified period of time. (Forbearance/ Tolerate of Act by Port Authorities)- GST LEVIABLE ON
Rs2 lakh.

DEPOSIT IN RESPECT OF SUPPLY OF GOODS OR SERVICE- considered as payment only when supplier
apply such deposit as consideration for supply.

7. Airtel receives security deposits from subscriber for Landline connection. This security deposit
is refundable.- Security deposit is not ‘consideration for supply of service- No GST LEVIABLE.

If in future, if it is adjusted (Rs5000)) towards value of services supplied- This security deposit
shall be treated as consideration- GST LEVIABLE ON Rs5000.

GST _V1 CA VIKRAM BIYANI

 35

SEC 2(44) “Electronic commerce”

means the supply of goods or services or both, including digital products over digital or
electronic network;

Analysis
“electronic commerce” (i)Sec 9(5) CGST+ Sec 5(5) IGST- The Government may, by
notification, SPECIFY CATEGORIES OF SERVICES the
tax ON which shall be paid by the electronic commerce
Find mention in Sec 10, 24, operator if such services are supplied through it (known as
52, Sec 9(5) CGST+ sec 5(5) Aggregator)
IGST NOTE- if an electronic commerce operator (ECO) does not
have a physical presence in the taxable territory, any person
representing such ECO for any purpose in the taxable
territory shall be liable to pay tax:
NOTE- where n electronic commerce operator (ECO) 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.
(ii)Sec 100- A person making any supply of goods through
an ECO is not eligible for Composition scheme.
(iii)Sec 24- Every ECO is required to Take Mandatory
Registration irrespective of his Turnover.
(iv)sec 24- persons who supply goods or services or both,
other than supplies specified under sub-section (5) of section
9, through such ECO who is required to collect tax at source
u/s 52 is required to Take Mandatory Registration
irrespective of his Turnover.
(v)Sec 52- every ECO shall collect an amount 1% CGST +
1% SGST of the net value of taxable supplies (Value of
Taxable Supply made- Sale Return) made through it by other
suppliers where the consideration with respect to such
supplies is to be collected by the operator
Note- TCS not applicable to a transaction where monies are
received by the supplier on delivery (COD basis) and the
delivery is made directly by the supplier.

GST _V1 CA VIKRAM BIYANI

 36

SEC 2(45) “electronic commerce operator”

means any person who owns, operates or manages digital or electronically facility or platform
for electronic commerce;

Analysis
E -COMMERCE OPERATOR
E- Commerce Not an Ecommerce Not an Ecommerce
Operator Operator
Amazon and Flipkart are e- Amazon and Flipkart will XYZ Electronics supplying
commerce Operators because not be treated as e— Laptop through its own
they are facilitating actual commerce operators in website would not be
suppliers to supply goods relation to those supplies considered as an e-
through their platform (popularly which they make on their commerce operator for the
called Market place model or own account (popularly purposes of this provision.
Fulfillment Model) called inventory Model).

E-COMMERCE OPERATOR
1. SERVICES Supply of notified services ECO will take Sec 9(5) of
through ECO registration and ECO CGST Act Sec
will pay GST 5(5) of IGST Act
Note-Supplier and
Receiver are not
liable to pay GST to
Government. But
GST can be
recovered from them.
Supply off other services Supplier will take Sec 52 of CGST
through ECO Registration and Act Sec 20 of
Supplier will pay GST IGST Act
Note- ECO also to
take Registration and
collect TCS and
deposit TCS to
Government

2. GOODS Supply of any goods Supplier will take Sec 52 of CGST

through ECO Registration and Act Sec 20 of
Supplier will pay GST IGST Act
Note- Eco also to
take Registration and
collect TCS and
deposit TCS to
Government.

GST _V1 CA VIKRAM BIYANI

 37

Electronic Commerce Operator

Question Answer
1. Whether Ola Uber Cab, Flipkart, Snapdeal, Amazon, Flip cart, Snapdeal, and
falls in the definition of electronic commerce operator. Amazon re Ecommerce
operator because they
facilitate the supply of Goods/
Services through electronic
network.
Ola, Uber Cab are aggregator.
They supplier/ service
provider. They are also
covered in definition E-
commerce operator.
2. Suppose in the above question Ecommerce operator Electronic commerce operator
Flip cart, Snapdeal, and Amazon having turnover of is required to get registration
Rs5 lakh in a year whether he is required to get irrespective of his turnover. He
registration. Whether he is required to collect Tax at is required to collect tax at
Source. source at the rate of 1% on
value of supply of goods/
Services.
3. The transaction where money is received by the No T.C.S will be collected.
supplier on cash on delivery basis and delivery is
made directly by the supplier. Whether T.C.S will be
collected.

GST _V1 CA VIKRAM BIYANI

 38

SEC 2(49) “Family” means

 The spouse and children of the person, and

 The parents, grand-parents, brothers and sisters of the person if they are wholly or mainly
dependent on the said person;

Question Answer
If the goods are sold for Rs12000 by a son (Mr. X) As Per Explanation to sec 15- Related Person
to his Father who is independent and a Practicing means member of same Family. His Father is not
Chartered Accountant. How value shall be included in the definition of Family, since he is
calculated? independent. Hence he is not Related Person.
Value as per sec 15=12000(Transaction Value)
If the goods are sold for Rs15000 by a Father (Mr. As per Rule 28 of Valuation Rules- Value of Supply
Z) to his Son who is independent and a Practicing between Related Person- Value= Open Market
Chartered Accountant. How value shall be Value.
calculated, if Open Market Value is 20000? Note- if Recipient Eligible for 100% ITC, =Value
Further his son is eligible to take 100% input tax declared in Invoice deemed to be Open Market
credit as per Sec 16 read with sec 22 Value.
Hence Value shall be Rs15000.

GST _V1 CA VIKRAM BIYANI

 39

SEC 2(52) “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 SERVED BEFORE SUPPLY or under a contract of supply;

SEC 2(102) “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 on form, currency or
denomination, to another form, currency or denomination
 For which a separate consideration is charged

GST _V1 CA VIKRAM BIYANI

 40

GST _V1 CA VIKRAM BIYANI

 41

SEC 2(55) “goods and service s tax practitioner”

means any person who has been approved under section 48 to act as such practitioner;\

Analysis

“goods and services tax Sec 48 + Rule 83 of CGST Rules- A registered person may
practitioner” authorize an approved GST practitioner to

(a) Furnish the details of outward and inward

supplies;
(b) Furnish monthly, quarterly, annual or final return;
(c) Make deposit for credit into the electronic cash
Find mention in Sec 48 ledger;
(d) File a claim for refund; and
(e) File an application for amendment or cancellation
of registration:
Sec 48-However the responsibility for correctness of any
particulars furnished in the return or other details filed by GST
practitioners shall continue to rest with the registered person on
whose behalf such return and details are furnished.

GST _V1 CA VIKRAM BIYANI

 42

SEC 2(56) “India” means-

 The territory of India as referred to in article 1 of the Constitution,

 Its territorial waters, seabed and sub-soil underlying such waters,
 Continental shelf,
 Exclusive economic zone or
 Any other maritime zone as referred to in the territorial waters, Continental Shelf,
Exclusive Economic Zone and other Maritime Zones Act, 1976, and
 The air space above its territory and territorial waters;

GST _V1 CA VIKRAM BIYANI

 43

Analysis
Article of the constitution 28 States + 2 Union Territories with State
Legislature + 7 Union Territories without
state Legislature
Territorial Water 12 NM (Nautical Mile) from Base Line
Exclusive economic zone 200 NM(Nautical Mile) from Base Line

SEC 2(103) “State” includes a Union territory with Legislature;

SEC 2(114) “Union territory” means the territory of-

(a) The Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli & Daman and Diu;
(d) Chandigarh; and
(e) Ladakh
(f) Other territory

GST _V1 CA VIKRAM BIYANI

 44

SEC 2(59) “input” means

 Any goods other than capital goods

 Used or intended to be used
 By a supplier
 In the course or furtherance of business;
Analysis

Find mention in Sec Following are the condition for input

(i)It should be goods- Refer Sec 2(52)

(ii)It should not be capital goods- Refer Sec 2(19)

(iii)Used or intended to be used- where goods have been

purchased but, are yet to be used in the business. Hence
the condition of ready-to-use and put-to-use would not be
relevant for considering goods as input.

(iv)In the course or furtherance of business- Refer Sec 2(22)

Question Answer

A furniture dealer has purchased furniture of Rs10 lakh on Furniture capitalized in the books of
which IGST is paid Rs1,80,000. Out of this furniture 2 lakh accounts will be treated as capital goods.
value of furniture capitalized in the books of accounts on Even in case of capital goods 100% credit will
which IGST paid is Rs36000. What is the amount of credit be allowed on receipt on furniture i.e. IGST
available to furniture dealer. Rs36000 credited to the Electronic Credit
ledger. Further Rs800000 value of furniture
will be treated as Input100% credit can be
taken on the date of receipt Rs144000 will
be credited in the Electronic credit Ledger.

GST _V1 CA VIKRAM BIYANI

 45

SEC 2(60) “input service” means

 Any service
 Used or intended to be used
 By a supplier
 In the course or furtherance of business;
Analysis

“input service” Following are the condition for input service

(i)It should be Service- refer Sec 2(102)

(ii)Used or intended to be used- There is no requirement to

have direct nexus with the outward supply.

(iii)In the course or furtherance of business- Refer Sec 2(22)

SEC 2(61) “input Service Distributor” means –

 An office of the supplier of goods or services or both

 Which receives tax invoices issued under section 31 towards the receipt of input
services and
 Issues a prescribed document
 For the purposes of distributing the credit of central tax, State tax, integrated tax
or union territory tax paid on the said services
 To a supplier of taxable goods or services or both having the same Permanent
Account Number (PAN) as that of the said office;

GST _V1 CA VIKRAM BIYANI

 46

SEC 2(66) “in voice” o r “tax invoice”

means the tax invoice referred to in section 31;

Analysis

“invoice” or “tax invoice” (i)Sec 16- Credit can be taken on the basis of Tax Invoice or Debit
Note by Recipient issued by Supplier

(ii)Sec 22- Credit can be taken in case of (i)Mandatory Reg- Credit

of Stock imm. Preceding of date of Reg (ii) Voluntary Reg- Credit of
stock of IP/WIP/FG on day immediately Preceding date of Reg (iii)
conversion from composition to Regular- Credit of stock-
Find mention in Sec 16, 22, 31, 33, IP/WIP/FG on day of conversion
67(12)
(iii)Sec 31- A registered person supplying exempted goods or
services or both or paying tax under the provisions of section 10
shall issue, instead of a tax invoice, a bill of supply.

(iv)Refer CR note- Sec 2(37) and DR Note Sec 2(38)

(v)Sec 31- Supply INVOLVE MOVEMENT OF GOODS- issue TAX

INVOICE Before or AT THE TIME OF- REMOVAL, of goods

SUPPLYING TAXABLE SERVICE-issue TAX INVOICE Before or After

BUT Within 30 days of Provision of service

(vi)Other provisions of contained in Sec 31

(vii)Sec 33- Tax amount to be shown separately on Tax Invoice.

GST _V1 CA VIKRAM BIYANI

 47

SEC 2(75) “money”

means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter
of credit, draft, pay order, traveler cheque, money order, postal or electronic remittance or any other
instrument recognized by the reserve Bank of India when used as a consideration to settle an obligation
or exchange with Indian legal tender of another denomination but shall not include any currency that is
held for its numismatic value;

“money” (i)Money is neither goods nor Service

(ii)but includes activities relating to use of money or its conversion by cash or by

any other mode, from one form, currency or denominations is charged; is service

GST _V1 CA VIKRAM BIYANI

 48

SEC 2(76) “motor veh icle”

shall have the same meaning as assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988;

Analysis

“motor vehicle” Section 2(28) reads as under:

“motor vehicle” or “vehicle” means any mechanically propelled

vehicle adapted for use upon roads whether the power of
proplusion is transmitted thereto from an external or internal
source and includes a chassis to which a body has not been
attached and a trailer;
Find mention in Sec 22 But does not include a vehicle running upon fixed rails or a
vehicle of a special type adapted for use only in a factory or in
any other enclosed premises or a vehicle having less than four
wheels fitted with engine capacity of not exceeding 25 cubic
centimeters.

(i)Hence, All vehicles such as cars, scooters, bikes, auto-

rickshaws, trucks, buses, tempo-travellers, etc. that are meant
for usage on roads will be covered within the meaning of
‘motor vehicles’.

(ii)Sec 22- Input tax credit shall not be available in respect of

motor vehicles and other conveyances except when they are
used-

for (i)

A) further supply of such vehicles or conveyances; or

(B) transportation of passengers; or

(C)imparting training on driving, flying, navigating such

vehicles or conveyances;

(ii)for transportation of goods;

GST _V1 CA VIKRAM BIYANI

 49

Sec 2(77) “Non-resident taxab le person”

means any person who occasionally undertakes transactions involving supply of goods or services or
both, whether as principal or agent or in any other capacity, but who has no fixed place of business or
residence in India

Analysis

“non-resident taxable person” Sec 22- Input tax credit shall not be available of goods or services or
both received by a non-resident taxable person except on goods
imported by him;

Find mention in Sec 22, 24, 25,

Sec 24-A Non-resident taxable person has to take compulsory
27, 39(5), 44, 54(13) Registration irrespective of his Turnover

Sec 25- A Non-resident taxable person shall apply for registration at

least 5 days prior to the commencement of business.

Sec 27- The certificate of registration shall be valid for the period
specified in the application for registration or 90days from the
effective date of registration, whichever is earlier and such person
shall make taxable supplies only after the issuance of the certificate
of registration

Provided that the proper office may, extend the said period of 90
days by a further period not exceeding 90 days

He shall, at the time of application for registration, make an

advance deposit of tax equivalent to the estimated tax liability of
such person for the period for which the registration is sought:

If extension of Period is sought then pay additional estimated tax

liability

Sec 39(5)- Furnish Monthly Return in FORM GSTR-5 within 20 days

after the end of a calendar month or within 7 days after the last day
of the period of registration specified, whichever is earlier.

Sec 44- Non-resident taxable person is not required to file Annual

Return

GST _V1 CA VIKRAM BIYANI

 50

Non-Resident Taxable Person

Question Answer

A dealer of USA of comes in Trade Fair in Delhi Dealer falls in the definition of No-Resident
for selling L.E.D. He has sole L.E.D of Rs1,50,000/- Taxable person he is required to get registration
during Trade Fair Exhibition. Whether he is irrespective of his turnover atleast 5 days prior to
required to get registration. commencement of business. Even if he is
required to deposit his estimated tax liability.

As per Sec 27- The of registration shall be valid

for the period specified in the application for
registration or 90 days from the effective date of
registration, whichever is earlier and such person
shall make taxable supplies only after the
issuance of the certificate of registration

A dealer of USA purchases sweets to gift to their Non Resident taxable person means a person
relatives in Delhi. Whether he is required to get who occasionally undertakes transactions
Registration. involving-Supply of goods or services Or both in
the course or furtherance of business.

Since gift of sweets is not in course or

furtherance of business. Hence he doesn’t d fall
in the definition of Non-Resident Taxable Person.
Therefore he is not required to take Non-
Resident taxable person Registration.

An Practicing Chartered Accountant of USA Yes, he is required to take Non-resident taxable

organizes 10 day training on Goods and Services person Registration.
tax in Delhi. Whether he is required to take Non-
Resident registration?

GST _V1 CA VIKRAM BIYANI

 51

SEC 2(84) “person” includes-

 an individual;
 a Hindu Undivided Family;
 a company;
 a firm;
 a Limited Liability Partnership;
 an association of persons or a body of individuals, whether incorporated or not, in India
or outside India;
 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;
 any body corporate incorporated by or under the laws of a country outside India;
 a co-operative society registered under any law relating to co-operative societies;
 a local authority;
 Central Government or a State Government;
 Society as defined under the Societies Registration Act, 2260;
 Trust; and
 Every artificial juridical person, not falling within any of the above;

GST _V1 CA VIKRAM BIYANI

 52

SEC 2(92) “Registered person”

means a person who is registered under section 25 but does include a person having a Unique Identity
Number;

Analysis

“registered person” (i)Every person or unit in a state or more than 1 state who is liable to be
registered make application for Registration. Once Registration is granted,
it becomes Registered Person.

(ii)ANY SPECIALISED AGENCY OF THE UNO (United Nations Organisation)

or any Multilateral Financial Institution and Organisation notified under
the United Nations (Privileges and Immunities) Act, 1947, Consulate or
Embassy of foreign countries; and any other person or class of persons, as
may be notified by the Commissioner, shall be granted a UIN(Unique
Identity Number)

Question

Question Answer

Whether a person having unit in Delhi and Yes, both the units have to take separate
Haryana supplying goods or services are required Registration. One Registration per state has to be
to take Separate Registration if the Aggregate taken. Further as per sec 25, both the units treated
Turnover exceeds 20 lakh of both units. Whether as distinct person. And as per sec 7 supply
supply between the units of same person liable to between units of same person is liable to GST, if
GST? they are distinct person as per sec 25.

Whether Special Agency of UN or Embassy shall Special Agency of UN or Embassy shall be granted
be granted Registration or UIN? What is the UIN. The purpose is to refund the GST paid on
Purpose purchase of goods or services.

GST _V1 CA VIKRAM BIYANI

 53

Section 2(98) “ Reverse charge”

means the liability to pay tax by the recipient of supply of goods or service or both instead of the
supplier of such goods or services or both.

Under sub-section (3) or subsection (4) of section 9,

Under sub-section (3) or subsection (4) of Section 5 of the integrated goods and services Tax Act.

Who is liable to pay

GST
Regular TAXPAYER

Notified Supplies goods or services or both Recipient shall be liable Sec 9(3) of CGST Act
to Pay Sec5(3) of IGST Act

Supply Received by Registered Person from Registered Person Sec9(4) of CGST Act
Unregistered Person receiving supply Liable
to Pay GST Sec5(4) of IGST Act

GST _V1 CA VIKRAM BIYANI

 54

Sec 2(101) “Securities”

Shall have the same meaning as assigned to it clause (h) of Section 2 of the securities Contracts
(Regulation) Act 1956;

Analysis

Securities are Section 2(h) of the securities contract(Regulation) Act,1956 “Securities” include-
neither treated as (i)Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable
goods nor as securities of a like nature in or of any incorporated company or the other body
services corporate;

(ia) derivative

(ib)Units for any other instrument issued by any collective investment scheme to
the investors in such schemes;

(ic)security receipts as defined in clause (zg) of Section 2 of the securitization and

reconstruction of financial assets and enforcement of security interest Act 2002;

(id) units or any other such instruments issued to the investors under any mutual
fund scheme.

(ii)Government securities,

(iia)Such other instrument as may be declared by the central government to be

securities: and

(iib)Rights or interest in securities.

Note- Since securities are neither treated as goods or services .hence it is not
taxable supply and also included in definition of exempt supply.

Input tax credit related to the transaction of securities is not available.

GST _V1 CA VIKRAM BIYANI

 55

Suppliers

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.
However,
 a person who organises or arranges, directly or indirectly, supply of
specified actionable claims,
 including a person who owns, operates or manages digital or
electronic platform for such supply,
shall be deemed to be a supplier of such actionable claims, whether such actionable
claims are supplied by him or through him and whether consideration in money or
money's worth, including virtual digital assets, for supply of such actionable claims is
paid or conveyed to him or through him or placed at his disposal in any manner, and all
the provisions of this Act shall apply to such supplier of specified actionable claims, as if
he is the supplier liable to pay the tax in relation to the supply of such actionable claims

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

Online gaming

Means offering of a game on the internet or an electronic network and includes online
money gaming.4

GST _V1 CA VIKRAM BIYANI

 56

Online money gaming

Means online gaming in which players pay or deposit money or money's worth, including
virtual digital assets, in the expectation of winning money or money's worth, including
virtual digital assets, in any event including game, scheme, competition or any other
activity or process, whether or not its outcome or performance is based on skill, chance
or both and whether the same is permissible or otherwise under any other law for the
time being in force.

GST _V1 CA VIKRAM BIYANI

 57

GST _V1 CA VIKRAM BIYANI

 58

SUPPLY UNDER GST

Supply with consideration in course/ furtherance of business

Import of services with consideration whether or not in course/ furtherance of

business

Supply without consideration

Taxable Event
(Supply)

Activities treated as Supply of goods or Supply of services

Activities neither the supply of goods nor the supply of services

Composite and Mixed Supplies

GST _V1 CA VIKRAM BIYANI

 59

GST _V1 CA VIKRAM BIYANI

 60

GST Eligibility
Supply Type of Supply Examples
Applicable for ITC

Grains, Salt,
Nil Rated 0% Everyday items No
Jaggery, etc.

Bread, Fresh
Exempted - Basic essentials No fruits, Fresh
milk, Curd, etc.

Overseas supplies,
Zero Supply to Special
0% Yes -
Rated Economic Zones (SEZ)
or SEZ Developers

Supplies for which GST

Petrol, Alchohol,
Non-GST - is not applicable but can No
etc.
attract other taxes

GST _V1 CA VIKRAM BIYANI

 61

Section 7 - Compre hensive discussion of the concept of “supply”

Supply

Includes Excludes

Supply for Activities or Importation of Supply without Activities to Negative

consideration transactions services for consideration. be treated list of
in course or by AOP to consideration [Section as supply services
furtherance of its members whether or 7(1)(c) + of goods or [Section
business. or not in course Schedule 1] supply of 7(2) +
[Section constituents or furtherance services. Schedule
7(1)(a)] or vice- of business. [Section III]
versa. [Section 7(1A) +
[Section 7(1)(b)] Schedule
7(1)(aa)] II]

GST _V1 CA VIKRAM BIYANI

 62

Suppl y for consider ation in cour se or f urtherance of business [Section

7(1)(a)]

―Supply includes -

(a) all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal

(b) made or agreed to be made for a consideration

(c) by a person

(d) in the course or furtherance of business.

GST _V1 CA VIKRAM BIYANI

 63

Analysis of section 7(1)(a)

(a) Modes of (i) Sale and Transfer

supply
(ii) Barter and Exchange

Example of exchange - When a new car worth Rs.

5,00,000 is purchased in exchange of an old car alongwith
the monetary consideration of Rs. 4,00,000 paid for the said
purchase.

Example of barter - Doctor provides medical consultancy and Barber

cuts doctor‘s hair. Medical consultancy is a ‗supply‘ of services by
doctor. It is a consideration for the hair cut by the barber.

By making a specific inclusion in the definition of supply, all

barters and exchanges would be leviable to GST.

(iii) Licence, Lease, Rental etc.

Under the GST regime, such licenses, leases and rentals of goods with
or without transfer of right to use are covered under the supply
of service because there is no transfer of title in such supplies.
Such transactions are specifically treated as supply of service in
(b) Considerati on OneSchedule-II of CGST Act.
of the essential conditions for the supply of goods and/or
services to fall within the ambit of GST is that a supply is made for a
consideration.

GST _V1 CA VIKRAM BIYANI

 64

Points to be noted

i. Consideration does not always means money. It covers anything

which might be possibly done, given or made in exchange for
something else.
ii. Further, a consideration need not always flow from the recipient
of the supply. It can also be made by a third person.
iii. Any transaction involving supply of goods and/or services without
consideration is not a supply unless it is deemed to be a supply
under law [as deemed in Schedule I of the CGST Act].

GST _V1 CA VIKRAM BIYANI

 65

(c) In course or GST is essentially a tax only on commercial transactions. Hence,only

those supplies that are in the course or furtherance of business
furtherance qualify as supply under GST.Resultantly, any supplies made by an
of business individual in his personal capacity do not come under the ambit of
GST unless they fall within the definition of business.

Note - The term ‗business‘ is defined u/s 2(22).

Example 1 : Rishabh buys a car for his personal use and after a year
sells it to a car dealer. Sale of car by Rishabh to car dealer is not a
supply under CGST Act because supply is not made by Rishabh in
the course or furtherance of business.

Example 2 : Sundaram Acharya, a famous actor, paints some

paintings and sells them. The consideration from such sale is to be
donated to a Charitable Trust – ‗Kind Human‘. The sale of paintings
by the actor qualifies as supply even though it is a one-time
occurrence.

Example 3 : A Resident Welfare Association provides the service

of depositing the electricity bills of the residents in lieu of some
nominal charges. Provision of service by a club or association or
society to its members is treated as supply as this is included in the
definition of ‗business

Note - There is one exception to this „ course or furtherance of

business‟ rule i.e. import of services for a consideration.

GST _V1 CA VIKRAM BIYANI

 66

(d) Supply by a A supply to attract GST should be made by a taxable person.

taxable Points to be noted :

person (i) Hence, a supply between two non-taxable persons does not constitute
taxable supply under GST.

(ii) The restriction of being a taxable person is only on the supplier whereas
the recipient can be either taxable or non-taxable. In other words, supply
can be made to a non-taxable person also.

(iii) Further, there is no condition that supply needs to be made to another

person, i.e. supplies made to self are also taxable.

Meaning of taxable person:

A ―taxable person‖ is a person who is registered or liable to be registered

under section 22 or section 24.Hence, even an unregistered person who is
liable to be registered is a taxable person. Similarly, a person not liable to be
registered, but has taken voluntary registration and got himself registered is
also a taxable person.

(e) Taxable For a supply to attract GST, the supply must be taxable. Taxable supply has
supply been broadly defined and means any supply of goods or services or both
which, is leviable to tax under the GST Law.

GST _V1 CA VIKRAM BIYANI

 67

Importation of services for considera tion wh ether or not in

course or furtherance of business [Sec tion 7(1)(b)]

The term 'supply' includes import of a service, made for a consideration (whether or not in
the course or furtherance of business).

This implies that import of services even for personal consumption would qualify as 'supply'
and therefore would be liable to tax.

This is the only exception to the condition of supply being in course or furtherance of
business.

Example - Ramaiyaa, a proprietor, has received the architect services for his house
from an architect located in New York at an agreed consideration of $ 5,000. The
import of services by Ramaiyaa is supply under section 7(1)(b) though it is not in course
or furtherance of business.

Supply without consideration [Section 7(1)(c) read with Schedule I]

The law provides that in certain cases, even though there is no consideration, the same
would be treated as 'supply'.Such cases are listed in Schedule I appended to the CGST
Act.

As per Schedule I, in the following four cases, supplies made without consideration will be
treated as supply under section 7 of the CGST Act:

GST _V1 CA VIKRAM BIYANI

 68

Schedule I

I Permanent transfer / Any kind of disposal or transfer of business assets made by an

entity on permanent basis even though without
disposal of business consideration qualifies as supply.
assets where input tax
This clause is wide enough to cover transfer of business
credit has been availed assets from holding to subsidiary company for nil consideration.
However, it is important to note that this provision would
apply only if input tax credit has been availed on such
assets.

Example 1 - XYZ & Co. donates old laptops to Charitable Schools

when new laptops are purchased by business will qualify as
supply provided input tax credit has been availed by XYZ & Co. on
such laptops.

Example 2 - A cloth retailer gives clothes from his business

stock to his friend free of cost. In this case, transfer of business
stock would amount to ‗supply‘ if he had claimed input tax credit
on his purchase of the business asset.

Example 3 - A dealer of air-conditioners permanently

transfers an air conditioner from his stock in trade, for
personal use at his residence. The transaction will
constitute a supply as it is a permanent transfer/ disposal
of business assets. The only condition is that input tax credit
should have been availed on such assets.

GST _V1 CA VIKRAM BIYANI

 69

II Supply between Supply of goods or services or both

related person or (a) between related persons or

distinct persons (b) between distinct persons as specified in section 25,

will qualify as supply provided it is made in the course or

furtherance of business.

Related persons [ Explanation to Section 15]

Persons shall be deemed to be ―related persons‖ if––

(i)such persons are officers or directors of one another‘s businesses;

(ii) such persons are legally recognized partners in business;

(iii) such persons are employer and employee;

(iv) any person directly or indirectly owns, controls or holds 25% or more
of the outstanding voting stock or shares of both of them;

(v) one of them directly or indirectly controls the other;

(vi) both of them are directly or indirectly controlled by a third person;

(vii) together they directly or indirectly control a third person; or

(viii) they are members of the same family.

GST _V1 CA VIKRAM BIYANI

 70

Note - Persons who are associated in the business of one another in

that

one is the sole agent or sole distributor or sole concessionaire,

howsoever described, of the other, shall be deemed to be related.

Distinct Persons specified under section 25

A person who has obtained/is required to obtain more than one

registration, whether in one State/Union territory or more than
one State/Union territory shall, in respect of each such
registration, be treated as distinct persons.

Further, where a person who has obtained or is required to

obtain registration in a State or Union territory in respect
of an establishment, has an establishment in another State or
Union territory, then such establishments shall be treated as
establishments of distinct persons.

Example 1 - Mohan, a C.A., has a registered head office in

Delhi. He has also obtained registration in the State of West
Bengal in respect of his newly opened branch office. Mohan
shall be treated as distinct persons in respect of registrations in
West Bengal and Delhi.

Special issue 1 : Stock transfers or branch transfers:

In view of the aforesaid discussion, transactions between

different locations (with separate GST registrations) of same legal
entity (e.g., stock transfers or branch transfers) will qualify as
‗supply‘ under GST.

Example - Raghubir Fabrics transfers 1000 shirts from his factory

located in Lucknow to his retail showroom in Delhi so that the
same can be sold from there. The factory and retail showroom of
Raghubir Fabrics are registered in the States where they are
located. Although no consideration is charged, supply of goods
from factory to retail showroom constitutes supply.

GST _V1 CA VIKRAM BIYANI

 71

Special issue 2 : Supply of goods or services or both

between an employer and employee:

Related person - By virtue of the definition of related person

given above, employer and employee are related persons.

Schedule III - However, services provided by an employee

to the employer in the course of or in relation to his
employment are not treated as supply of services
[Schedule III of CGST Act (discussed in subsequent paras)].

Gifts by employer to employee

Further, Schedule I provides that gifts not exceeding Rs.

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.

However, gifts of value more than Rs. 50,000 made

without consideration are subject to GST, when made in the
course or furtherance of business.

No GST on supply by the employer in terms of contractual

agreement

Supply by the employer to the employee in terms of

contractual agreement entered into between the employer and
the employee, will not be subjected to GST. Therefore,

(i) If services (e.g. membership o f a c l u b , h e a l t h a n d

fitness centre) are provided free of charge to all the
employees by the employer then the same will not be
subjected to GST, provided appropriate GST was paid when
procured by the employer.

(ii) The same would hold true for free housing to the
employees, when the same is provided in terms of the
contract between the employer and employee and is part
and parcel of the cost-to company (C2C).

GST _V1 CA VIKRAM BIYANI

 72

III Principal – Agent Supply of goods by a principal to his agent, without

consideration, where the agent undertakes to supply such
goods on behalf of the principal is considered as supply.

Similarly, supply of goods by an agent to his principal, without

consideration, where the agent undertakes to receive such goods
on behalf of the principal is considered as supply.

Following should be noted :

1. Only supply of goods is covered here.

2. Supply of goods between principal and agent without

consideration is also supply.

Example - ABC Ltd. engages R & Sons as an agent to sell

goods. For the purpose, ABC Ltd. has supplied the goods to R &
Sons located in Haryana. Supply of goods by ABC Ltd. to R &
Sons will qualify as supply even though R & Sons has not paid any
consideration yet.

GST _V1 CA VIKRAM BIYANI

 73

IV Importation of Import of services by a taxable person from a related person or

from his establishments located outside India, without
services consideration, in the course or furtherance of business shall be
treated as ―supply‖.

Example 1 - ABC Associates received legal consultancy services

from its head office located in Malaysia. The head office has
rendered such services free of cost to its branch office. Since ABC
Associates and the branch office are related persons,
services received by ABC Associates will qualify as supply
even though the head office has not charged anything from it.

Example 2 - Sumedha, a proprietor registered in Delhi, has

sought architect services from his brother located in US, with
respect to his newly constructed house in Delhi. Although
services have been received by Sumedha without consideration
from a related person, yet it will not qualify as supply since the
same has not been received in course or furtherance of
business.

GST _V1 CA VIKRAM BIYANI

 74

The above clarification can be understood with the help of following scenario based
examples:
Example: Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies
various suppliers who can provide the goods as desired by Mr. A, and asks the supplier (Mr. C)
to send the goods and issue the invoice directly to Mr. A.
In this scenario, Mr. B is only acting as the procurement agent, and has in no way involved
himself in the supply or receipt of the goods. Hence, in accordance with the provisions of this
Act, Mr. B is not an agent of Mr. A for supply of goods in terms of Para 3. of Schedule I.
Example: M/s XYZ, a banking company, appoints Mr. B (auctioneer) to auction certain goods.
The auctioneer arranges for the auction and identifies the potential bidders.
The highest bid is accepted and the goods are sold to the highest bidder by M/s XYZ. The
invoice for the supply of the goods is issued by M/s XYZ to the successful bidder. In this
scenario, the auctioneer is merely providing the auctioneering services with no role played in the
supply of the goods. Even in this scenario, Mr. B is not an agent of M/s XYZ for the supply of
goods in terms of Para 3. of Schedule I.
Example: Mr. A, an artist, appoints M/s B (auctioneer) to auction his painting. M/s B arranges
for the auction and identifies the potential bidders. The highest bid is accepted and the painting
is sold to the highest bidder. The invoice for the supply of the painting is issued by M/s B on the
behalf of Mr. A but in his own name and the painting is delivered to the successful bidder.
In this scenario, M/s B is not merely providing auctioneering services, but is also supplying the
painting on behalf of Mr. A to the bidder, and has the authority to transfer the title of the painting
on behalf of Mr. A. This scenario is covered under Para 3. of Schedule I.
Example: A C&F agent or commission agent takes possession of the goods from the principal
and issues the invoice in his own name. In such cases, the C&F commission agent is an agent
of the principal for the supply of goods in terms of Para 3. of Schedule I. The disclosure or non-
disclosure of the name of the principal is immaterial in such situations.
Example: Mr A sells agricultural produce by utilizing the services of Mr B who is a commission
agent as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr B
identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he charges a
commission from Mr. A.
As per the APMC Act, the commission agent is a person who buys or sells the agricultural
produce on behalf of his principal, or facilitates buying and selling of agricultural produce on
behalf of his principal and receives, by way of remuneration, a commission or percentage upon
the amount involved in such transaction.
In cases where the invoice is issued by Mr. B to the buyer, the former is an agent covered under
Para 3. of Schedule I. However, in cases where the invoice is issued directly by Mr. A to the
buyer, the commission agent (Mr. B) doesn't fall under the category of agent covered under
Para 3.
It is important to note that services provided by the commission agent for sale or purchase of
agricultural produce are exempt from GST.

GST _V1 CA VIKRAM BIYANI

 75

Activities to be treated as supply of goods or supply of services

[Section 7(1A) read with Schedule II]

Schedule II appended to the CGST Act enlists the matters / transactions to be treated

 either supply of goods;

 or supply of services.
Schedule II

Transaction Type Nature of

Supply
1. Transfer (a) any transfer of the title in goods supply of goods

Example - X sells fertilizer to Y .The title is

transferred by X to Y .It is transaction of
supply of goods
(b) any transfer of right in goods or of undivided supply of
share in goods without the transfer of title
thereof services

Example - X ltd owns a computer .It is given

on rent .Ownership not transferred.X ltd has
transferred only right to use computer to Y .It
is transaction of supply of services
(c) any transfer of title in goods under an supply of goods
agreement which stipulates that property in
goods shall pass at a future date upon
payment of full consideration as agreed

Example - X enter into an agreement with Y

on July 20,2022.Under this agreement ,X will
sell 5,000 bags of white cement to Y on Dec
1,2022 at Rs 810 per bags .Title in goods will
be transferred to Y at the time of payment of
full consideration on Dec 1, 2022 .This is
supply of goods

2. Land and (a) any lease, tenancy, easement, licence to occupy supply of
land
services

GST _V1 CA VIKRAM BIYANI

 76

Building (b) any lease or letting out of the building supply of

including a commercial, industrial or residential
complex for business or commerce, either wholly or services.
partly

Example - Lease rentals collected shall be taxable

as supply of services under GST.

3. Treatment / Any treatment or process which is applied to supply of

another
process services.
person‟ s goods

Example - Job Work‘ performed by a job worker like

dyeing of fabric in various colours.
4. Transfer of (a) where goods forming part of the assets of a supply of goods
business are transferred or disposed of by or under
business assets the directions of the person carrying on the
business so as no longer to form part of those
assets, whether or not for a consideration, such
transfer or disposal

(b) where, by or under the direction of a person supply of

carrying on a business, goods held or used for the
purposes of the business are put to any private use services
or are used, or made available to any person for
use, for any purpose other than a purpose of
the business, whether or not for a consideration,
the usage or making available of such goods

Example - A director using car provided by the

company for personal travels.

GST _V1 CA VIKRAM BIYANI

 77

(c) where any person ceases to be a taxable person, Supply of

any goods forming part of the assets of any
business carried on by him shall be deemed to be Goods
supplied by him in the course or furtherance of his
business immediately before he ceases to be a
taxable person, unless—

(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.

Example – X is in the business of selling computer

hardware in New Mumbai .He closes his business on
Nov 25, 2022 immediately aftr Nov 25,2022 , he cease
to be a taxable person under GST .At the time of
closer , the business has the following stock in trade –

a. 20 unsold Dell computer

b. 84 unsold LG computer monitor
c. 38 unsold HP printers

value of above closing stock is Rs 16,90,000.On the

closure of business on Nov 25,2022 ,it would be
deemed that these goods have been supplied by X in
the course of business. However , this rule is not
applicable if the business is transferred as a going
concern to another person or business was carried on
by X as personal representative of another person

GST _V1 CA VIKRAM BIYANI

 78

5. Supply of The following six shall be treated as supply of supply of

service, namely –
services services
(a)renting of immoveable property

 renting of telecom tower is considered as supply

of service

(b) construction of a complex, building, civil supply of

structure or a part thereof, (including a complex
or building intended for sale to a buyer), wholly or services
partly, except where the entire consideration has
been received after issuance of completion
certificate, where required, by the competent
authority or after its first occupation, whichever is
earlier.

Explanation.—For the purposes of this clause—

(1) the expression ―construction‖ includes

additions, alterations, replacements or remodeling of
any existing civil structure;

 DLF builders constructed 20 flats for sale to

buyers
 15 flats sold before completion for
which entire or any part of
consideration is received before
completion certificate .It is supply of
service
 5 flats –Entire consideration is
received after issuance of completion
certificate .It is neither supply of
goods nor supply of service
(c) temporary transfer or permitting the use or Supply of
enjoyment of any of any intellectual property right;
services
 temporary transfer of Design ,trademark ,copyright
for use to Mrs X is supply of service
 sale/permanent transfer of IPR –Supply of goods

GST _V1 CA VIKRAM BIYANI

 79

(d) development, design, programming, Supply of

customization, adaptation, up-gradation,
enhancement, implementation of information services
technology software;
Example - Supply of GST related software to
businesses for smooth processing of returns and
accounts is supply of service.

(e) supply of

• agreeing to the obligation to refrain from services

an act, or
• to tolerate an act or a situation, or
• to do an act;
A software developer was given Rs 2 crore for not joining
competitor business after retirement
To tolerate an act /situation

 penalty for early termination of agreement

 late delivery charges /liquidated damages charged
by buyer from seller
 prepayment charges on early payment of loan
installment
 demurrage charges paid to the port authorities for
not clearing the goods within a specified period of
time
 cancellation charges charged by airline ,railway
,builders
 bank charges for not maintaining minimum
balance

(f) transfer of the right to use any goods for any supply of
purpose (whether or not for a specified period)
for cash, deferred payment or other valuable services
consideration.

GST _V1 CA VIKRAM BIYANI

 80

6. Composite The following two composite supplies shall be treated supply of

as a
supply
supply of services, namely – services
(a) works contract as defined in section 2(119);
and

 AB construction Ltd constructed a commercial

complex involving material and labour. This is
supply of services
supply of
(b) supply, by way of or as part of any service or services
in any other manner whatsoever, of goods, being
food or any other article for human
consumption or any drink (other than
alcoholic liquor for human consumption),
where such supply or service is for cash,
deferred payment or other valuable
consideration.
 A restaurant of Delhi sold Burger ,Tikki and
Pizza for Rs 1 lac is supply of service
7. Supply of Activities or transaction ,by a person ,other than supply of

Goods individual , to its members or constitutes or vice versa Goods

,for cash ,deferred payment or other valuable
consideration

Example - A local club supplies snacks etc. to its

members during its monthly meeting for a nominal
payment.

GST _V1 CA VIKRAM BIYANI

 81

GST _V1 CA VIKRAM BIYANI

 82

GST _V1 CA VIKRAM BIYANI

 83

Negative list of supply [Section 7(2)]

Notwithstanding anything contained in sub-section (1),––

(a) activities or transactions specified in Schedule III; or

(b) such activities or transactions undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public authorities, as
may be notified by the Government on the recommendations of the Council, shall be
treated

a. neither as a supply of goods

b. nor a supply of services.

Activities or transactions which shall be treated neither as a supply of goods nor

a supply of services [Section 7(2)(a) read with Schedule III]]

Schedule III specifies transactions/ activities which shall be neither treated as supply of
goods nor a supply of services.

GST _V1 CA VIKRAM BIYANI

 84

1 Services by an employee Services by an employee to the employer in the

to the employer
course of or in relation to his employment.

2 Services by any court or Services by any court or Tribunal established

Tribunal
under any law for the time being in force.

3 Service by MLA, MP etc. a) the functions performed by the Members of

Parliament, Members of State Legislature,
Members of Panchayats, Members of
Municipalities and Members of other local
authorities;

 remuneration paid to MP/MLA for

performing their Function –No GST

(b) the duties performed by any person who

holds any post in pursuance of the
provisions of the Constitution in that capacity;
or

 Person holding post of C& AG of India

receiving remuneration –No GST

 Remuneration to AGI –No GST

 Remuneration to PM/CM/GOVERNER
/PRESIDENT /CJI

(c) the 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

GST _V1 CA VIKRAM BIYANI

 85

 Remuneration received by chairperson or

a member or a director of
IRDA/IMA/UPSC/SSC/ELECTION
COMMISSION –No GST

4 Services of funeral, etc. Services of funeral, burial, crematorium or

mortuary including transportation of the
deceased.

5 Sale of land and Sale of land and, subject to clause (b) of

building
paragraph 5 of Schedule II, sale of building.

6 Actionable claims Actionable claims, (other than lottery, betting

and gambling

7. 'Out and out supplies/ As per paragraph 7 of Schedule III, Supply of goods
Merchant trading from a place in the non- taxable territory to another
Transactions
place in the non-taxable territory without such goods
entering into India shall be regarded neither as supply
of goods nor supply of services.

As an example, a person registered in India procuring

goods from China and sending the same directly to
the customer in United Kingdom shall not be liable to
pay tax on the said supply in view of the above
inserted Para.

8 (a) Supply of As per Paragraph 8(a) of Schedule III, Supply of

warehoused goods warehoused goods to any person before clearance
before clearance for for home consumption shall be regarded neither as
home consumption supply of goods nor supply of services.

.
(b) High sea sale
transactions : As per As per Paragraph 8(b) of Schedule III, supply of
Paragraph 8(b) of goods by the consignee to any other person, by
Schedule III, supply of endorsement of documents of title to the goods, after
goods by the consignee the goods have been dispatched from the port of
to any other person, origin located outside India but before clearance for
home consumption shall be regarded neither as
by endorsement of supply of goods nor supply of services

GST _V1 CA VIKRAM BIYANI

 86

documents of title to the

goods, after the goods
have been dispatched
from the port of origin
located outside India but
before clearance for home
consumption shall be
regarded neither as supply
of goods nor supply of
services.

GST _V1 CA VIKRAM BIYANI

 87

Activities/transactions notified by the Government [Section 7(2)(b)]

Such a c t i v i t i e s / transactions undertaken by the Central Government, a State Government or

any local authority in which they are engaged as public authorities, as may be notified by the
Government on the recommendations of the Council shall be treated neither as a supply of
goods nor a supply of services.

Notification No. 14/2022 CT (R) dated 28.06.2022

T h i s n o t i f i c a t i o n has notified the services by way of any activity in relation to a function

entrusted to a Panchayat under article 243G of the Constitution for the said purpose.

Section 7(3)

Subject to the provisions of sub-sections (1) and (2), the Government may, on the
recommendations of the Council, specify, by notification, the transactions that are to be
treated as—

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 88

1. Service by way of grant of alcoholic liquor licence is neither a supply of goods nor a supply of
service
In terms of section 7(2) of the CGST Act, the Government has notified the following activity
or transaction undertaken by the State Governments in which they are engaged as public
authorities, to be treated neither as a supply of goods nor a supply of service, namely:-
“Service by way of grant of alcoholic liquor licence, against consideration in the form of licence fee
or application fee or by whatever name it is called.”
Circular has clarified that the above special dispensation applies only to supply of service by
way of grant of liquor licenses by the State Governments as an agreement between the
Centre and States and has no applicability or precedence value in relation to grant of other
licenses and privileges for a fee in other situations, where GST is payable.
It may be noted that services provided by the Government to business entities including
by way of grant of privileges, licences, mining rights, natural resources such as spectrum
etc. against payment of consideration in the form of fee, royalty etc. are taxable under
GST. Tax is required to be paid by the business entities on such services under reverse
charge.
2. Levy of GST on the service of display of name or placing of name plates of the donor in the
premises of charitable organisations receiving donation or gifts from individual donors
Individual donors provide financial help or any other support in the form of donation or
gift to institutions such as religious institutions, charitable organisations, schools,
hospitals, orphanages, old age homes etc. The recipient institutions place a name plate or
similar such acknowledgement in their premises to express the gratitude. When the name
of the donor is displayed in recipient institution premises, in such a manner, which can be
said to be an expression of gratitude and public recognition of donor’s act of philanthropy
and is not aimed at giving publicity to the donor in such manner that it would be an advertising
or promotion of his business, then it can be said that there is no supply of service for a
consideration (in the form of donation). There is no obligation ( quid pro quo) on part of
recipient of the donation or gift to do anything (supply a service). Therefore, there is no
GST liability on such consideration.
Some examples of cases where there would be no taxable supply are as follows:-
(i) “Good wishes from Mr. Rajesh” printed underneath a digital blackboard donated by Mr. Rajesh
to a charitable Yoga institution.
(ii) “Donated by Smt. Malati Devi in the memory of her father” written on the door or floor of a room
or any part of a temple complex which was constructed from such donation.
In each of these examples, it may be noticed that there is no reference or mention of any
business activity of the donor which otherwise would have got advertised. Thus, where all
the three conditions are satisfied namely the gift or donation is made to a charitable
organization, the payment has the character of gift or donation and the purpose is
philanthropic (i.e., it leads to no commercial gain) and not advertisement, GST is not
leviable.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 89

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 90

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 91

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 92

Example: Radhika sold her old gold bangles and earrings to 'Bhola Jewellers'. Sale of old gold
jewellery by an individual to a jeweller will not constitute supply as the same cannot be said to
be in the course or furtherance of business of the individual1.
Example: Ramaiyaa, a proprietor, has received the architect services for his house from an
architect located in New York at an agreed consideration of $ 5,000. The import of services by
Ramaiyaa is supply under section
Example: XYZ & Co. donates old laptops to Charitable Schools when new laptops are
purchased by business will qualify as supply provided input tax credit has been availed by XYZ
& Co. on such laptops.
Example: Rishabh Enterprises, a registered supplier, owns an air- conditioned restaurant in
Virar, Maharashtra. It has opened a liquor shop in Raipur, Uttarakhand for trading of alcoholic
liquor for human consumption. Since supply of alcoholic liquor for human consumption in
Uttarakhand is a non-taxable supply, Rishabh Enterprises is not required to obtain registration
with respect to the same in Uttarakhand. In this case, air-conditioned restaurant in Maharashtra
and liquor shop in Raipur [though unregistered] shall be treated as establishments of distinct
persons. Supply by Maharashtra office to Uttarakhand office, in course or furtherance of
business even without consideration will qualify as supply.
Stock transfers or branch transfers qualify as supply: In view of the aforesaid discussion,
transactions between different locations (with separate GST registrations) of same legal entity
(eg., stock transfers or branch transfers) will qualify as 'supply' under GST which is in contrast
to the earlier regime.
Example: Sumendu, a proprietor registered in Delhi, has sought architect services from his son
located in US, with respect to his newly constructed house in Delhi. Although services have
been received by Sumendu without consideration from a related person, yet it will not qualify as
supply since the same has not been received in course or furtherance of business

Example: Suvarna Manufacturers entered into a contract with XYZ Ltd. for supply of
readymade shirts packed in designer boxes at XYZ Ltd.'s outlet. Further, Suvarna
Manufacturers would also get them insured during transit. In this case, supply of goods, packing
materials, transport & insurance is a composite supply wherein supply of goods is principal
supply.
Example: When a consumer buys a television set and he also gets warranty and a
maintenance contract with the TV, this supply is a composite supply. In this example, supply of
TV is the principal supply, warranty and maintenance services are ancillary.
Example: A travel ticket from Mumbai to Delhi may include service of food being served on
board, free insurance, and the use of airport lounge. In this case, the transport of passenger,
constitutes the pre-dominant element of the composite supply, and is treated as the principal
supply and all other supplies are ancillary.
Example : Roy, a Chartered Accountant, has a registered head office in Delhi. He has also
obtained registration in the State of Madhya Pradesh in respect of his branch office. Roy shall
be treated as distinct persons in respect of registrations in Madhya Pradesh and Delhi.
Example: Maheshwari Enterprises, a registered supplier, owns an air-conditioned restaurant in
Jaipur, Rajasthan. It has opened a liquor shop in Raipur, Uttarakhand for trading of alcoholic
liquor for human consumption. Since supply of alcoholic liquor for human consumption in
Uttarakhand is a non-taxable supply, Maheshwari Enterprises is not required to obtain
registration with respect to the same in Uttarakhand. In this case, air-conditioned restaurant in
Rajasthan and liquor shop in Raipur [though unregistered] shall be treated as establishments of
distinct persons. Supply by Rajasthan office to Uttarakhand office, in course or furtherance of
business even without consideration will qualify as supply.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 93

Example : Acopic fashions transfers 5000 jackets from his factory located in Bhilwara to his
retail showroom in Delhi so that the same can be sold from there. The factory and retail
showroom of Acopic fashions are registered in the States where they are located. Although no
consideration is charged, supply of goods from factory to retail showroom constitutes supply.
However, transfer between two units of a legal entity under single registration (apparently within
same State) will not be considered as supply. This can be understood with the help of the
following example:
Example : BSL transfers 1000 shirts from his factory located in Bhilwara (Rajasthan) to his
retail showroom in Jaipur (Rajasthan) so that the same can be sold from there. It has taken one
registration in the State of Rajasthan declaring Bhilwara factory as its principal place of
business and Jaipur showroom as its additional place of business. Since no consideration is
charged, supply of goods from factory to retail showroom in same State under single
registration does not constitute supply.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 94

Illustrations - Scope of supply :

Illustration Answer

1. Business dealings – An electronics Yes. As per Section 7(l)(a) of CGST Act,

dealer sells a laptop for Rs. 50,000 to 2022, Supply includes all forms of supply of
earn a profit. Does it qualify as a supply. goods or services or both such as sale,
transfer, barter, exchange, license, rental,
lease or disposal made or agreed to be made
for a consideration by a person in the course
or furtherance of business. Hence, in the
above case it will be treated as supply and
liable to GST.

2. Import of service : Mr. X (an

Yes. As per Section 7(l)(b) of CGST Act,
unregistered person) plans to pursue his
2022, Supply includes import of services for a
higher education in US. He receives
consideration whether or not in the course
career consultancy services from a US
or furtherance of business. Hence, in the
based consultant for ^ 5,00,000. Does it
above case it will be treated as supply.
qualify as a supply?

3. Permanent transfer of business Yes. As per Section 7(l)(c) read with Schedule
assets : XYZ & Co. a manufacturer of I of CGST Act, 2022, Permanent transfer or
goods donated old computers to disposal of business assets where input tax
Charitable Schools on account of credit has been availed shall be treated as
renovation of office. The company has supply even if made without consideration.
taken input tax credit on the computers Hence, donation of old computers to charitable
so donated. Does it qualify as a supply? schools shall qualify as supply since input tax
credit has been availed by XYZ & Co.

4. Transactions between related Yes. As per Section 7(l)(c) read with Schedule
persons :Happy Ltd. provides I of CGST Act, 2022, Supply of goods or
management consultancy services services between related persons is treated as
without charge to Joy Ltd in which supply even if it is without consideration. As
Happy Ltd. has controlling rights. The per Explanation to Section 15 of CGST Act,
said consultancy has been provided for 2022, persons shall be deemed to be "related
benefit of entire group. Does it qualify as persons" if "one of them directly or indirectly
a supply? controls the other". Since Happy Ltd. has
controlling rights of Joy Ltd., they will be
treated as related person and the said
transaction will qualify as supply.

5. Transaction between employer and Yes. As per Section 7(l)(c) read with Schedule
employee : I of CGST Act, 2022, Supply of goods or
XYZ Ltd. gives gift worth Rs. 5,00,000 to services between related persons is treated as
an employee. Does it qualify as a supply even if it is without consideration when
supply? Would your answer be different made in course or furtherance of business. As
if gifts of Rs. 45,000 has been given to per Explanation to Section 15 of CGST Act,
the employee? 2022, persons shall be deemed to be "related
persons" if such persons are employer and

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 95

employee. Thus, gift to an employee worth Rs.

5,00,000 will qualify as supply and such
supply would be leviable to GST.
If gift of Rs. 45,000 is given instead of Rs.
5,00,000, the same will not qualify as supply
since it has been specifically provided that
gifts not exceeding Rs. 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.

6. Transaction between Principal & Yes. As per Section 7(l)(c) read with Schedule
Agents : ABC Motors Ltd. engages I of CGST Act, 2022, Supply of goods by a
Sunshine Cars Ltd. as an agent to sell principal to his agent where the agent
cars on its behalf. For the purpose, ABC undertakes to supply such goods on behalf of
Motors Ltd. has supplied 200 cars to the the principal shall be treated as supply even if
showroom of Sunshine Cars Ltd. located made without consideration. In view of the
in Rajasthan. Does it qualify as supply? same supply of cars by ABC Motors Ltd. to
Sunshine Cars Ltd. will qualify as supply.

7. Import of service from HO : ABC Yes. As per Section 7(l)(c) read with Schedule
Associates received management I of CGST Act, 2022, Import of services by a
consultancy services from its head office person from a related person or from any of
located in Malaysia. The head office has his other establishments outside India, in the
rendered such services free of cost to its course or furtherance of business will be
branch office. Does it qualify as supply? treated as supply even if made without
consideration. Thus, management consultancy
services received by ABC Associates will
qualify as supply even though the head office
has not charged anything from it and will be
liable to GST.

8. Import of service for personal use : Yes. As per Section 7(l)(b) of CGST Act,
Archean Constructions Ltd. (a registered 2022, Importation of services for a
taxable person) receives architectural consideration whether or not in the course or
design supplied by a foreign architect to furtherance of business is covered under
design a residential house to be built in supply. In the above case it will be treated as
Hyderabad for a consideration of Rs. supply and will be liable to GST.
50,00,000. Does it qualify as supply?

9. Yes. Any activity undertaken in course/ for

Business : Mr. B, a famous actor, furtherance of business would constitute a
recorded a song sung by him for a music supply. Since 'business' includes vocation,
company and sold the audio CD. The sale of goods or service even as a vocation is
consideration for such sale was to be a supply under GST. Hence, the sale of CD to
donated to a Charitable Trust - 'Being music company by the actor will qualify as
Human'. Will the sale of CD to music supply.
company by the actor qualify as supply?

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 96

10. Transaction in Securities : XYZ Ltd. No. Transaction in securities is neither supply
was amalgamated with ABC Ltd. On of goods nor services. Securities are excluded
account of amalgamation Mr. X a from the definition of both goods as well as
shareholder received 10,000 shares of services. Hence, such transaction will not
ABC Ltd. in exchange of 5,000 shares of qualify as supply.
XYZ Ltd. Does it qualify as supply?

11. Actionable claims : Sahara Ltd., an No. Actionable claims are covered in definition
NBFC transfers bad loans (unsecured) of goods. However, Schedule III excludes
to Vasooli Capital Advisors Ltd. Does it actionable claims other than lottery, gambling
qualify as supply? and betting from the scope of supply. Transfer
of unsecured loans, therefore, would not
amount to supply.

12. Inter branch transaction : XYZ Ltd. Yes. As per Section 7(1) (c) read with
having head office in Mumbai Schedule I of CGST Act, 2022, Supply of
(Maharashtra) supplied goods worth Rs. goods or services or both between distinct
10,00,000 to its branch office in Jaipur persons as specified in Section 25, when
(Rajasthan). Does it qualify as supply? made in the course or furtherance of business
will be treated as supply even if made without
consideration.
As per Section 25(5) of CGST Act, 2022,
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.
Hence, branch transfer of goods worth Rs.
10,00,000 from Maharashtra to Rajasthan will
qualify as supply.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 97

Illustration - Importation of service: Mrs. Pragati received legal advice for the personal
problems & paid 1,000 pound as a legal fees to Miss. Unnati of U.K. (London). Explain
whether the above activity of import of service would amount to supply under section 7
of the CGST Act, 2022? If in above case both of them are real sisters & no consideration
is paid then will it change your answer? Further in the above case both of them are real
sisters & Mrs. Pragati receives legal advice for her business & she didn't paid any
consideration then what will be your answer?
ANS: As per Section 7(l)(b), the term 'supply' includes import of services for a consideration
whether or not in the course or furtherance of business. Thus, legal advice received by Ms.
Pragati for her personal services for a consideration will be covered under the ambit of supply.
In case Pragati and Unnati are real sisters & no consideration is paid : As per Section 7(l)(c)
read with Schedule I, Import of services by person from a related person or from any of his
other establishments outside India, in the course or furtherance of business will be treated as
supply.
In this case though Pragati and Unnati are related person, legal service received will not be
covered under the ambit of supply, since the said services are not received by her in course or
furtherance of business.
In case Mrs. Pragati receives legal advice from her sister for her business without
consideration, since it is in course or furtherance of business, it will be covered under the ambit
of supply as per Section 7(l)(c) read with Schedule I of CGST Act, 2022.

Illustration - Examine whether the following activities would amount to supply under
section 7 of the CGST Act:
(1) Hitkari Charitable Trust, a trust engaged in providing medical relief free of cost,
donates books and stationery to children living in slum area.
(2) Karishma Manufacturers have a factory in Jaipur and a depot in Delhi. Both these
establishments are registered in respective States. Finished goods are sent from the
factory to the depot without consideration so that the same can be sold.
(3) Manan is an Electronic Commerce Operator in Delhi. His father who is settled in
London is a well- known lawyer. Manan has taken legal consultancy from him free of
cost with regard to his family dispute.
Would your answer be different if in the above case, Manan has taken advice in respect
of his business unit in Delhi?
Ans:
(1) Section 7 of the CGST Act, provides that supply must be made for a consideration except
the activities specified in Schedule I and in course or furtherance of business. Since, both these
elements are missing, donation of books and stationery to children living in slum area would not
amount to supply under Section 7 of the CGST Act.
(2) Schedule I of CGST Act, provides that supply of goods or services or both between related
persons or between distinct persons as specified in Section 25, is supply even without
consideration provided it is made in the course or furtherance of business.
According to Section 25(5) of the CGST Act, 2022, where a person who has obtained or is
required to obtain registration in a State in respect of an establishment, has an establishment in
another State, then such establishments shall be treated as establishments of distinct persons
for the purposes of this Act. In view of the same, factory and depot of Karishma Manufacturers

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 98

are establishments of two distinct persons. Therefore, supply of goods from factory to depot
without consideration, but in course of or in furtherance of business, is supply under Section 7
of the CGST Act.
(3) Schedule I of CGST Act, provides that import of services by person from a related person
located outside India, without consideration is treated as supply if it is provided in the course or
furtherance of business. In the given case, Manan has received legal consultancy from his
father free of cost in a personal matter and not in course or furtherance of business. Hence,
services provided by Manan's father to him would not be treated as supply under Section 7 of
the CGST Act.
In the above case, if Manan has taken advice with regard to his business unit, services provided
by Manan's father to him would be treated as supply under Section 7 of the CGST Act as the
same are provided in course or furtherance of business though received from a related person.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 99

COMPOSITE AND MIXED SUPPLIES

GST is payable on individual goods or services or both at the notified rates. The
application of rates poses no problem if the supply is of individual goods or individual
services.

However, in certain cases, the supplies are a

 combination of goods or
 combination of services or
 combination of goods and services both

and each individual component of such supplies may attract a different rate of tax.

In such a case, the rate of tax to be levied on such supplies may be a challenge.

It is for this reason, that the GST Law identifies composite supplies and mixed
supplies and provides certainty in respect of tax treatment under GST for such supplies.

In order to determine whether the supplies are ‗composite supplies‘ or ‗mixed supplies‘, one
needs to determine whether the supplies are

 naturally bundled or
 not naturally bundled
in ordinary course of business.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 100

Composite supplies Mixed supply

Composite supply means a supply made by a Mixed supply means

taxable person to a recipient and: two or more individual supplies of goods

or services, or any combination thereof,
comprises two or more taxable supplies of
made in conjunction with each other
goods or services or both, or any combination
by a taxable person for a single price
thereof, are naturally bundled and supplied
in conjunction with each other, in the ordinary
course of business one of which is a principal
supply.

Any supply of goods or services will be treated Note - The individual supplies are
as composite supply if it fulfils BOTH the independent of each other and are not
following criteria: naturally bundled.

1. Supply of 2 or more goods or services

together, AND
In other words, If the second condition of
2. It is a natural bundle, i.e., goods or
composite supply is not fulfilled it becomes a
services are usually provided together in
mixed supply.
normal course of business. They
cannot be separated.

Example 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.

Note - It shall not be a mixed supply if these

items are supplied separately.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 101

Principal supply [Section 2(90) of CGST Act] Example 2 : A shopkeeper selling

storage water bottles along with
Principal supply means the supply of goods or
refrigerator. Bottles and the refrigerator
services which constitutes the predominant
can easily be priced and sold
element of a composite supply and to which any
independently and are not naturally
other supply forming part of that composite
bundled. So, such supplies are mixed
supply is ancillary.
supplies

Example 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.

Example 2: A travel ticket from Mumbai to Delhi

may include service of food being served on
board, free insurance, and the use of airport
lounge. In this case, the transport of
passenger, constitutes the pre-dominant
element of the composite supply, and is treated
as the principal supply and all other supplies are
ancillary.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 102

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 103

Example

Booking of Air Tickets which involves cost of the meal to be provided during travel will be
Composite supply and tax will be calculated on the principle supply which in this case is
transportation of passengers through flight.

Example

M/s P Ltd. entered into a contract with M/s Z Ltd. for supply of goods. 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.

Example :

A Five-star hotel provides four days and three-night package, with breakfast. This is a
composite supply as the package of accommodation facilities and breakfast is a natural
combination in the ordinary course of business for a hotel. In this case, the hotel
accommodation is the principal supply, and breakfast is ancillary to the hotel accommodation.

The hotel accommodation attracts 22% tax and the restaurant service attracts 28% tax. As per
the example, hotel accommodation is the principal supply, and the entire supply will be taxed at
22%.

Example :

Mr. Ravi being a dealer in laptops, sold a laptop bag along with the laptop to a customer, for Rs.
55,000. CGST and SGST for laptop @22% and for laptop bag @28%. What would be the rate of
tax leviable? Also find the GST liability.

If the laptop bag is supplied along with the laptop in the ordinary course of business, the
principal supply is that of the laptop and the bag is an ancillary.

Therefore, it is a composite supply and the rate of tax would that as applicable to the laptop.
Hence, applicable rate of GST 22% on Rs. 55,000.

CGST is Rs. 4,950 and SGST is Rs. 4,950

Example :

Diwali gift hamper which consist of different Items like sweets, chocolates, cakes, dry fruits
packed in one pack is Mixed supply as these items can be sold separately and it shall be
treated as a supply of that particular item which attracts the highest rate of tax.

Example :

M/s X Ltd. a dealer offer combo packs of shirt, watch, wallet, book and they are bundled as
a kit and this kit is supplied for a single price and the supply of one item does not naturally
necessitate the supply of other elements. Hence the supply is a mixed supply. Tax rate for a
shirt, watch, wallet and book are 12%, 22%, 5% and Nil respectively. In this case, watch attracts
the highest rate of tax in the mixed supply i.e., 22%. Hence, the mixed supply will be taxed at
22%.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 104

Example :

Mr. A booked a Rajdhani train ticket, which includes meal. Is it composite supply or mixed
supply?

Answer:

It is a bundle of supplies. It is a composite supply where the products cannot be sold separately.
The transportation of passenger is, therefore, the principal supply. Rate of tax applicable to the
principal supply will be charged to the whole composite bundle.

Therefore, rate of GST applicable to transportation of passengers by rail will be charged by

IRCTC on the booking of Rajdhani ticket.

Example :

Space Bazar offers a free bucket with detergent purchased. Is it composite supply or mixed
supply? Assume rate of GST for detergent @28% and bucket @22%.

This is a mixed supply. These items can be sold separately. Product which has the higher rate

Example :
Examine whether the following activities would amount to supply under section 7 of CGST
Act?
1. Import of services without consideration for personal purposes
2. Import of services for a consideration in the course or furtherance of business
3. Import of services for consideration for personal purposes
4. Import of services by taxable person from related person located outside India without
consideration:
(a) For personal purposes.
(b) In the course or furtherance of business

Solution: The provisions relating to import of services are covered in section 7(1 )(b). An exceptional
case of import of services from related person is given in Schedule I.
Activity or Transaction Supply Remarks

Import of services without consideration for No

1.
personal purposes Not a supply as ‘Consideration’ is missing.
Import of services for a consideration in the Yes
2. It qualifies for supply as it is for consideration.
course or furtherance of business

3. Import of services for consideration for Yes It also qualifies as supply as consideration is
personal purposes present. The purpose is not relevant, if it is for
consideration.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 105

4. Import of services by taxable person from The importation of such services from related
related person located outside India without person are covered under Schedule 1 and
consideration: treated as supply provided it is in the course
(a) For personal purposes. or furtherance of business.
No
(b) In the course or furtherance of business (a) It will not qualify as supply since the same
Yes has not been received in course or
furtherance of business.
(b) It will qualify as supply as received in the
course or furtherance of business.

Example :
State whether the following supplies would be treated as supply of goods or supply of services as per Schedule
II of the CGST Act:
a) Title in goods under an agreement which stipulates that property shall pass at a future date
b) Transfer of right in goods without transfer of title in goods
c) Transfer of Title in goods immediately
d) Renting of immovable property
e) The job work performed by a job worker
f) Leasing of land
g) Repairing of goods belonging to another person
h) Motor cab of business brought to personal use
i) Construction of civil structure
j) Renovation of building (on labor-cum material basis)
k) Supply of burger by McDonald’s
l) Supply of goods by any unincorporated association or body of persons to a member thereof
m) Tolerate an act

Activity or Transaction Schedule Type of Supply

1. Goods forming part of business assets are transferred II Supply of Goods

by the business so as no longer to form part of those
assets, without any consideration

Services by an employee to the employer in the course III Neither Goods nor Services
2.
of or in relation to his employment

3. Services by any court or Tribunal established under III Neither Goods nor Services
any law for the time being in force.

4. Temporary transfer of intellectual property right II Supply of Services

5. Services of funeral, burial, crematorium or mortuary III Neither Goods nor Services
including transportation of the deceased.

6. Lease rentals collected II Supply of Services

7. Sale of land III Neither Goods nor Services

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 106

Example :
Examine whether the following activities would amount to supply under CGST Act, 2022:
a. A Ltd. is a renowned furniture house. As a part of their business policy, the company donated 5
office tables to Charitable School. At the time of purchase, the ITC has been taken.
b. A Ltd. has a factory in Delhi and a depot in Mumbai. Both these establishments are registered in
respective States.Finished goods are sent from factory in Delhi to the Mumbai depot without
consideration so that the same can be sold.
c. VB Trust is engaged in getting the eye treatment of needy people done free of cost. It donates
clothes and toys to children living in slum area.
d. Mr. V is a registered person under GST in Mumbai. His brother who is settled in London is a well-
known lawyer. Mr. V has taken legal advice from him free of cost with regard to his family dispute.
Solution:
a. The given transaction is covered under Schedule I under the category, “Permanent transfer
of business assets”. Since the input tax credit has been availed, the donation of this business
stock will qualify as supply.
b. There are two points relevant in this regard:

 Firstly, the two establishments are distinct persons as per section 25 of COST Act, 2022.
 Secondly, Schedule I stipulates that supply of goods or services or both between related
persons or between distinct persons is supply even without consideration provided it is made
in the course or furtherance of business. In the given case, the goods have been sent in
course/furtherance of business.
Therefore, supply of goods from Delhi factory of J Ltd. to Mumbai Depot without consideration, but in
course/furtherance of business, is supply under section 7 of the CGST Act.

(a) There are two elements in Section 7 of the CGST Act:

(i) The supply must be made for a consideration
(ii) It should be in course or furtherance of business.
Since, both these elements are missing, donation of clothes and toys to children living in slum area
would not amount to supply under section 7 of the CGST Act. Such transfer does not fall under
Schedule I as it is not transfer of business asset. Therefore, the activity shall not be treated as
supply.
(b) Since the service has not been taken for consideration, section 7(1 )(b) “Importation of
Service” does not apply. The similar entry can be traced in Schedule I of CGST Act, but it treats
the importation of service as supply if it is provided in the course or furtherance of business. In the
given case, Mr. J has received legal services from his brother free of cost in a personal matter and
not in course or furtherance of business. Therefore, it does not qualify as supply.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 107

Example :

Situation Applicability of GST

Mr. V transfers 1,000 debentures of A Ltd. to Debentures are securities which are neither goods
Mr. D for a consideration of Rs. 4,50,000. nor services. Thus, transfer of debentures is not
subject to GST.

Mr. V transfers a plot of land situated in Delhi

to Mr. D for a consideration of Rs. 40 Lakhs. Transaction of sale of land is out of scope of supply
Consideration is, however, payable in under Schedule III of CGST Act. Thus, sale
installments. consideration is not subject to GST.

Mr. V, a registered person in GST, is a flower

dealer in Delhi, He sells roses for decoration Flowers are goods. GST is applicable. However,
purposes for Rs. 1,50,000 to an interior GST rate for supply of natural flower is nil.
decorator. Therefore, GST liability is nil.

A cloth retailer gives clothes from his Cloth retailer (trader) has gifted cloth to his friend
business stock to his friend free of cost. (unrelated person). Since the goods supplied (cloth)
is his business stock, he must have availed ITC
thereon and thus such transfer of business stock
would amount to supply.

A dealer of air-conditioners permanently Since the goods transferred (AC) is his business
transfers an air conditioner from his stock in asset, he must have availed ITC thereon and thus
trade, for personal use at his residence. such transfer of business stock would amount to
supply.
ABC Academy purchases some laptops for Since the goods transferred (laptop) is his business
business purpose. ITC on these laptops have asset, he must have availed ITC thereon and thus
been availed. After 3 years it has been such transfer of business asset would amount to
donated to the trust. supply.

Mr. V, a proprietor, has received the architect Supply of service by foreign architect to Mr. V Indian
services for his house in Punjab from an service recipient constitutes ‘import of service’.
architect located in New York at an agreed Though such import is not in course of or
consideration of $ 5,000. furtherance of business of Mr. V this transaction of
import of service will fall within the scope of supply
but GST is exempt- Entry No. 10

VB and Associates received legal consultancy

services from its head office located in The import of service by VB and Associate from his
Malaysia. The head officer has rendered such other establishment outside India (which is deemed
services free of cost to its branch office in distinct entity) will constitute supply, even if no
Delhi. consideration has been charged for such supply.

Mr. Sharad is running a printing press in Purchase of paper, printing calendars thereon and
Delhi. He purchases paper, prints calendars selling/supplying calendars in market for the
on it and then sells or supplies calendars in consideration of Rs. 1,00.000 is the case of
market. The consideration received from such manufacture of calendars and supply thereof. Thus,
sale is Rs. 1,00,000. it is simple case of supply of goods on which GST is
applicable.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 108

Example :
Mr. V is employee of A Ltd. For the year ending 31/3/2022 Mr. V has earned following emoluments
Particulars

Salary ( Rs. 2,00,000 per month) 24,00,000

Residential accommodation (taken on rent by company, cost to company: Rs. 6,00,000
6,00,000) Conveyance facility 3,00,000

Cost to company (CTC) for employing Mr. V 33,00,000

On 1/1/2020 A Ltd. gifts a new car to Mr. P (price tag: Rs. 12,65,000 before GST). Gift of car is not
covered by CTC as well employment agreement.
Mr. V owns a commercial building. It is given on rent to A Ltd. (monthly rent being Rs. 3,00,000).
Discuss whether GST is applicable. Determine the amount of GST liability for the month of January
2020 (assume that GST rate is 28 per cent for car and 22 per cent for others)
(1) Rent received on account of renting of commercial building by Mr. V to A Ltd.
(2) Salary received by Mr. V
(3) Residential accommodation, conveyance facility provided by A Ltd. to Mr. V
(4) Gift of car by A Ltd. to Mr. V

Solution: Taxability in hands of Mr. V

 Taxability of Salary received: Supply of employment services by Mr. V to A ltd. is out of
scope of supply. Thus, it will not attract any GST liability.
 Taxability of rent received: Transaction of renting services by Mr. V to V ltd. falls within
the scope of supply. Thus, it will attract any GST liability. GST @ 22% is payable if Mr. V
is not opting for benefit of threshold exemption limit.
Taxability in hands of Infosys
• Taxability of supply of residential accommodation:
• Taxability of supply of conveyance facility:
Providing residential accommodation or/and conveyance facility to employee as a part of
employment contract cannot be treated as gift by employer to employee but it is part of
remuneration on which no GST is applicable.
• Taxability of gift of car: Gift of car is not covered by employment contract. Though A Ltd
has not charged anything from Mr. V but still transaction will fall within the scope of supply.
Further the value

Illustration - Jul 21
Explain the composite supply & mixed supply. If a trader launches a package sales for
marriage contained double bed, refrigerator, washing machine, wooden wardrobe at a
single rate. He is issuing of invoice showing value of each goods separately, whether
this is case of mixed supply or composite supply. Explain.
This is a case where neither mixed supply nor composite supply. The given supplier will be
considered as Independent supplier that goods are supplied simultaneously for individual
prices.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 109

Example :
Discuss whether following are mixed supplies or composite supplies?
SITUATION ANSWER

Mr. V sells gift hampers consisting of canned foods, sweets, chocolates,

Mixed supply
cakes and dry fruits on Diwali.

Mr.V dispatched chocolates to Mr. D from Delhi to Punjab after getting it

Composite supply
packed and paying insurance charges of such goods.

Mr. V purchases air travel ticket of Air India from Delhi to Bangalore for Rs.
Composite supply
75,000 which includes free food on board and free insurance.

A hotel provides a 3-D/2-N package with all meals for Rs. 40,000 to Mr. V Composite supply

Mr. V has let out his house which has two floors. The tenant uses ground
Mixed supply
floor as a shop and the first floor as his residence.

Mr. V purchases a washing machine from X Ltd. He also gets warranty

Composite supply
and a maintenance contract with the washing machine

A toothpaste company has offered the scheme of free toothbrush along

Mixed Supply
with the toothpaste.

Rent deed executed for renting of two different floors of a building by Mr. Mixed supply
V in favour of Mr. P. The first floor has been let out for residential purpose
whereas the ground floor is let out for business purposes. Both the floors
have separate entry and passage and can be let out separately also

On the occasion of Diwali Festival A Ltd. sells watch, tie and belt in a
Mixed supply
single pack at a consolidated price

A charger has been supplied by the vendor along with the mobile phone Composite supply

A gift pack comprising of chocolates and sweets Mixed supply

Example :
Mr. A sells certain goods comprising of set of articles at a consolidated price of Rs. 80,000. Mr. A claims
that the value of various articles and GST rate on such articles are as under—
(a) Article ‘X’ Rs. 40,000 5%
(b) Article ‘Y’ Rs. 30,000 13%

(c) Article ‘Z’ Rs. 10,000 Exempt

How much GST payable by Mr. A if
All articles are sold separately? X: 5%, Y: 13%, Z: Exempt
All articles are sold as one set for a consolidated price of Rs. 80,000 ? 13%

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 110

Circular No. 52/26/2022, dated 9/8/2022

Bus body builder builds bus on the chassis owned
by him and then supplies the bus to customer in The supply is the supply of bus which is
return of the consideration regarded as goods and this supply attracts GST
@ 28%
Bus body builder builds bus on the chassis
This supply is the supply of sendee and will
provided to him by the principal for body building
attract GST of 22%
and charges consideration for the fabrication

Example :
Circular No. 47/21/2022, dated 8/6/2022
In case of servicing of a car which involves supply of goods (spare parts) and supply of service
(labor) and where value of goods and services are shown separately.
We have to treat it as two separate supplies i.e.
supply of goods - which will be charged with GST of goods and supply of services - which will be
charged with GST of services

Example:
From the following information determine the nature of supply and tax liability.
XYZ Ltd. a manufacturer of cosmetic products supplied a package consisting of hair oil (GST Rate -
22%), sun screen cream (GST Rate - 28%), shampoo (GST Rate - 28%) and hair comb (GST Rate -
12%). The price per package is Rs. 500 (exclusive of taxes). 10,000 packages were supplied by the
company to its dealers. Determine the nature of supply and its tax liability.
Solution: This supply would be regarded as mixed supply, since in this case each of the goods in the
package have individual identity and can be supplied separately, but are deliberately supplied
conjointly for a single consolidated price. The 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, the package will be chargeable to 28% GST. The tax liability will be arrived as under :

Circular No. In case of servicing of cars involving supply of both goods (spare
47/21/2022- GST parts) and services (labour) where the value of goods and services
dated 08-06-2022 are shown separately, CBIC has clarified that the goods and
services would be liable to tax at the rates as applicable to such
goods and services separately.

Retreading of tyres is a supply of services. Supply of retreaded tyres is supply of goods

[Circular No. 34/8/2022-GST dated 1-3-2022]

Issue Clarification

Whether retreading Pre-dominant element is process of retreading which is a supply of

of tyres is a supply of service. Rubber used for retreading is an ancillary supply. Supply of
goods or services? retreaded tyres, where the old tyres belong to the supplier of
retreaded tyres, is a supply of goods.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 111

Supply of retreaded tyres, where the old tyres belong to the supplier
of retreaded tyres, is a supply of goods.

Whether activity of In the case of bus body building there is supply of goods and
bus body building, is services. Thus, classification of this composite supply, as goods or
a supply of goods or service would depend on which supply is the principal supply which
services? may be determined on the basis of facts and circumstances of each
case.

In re : Switching Avo Where UPS and battery are supplied as separate goods, but a single
Electro Power Ltd. price is charged for combination of goods supplied as a single
[2022] 92 contract, supply of UPS and Battery is to be considered as mixed
taxmann.com 223 supply within meaning of Section 2(74), as they are supplied under a
(AAR-West Betigal) single contract at a combined single price.

Question on which ruling sought : The Applicant, a supplier of power solutions, including
UPS, servo stabiliser, batteries etc. wants a ruling on the classification of the supply when it
supplies UPS along with the battery. More specifically, he seeks a ruling on whether such
supplies can be treated as Composite Supply within the meaning of Section 2(30) of the
CGST Act, 2022?
Ruling : The contract for the supply of a combination of UPS and battery, if not built as a
composite machine, is not indivisible. The recipient can split it up into separate supply
contracts if he chooses. The goods supplied in terms of such contracts are, therefore, no
longer naturally bundled and cannot be treated as a composite supply. If a combination of
goods that does not amount to a composite supply is being offered at a single price, such
supplies are to be treated as mixed supplies.
Thus, the supply of UPS and Battery is to be considered as Mixed Supply within the meaning
of Section 2(74) of the GST Act, as they are supplied under a single contract at a combined
single price.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 112

PAST EXAMINATION QUESTIONS

ILLUSTRATION 1
Scope of supply: Decide whether the following activities constitute supply or not.
(i) Services received from Government against taxes paid.
(ii) Free seminar to educate about prudent investment indirectly promoting a mutual fund.
(iii) Services received from a club against membership fees.
(iv) Buying a new car in exchange of old car.
SOLUTION
(i) No. A tax payer pays different types of taxes to the government treasury and
government performs welfare activities out of such taxes. There should be a direct link
and a not any casual link between activity and consideration. Therefore, such activities
do not constitute service as there is no direct link between such services and taxes,
hence, such activities would not qualify as supply.
(ii) No. As per Section 7(1)(a) of CGST Act, 2017, supply includes supply of goods and
services or a consideration by a person in the course or furtherance of business. In
given case free seminar was organised to educate people, no direct consideration
was received by supplier, hence, such activity will not constitute supply.
(iii) Yes. Since there is a direct link between the facilities available for use at club,
whether or not immediately used and membership fees, hence, it will constitute supply.
(iv) Yes. As per Section 7(1)(a) of CGST Act, 2017, supply includes exchange of goods
for a consideration by a person in the course or furtherance of business. Thus, buying a
new car in exchange of old car will constitute supply and dealer of car will be liable to
pay GST.
ILLUSTRATION 2
Scope of supply: An electronics dealer sells a television for ₹ 70,000 to earn a profit. Does it
qualify as a supply.
SOLUTION
Yes. As per Section 7(1)(a) of CGST Act, 2017, Supply includes all forms of supply of goods or
services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal
made or agreed to be made for a consideration by a person in the course or furtherance of
business. Hence, in the above case it will be treated as supply and liable to GST.
ILLUSTRATION 3
Scope of supply: An individual buys a car for personal purpose and sells it to a car dealer.
Does it qualify as a supply.
SOLUTION
No. As per Section 7(1)(a) of CGST Act, 2017, Supply shall be made for a consideration by a
person in the course or furtherance of business. When an individual who buys a car for
personal use and after a year sells it to a car dealer, the transaction will not be supply, because
supply is not made by the individual in the course or 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. Hence, in the above case it will not be treated as supply and hence not liable to
GST.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 113

ILLUSTRATION 4
Sahab Sales, an air-conditioner dealer in Janakpuri, Delhi, needs 4 air-conditioners for his
newly constructed house in Safdarjung Enclave. Therefore, he transfers 4 air-conditioners [on
which ITC has already been availed by it] from its stock, for the said purpose. Examine whether
the said activity amounts to supply under section 7 of the CGST Act, 2017.
Further, a Janakpuri resident, Aakash, approached Sahab Sales. He sold an air-conditioner to
Sahab Sales for ₹ 5,000. Aakash had bought the said air-conditioner 6 months before, for his
residence. Does sale of the air conditioner by Aakash to Sahab Sales amount to supply under
section 7 of the CGST Act, 2017 ?
SOLUTION
Section 7 of the CGST Act, 2017 stipulates that in order to qualify as supply:
(a) Supply should be of goods and/or services.
(b) Supply should be made for a consideration.
(c) Supply should be made in the course or furtherance of business.
Further, Schedule I of the CGST Act, 2017 illustrates the activities to be treated as supply even
if made without consideration. One such activity is permanent transfer or disposal of business
assets where input tax credit has been availed on such assets, i.e. said activity is to be treated
as supply even if made without consideration. In view of said provisions, permanent transfer of
air conditioners by Sahab Sales from its stock for personal use at its residence, though without
consideration, would amount to supply.
However, sale of air-conditioner by Aakash to Sahab Sales will not qualify as supply u/s 7 of the
CGST Act, 2017 as although it is made for a consideration, but its not in the course or
furtherance of business.
ILLUSTRATION 5
Arihant construction Ltd. (a registered taxable person) receives management consultancy
services supplied by a foreign consultancy company located in London for a consideration of ?
20,00,000. Does it qualify as supply.
SOLUTION
As per Section 7(1)(b) of CGST Act, 2017, Importation of services for a consideration whether
or not in the course or furtherance of business is covered under supply. In the above case it will
be treated as supply and will be liable to GST.
ILLUSTRATION 6
ABC & Co. a manufacturer of goods donated old furniture to Charitable Schools on account of
renovation of office. The company has taken input tax credit on the computers so donated.
Does it qualify as a supply?
SOLUTION
Yes. 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 furniture to charitable schools shall
qualify as supply since input tax credit has been availed by ABC & Co.
ILLUSTRATION 7
Mr. Gupta gives gift worth ₹ 2,00,000 to his spouse. Does it qualify as a supply? Would your
answer be different if gifts of ₹ 47,000 has been given to spouse.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 114

SOLUTION
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, Supply of goods or services
between related persons is treated as supply even if it is without consideration when made in
course or furtherance of business. As per Explanation to Section 15 of CGST Act, 2017,
persons shall be deemed to be "related persons" if such persons are member of same family.
As per Section 2(49) "Family" means, the spouse and children of the person, and the parents,
grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on the
said person.
Gift to spouse worth ₹ 2,00,000 will not qualify as supply since it is not made in course or
furtherance of business and such activity would not be leviable to GST.
If gift of ₹ 47,000 is given instead of ₹ 2,00,000, the same will also not qualify as supply.
ILLUSTRATION 8
ABC Electronics Ltd. engages Sunshine computers Ltd. as an agent to sell laptops on its
behalf. For the purpose, ABC Electronics Ltd. has supplied 500 laptops to the showroom of
Sunshine Cars Ltd. located in Rajasthan. Does it qualify as supply?
SOLUTION
As per Section 7(1)(c) read with Schedule I of 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 laptops by
ABC Electronics Ltd. to Sunshine Computers Ltd. will qualify as supply.
ILLUSTRATION 9
Scope of supply: XYZ Associates received legal consultancy services from PQR Associates
(unrelated person) located in Malaysia. PQR Associates has rendered such services free of
cost to XYZ Associates. Does it qualify as supply.
SOLUTION
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, Import of services by a person
from a related person or from any of his other establishments outside India, in the course or
furtherance of business will be treated as supply even if made without consideration. Thus,
legal consultancy services received by XYZ Associates will not qualify as supply as both are not
related persons and PQR Associates has not charged anything from it and will not be liable to
GST.
ILLUSTRATION 10
Decide whether the following activities constitute supply or not.
(1) Gifts received from friends at the time of wedding
(2) Mr. A gave his residential house on lease to Mr. B for residential purpose.
(3) A Chartered Accountant rendering services in Srinagar (Jammu & Kashmir).
(4) A local club supplies snacks etc. to its members during its monthly meeting for a nominal
payment.
(5) Sum received from employer on premature termination.
SOLUTION
(1) As per Section 7(1)(c) of CGST Act, 2017, 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. Gift received from friend at time of
wedding is not between related persons and it is not made in the course or furtherance
of business. So, it does not constitute supply.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 115

(2) As per Section 7(1A) of CGST Act, 2017 read with Schedule II, leasing or renting out
building including commercial, industrial or residential complex for business or
commerce would be treated as supply of service. In given case Mr. A gave his
residential house on lease to Mr. B for residential purpose so it would constitute supply
of service. However, leasing for residential purpose is exempt under Entry 12 of
Notification No. 12/2017-CT (Rate).
(3) CGST Act, 2017 is applicable to whole India including Jammu & Kashmir. So,
services rendered by a Chartered Accountant in Srinagar (Jammu & Kashmir) would
constitute supply of services.
(4) As per Section 7(1)(aa), Activities or transactions, by a person, other than an
individual, to its members or constituents or vice-versa, for cash, deferred payment or
other valuable consideration would be covered in ambit of supply. Thus, if a local club
supplies snacks etc. to its members during its monthly meeting for a nominal payment
would constitute supply of goods.
(5) As per Section 7(2) read with Schedule III of CGST Act, 2017, Services by an
employee to the employer in course of or in relation to his employment would not be
regarded as supply. So sum received from employer on premature termination of a
contract of employment are treated as amount paid in relation to services provided by
employee to employer in the course of employment and thus, would not constitute
supply.
ILLUSTRATION 11
Scope of supply - Goods: Mr. X sold shares of company AB Ltd. to Mr. Y for ₹ 20,000. Does it
attract GST.
SOLUTION
No. Since, as per Section 7 of CGST Act, 2017, Supply should be of goods or services to
attract GST. Securities are neither goods nor services, hence supply of securities does not
attract GST.
ILLUSTRATION 12
Balaram Manufacturers sends certain category of yarn for processing to the job worker. The job
worker undertakes the processing work on the yarn as per the requirement of Balaram
Manufacturers. During the process, the job worker uses his own material also. The processed
yarn is sold by Balaram Manufacturers directly from the job worker premises. Balance quantity
of yarn and waste material is sent back by the job worker to Balaram Manufacturers. The job
worker is of the opinion that he is using his own material also in the processing and hence the
supply to Balaram Manufacturers is in the nature of supply of goods as well as services. Do you
agree with the opinion of job worker?
SOLUTION
No, the opinion of the job worker is not fully correct. Section 7(1 A) provides that when certain
activities or transactions constitute a supply in accordance with the provisions of section 7(1),
they shall be treated either as a supply of goods or supply of services as referred to in Schedule
II of the CGST Act. Any processing activity carried on any other person's goods is treated as
supply of service in terms of Schedule II. The job worker, in addition to the goods received from
the principal, can use his own goods for providing the services of job work. These goods are not
supply per se, but being used in the processing activity carried out by it.
Thus, the activity undertaken by the job worker, in the given case, squarely falls within the
purview of Schedule II and shall be considered as supply of service by the job worker to
Balaram Manufacturers.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 116

ILLUSTRATION 13
Mr. Ram takes a showroom on rent from Mr. Vikram. Mr. Ram agree to keep ₹ 1,00,000 as
security deposit with Mr. Vikram. Will the security deposit is regarded as consideration for such
supply.
SOLUTION
No. Security deposit will not be regarded as consideration for supply. Security deposit will be
regarded as consideration only when the supplier i.e. Mr. Vikram appropriates the same
towards value of taxable supply.
ILLUSTRATION 14
Ms. Sudha is a teacher. She bakes cake and sale during summer camps. Is the sale of cake
qualifies supply.
SOLUTION
Yes, the sale of cake by Ms. Sudha qualifies as supply even though it is a one time
occurrences. Any activity undertaken in course or furtherance of business would constitute a
supply. Since 'business' includes, vocation, sale of goods or service even as vocation is a
supply under GST.
ILLUSTRATION 15
Mr. Bhushan is not liable for registration, but has taken voluntary Registration. He supplies
goods for a consideration. Will the supply of goods attracts GST.
SOLUTION
Yes, Supply to attract GST should be made by a taxable person. A 'taxable person' is a person
who is registered or liable to be registered under section 22 or section 24. Therefore, even a
person not liable to be registered, but has taken voluntary registration and got himself
registered is also a taxable person. Thus, supply of goods by Mr. Bhushan would be liable to
GST.
ILLUSTRATION 16
Mr. Rachit has received interior decoration services for Japanese Yen 1,00,000 from Mr. John,
located in Japan for his new house which he purchased for his family. Will such services qualify
as supply.
SOLUTION
Yes. As per Section 7(1)(b), the connotation of supply gets expanded significantly as it brings
within the ambit of supply, the importation of services for a consideration whether or not in the
course or furtherance of business. Thus, import of interior decoration services will qualify as
supply.
ILLUSTRATION 17
A proprietor gives computer from his business stock to his friend, as a gift on his birthday. He
claimed input tax credit on the purchase. Will it be covered in the scope of supply.
SOLUTION
Yes. As per Section 7(1)(c) read with Schedule I, permanent transfer or disposal of business
assets where input tax credit has been availed on such assets qualifies as a supply even
though made without consideration. Such transaction will be treated as supply as input tax
credit has been availed on such computer business assets.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 117

ILLUSTRATION 18
ABC Ltd. Co. has a registered head office in Mumbai. It has also obtained registration for its
branch situated in Jaipur, Rajasthan. If ABC Ltd. Co. transfers 1000 finished goods from
Mumbai to Jaipur branch without consideration, does it qualify as supply.
SOLUTION
Yes. As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, when a person who has
obtained or is required to obtain registration in a State or Union Territory in respect of an
establishment in another State or Union Territory, then such establishments shall be treated as
establishments of distinct persons.
In view of the aforesaid statement, transactions between different establishments with separate
GST registration, of same legal entity (eg. Stock transfers or branch transfers) will quality as
'supply' under GST.
ILLUSTRATION 19
Mr. Ramesh gifts a Mobile phone to his employee because he won the title 'Best employer of
the Year - 2024'. The value of Mobile was ₹ 65,000. Does it qualify as supply ?
Are the services provided by the employee qualify as supply of services. Would your answer be
different if gift of ₹ 45,000 has been given to employee.
SOLUTION
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, supply of goods or services
between related person is treated as supply even if its without consideration. As per
Explanation to Section 15 of CGST Act, 2017, persons shall be deemed to be related persons if
such persons are employer and employee. Thus, gift of a Mobile phone worth ₹ 65,000 will
qualify as supply and such supply would be leviable to GST.
However, services provided by an employee to the employer in the course of or in relation to his
employment are not treated as supply of service. (Schedule III of CGST Act).
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. So, gift of ₹ 45,000 given by employer to
employee would not be regarded as supply.
ILLUSTRATION 20
Incentive to employees forming service contract of employment - not regarded as
supply: Neelkanth Private Ltd. is engaged in the business of distribution of construction
material. As an incentive, Neelkanth Private Ltd. pays an amount of ₹ 1,25,000 to its employees
upon achieving a specified sales target. The incentive is part of the salary of the employees and
applicable tax is deducted at source as per relevant income tax provisions. Neelkanth Private
Ltd. is of the view that GST is not leviable on such incentive paid to the employees. Whether the
view taken by Neelkanth Private Ltd. is correct?
SOLUTION
Yes, Neelkanth Private Ltd.'s view is correct. In terms of section 7(2) read with Schedule III of
the CGST Act, services by an employee to employer in the course of or in relation to his
employment shall not be treated as supply under GST. Further, the amount paid as incentive by
Neelkanth Private Ltd. is not in the nature of gift, and thus, is not covered under Schedule I of
the CGST Act. In fact, in the given case, the incentive is part of the salary and is directly linked
to the sales target. Therefore, the services provided by the employees in return of the incentive
given to them shall not be treated as a "supply". Thus, GST is not leviable on the incentive paid
by Neelkanth Private Ltd. to employees.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 118

ILLUSTRATION 21
A foreign holding company gives accounting services to its Indian subsidiary without any
consideration. Is it a supply.
SOLUTION
Yes. As per Explanation to Section 15, for the purpose of the Act, a person shall be deemed to
be "related person" if one of them directly or indirectly controls the other.
As per Schedule I of CGST Act, 2017, 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 shall be treated as supply even if made without consideration.
Hence, Foreign holding company and Indian subsidiary company are related persons, therefore
services received by the Indian subsidiary company without consideration will qualify as supply
since the same has been received in course or furtherance of business.
QUESTION 1
Karamveer Enterprises appoints Rajul to procure certain goods from the market. Rajul identifies
various suppliers who can provide the goods as desired by Karamveer Enterprises, and asks a
supplier - Satya Manufacturers to send the goods and issue the invoice directly to Karamveer
Enterprises. You are required to determine whether Rajul can be considered as an agent of
Karamveer Enterprises in terms of Schedule I of the CGST Act.
ANSWER
As per section 7(1)(c) read with Schedule I of the CGST Act, supply of goods by an agent to his
principal where the agent undertakes to receive such goods on behalf of the principal qualifies
as supply even if the same is made without consideration. Further, Circular No. 57/31/2018-
GST dated 04-09-2018 clarifies that principal-agent relationship falls within the ambit of the
Schedule I only where the goods being procured by the agent on behalf of the principal are
invoiced in the name of the agent. In that case, further provision of the said goods by the agent
to the principal without consideration, would be covered in Schedule I and thus would qualify as
supply.
In the given case, Rajul is only acting as the procurement agent, and has in no way involved
himself in the supply or receipt of the goods. The invoice is being issued in the name of
Karamveer Enterprises and not Rajul. Hence, Rajul is not an agent of Karamveer Enterprises
for the supply of goods in terms of Schedule I of the CGST Act.
QUESTION 2
Agreeing to the obligation to refrain from an act - Deemed Supply of service : XYZ
Consultancy, registered in Bangalore, supplies technical consultancy services to its clients. It
has been providing technical services to BA Ltd., Mumbai since past 2 years. Consideration is
settled by BA Ltd. assignment-wise. BA Ltd. paid ₹ 37 lakh to XYZ Consultancy on 10th
January for XYZ Consultancy agreeing not to provide similar technical services to any other
business entity in India or abroad for a period of next 8 years. XYZ Consultancy is of the view
that ₹ 37 lakh is not chargeable to tax under GST law.
You are required to examine whether the view taken by XYZ Consultancy is valid in law. It may
be noted that BA Ltd. is not ready to pay any further amount to XYZ Consultancy in addition to
the amount already agreed.
SOLUTION
In the given case, XYZ Consultancy is providing the service of agreeing to the obligation to
refrain from an act to BA Ltd. against a consideration of ₹ 37 lakh [Schedule II read with Circular
No. 178/10/2022 GST dated 03.08.2022], Therefore, the same is liable to tax under GST law.
Thus, view taken by XYZ Consultancy is incorrect.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 119

QUESTION 3
Vikramaditya is a salaried employee and is planning to invest in stocks. He has opened a
trading account with Vaydaa Brokers. During the month, Vikramaditya undertook future
contracts (without a physical delivery option, but are cash settled on the expiry of the contract
date), amounting to ₹ 35,00,000. Vikramaditya needs your advice whether such future contracts
undertaken by him amount to supply and are liable to GST.
ANSWER
For a transaction to fall within the purview of supply, it must be a supply of either goods or
services or both. The definitions of the terms "goods" and "services" specifically exclude
"securities" from their purview. Further, 'derivatives' are included in the definition of 'securities'.
As 'derivatives' fall in the definition of securities, they are neither goods nor services and hence,
are not liable to GST.
Future contracts are in the nature of financial derivatives, the price of which is dependent on the
value of underlying stocks or index of stocks or certain approved currencies and the settlement
happens normally by way of net settlement with no actual delivery.
Since future contracts are in the nature of derivatives, these qualify as 'securities' and thus, are
not subject to GST.
In view of the above discussion, it can be inferred that since the future contracts undertaken by
Vikramaditya are in the nature of derivatives, these qualify as 'securities' and do not qualify as
supply and thus, are not subject to GST.
QUESTION 4
"Diligent Force" a professional training institute gets its training material of "Aptitute Quotient"
printed from "Durga printing House" a printing press. The content of the material is provided by
the Diligent Force who owns the usage rights of the same while the physical inputs including
paper used for printing belong to the Durga Printing House.
Ascertain whether supply of training material by the Durga Printing House constitutes supply of
goods or supply of services.
ANSWER
Circular No. 11/11/2017-GST dated 20-10-2017 has clarified that supply of books printed with
contents supplied by the recipient of such printed goods, is composite supply and the question,
whether such supplies constitute supply of goods or services would be determined on the basis
of what constitutes the principal supply.
Principal supply has been defined in section 2(90) of the CGST Act as supply of goods or
services which constitutes the predominant element of a composite supply and to which any
other supply forming part of that composite supply is ancillary.
In the case of printing of books where content is supplied by the publisher or the person who
owns the usage rights to the intangible inputs while the physical inputs including paper used for
printing belong to the printer, supply of printing [of the content supplied by the recipient of
supply] is the principal supply and therefore, such supplies would constitute supply of service.
Thus, in view of the above-mentioned provisions, the supply of training material by the Durga
Printing House would constitute supply of services.
QUESTION 5
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 alongwith the room accommodation.
(b) A toothpaste company has offered the scheme of free toothbrush alongwith the toothpaste.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 120

ANSWER
Composite supply means two or more taxable supplies of goods or services or both, or any
combination thereof, are naturally bundled and supplied in conjunction 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'.
ILLUSTRATION 22
Scope of supply: A company has entered into an agreement with a customer for the
manufacture and supply of cement pipes for their exclusive use. A company manufactured the
product but before receiving the inspection certificate, their customer rejected some quantity of
goods on the grounds of quality. As per agreement the rejected quantity will be destroyed in
front of the customer and shall not be sold. Examine the issue in the light of statutory provisions
and suggest future course of action to the assessee as to whether any liability arises as per the
provisions of GST law. (4 Marks, Nov. 2018-OS)
SOLUTION
The taxable event under GST is supply of goods. The scope of term supply has been given
under Section 7 of the CGST Act, 2017. As per Section 7(1)(a), Supply includes all forms of
supply of goods or services or both such as sale, transfer, barter, exchange, license, rental,
lease or disposal made or agreed to be made for a consideration by a person in the course or
furtherance of business. Transactions where goods are destroyed without a transfer of any kind
taking place do not fall under the ambit of term supply. Thus, the company will not be liable to
pay GST on the rejected quantity of the cement pipes which were destroyed in front of
customer.
However, the company will be required to reverse input tax credit so taken in respect of
destroyed goods since the same fall under the ambit of blocked credit under Section 17(5)(h) of
the CGST Act, 2017.
QUESTION 6
Pinkcity International entered into a transaction for import of goods from a vendor located in
Brazil. Due to financial issues, Pinkcity International was not in a situation to clear the goods
upon payment of import duty. Pinkcity International sold the goods to Gemini Export House by
endorsement of title to the goods, while the goods were in high seas. The agreement further
provided that Pinkcity International shall purchase back the goods in future from Gemini Export
House. Discuss the taxability of transaction(s) involved, under the GST law.
SOLUTION
As per Schedule III of the CGST Act, high seas sale transactions i.e. supply of goods by the
consignee to any other person, by endorsement of documents of title to the goods, after the
goods have been dispatched from the port of origin located outside India but before clearance
for home consumption shall not be considered as supply under GST. Thus, the sale of goods by
Pinkcity International to Gemini Export House in high seas shall not be liable to GST.
Further, the import duty including IGST shall be payable by Gemini Export House at the time of
clearance of goods at port of import. In case the goods are sold back by Gemini Export House
to Pinkcity International at a subsequent point of time, the same shall be treated as normal
domestic sale transaction and GST shall be applicable on the same subject to other conditions
prescribed under GST Law.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 121

QUESTION 7
GER Ltd. of Germany supplies luxurious car worth ₹ 1 crore to IND Ltd. of India. Before the car
reached Indian port but after crossing of the territorial waters of India, IND Ltd. sells it to T1 Ltd.
by way of transfer of documents of title.
T1 Ltd. clears the said car for warehousing and stores the said goods in customs bonded
warehouse. T1 Ltd. sells the said car from warehouse to T2 Ltd., and T2 Ltd., clears the said
car from the customs bonded warehouse.
Answer the following with brief reasons:
(i) Is GST leviable on import of goods from GER Ltd. by IND Ltd.?
(ii) Is GST leviable on supply of goods by IND Ltd. to T1 Ltd.?
(iii) Is GST leviable on supply of goods by T1 Ltd. to T2 Ltd.?
(iv) Is GST leviable on clearance of goods by T2 Ltd. from the Customs bonded warehouse?
(5 Marks, Jan. 2021)
ANSWER
(i) GST on import of goods is levied at the time when customs duty is levied on the said goods
under the Customs Act, 1962, i.e., on importation. Importation gets completed when the goods
become part of the mass of goods within the country. Thus, GST is not leviable on import of
goods from GER Ltd. by IND Ltd. since the import of goods is not complete.
(ii) GST is not leviable on supply of goods by IND Ltd. to T1 Ltd. as supply of goods by the
consignee to any other person, by endorsement of documents of title to the goods, after the
goods have been dispatched from the port of origin located outside India but before clearance
for home consumption is treated neither as a supply of goods nor a supply of services.
(iii) GST is not leviable on supply of goods by T1 Ltd. to T2 Ltd. since supply of warehoused
goods to any person before clearance for home consumption is treated neither as a supply of
goods nor a supply of services.
(iv) Yes, GST is leviable on clearance of goods by T2 Ltd. from the customs bonded warehouse
as customs duty is levied on warehoused goods at the time of clearance thereof from the
warehouse and as mentioned in point (i), GST on import of goods is levied at the time when
customs duty is levied thereon.

QUESTION 8
Explain the concept of 'Dual GST'. (2 Marks, Nov. 2017)
ANSWER
Under dual GST model, GST is imposed concurrently by the Centre and States, i.e. Centre and
States simultaneously levy tax on intra state supplies of goods and services. Centre has the
power to levy GST on inter-State supplies of goods and/or services.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 122

QUESTION 9
Bring out the salient features of cross utilization of ITC under the GST Law ? (3 Marks, Nov.
2017)
ANSWER
The salient features of cross utilisation of ITC under GST law are as under —
(i) IGST credit should first be utilized towards payment of IGST.
(ii) Remaining IGST credit, if any, can be utilized towards payment of CGST and
SGST/UTGST in any order and in any proportion.
(iii) Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or
SGST/UTGST.
(iv) ITC of CGST should be utilized for payment of CGST and IGST in that order.
(v) ITC of SGST/UTGST should be utilized for payment of SGST/UTGST and IGST in
that order. However, ITC of SGST/UTGST should be utilized for payment of IGST, only
after ITC of CGST has been utilized fully.
(vi) CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST
credit cannot be utilized for payment of CGST.
ILLUSTRATION 23
GST liability and Government revenue: A makes intrastate supply of goods valued at ₹
50,000 to B within State of Karnataka. B makes inter-state supply to X Ltd. (located in
Telangana) after adding 10% as his margin. Thereafter X Ltd. sells it to Y in Telangana
(Intrastate sale) after adding 10% as its margin.
Assume that the rate of GST chargeable is 18% (CGST 9% plus SGST 9%) and IGST
chargeable is 18%. Calculate tax payable at each stage of the transactions detailed above.
Wherever input tax credit is available and can be utilized calculate the net tax payable in cash.
At each stage of the transaction indicate which government will receive the tax paid and to what
extent. (9 Marks, Nov. 2018-OS)

SOLUTION
In case of inter-State supply of goods, the supplier would charge IGST at specified rates on the
supply.
(i) Supply of goods by A of Karnataka to B of Karnataka:

Particulars ₹

Value charged for supply of goods 50,000

Add: CGST @ 9% 4,500

Add: SGST @ 9% 4,500

Total price charged by A from B for intra-State supply of goods 59.000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 123

A is the first stage supplier of goods and hence, does not have any credit of CGST, SGST or
IGST.
(ii) Supply of goods by B of Karnataka to X Ltd. of Telangana - Value addition @ 10% :

Particulars ₹

Value charged for supply of goods (₹ 50,000 x 110%) 55,000

Add: IGST @ 18% 9,900

Total price charged by B from X Ltd. for inter-State supply of goods 64.900

Computation of IGST payable to Government:

Particulars ₹

IGST payable 9,900

Less: Credit of CGST 4,500

Less: Credit of SGST 4,500

IGST payable to Central Government 900

The IGST charged on X Ltd. of Telangana for supply of goods will be remitted by B of
Karnataka to the appropriate account of the Central Government. Karnataka Government will
transfer SGST credit of ₹ 4500 utilised in the payment of IGST to the Central Government.
(iii) Supply of goods by X Ltd. of Telangana to Y of Telangana - Value addition @ 10% : X
Ltd. will avail credit of IGST paid by him on the purchase of goods and will utilise such credit for
being set off against the CGST and SGST payable on the local supply of goods made by him to
Y.

Particulars ₹

Value charged for supply of goods/ services (₹ 55,000 x 110%) 60,500

Add: CGST @ 9% 5,445

Add: SGST @ 9% 5,445

Total price charged by X Ltd. from Y for local supply of goods 71,390

Computation of CGST, SGST payable to Government:

Particulars ₹

CGST payable 5,445

Less: Credit of IGST to the extent of CGST payable 5,445

CGST payable to Central Government Nil

SGST payable 5,445

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 124

Less: Credit of IGST (? 9,900 - ? 5,445) 4,455

SGST payable to State Government 990

Central Government will transfer IGST credit of ₹ 4,455 utilised in the payment of SGST to
Telangana (Importing State).
Statement of revenue earned by Central and State Governments:

Transaction Revenue to Revenue to Revenue to

Central Government of Government of
Government Karnataka (₹) Telangana (₹)
(₹)

Supply of goods by A to B 4,500 4,500

Supply of goods by B to X Ltd. 900

Transfer by Karnataka State to Centre 4,500 -4,500

Supply of goods by X Ltd. to Y Nil - 990

Transfer by Centre to Telangana State -4,455 4,455

Total 5.445 Nil 5.445

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 125

LEVY & COLLECTION

Extent and commencement of CGST Act/ UTGST Act/ SGST Act

Levy and collection of CGST

Extent and commencement of IGST Act

Levy and collection of IGST

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 126

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 127

STATUTORY PROVISIONS

Section 9 Levy and collection

Sub-section Particulars

(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), 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 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

(4) The central tax in respect of the supply of taxable goods or services or both by a
supplier, who is not registered, to a registered person shall be paid by such
person on reverse charge basis as the recipient 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 specified goods or services or both.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 128

GST

(5) The Government may, on the recommendations of the Council, by

notification, specify categories of services the tax on intraState 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.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 129

ANALYSIS
Central Goods and Services Tax (CGST) shall be levied on all intra-State supplies of goods or
services or both.
The tax shall be collected in such manner as may be prescribed and shall be paid by the taxable
person. However, intra-State supply of alcoholic liquor for human consumption is outside the
purview of CGST.
Value for levy: Transaction value under section 15 of the CGST Act.
Rates of CGST: Rates for CGST are rates as may be notified by the Government on the
recommendations of the GST Council [Rates notified are 0%, 0.125%, 1.5%, 2.5%, 6%, 9% and
14%]. Maximum rate of CGST will be 20%.
On inter-State supplies of goods and/or services, Integrated Goods and Services Tax (IGST) is
levied on the transaction value under section 15 of the CGST Act1. Since alcoholic liquor for
human consumption is outside the purview of GST law, IGST is also not leviable on the same.
IGST is approximately the sum total of CGST and SGST/UTGST. Maximum rate of IGST will be
40%.
However, CGST/IGST on supply of the following items has not been levied immediately. It shall be
levied with effect from such date as may be notified by the Government on the recommendations
of the Council:
• petroleum crude
• high speed diesel
• motor spirit (commonly known as petrol)
• natural gas and
• aviation turbine fuel
Tax payable on supply of goods or services or both under Reverse charge
CGST/IGST shall be paid by the recipient of goods or services or both, on reverse charge basis, in
the following cases:
✓ Supply of goods or services or both, notified by the Government on the recommendations of the
GST Council.
1
Goods imported into India: For the goods imported into India, the IGST shall be levied and
collected as per the section 3 of the Custom Tariff Act, 1975 i.e. the additional duty shall be as per
the Custom Tariff Act, 1975 and the value shall also be determined as per the said Act. This aspect
will be discussed in detail at the Final Level.
✓ Supply of taxable goods or services or both by an unregistered supplier to a registered person.
All the provisions of the CGST/IGST Act shall apply to the recipient in the aforesaid cases as if he
is the person liable for paying the tax in relation to the supply of such goods or services or both. Let
us first understand the concept of reverse charge mechanism:
Generally, the supplier of goods or services is liable to pay GST. However, under the reverse
charge mechanism, the liability to pay GST may be cast on the recipient of the goods or services.
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.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 130

There are two type of reverse charge scenarios H provided in law.

(i) First is dependent on the nature of supply and/or nature of supplier. This scenario is covered
by section 9(3) of the CGST/ SGST (UTGST) Act [as discussed in preceding paras]. Similar
provisions are contained under the IGST law.
(ii) Second scenario is covered by section 9(4) of the CGST Act [as discussed in preceding
paras] where taxable supplies by any unregistered person to a registered person are covered.
Similar provisions are contained under the IGST law.
Corresponding provisions are included under the charging section 5 of the IGST Act.
It is important to note that GST being an indirect tax, burden of the tax has to be ultimately
passed on to the recipient. Under reverse charge also, the burden to pay GST is on the
recipient, but the compliance requirements, i.e. to obtain registration under GST, deposit tax,
filing returns with the Government, etc. has been shifted from supplier to recipient.
Goods and services notified under reverse charge mechanism are as follows:
A. Supplies of goods taxable under reverse charge, i.e. the goods where tax is payable by the
recipient: Goods like cashewnuts [not shelled/peeled], bidi wrapper leaves, tobacco leaves,
supply of lottery, silk yarn, used vehicles, seized and confiscated goods, old and used goods,
waste and scrap, raw cotton, etc. are taxable under reverse charge, i.e. recipient is liable to pay
tax.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 131

The Central Government has notified the following categories of supply of services
wherein the whole of central tax leviable under section 9 of the said CGST Act, shall be
paid on reverse charge basis by the recipient of the such services

SI. Category of Supply of Services Supplier of Recipient of Service

No. service

1 Supply of Services by a Goods Goods (a) Any factory registered under or

Transport Agency (GTA) in Transport governed by the Factories Act,
respect of transportation of goods Agency (GTA) 1948; or
by road to—
(b) any society registered under
(a) any factory registered under or the Societies Registration Act,
governed by the Factories Act, 1860 or under any other law for
1948; or the time being in force in any part
of India; or
(b) any society registered under
the Societies Registration Act, (c) any co-operative society
1860 or under any other law for the established by or under any law;
time being in force in any part of or
India; or
(d) any person registered under
(c) any co-operative society the CGST Act or the IGST Act or
established by or under any law; or the SGST Act or the UTGST Act;
or
(d) any person registered under
the CGST Act or the IGST Act or (e) any body corporate
the SGST Act or the UTGST Act; established, by or under any law;
or or
(e) any body corporate (f) any partnership firm whether
established, by or under any law; registered or not under any law
or including association of persons;
or
(f) any partnership firm whether
registered or not under any law (g) any casual taxable person;
including association of persons; or
located in the taxable territory.
(g) any casual taxable person.
However nothing contained in this
RCM not applicable if recipient entry shall apply where, -
registered only for TDS :
(i) the supplier has taken
However, nothing contained in this
registration under the CGST Act,
entry shall apply to services
2017 and exercised the option to
provided by a goods transport
pay tax on the services of GTA in
agency, by way of transport of
relation to transport of goods
goods in a goods carriage by road,
supplied by him under forward
to,—
charge; and
(a) a Department or Establishment
(ii) the supplier has issued a tax
of the Central Government or State
invoice to the recipient charging
Government or Union territory; or
Central Tax at the applicable rates
(b) local authority; or and has made a prescribed
declaration on such invoice issued
(c) Governmental agencies, which
by him.
has taken registration under the
CGST Act, 2017 only for the If a GTA has exercised the
purpose of deducting tax u/s 51 option to pay tax under forward
and not for making a taxable charge for a particular financial

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 132

supply of goods or services. year, it shall be deemed that the

option has been exercised for
the next and future financial
years also unless the GTA files
a declaration that it wants to
revert to the reverse charge
mechanism during 1st January
to 31st March of the preceding
financial year.

2 Services provided by an individual An individual Any business entity located in the

advocate including a senior advocate taxable territory.
advocate or firm of advocates by
including a Business entity being Litigant,
way of legal services, directly or
senior advocate applicant or petitioner located
indirectly.
or firm of in taxable territory - Deemed
"Legal service" means any advocates. Recipient : The business entity
service provided in relation to located in the taxable territory who
advice, consultancy or assistance is litigant, applicant or petitioner,
in any branch of law, in any as the case may be, shall be
manner and includes treated as the person who
representational services before receives the legal services for the
any court, tribunal or authority. purpose of this notification.
[Explanation]

3 Services supplied by an arbitral An arbitral Any business entity located in the

tribunal to a business entity. tribunal. taxable territory.

4 Services provided by way of Any person Any body corporate or partnership

sponsorship to any body firm located in the taxable
corporate or partnership firm. territory.

5 Services supplied by the Central Central Any business entity located in the
Government. State Government, taxable territory.
Government,
Union territory or local authority
Effect of amendment : Supply of
to a business entity excluding,— State
all goods and services by Indian
(1) renting of immovable property, Government, Railways shall be taxed under
and Union territory Forward Charge Mechanism to
or local enable them to avail ITC.
(2) services specified below—
authority
(i) services by the Department of
Posts and the Ministry of
Railways (Indian Railways)4
(ii) services in relation to an aircraft
or a vessel, inside or outside the
precincts of a port or an airport;
(iii) transport of goods or
passengers.
"Renting of immovable
property"
means allowing, permitting or
granting access, entry, occupation,

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 133

use or any such facility, wholly or

partly, in an immovable property,
with or without the transfer of
possession or control of the said
immovable property and includes
letting, leasing, licensing or other
similar arrangements in respect of
immovable property.

5A Services supplied by the Central Central Any person registered under the
Government [excluding the CGST Act, 2017.
Government,
Ministry of Railways (Indian
Railways)], State Government, State
Union territory or local authority by Government,
way of renting of immovable Union territory
property to a person registered or local
under the CGST Act, 2017. authority

5A Service by way of renting of Any person Any registered person.

residential dwelling to a
A
registered person.

5B Services supplied by any person Any person Promoter

by way of transfer of
development rights or Floor
Space Index (FSI) (including
additional FSI) for construction of a
project by a promoter.

5C Long term lease of land (30 Any person Promoter

years or more) by any person
against consideration in the form of
upfront amount (called as
premium, salami, cost, price,
development charges or by any
other name) and/or periodic rent
for construction of a project by a
promoter.

6 Services supplied by a director A director of a The company or a body corporate

of a company or a body corporate company or a located in the taxable territory.
to the said company or the body body corporate
corporate.

7 Services supplied by an An insurance Any person carrying on insurance

insurance agent to any person agent business, located in the taxable
carrying on insurance business. territory.

8 Services supplied by a recovery A recovery A banking company or a financial

agent to a banking company or a agent institution or a non-banking
financial institution or a non- financial company, located in the
banking financial company. taxable territory.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 134

9 Supply of services by a music Music Music company, producer or the

composer, photographer, artist composer, like, located in the taxable
or the like by way of transfer or photographer, territory.
permitting the use or enjoyment of artist, or the
a copyright covered under section like
13(1)(a) of the Copyright Act, 1957
relating to original dramatic,
musical or artistic works to a music
company, producer or the like.

9A Supply of services by an author Author Publisher located in the taxable

by way of transfer or permitting the territory : However, nothing
use or enjoyment of a copyright contained in this entry shall apply
covered u/s 13(1)(a) of the where, -
Copyright Act, 1957 relating to
(i) the author has taken
original literary works to a
registration under the CGST Act,
publisher.
2017, and filed a declaration, in
the specified form before the
commencement of F.Y. with the
jurisdictional CGST or SGST
commissioner, as the case may
be, that he exercises the option to
pay central tax on such services
in accordance with section 9(1) of
the CGST Act, 2017 under
forward charge, and to comply
with all the provisions of CGST
Act, 2017 as they apply to a
person liable for paying the tax in
relation to the supply of any goods
or services or both and that he
shall not withdraw the said option
within a period of 1 year from
the date of exercising such option;
(ii) the author makes a declaration
regarding payment of tax on
forward charge on the invoice
issued by him in Form GST Inv-I
to the publisher.

10 Supply of services by the Members of RBI

members of Overseeing Overseeing
Committee to RBI Committee
constituted by
the RBI

11 Services supplied by individual Individual DSAs A banking company or a

Direct Selling Agents (DSAs) other than a nonbanking financial company,
other than a body corporate, body corporate, located in the taxable territory.
partnership or limited liability partnership or
partnership firm to bank or non- LLP firm.
banking financial company
(NBFCs)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 135

12 Services provided by business Business A banking company, located in

facilitator (BF) to a banking facilitator (BF) the taxable territory.
company

13 Services provided by an agent of An agent of A business correspondent,

business correspondent (BC) to business located in the taxable territory
business correspondent (BC) correspondent

14 Security services (services Any person A registered person, located in the

provided by way of supply of other than a taxable territory.
security personnel) provided to a body corporate
registered person.

RCM not applicable if recipient registered only for TDS and in case composition
suppliers: However, nothing contained in this entry shall apply to,—

(i) (a) a Department or Establishment of the Central Government or State

Government or UT; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the CGST Act, 2017 only for the purpose of
deducting tax u/s 51 of the said Act and not for making a taxable supply of
goods or services; or

(ii) a registered person paying tax under section 10 of the said Act.

15 Services provided by way of Any person, Any body corporate located in the
renting of any motor vehicle other than a taxable territory.
designed to carry passengers body corporate
where the cost of fuel is included in who supplies
the consideration charged from the the service to a
service recipient, provided to a body corporate
body corporate. and does not
issue an
invoice
charging
central tax @
6% to the
service
recipient

16 Services of lending of securities Lender i.e. a Borrower i.e. a person who

under Securities Lending Scheme, person who borrows the securities under the
1997 ("Scheme") of SEBI as deposits the Scheme through an approved
amended. securities intermediary of SEBI.
registered in
his name or in
the name of any
other person
duly authorised
on his behalf
with an
approved

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 136

intermediary for
the purpose of
lending under
the Scheme of
SEBI

Explanation : For purpose of this notification,—

(a) Person liable to pay freight is Service Recipient : The person who pays or is
liable to pay freight for the transportation of goods by road in goods carriage, located in
the taxable territory shall be treated as the person who receives the service for the
purpose of this notification.
(b) "Body Corporate" has the same meaning as assigned to it in Section 2(11) of the
Companies Act, 2013.
As per Section 2(11) of Companies Act, 2013, body corporate or corporation includes a
company incorporated outside India, but does not include—
(i) a co-operative society registered under any law relating to co-operative societies; and
(ii) any other body corporate (not being a company as defined in this Act), which the
Central Government may, by notification, specify in this behalf.
(c) A "Limited Liability Partnership" formed and registered under the provisions of the
Limited Liability Partnership Act, 2008 shall also be considered as a partnership firm or a
firm.
(d) Provisions of this notification, in so far as they apply to the Central Government and
State Governments, shall also apply to the Parliament, State Legislatures, Courts and
Tribunals.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 137

Recipient of GTA service is the person who pays/is liable to pay freight for transportation of
goods by road in goods carriage, located in the taxable territory.

Reverse charge mechanism (RCM) on renting of motor vehicles designed to carry

passengers : RCM shall be applicable on the service by way of renting of any motor vehicle
designed to carry passengers where the cost of fuel is included in the consideration charged
from the service recipient only if the supplier is other than a body-corporate and does not issue
an invoice charging GST @ 12% from the service recipient; and supplies the service to a body
corporate.

It is important to note here that when any service is placed under RCM, the supplier shall not
charge any tax from the service recipient as this is the settled procedure in law under RCM.
Thus, in this case, the supplier does not issue an invoice charging GST @ 12% (6% CGST+6%
SGST/UTGST or 12% IGST) from the service recipient.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 138

SERVICES PROVIDED BY A GOODS TRANSPORT AGENCY [Entry 21]:

Services provided by a goods transport agency, by way of transport in a goods carriage of—
(a) agricultural produce;
(b) milk, salt and food grain including flour, pulses and rice;
(c) organic manure;

(d) newspaper or magazines registered with the Registrar of Newspapers;

(e) relief materials meant for victims of natural or man-made disasters, calamities,
accidents or mishap; or
(f) defence or military equipments are exempt.
[Entry 21A]: Services provided by GTA to an Unregistered person (Including an
unregistered CTP) , other than the following recipient ( services to the following are
chargeable to GST)-

 Any factory registered under or governed by the Factories Act, 1948; or

 any society / any cooperative society
 any person registered under GST
 body corporate
 Firm /AOP
 Casual taxable person

[Entry 21B]:Services provided by GTA , by way of transport of goods in a goods

carriage ,to
(a) a Department or Establishment of the Central Government or State Government or Union
territory; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the CGST Act, 2022 only for the purpose of deducting
tax u/s 51 and not for making a taxable supply of goods or services

[Entry 24C]:
Services by department of post by way of
 Post cards
 Inland letter
 Book post
 Ordinary post (envelopes weighing less than 10 grams )

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 139

Illustration 1: Mr. Vicky Frankyn, an unregistered famous author, received ' 3 crore of
consideration from Shiv Bhawan Publications (SBP) located in Indore for supply of
services by way of temporary transfer of a copyright covered under section 13(1) (a) of
the Copyright Act, 1957 relating to original literary works of his new book. He finished
his work & made available the book to the publisher, but has yet not raised the invoice.

Mr. Vicky Frankyn is of the view that SBP is liable to pay tax under reverse charge on
services provided by him. SBP does not concur with his view and is not ready to deposit
the tax under any circumstances.
Examine whether the view of Mr. Vicky Frankyn is correct. Further, if the view of Mr.
Vicky Frankyn is correct, what is the recourse available with Mr. Vicky Frankyn to comply
with the requirements of GST law as SBP has completely refused to deposit the tax.
Solution : Yes, the view of Mr. Vicky Frankyn is correct. GST is payable under reverse charge
in case of supply of services by an author by way of transfer/permitting the use or enjoyment of
a copyright covered under section 13(l)(a) of the Copyright Act, 1957 relating to original literary
work to a publisher located in the taxable territory in terms of reverse charge Notification No.
13/2022-CT(R) dated 28-06-2022. Therefore, in the given case, person liable to pay tax is the
publisher - SBP.
However, since SBP has completely refused to deposit the tax on the given transaction, Mr.
Vicky Frankyn has an option to pay tax under forward charge on the same. For the purpose, he
needs to fulfill the following conditions:
(i) since he is unregistered, he has to first take registration under the CGST Act, 2022
(ii) he needs to file a declaration, in the prescribed form, that he exercises the option to pay
CGST on the said service under forward charge in accordance with section 9(1) of the
CGST Act and to comply with all the provisions as they apply to a person liable for paying
the tax in relation to the supply of any goods and/or services and that he shall not withdraw
the said option within a period of 1 year from the date of exercising such option;
(iii) he has to make a declaration on the invoice, which he would issue to SBP, in
prescribed form.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 140

What do you mean by E-Commerce. Who are E-commerce operator. Explain the liability
of E-Commerce operator to pay tax on notified Services.
Ans: The relevant provisions are discussed as under —
(1) "Electronic commerce" means the supply of goods or services or both, including digital
products over digital or electronic network. [Section 2(44)]
(2) "Electronic commerce operator" (ECO) means any person who owns, operates or
manages digital or electronic facility or platform for electronic commerce. [Section (2(45)]
ECO is engaged in facilitating the supply of any goods and/or services or in providing any
information or any other services incidental to or in connection there with but shall not include
persons engaged in supply of such goods and/or services on their own behalf. ECO display
products as well as services which are actually supplied by some other person to the consumer,
on their electronic portal. The consumers buy such goods/services through these portals. On
placing the order for a particular product/ service, the actual supplier supplies the selected
product/service to the consumer. The price/ consideration for the product/ service is collected
by the ECO from the consumer and passed on to the actual supplier after the deduction of
commission by the ECO.
(3) E-Commerce operator liable to pay tax on notified services [Section 9(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.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 141

Person liable to pay tax:

Situation Person liable to pay tax

ECO is located in taxable territory ECO

ECO does not have a physical presence in the Any person representing such ECO for any
taxable territory purpose in the taxable territory shall be liable to
pay tax.

ECO- ECO shall appoint a person in the taxable

territory for the purpose of paying tax and such
• Neither has physical presence in the taxable
person shall be liable to pay tax.
territory
• Nor has a representative in the said territory.

It is important to note that this exception is carved out only in respect of supply of
services through an e-commerce operator and will not be applicable/ relevant to supply
of any goods through an e-commerce operator.

Categories of services the tax on intra-State supplies of which shall be paid by the electronic
commerce operator.
The Central Government has notified that in case of the following categories of services, the
tax on intra-State supplies shall be paid by the electronic commerce operator-

a. services by way of transportation of passengers by a radio-taxi, motorcab,

maxicab and motor cycle;
b. services by way of providing accommodation in hotels, inns, guest houses,
clubs, campsites or other commercial places meant for residential or lodging
purposes, except where the person supplying such service through electronic
commerce operator is liable for registration u/s 22(1) of the said CGST Act.
c. services by way of house-keeping, such as plumbing, carpentering etc, except where
the person supplying such service through electronic commerce operator is liable for
registration u/s 22(1) of the said CGST Act.
d. Supply of restaurant service other than the services supplied by restaurant ,eating
joints etc located at specified premises

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 142

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 143

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 144

Illustration 2 - Person liable to pay GST: Decide which person is liable to pay GST in the
following independent cases, where the recipient is located in the taxable territory.
Ignore the Aggregate Turnover and Exemption available.
(i) Mr. Raghu provided sponsorship services to WE-WIN Cricket Academy, an LLP.
(ii) 'Safe Trans', a Goods Transport Agency, transported goods of Kapil & Co., a
partnership firm which is not registered under GST.
Answer:
(i) Services provided by way of sponsorship to any body corporate or partnership firm
shall be liable to be taxed under reverse charge mechanism and the recipient of service
shall be liable to pay GST. For the purpose of this notification, A "Limited Liability
Partnership" formed and registered under the provisions of the Limited Liability
Partnership Act, 2008 shall also be considered as a partnership firm or a firm. Thus,
WE-WIN Cricket Academy shall be liable to pay GST.
(ii) Supply of Services by a goods transport agency (GTA) in respect of transportation of
goods by road to any partnership firm whether registered or not under any law shall be
liable to be taxed under reverse charge mechanism and the recipient of service shall be
liable to pay GST. Thus, Kapil and Co, shall be liable to pay GST under reverse charge
mechanism. However, if GST is paid @ 12% by GTA, then Goods transport agency is
liable to pay tax under forward charge mechanism.

Illustration 3 - Person liable to pay GST : State with reason, person liable to pay GST in each
of following independent cases. Assume recipient is located in taxable territory.
(1) Rental income received by Tamil Nadu State Government from renting an
immovable property to Mannappa Pvt. Ltd. (Turnover of the company was f 42
lakhs in the preceding F.Y.)
(2) Legal Fees received by Mr. Sushrut, a senior advocate, from M/s. Tatva Trading
Company having turnover of Rs. 50 lakhs in preceding F.Y.
(3) XYZ & Co., a partnership firm provides security services to ABC Ltd. registered
under GST.
Answer:
(1) As per Entry 5A of Notification No. 13/2022-CT (Rate), in case of Services supplied by the
Central Government, State Government, Union territory or local authority by way of renting of
immovable property to a person registered under the CGST Act, 2022, the recipient registered
under the CGST Act, 2022 will be liable to pay GST. Hence, Mannappa Pvt. Ltd. will be liable to
pay GST under reverse charge mechanism.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 145

(2) Services provided by a senior advocate by way of legal services, directly or indirectly to any
business entity located in the taxable territory, reverse charge mechanism is applicable and
business entity is liable to pay GST. In this case M/s. Tatva Trading Company will be liable to
pay GST.
(3) Security services (services provided by way of supply of security personnel) provided by any
person other than a body corporate to a registered person is liable to be taxed under reverse
charge basis. Hence, ABC Ltd. registered under GST shall be liable to pay tax on the same.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 146

Liquidated Damages

1. Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an

act" has been specifically declared to be a supply of service in para 5(e) of Schedule II of CGST
Act if the same constitutes a "supply" within the meaning of the Act.
The said expression has following three limbs: -
(i) Agreeing to the obligation to refrain from an act —
 Example of activities that would be covered by this part of the expression
would include non-compete agreements, where one party agrees not to
compete with the other party in a product, service or geographical area
against a consideration paid by the other party.
 Another example of such activities would be a builder refraining from
constructing more than a certain number of floors, even though permitted
to do so by the municipal authorities, against a compensation paid by the
neighbouring housing project, which wants to protect its sunlight, or an
industrial unit refraining from manufacturing activity during certain hours
against an agreed compensation paid by a neighbouring school, which
wants to avoid noise during those hours.
(ii) Agreeing to the obligation to tolerate an act or a situation —
 This would include activities such a shopkeeper allowing a hawker to
operate from the common pavement in front of his shop against a monthly
payment by the hawker, or an RWA tolerating the use of loud speakers for
early morning prayers by a school located in the colony subject to the
school paying an agreed sum to the RWA as compensation.
(iii) Agreeing to the obligation to do an act —
 This would include the case where an industrial unit agrees to install
equipment for zero emission/discharge at the behest of the RWA of a
neighbouring residential complex against a consideration paid by such
RWA, even though the emission/discharge from the industrial unit was
within permissible limits and there was no legal obligation upon the
individual unit to do so.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 147

2. Some of the examples of such cases are Service Tax/GST demands on -

Sl.No Situations Applicability of

GST

1. Liquidated damages paid for breach of contract Not Taxable.

2. Compensation given to previous allottees of coal blocks for Not Taxable.

cancellation of their licenses pursuant to Supreme Court Order

3. Cheque dishonour fine/penalty charged by a power distribution Not Taxable

company from the customers

4. Penalty paid by a mining company to State Government for Not Taxable

unaccounted stock of river bed material

5. Bond amount recovered from an employee leaving the Not Taxable

employment before the agreed period

6. Compensation for not collecting toll charges Taxable

7. Late payment charges collected by any service provider for late Taxable
payment of bills

8. Fixed charges collected by a power generating company from Not Taxable

State Electricity Boards (SEBs) or by SEBs/DISCOMs from
individual customer for supply of electricity

9. Cancellation charges recovered by railways for cancellation of Not Taxable

tickets, etc.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 148

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 149

composition scheme [Section 10 ]

Turnover in preceding Can opt for

year not exceeding 1.5crore Composition
Taxable person
/seventy five lakhs scheme

**Trader can supply services upto 10% of their turnover in PY or 5 lakh ,whichever is higher

Xis engaged in supply of goods. His aggregate turnover in preceding FY is ₹ 110 lakh.
Since his aggregate turnover in the preceding FY does not exceed ₹ 1.5 crore, he is
eligible for composition scheme in current FY. Further, in current FY, he can supply
services [other than restaurant services] upto a value of not exceeding:
(a) 10% of ₹ 110 lakh, i.e. ₹ 11 lakh OR
(b) ₹ 5 lakh,
whichever is higher. Thus, he can supply services upto a value of ₹ 11 lakh in current FY. If the
value of services supplied exceeds ₹ 11 lakh, he becomes ineligible for the composition
scheme and has to opt out of the composition scheme.

Turnover upto 50lakh per annum can simplified

Service
scheme and pay tax @6%
Provider

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 150

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 151

Composition scheme under CGST Act, 2017 [Section 10(1)]:

(a) Optional Scheme : Tax payment under this scheme is an option available to the
taxable person. This scheme is available only to certain eligible taxable persons.
(b) Eligibility: If aggregate turnover is upto ₹ 1.5 crore in the preceding financial year,
such person will be eligible to opt for payment of tax under the composition scheme.
However, the aggregate turnover in the preceding financial year shall be ₹ 75 lakh in the case
of an eligible registered person, registered under section 25 of the said Act, in any of the
following States, namely: -

Special Category States

> Arunachal Pradesh, > Manipur, > Meghalaya,

> Mizoram, > Nagaland, > Sikkim,

> Tripura, > Uttarakhand.

Note: In case of Assam, Himachal Pradesh and Jammu and Kashmir, the turnover limit will be
₹ 1.5 crore.

While computing the threshold limit of ₹ 1.5 crore, inclusions in and exclusions from ‘aggregate
turnover' are as follows -

Inclusions Exclusions

Value of all outward supplies i.e.-  CGST

 Taxable supplies  SGST
 Exempt supplies  UTGST
 Exports  IGST
 Inter-State supplies  Cess
 Value of inward supplies on which
of persons having same PAN to be computed tax is payable under reverse
on all India basis. charge.

Computation of aggregate turnover for the purpose of eligibility under this scheme
[Explanation 1] :
For the purposes of computing aggregate turnover of a person for determining his eligibility to
pay tax under this section, the expression "aggregate turnover" -
 shall include the value of supplies made by such person from the 1st day of April
of a financial year upto the date when he becomes liable for registration under
this Act,
 but shall not include 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.

Note : The value of exports and inter-State supplies are relevant only while determining the
aggregate turnover of the preceding financial year. These values are not relevant for
determining the aggregate turnover of the current financial year in which the composition
supplier has opted for composition levy as he is not permitted to make inter-State supplies and
exports in the said financial year.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 152

(c) Rates of composite tax : As per Section 10(1), the rates of tax under composition scheme
are as under a composition supplier may opt to pay, in lieu of the tax payable by him under
section 9(1), an amount of tax calculated at under mentioned rates—

S. Eligible Person Rate of Tax cannot exceed (% of turnover) Total rate of tax
cannot exceed
No.
CGST SGST

(a) Manufacturer 0.5% of the turnover 0.5% of the turnover in 1% of the turnover
in the State or Union the State or Union in the State or
territory territory Union territory

(b) Restaurant 2.5% of the turnover 2.5% of the turnover in 5% of the turnover
in the State or Union the State or Union in the State or
service
territory territory Union territory

(0 Other Suppliers 0.5% of the turnover 0.5% of the turnover of 1% of the turnover
of taxable supplies of taxable supplies of of taxable supplies
goods and services goods and services in of goods and
in the State or Union the State or Union services in the
territory territory State or Union
territory

Services can be supplied by the composition suppliers [Second Proviso to Section 10(1)]
:
A person who opts to pay tax under (a) or clause (b) or clause (c) may supply services (other
than those referred to in clause (b) of paragraph 6 of Schedule II i.e. restaurant services), of
value -
(a) not exceeding 10% of turnover in a State or Union territory in the preceding F.Y.; or
(b) ₹ 5,00,000, whichever is higher.
Explanation : 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.

"Turnover in State" or "turnover in Union territory" means the aggregate value of all taxable
supplies (excluding the value of inward supplies on which tax is payable by a person on reverse
charge basis) and exempt supplies made within a State or Union territory by a taxable person,
exports of goods or services or both and inter-State supplies of goods or services or both made
from the State or Union territory by the said taxable person but excludes central tax, State tax,
Union territory tax, integrated tax and cess. [Section 2(112)]

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 153

Supplies to be excluded for determining turnover in State/UT for determining payment of

tax [Explanation 2]: For the purpose of payment of tax -
"Turnover in State or turnover in Union territory" shall not include the value of following
supplies, namely:—
(i) supplies from the first day of April of a financial year upto the date when such person
becomes liable for registration under this Act; and
(ii) 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.

(d) Persons not eligible to opt for composition scheme [Section 10(2)] : Broadly, six
categories of registered person are not eligible to opt for the composition scheme. These are:
(i) supplier of services other than those mentioned in point no. C above.
(ii) supplier of goods or services which are not taxable under the CGST Act/SGST
Act/ UTGST Act;
(iii) an inter-State supplier of goods or services;
(iv) person supplying goods or7 services through an electronic commerce operator
who is required to collect tax at source under section 52;
(v) manufacturer of certain notified goods i.e-
(a) Ice cream and other edible ice, whether or not containing cocoa,
(b) Pan masala,
(c) Aerated waters,
(d) Tobacco and manufactured tobacco substitutes,
(e) Fly ash bricks;
(f) Fly ash aggregates;
(g) Fly ash blocks,
(h) Bricks of fossil meals or similar siliceous earths,
(i) Building bricks,
(j) Earthen or roofing tiles;
(vi) casual taxable person or a non-resident taxable person.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 154

a. Composition scheme is applicable for all transactions of registered person

with same PAN. [Section 10(2)]
b. Option to pay composition tax lapses if aggregate turnover exceeds ₹ 1.5 crore/
₹ 75 lakh. [Section 10(3)]
c. Composition tax cannot be collected from recipients. [Section 10(4)]
d. Input tax credit cannot be availed by composition supplier. [Section 10(4)]
e. In case of irregular availment of the composition scheme, registered person shall
be liable to pay tax and shall also be liable for penalty. [Section 10(5)]
f. Composition scheme not applicable for tax payable under Reverse Charge
Mechanism (RCM). Rate of tax payable on supplies taxable under RCM will be
regular rates and not the composition rate.
g. Customer not entitled to take credit of composition tax.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 155

Illustration 1 - Tax liability under Composition Scheme of trader: Mr. X opened a retail
shop - 'Aapki Dukan1 in Janta Market, Jaipur, Rajasthan on 01st April, 2021. He opted to
pay tax under Section 10(1) of the CGST Act, 2022 in the said financial year The
th
aggregate turnover of the retail shop for the quarter ending 30 June, 2021 was Rs. 40
lakh. Further, for the half year ending 30th September, 2021, the turnover reached Rs. 85
lakh. Aapki Dukan recorded a rapid growth and the turnover reached Rs. 150 lakh by the
end of December, 2021 and Rs. 165 lakh by the end of January 2022. Determine the total
tax liability of Aapki Dukan. Mr. X has duly complied with the provisions of GST laws.
Normal rate of tax in respect of goods sold in shop is 12%.
Solution: Section 10(1) of the CGST Act, 2022 provides that a registered person, whose
aggregate turnover in the preceding financial year did not exceed Rs. 1.5 crore in the State of
Rajasthan, will be eligible to opt for payment of tax under the composition scheme.
According to Section 10(3), the benefit of composition scheme can be availed up to the
aggregate turnover of Rs. 1.5 crore in current financial year. The option availed of by a
registered person under Section 10(1) shall lapse with effect from the day on which his
aggregate turnover during a financial year exceeds the limit of Rs. 1.5 crore. According to
Explanation 2, for the purposes of determining the tax payable by a person under this section,
the expression "turnover in State or turnover in Union territory" shall not include the value of
following supplies, namely: —
(i) supplies from the first day of April of a financial year upto the date when such person
becomes liable for registration under this Act; and
(ii) 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.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 156

Thus, Aapki Dukan is eligible to pay tax under this section upto the turnover of Rs. 150
lakh. The total tax payable by it is as under:-

Period Tax rate Turnover (Rs.) Tax liability

(Rs.)

1st Quarter Since turnover did not exceed Rs. 40 40 lakh Nil
lakh, it was not required to obtain
registration. Hence, no tax was required
to be paid

2nd Quarter Effective rate is 1% (CGST+ 45 lakh [(85-40) 45,000

SGST/UTGST)] under Section 10(1) lakh]

For 3rd Quarter Effective rate is 1% (CGST+ 65 lakh [(150- 65,000

SGST/UTGST)] under Section 10(1) upto 85) lakh]
Rs. 150 lakh

For the month of Normal rate of tax i.e. 12% will be Rs.15 lakh 1,80,000
January 2022 applicable [Rs. (165 -150)
lakh]

Total tax liability 2,90,000

Illustration 2 : Shubhlaxmi traders is engaged in trading of goods within the state of

Maharashtra. In the preceding financial year, it has a turnover of Rs. 140 lakh from the
trading of goods. Further, it has also earned a bank interest of Rs. 20 lakh from the fixed
deposits. Shubhlaxmi traders wishes to opt for composition scheme in the current year.
You are required to advise Shubhlaxmi traders on the same. Would your answer be
different if Shubhlaxmi traders is also engaged in supply of farm labour and the turnover
from the said activity is Rs. 14 lakh?
Solution: The eligibility of Shubhlaxmi traders under composition scheme is discussed as
under - > Eligiblity under Composition scheme : As per Section 10(1) of the CGST Act, 2022, a
registered person, engaged in trading of goods and supplier of services whose aggregate
turnover in the preceding financial year did not exceed Rs. 1.5 crore, may opt to pay, in lieu of
the tax payable by him, an amount calculated at the specified rates.
According to Explanation 1, "aggregate turnover" shall include the value of supplies made by
such person from the 1st day of April of a financial year upto the date when he becomes liable
for registration under this Act, but shall not include the value of exempt supply of services
provided by way of extending deposits, loans or advances in so far as the consideration is

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 157

represented by way of interest or discount.

Thus, in computing hrs aggregate turnover in order to determine his eligibility for composition
scheme, value of supply of any exempt services 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.

 Subhlaxmi traders is eligible for composition scheme : In the given case, the
services provided by Shubhlaxmi traders apart from trading of goods, viz.
services by way of extending deposits where the consideration is represented by
way of interest shall not be taken into account for computation of aggregate
turnover for determination of eligibility of composition scheme. Since the
aggregate turnover of Shubhlaxmi traders do not exceed Rs. 1.5 crores in
preceding financial year, it shall be eligible to opt for composition scheme.
 Subhlaxmi traders is not eligible for composition scheme : However, if
Shubhlaxmi traders is also engaged in supply of farm labour, it will not be eligible
for composition levy since only value of supply of exempt services 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. Other
exempt services shall be taken into account. Since its aggregate turnover is Rs.
1.54 crores in preceding financial year it will not be eligible to opt for composition
scheme.

Illustration 3 : A Ltd. is a manufacturing concern in Pune. In Financial Year 2020-21

total value of supplies including inward supplies taxed under reverse charge basis
are Rs. 1,53,60,000. (exclusive of taxes). The break up of supplies are as follows -

Particulars Rs.

(1) Intra-State Supplies made under forward charge 75,00,000

(2) Intra-State Supplies of goods which are chargeable to GST at Nil rate 43,00,000

(3) Intra-State Supplies which are wholly exempt under Section 11 of CGST Act, 32,00,000
2022

(4) Value of exempt supply of services being interest earned on fixed deposits 1,00,000
with bank

(5) Value of inward supplies on which tax payable under RCM 2,60,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 158

Briefly explain whether A Ltd. is eligible to opt for Composition scheme in Financial Year
2021-22.

Solution: A registered person, whose aggregate turnover in the preceding financial year did not
exceed Rs. 1,50,00,000, may opt for payment of tax under Composition scheme.
According to Explanation 1, for the purposes of computing aggregate turnover of a person for
determining his eligibility to pay tax under this section, the expression "aggregate turnover" shall
not include 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.
Thus, aggregate turnover shall be computed as under—
Computation of Aggregate Turnover (amount in X):

(1) Supplies made under forward charge 75,00,000

(2) Supplies made which are chargeable to GST at Nil rate (covered under 43,00,000
exempt supply)

(3) Supplies which are wholly exempt under Section 11 of CGST Act, 2022 32,00,000

(4) Value of exempt supply of services being interest earned on fixed deposits Nil
with bank

(5) Value of inward supplies on which tax payable under RCM (specifically Nil
excluded)

Total 1,50,00,000

Since, Aggregate turnover does not exceed Rs. 1,50,00,000 during the Financial Year 2020-21,
So, A Ltd. is entitled for Composition Scheme for Financial Year 2021-22.
Illustration 4 : A Ltd. a manufacturing concern of Rajasthan having aggregate turnover
of Rs. 120 lakhs in financial year 2020-21 has opted for composition scheme furnishes
you with the following information for Financial Year 2021-22. It requires you to
determine its composition tax liability and total tax liability. The break up of supplies are
as follows -

Particulars Rs.

(1) Intra State Supplies of Goods X chargeable @ 5% GST 30,00,000

(2) Intra State Supplies of goods which are chargeable to GST at Nil rate 22,00,000

(3) Intra state supply of services chargeable with 5% GST 6,00,000

(4) Interest earned on fixed deposits with banks 8,00,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 159

(5) Intra state supplies which are wholly exempt under Section 11 of CGST 2,40,000
Act, 2022

(6) Value of inward supplies on which tax payable under RCM (GST Rate 5%) 5,00,000

(7) Intra State Supplies of Goods Y chargeable @ 22% GST 30,00,000

Also determine composition tax liability if A Ltd. is a trader instead of

manufacturer.

Solution: The composition tax liability of A Ltd. shall be as under —

(1) Computation of Aggregate Turnover and composite tax (amount in Rs.):

Particulars Manufacturer Trader

(1) Intra State Supplies of Goods X chargeable @5% GST 30,00,000 30,00,000

(2) Intra State Supplies of goods which are chargeable to GST at 22,00,000 -
Nil rate

(3) Intra State supply of services chargeable with 5% GST 6,00,000 6,00,000

(4) Interest earned on fixed deposits with banks [WN-2] _ _

(5) Intra State Supplies which are wholly exempt u/s 11 of CGST 2,40,000 _
Act, 2022

(6) Value of inward supplies on which tax payable under RCM Nil Nil
(GST Rate 30,00,000 30,00,000
5%) (not to be included)
86,40,000 66,00,000
(7) Intra-State supplies of goods Y chargeable @22% GST
1% 1%
Aggregate turnover
Rate of composite tax 86,400 66,000

Total Composite tax [A]

(2) Tax payable under reverse charge basis (amount in Rs.):

Value of inward supplies on which tax payable under 5,00,000 5,00,000

RCM

Rate of GST 5% 5%

Tax payable under RCM [B] 25,000 25,000

Total Tax liability [A + B] 1,11,400 91,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 160

Working Note:
(1) As per Second proviso to Section 10(1) to provide that a composition supplier may supply
services of value not exceeding 10% of the turnover in the preceding financial year in a State or
Union Territory or Rs. 5 lakh whichever is higher. Thus, A Ltd. can supply services to the extent
of 10% of Rs.120 lakhs i.e. Rs. 12 lakhs.

According to Explanation to Section 10(1), for the purposes of second proviso, 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.
Since the value of services provided excluding interest earned on deposits is Rs. 6,00,000
which is within the limit ofRs. 12 lakhs, hence A Ltd. is eligible for composition scheme.
(2) According to Explanation 2 to Section 10, for the purposes of determining the tax payable by
a person under this section, the expression "turnover in State or turnover in Union territory"
shall not include 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.
Illustration 5 : Mr. A, a retailer who keeps no inventories, presents the following
estimated information for the year -
(1) Purchases of goods : Rs. 50 lakhs (GST @5%)
(2) Sales (at fixed selling price inclusive of all taxes): Rs. 60 lakhs (GST on sales @ 5%)
Discuss whether he should opt for composition scheme if composite tax is 1% of turnover.
Expenses of keeping detailed statutory records required under the GST Laws will be Rs.
1,20,000 p.a., which shall get reduced to Rs. 50,000 if composition scheme is opted for. Other
expenses are Rs. 3,00,000 p.a.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 161

Solution: The cost to the ultimate consumer under two schemes is as under -

Particulars Normal Composition

GST Scheme*
Scheme (Rs.)
(Rs.)

Cost of goods sold (*No credit under composition scheme, hence, 50,00,000 52,50,000
cost of goods sold will be higher)

Add: Costs of maintaining records 1,20,000 50,000

Add: Normal Expenses 3,00,000 3,00,000

Total Costs 54,20,000 56,00,000

Sales (inclusive of all taxes) 60,00,000 60,00,000

Less: Tax (GST = Rs. 60 lakh x 5 * 105); (Composite Tax = Rs. 60 2,85,714 60,000
lakh x 1%)

Sales (net of taxes) 57,14,286 59,40,000

Profit of the dealer (Sales, net of taxes - Total Costs) 2,94,286 3,40,000

Conclusion: It is apparent that while cost to ultimate consumer, in both the cases remains same,
the profit of the dealer is higher if the dealer opts for composition scheme. Hence, composition
scheme should be opted.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 162

COMPOSITION SCHEME FOR SERVICE S S UPPLIERS AND MIXED

SUP PLI ERS

2. Explain the provisions relating to composition scheme for suppliers of service and mixed
suppliers who are not eligible to opt for composition scheme under Section 10(1) and 10(2) of
the CGST Act, 2022.

Ans: Composition scheme for services suppliers and mixed suppliers [Section 10(2A)] :
The relevant provisions are discussed as under —
(1) Composition scheme for services suppliers - Optional scheme : Section 10(2A) has
provided an option to a registered person whose aggregate turnover in the preceding financial
year is upto Rs. 50 lakh and who is not eligible to pay tax under section 10(1), to pay tax @6%
(3% CGST and 3% SGST/UTGST).
Thus, traders and manufacturers of goods and restaurant service providers who are eligible for
composition scheme u/s 10(1) (even if not opted) will not enter this facility.
(2) Conditions : A registered person can claim the benefit of this scheme provided he complies
with the following conditions:
(a) His aggregate turnover in the preceding financial year must not exceed Rs. 50 lakh. Thus,
the registered persons intending to opt for this scheme in the Financial Year 2021-22 should not
have aggregate turnover of more than Rs. 50 lakhs during the Financial Year 2020-21;
Computation of aggregate turnover for the purpose of eligibility [Explanation 1] : For the
purposes of computing aggregate turnover of a person for determining his eligibility to pay tax
under this scheme, the expression "aggregate turnover" —

 shall include the value of supplies made by such person from the 1st day of
April of a financial year upto the date when he becomes liable for
registration under this Act,
 but shall not include 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.
(b) He is not engaged in making any supply of goods or services which are not leviable to tax
under this Act; Under Section 10(1) the restriction is only on supply of goods not leviable to tax.
(c) He is not engaged in making any inter-State outward supply - neither of goods nor of
services. This condition is a divergence from the composition scheme u/s 10(1), where the
restriction is only on making inter-State outward supply of goods and not on inter-State outward
supply of services.
(d) He is not engaged in making any supply of goods or services through an electronic

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 163

commerce operator who is required to collect tax at source under section 52;
(e) He is not a manufacturer of such goods or supplier of such services as may be notified by
the Government on the recommendations of the Council;
Under composition scheme, condition is that the supplier should not be engaged in manufacture
of notified goods.

(f) He is not a casual taxable person or a non-resident taxable person.

The supplier of following goods will not be eligible to opt for this scheme :

S. Tariff item, subheading, Description

No. heading or Chapter

1. 2105 00 00 Ice cream and other edible ice, whether or not containing
cocoa

2. 2106 90 20 Pan masala

2A. 22021010 Aerated Water

3. 24 All goods, i.e. Tobacco and manufactured tobacco

substitutes

(3) Applicable for all transactions of registered person with same PAN : Where more than one
registered person are having the same Permanent Account Number issued under the Income-
tax Act, 1961, the registered person shall not be eligible to opt for this scheme unless all such
registered persons opt to pay tax under this scheme.
(4) Rates of tax : The rate of tax under this scheme levy is as under —

Eligible Person Rate of Tax cannot exceed (% of turnover) Total rate of tax
cannot exceed
CGST SGST

Service supplier and 3% of the turnover of 3% of the turnover of 6% of the turnover of

mixed supplier supplies of goods and supplies of goods and supplies of goods
services in the State or services in the State or and services in the
Union territory. Union territory. State or Union
territory.

(5) Option lapses if aggregate turnover exceeds Rs. 50 lakh [Section 10(3)] : The benefit of
composition scheme can be availed up to the aggregate turnover of Rs. 50 lakh in current
financial year. The option availed of by a registered person under Section 10(2A) shall lapse
with effect from the day on which his aggregate turnover during a financial year exceeds the

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 164

limit of Rs. 50 lakh.

(6) Composition tax not to be Collected from Recipients [Section 10(4)] : A taxable person to
whom the provisions of composition scheme applies shall not collect any tax from the recipient
on supplies made by him. It means that a composition scheme supplier cannot issue a tax
invoice.

(7) Input tax credit cannot be Availed [Section 10(4)]: A taxable person to whom the provisions
of composition scheme applies shall not be entitled to any credit of input tax.
(8) Penal Consequences [Section 10(5)] : If the proper officer has reasons to believe that a
taxable person has paid tax under composition scheme 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 be applicable for
determination of tax and penalty.
(9) Composition scheme not applicable for tax payable under Reverse Charge Mechanism
(RCM) : It is important to note that for any tax payable under reverse charge mechanism, the
option of payment under this scheme will not be available. Rate of tax payable on supplies
taxable under RCM will be regular rates and not the composition rate.
(10) Customer not entitled to take credit of Composition Tax : Customer who buys goods from
registered person who is under composition scheme is not eligible for composition input tax
credit because a composition scheme supplier cannot issue a tax invoice.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 165

PAST EXAMINATION QUESTIONS

ILLUSTRATION 1
Sponsorship service - Reverse Charge : Mr. Vivek sponsored a dance competition organized
by 'Taal Academy', a dance school run by an individual. The dance competition was named as
'Mr. Vivek's Dance Show' by 'Taal Academy'. Who is liable to pay GST in this case? Will your
answer be different if 'Taal Academy' is run by a partnership firm?
SOLUTION
In case of taxable service provided or agreed to be provided by way of sponsorship to any body
corporate or partnership firm located in the taxable territory, person liable to pay GST is the
recipient of such service. However, since in the given case sponsorship service is provided to
an individual, the person liable to pay GST will be supplier of service i.e., 'Taal Academy'.
Further, since the status of recipient of service is relevant for determining as to who would pay
GST, status of service supplier is immaterial. Therefore, as long as sponsorship service is
rendered to an individual, GST will be payable by supplier of service i.e., 'Taal Academy'
irrespective of whether the same is run by an individual or a partnership firm.
ILLUSTRATION 2
Sponsorship service - Reverse Charge: Rosserie Private Limited agrees to sponsor a sports
event organized by Pink City Club in Jaipur. Rosserie Private Limited has paid an amount of ₹
50,00,000 for such sponsorship of the sports event. Consequently, said event was named after
the brand name of Rosserie Private Limited. Examine who is the person liable to pay tax in the
given case.
SOLUTION
Notification No. 13/2017-CT (R) dated 28-06-2017 as amended (hereinafter referred to as
reverse charge notification), provides that sponsorship services provided by any person to a
body corporate or partnership firm located in the taxable territory, shall be liable to GST under
reverse charge in the hands of recipient.
In the present case, Pink City Club is the supplier of sponsorship services which is receiving the
consideration in the form of sponsorship fee of ₹ 50,00,000 from Rosserie Private Limited,
against the provision of sponsorship service. Since the recipient of sponsorship services -
Rosserie Private Limited is a body corporate, the tax on said services is payable by the
recipient- Rosserie Private Limited, under reverse charge.
ILLUSTRATION 3
Directors remuneration - Reverse charge : Darshan Tambi is a director in Mozica Limited.
The company paid him the sitting fee amounting to ₹ 25,000, for the month of January. Further,
salary was paid to Darshan Tambi amounting to ₹ 1.5 lakh for the month of January on which
TDS was also deducted as per applicable provisions under Income-tax law. Vikram &
Associates, in which Darshan Tambi is a partner, supplied certain professional services to
Mozica Limited in the month of January for an amount of ₹ 2 lakh. Discuss the person liable to
pay tax in each of the supplies involved in the given case.
SOLUTION
The person liable to pay GST in respect of different services are as under—
 Sitting fee paid to director - As per reverse charge notification, tax on services
supplied by a director of a company/ body corporate to the said company/ body
corporate, located in the taxable territory, is payable under reverse charge.
Hence, in the present case, the sitting fee amounting to ₹ 25,000, payable to
Darshan Tambi by Mozica Limited, is liable to GST under reverse charge and
thus, recipient of service - Mozica Limited - is liable to pay GST on the same.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 166

 Salary paid to director - As per Circular No. 140/10/2020-GST dated 10-06-

2020, the part of director's remuneration which is declared as salary in the books
of a company and subjected to TDS under section 192 of the Income-tax Act, are
not taxable being consideration for services by an employee to the employer in
the course of or in relation to his employment in terms of Schedule III. Therefore,
in the given case, the salary received by Darshan Tambi of ₹ 1.5 lakh is not liable
to GST.
 Services provided by Vikram & Associates - Vikram & Associates have
rendered certain professional services to Mozica Limited. The fact that Darshan
Tambi is a partner in Vikram & Associates and a director in Mozica Limited does
not have any impact on the taxability of the professional services supplied by
Vikram & Associates to Mozica Limited. The professional services provided by
Vikram & Associates to Mozica Limited are liable to GST under forward charge
and thus, supplier - Vikram & Associates - is liable to pay GST on the same.
ILLUSTRATION 4
Person liable to pay GST under reverse charge : From the following information pertaining to
month of December 2023, determine the person liable to pay GST and extent of GST payable
(Rate of GST is 18% and in case of Goods transport agency is 5%), if all sums are exclusive of
taxes and both service supplier and service recipient are located in India —
(1) Mr. Kanha is an agent of General Insurance Co. The insurance company pays
commission (excluding tax) ₹ 8 lakh to him. Mr. Kanha claims that no GST is leviable on
services provided by him as his value of taxable service does not exceed ₹ 20 lakhs.
(2) ABC Ltd. availed services of Kamal Goods transport agency for transportation of
goods by road from factory located in New Delhi to its Jaipur depot and paid freight of ₹
1,00,000.
(3) PC Jewellers Ltd. paid ₹ 50 lakhs for sponsorship of Miss India beauty pageant for
sponsorship services.
(4) Legal services provided by PDS 8t Co., a partnership firm of New Delhi to Hindustan
Unilever Ltd, Mumbai.: ₹ 75,00,000.
SOLUTION
As per Notification No. 13/2017-CT (Rate) dated 28-6-2017 w.e.f. 1-7-2017, the GST shall be
payable as follows—
(1) In this case General Insurance company will be liable to pay GST on reverse charge
basis. It cannot claim threshold exemption as it is receiver of service.
Hence, GST shall be ₹ 8,00,000 x 18% = ₹ 144,000. The same shall be paid by the
General Insurance Company.
(2) In this case GST shall be paid by ABC Ltd. under reverse charge mechanism, since
it is liable to pay freight for transportation of goods. The GST liability shall be ₹ 1,00,000
x 5% = ₹ 5,000. However, GTA can exercise the option to pay tax under forward charge
mechanism. In such a case, GTA has to take registration under the CGST Act, 2017 and
has to issue a tax invoice to the recipient charging GST @ 5 % and has to make a
prescribed declaration on such invoice issued by him.
(3) In this case sponsorship services are received by PC Jewellers Ltd. Hence, it will be
liable to pay GST under reverse charge mechanism. The GST liability shall be ₹
50,00,000 x 18% = ₹ 900000.
(4) In this case GST shall be paid by Hindustan Unilever Ltd. under reverse charge
mechanism. The GST liability shall be ₹ 75,00,000 x 18% = ₹ 1350000.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 167

ILLUSTRATION 5
Person liable to pay GST under RCM ; From the following information for the month of March
2024, determine the person liable to pay GST and extent of GST payable (applicable GST rate
is 18%), if all sums are exclusive of GST and both service supplier and service recipient are
located in India -
(1) Services supplied by a director of a company (not in capacity of employee) to the
company : ₹ 15 lakh ;
(2) Business support services supplied by Government to a business entity: ₹ 12 lakh ;
(3) Renting of immovable property services supplied by Government to XYZ Ltd.
registered under CGST Act, 2017 : ₹ 18 lakh.
SOLUTION
As per Notification No. 13/2017-CT (R) dated 28-6-2017 w.e.f. 1-7-2017, the GST shall be
payable as follows -

Particulars Value GST Amount Amount

Rate @ payable by payable by
18% supplier of recipient of
service service

₹ ₹ % ₹ % ₹

(1) Services provided by Director to 15,00,000 2,70,000 - - 100% 2,70,000

the company [GST payable by
company under reverse charge
mechanism]

(2) Business support services by 12,00,000 2,16,000 - - 100% 2,16,000

Government to Business entity

[Person liable to pay GST is business

entity]

(3) Renting of immovable property by 18,00,000 3,24,000 - - 100% 3,24,000

Government to XYZ Ltd. [Person
liable to pay GST is recipient of
service i.e. XYZ Ltd.] [Entry 5A]

ILLUSTRATION 6
Person liable to pay GST - Reverse charge/ Forward charge : Mr. Vicky Frankyn, an
unregistered famous author, received ₹ 3 crore of consideration from Shiv Bhawan Publications
(SBP) located in Indore for supply of services by way of temporary transfer of a copyright
covered under section 13(1 )(a) of the Copyright Act, 1957 relating to original literary works of
his new book. He finished his work & made available the book to the publisher, but has yet not
raised the invoice.
Mr. Vicky Frankyn is of the view that SBP is liable to pay tax under reverse charge on services
provided by him. SBP does not concur with his view and is not ready to deposit the tax under
any circumstances.
Examine whether the view of Mr. Vicky Frankyn is correct. Further, if the view of Mr. Vicky
Frankyn is correct, what is the recourse available with Mr. Vicky Frankyn to comply with the
requirements of GST law as SBP has completely refused to deposit the tax.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 168

SOLUTION
Yes, the view of Mr. Vicky Frankyn is correct. GST is payable under reverse charge in case of
supply of services by an author by way of transfer/permitting the use or enjoyment of a
copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary
work to a publisher located in the taxable territory in terms of reverse charge Notification No.
13/2017-CT(R) dated 28-06-2017. Therefore, in the given case, person liable to pay tax is the
publisher - SBP.
However, since SBP has completely refused to deposit the tax on the given transaction, Mr.
Vicky Frankyn has an option to pay tax under forward charge on the same. For the purpose, he
needs to fulfill the following conditions:
(i) since he is unregistered, he has to first take registration under the CGST Act, 2017;
(ii) he needs to file a declaration, in the prescribed form, that he exercises the option to
pay CGST on the said service under forward charge in accordance with section 9(1) of
the CGST Act and to comply with all the provisions as they apply to a person liable for
paying the tax in relation to the supply of any goods and/or services and that he shall not
withdraw the said option within a period of 1 year from the date of exercising such
option;
(iii) he has to make a declaration on the invoice, which he would issue to SBP, in
prescribed form.
ILLUSTRATION 7
Legal services: Vakil & Vakil, a firm of advocates rendered legal advice to Mr. B, an architect,
and MNO Ltd., an advertising agency during December, 2023. Both Mr. B and MNO Ltd.
aggregate turnover in financial year 2022-23 exceeded ₹ 20 lakhs. Who is liable to pay GST in
this case? Will your answer be different if Mr. B and MNO Ltd. sought legal advice from Mr. A, a
lawyer ?
SOLUTION
In case of taxable services provided or agreed to be provided to any business entity located in
the taxable territory by an individual advocate including a senior advocate or a firm of advocates
by way of legal services, person liable to pay GST is the recipient of service.
Further, services provided by an individual advocate or a partnership firm of advocates by way
of legal services to inter alia a business entity with a turnover up to ₹ 20 lakh (₹ 10 lakh in case
of special category states) in the preceding financial year are exempt from GST vide Entry No.
45 Notification No. 12/2017-CT (Rate).
In the given case, turnover of services of both Mr. B and MNO Ltd. exceeded ₹ 20 lakh in the
preceding financial year, hence, legal services provided by Vakil and Vakil (firm of advocates)
or Mr. A (individual lawyer) during December, 2022 will not be exempt from GST.
Therefore, GST will be payable by service receiver, Mr. B and MNO Ltd. irrespective of whether
the legal advice is sought from a firm of lawyers or from Mr. A, an individual lawyer.
ILLUSTRATION 8
Determination of GST liability - Reverse charge/Forward charge: M/s. All in One, a
partnership concern and a registered supplier under GST, is engaged in providing various
services under one roof. The concern provides the following information pertaining to supply
made/input services availed by it during the month of March 2024:

Particulars ₹

(i) Provided Direct Selling Agent service to Y Bank Ltd. 4,00,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 169

(ii) Provided security services to ABC P. Ltd. a registered Person under GST 60,000

(iii) Provided security services to PSR Trust, an unregistered Person under GST 1,00,000

(iv) Provided renting of motor vehicle to Amaze Tours Ltd. and supply value 75,000
included cost of fuel

(v) Provided renting of motor vehicle to Priti & Co., CA Firm and supply value 40,000
included cost of fuel

(vi) Availed representational service from PB and Co, a Law Firm towards a 70,000
Consumer Court case

Determine the GST liability of M/s. All-in-One for the month of March, 2024 by giving necessary
explanations for treatment of various items. Rate of tax for both inward and outward supply is
CGST/ SGST @ 9% each except renting a vehicle, for which CGST/ SGST @ 2.5% each is
applicable. M/s. All-in-One commenced its business from February, 2024. All the supplies are
intra-State only. (5 Marks, Nov. 2020)
SOLUTION
Computation of GST liability of M/s. All-in-One for the month of March, 2024:

Particulars (Amount in ₹)

Value CGST SGST

(i) Direct Selling Agent service to Y Bank Ltd. [WN-1] 4,00,000 36,000 36,000

(ii) Security services to ABC P. Ltd. a registered Person 60,000

under GST [WN-2]

(iii) Security services to PSR Trust, an unregistered Person 1,00,000 9,000 9,000
under GST [WN-3]

(iv) Renting of motor vehicle to Amaze Tours Ltd. and supply 75,000 - -
value included cost of fuel [WN-4]

(v) Renting of motor vehicle to Priti & Co., CA Firm and 40,000 1,000 1,000
supply value included cost of fuel [CGST - ₹ 40,000 x
2.5%] [SGST - ₹ 40,000 x 2.5%] [WN-5]

(Vi) Availed representational service from PB and Co, a Law 70,000 Exempt Exempt
Firm towards a Consumer Court case [WN-6]

Total GST liability on outward supplies 46,000 46,000

Working Notes:
(1) Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate,
partnership or limited liability partnership (LLP) firm to bank or non-banking financial company
(NBFCs) is covered under RCM. Since supplier in question is a partnership firm, RCM will not
be applicable.
(2) Security services (services provided by way of supply of security personnel) provided by any
person other than body corporate to a registered person in the taxable territory is covered under
reverse charge mechanism. Hence, ABC Pvt. Ltd. will be liable to pay GST.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 170

(3) Security services (services provided by way of supply of security personnel) provided by any
person other than body corporate to a registered person in the taxable territory is covered under
reverse charge mechanism. In this case since the services are provided to unregistered person,
it will be leviable to tax under forward charge mechanism.
(4) Service by way of renting of any motor vehicle designed to carry passengers where the cost
of fuel is included in the consideration charged from the service recipient is liable to tax under
RCM where supplier of service is any person, other than a body corporate who supplies service
to a body corporate & doesn't issue an invoice charging CGST @ 6% to service recipient. Since
in this case the recipient is a body corporate, hence RCM will be applicable.
(5) Service by way of renting of any motor vehicle designed to carry passengers where the cost
of fuel is included in the consideration charged from the service recipient is liable to tax under
RCM where supplier of service is any person, other than a body corporate who supplies service
to a body corporate & doesn't issue an invoice charging CGST @ 6% to service recipient. Since
in this case the recipient is not a body corporate, hence the said service will be taxable under
forward charge mechanism.
(6) Legal services provided by a partnership firm of advocates to a business entity with an
aggregate turnover up to such amount in the preceding FY as makes it eligible for exemption
from registration under the CGST Act, 2017 shall be exempt from tax. Since All-in-one
partnership firm has commenced the business in the month of February, 2024, hence the
services availed by it shall be exempt from tax.
QUESTION 1
Define 'intra-State supply' and 'inter-state supply' under GST law. Is it correct to say that inter-
State supply attracts both CGST and SGST ? (3 Marks, Nov. 2017)
ANSWER
The relevant provisions are discussed as under—
(i) Where the location of the supplier and the place of supply of goods or services are in the
same State/Union territory, it is treated as intra-State supply of goods or services respectively.
(ii) Where the location of the supplier and the place of supply of goods or services are in
two different States; or two different Union Territories; or a State and a Union territory, it is
treated as inter-State supply of goods or services respectively.
No it is not correct to say that inter-State supply attracts both CGST and SGST as inter-State
supply attracts IGST. However, IGST is the sum total of CGST and SGST/ UTGST.

ILLUSTRATION 9
Examine whether the suppliers are eligible for composition levy under section 10 in the
following independent cases in the beginning of the current financial year.
(a) Neon Enterprises, registered in Jalandhar, Punjab, is engaged in manufacturing computer
systems. Its aggregate turnover in the preceding financial year is ₹ 125 lakh. Neon Enterprises
supplies the computer systems manufactured by it within the State of Punjab only. With a view
to expand its business operations, it will also start providing the repairing services of computer
systems in the current financial year.
(b) M/s. Rajesh & Sons, registered in Delhi, owns a restaurant 'Tasty Foods' with a turnover of ₹
112 lakh in the preceding financial year. In view of the growing customer demand, it will also
start intra-State trading of juices in Delhi.
(c) Ghanshyam Associates, registered in Sikkim, is engaged in running a food chain 'Veg
Kitchen' in the State. It has a turnover of ₹ 73 lakh in the preceding financial year. In the current

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 171

financial year, it decides to shut down the food chain owing to huge losses being incurred in the
said business. Instead, it will start providing intra-State architect services.
(d) Kirti Services Ltd., registered in Uttarakhand, is exclusively providing hair styling services. It
has turnover of ₹ 34 lakh in the preceding financial year.
Will your answer be different, if Kirti Services Ltd. also start supplying beauty products along
with providing hair styling services in the current financial year? (Similar RTP Nov. 2020)
SOLUTION
Eligibility for composition levy of suppliers is as under —
(a) The turnover limit for being eligible for composition scheme under section 10(1)/(2) for
Jalandhar (Punjab) is ₹ 1.5 crore in the preceding financial year. Thus, Neon Enterprises can
opt for said composition scheme as its aggregate turnover does not exceed ₹ 1.5 crore in the
preceding financial year and it is making intra-State supplies. Further, since the registered
person opting for composition scheme can also supply services (other than restaurant services)
for a value up to 10% of the turnover in the preceding year or ₹ 5 lakh, whichever is higher.
Thus, Neon Enterprises can supply repair services up to a value of ₹ 12.5 lakh [10% of ₹ 125
lakh] in the current financial year.
(b) In the given case:-
(i) the turnover in the preceding year does not exceed the eligible turnover limit under
composition scheme under section 10(1)/(2) for Delhi, i.e. ₹ 1.5 crore.
(ii) the supplier is engaged in providing restaurant service which is an eligible supply
under said composition scheme.
(iii) the supplier wants to engage in trading of goods which is also an eligible supply
under said composition scheme.
Thus, M/s. Rajesh & Sons is eligible for composition scheme under section 10(1)/(2).
(c) The turnover limit for being eligible for composition scheme under section 10(1)/(2) for
Sikkim is ₹ 75 lakh in the preceding financial year. However, a registered person who is
exclusively engaged in supplying services other than restaurant services are not eligible for said
composition scheme. Thus, Ghanshyam Associates cannot opt for composition scheme under
section 10(1)/(2).
However, the benefit of composition scheme u/s 10(2A) is available in case of a registered
person who is not eligible to pay tax under section 10(1)/(2) provided its aggregate turnover in
the preceding financial year does not exceed ₹ 50 lakh.
Thus, in view of the above-mentioned provisions, Ghanshyam Associates cannot avail the
benefit of composition scheme u/s 10(2A) also as its aggregate turnover in the preceding
financial year is more than ₹ 50 lakh.
(d) A service provider can opt for the composition scheme under section 10(1)/(2) only if he is
engaged in supply of restaurant services. Said scheme permits supply of marginal services for
a specified value, but only when the same are supplied along with goods and/or restaurant
service.
Since Kirti Services Ltd. is exclusively engaged in supply of services other than restaurant
services, it is not eligible for composition scheme under section 10(1)/(2) even though its
turnover in the preceding year is less than ₹ 75 lakh, the eligible turnover limit for Uttarakhand.
However, since Kirti Services Ltd. is not eligible to opt for composition scheme under section
10(1)/(2) and its aggregate turnover in the preceding financial year does not exceed ₹ 50 lakh,
Kirti Services Ltd. is entitled to avail benefit of composition scheme under section 10(2A) in the
current financial year.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 172

Further, the answer will remain the same even if Kirti Services Ltd. also start supplying beauty
products alongwith providing hair styling services in the current financial year since it fulfils the
conditions laid down for availing the benefit of composition scheme u/s 10(2A) of the CGST Act.
It can avail the benefit of composition scheme u/s 10(2A) till the time its aggregate turnover in
the current year doesn't exceed ₹ 50 lakh.
QUESTION 2
MN Ltd. has two registered business verticals in the state of Haryana. Its aggregate turnover
during the previous financial year for both the business verticals was ₹ 142 lakhs. It wishes to
opt for composition levy for one of the verticals in the current year and wants to continue with
registration and pay taxes at the merit rate for the second vertical. Can MN Ltd. do so ? Explain
with reason. (3 Marks, Nov. 2018-OS)
ANSWER
A registered person with an aggregate turnover in the preceding financial year up to ₹ 1.5 crore
is eligible for composition levy. Since the aggregate turnover of MN Ltd. does not exceed ₹ 1.5
crore, it is eligible for composition levy in the current year.
However, it is applicable for all the transaction of a registered persons having the same
Permanent Account Number (PAN). If such registered person opts for normal scheme for one
of its vertical, other verticals become ineligible for composition scheme. Thus, MN Ltd. either
have to opt for composition levy for both the verticals or under normal levy for both the verticals.
ILLUSTRATION 10
Eligibility under composition scheme : A Ltd. is a manufacturing concern in Sikkim. In F.Y.
2023-24 total value of supplies including inward supplies taxed under reverse charge basis are
₹ 79,00,000. (exclusive of taxes). The break up of supplies are as follows -

Particulars ₹

(1) Intra-State Supplies made under forward charge 30,00,000

(2) Intra-State Supplies made which are which are chargeable to GST at Nil rate 25,00,000

(3) Intra-State Supplies which are wholly exempt under section 11 of CGST Act, 20,00,000
2017

(4) Value of exempt supply of services being interest earned on fixed deposits with 1,00,000
bank

(5) Value of inward supplies on which tax payable under RCM 3,00,000

Briefly explain whether A Ltd. is eligible to opt for Composition scheme in Financial Year 2024-
25.
SOLUTION
A registered person, whose aggregate turnover in the preceding financial year did not exceed ₹
75,00,000 (in state of Sikkim), may opt for payment of tax under Composition scheme.
As per Section 2(6) of the CGST Act, 2017, "Aggregate turnover" means the aggregate value
of all taxable supplies (excluding the value of inward supplies on which tax is payable by a
person on reverse charge basis), exempt supplies, exports of goods or services or both, and
inter-State supplies of persons having the same Permanent Account Number, to be
computed on all India basis, but excludes Central tax, State tax, Union territory tax, Integrated
tax, and Cess.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 173

According to Explanation 1, for the purposes of computing aggregate turnover of a person for
determining his eligibility to pay tax under section 10, the expression "aggregate turnover" shall
not include 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.
Thus, aggregate turnover shall be computed as under —

Particulars ₹

(1) Supplies made under forward charge 30,00,000

(2) Supplies made which are which are chargeable to GST at Nil rate (covered 25,00,000
under exempt supply)

(3) Supplies which are wholly exempt under section 11 of CGST Act, 2017 20,00,000

(4) Value of exempt supply of services being interest earned on fixed deposits with Nil
bank

(5) Value of inward supplies on which tax payable under RCM (specifically Nil
excluded)

Total 75,00,000

Since, Aggregate turnover does not exceed ₹ 75,00,000 during the Financial Year 2023-24, So,
A Ltd. is entitled for Composition Scheme for Financial Year 2024-25.
ILLUSTRATION 11
Computation of composition tax liability: A Ltd. a manufacturing concern in Rajasthan has
opted for composition scheme furnishes you with the following information for Financial Year
2023-24. It requires you to determine its composition tax liability and total tax liability. The break
up of supplies are as follows -

Particulars ₹

(1) Intra State Supplies of Goods X chargeable @ 5% GST 20,00,000

(2) Intra State Supplies made which are which are chargeable to GST at Nil rate 15,00,000

(3) Intra state supplies which are wholly exempt under section 11 of CGST Act, 5,00,000
2017

(4) Value of inward supplies on which tax payable under RCM (GST Rate 12%) 8,00,000

(5) Intra State Supplies of Goods Y chargeable @ 18% GST 15,00,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 174

SOLUTION
The composite tax liability of A Ltd. shall be as under—
(1) Computation of Aggregate Turnover and Composite tax :

Particulars ₹

(1) Supplies made under forward charge 20,00,000

(2) Supplies made which are which are chargeable to GST at Nil rate 15,00,000

(3) Supplies which are wholly exempt under section 11 of CGST Act, 2017 5,00,000

(4) Value of inward supplies on which tax payable under RCM (GST Rate 12%) Nil
(not to be included)

(5) Intra-State Supplies of Goods Y chargeable @ 18% GST 15,00,000

Aggregate turnover 55,00,000

Rate of composite tax 1%

Total Composite tax [A] 55,000

(2) Tax payable under reverse charge basis :

Particulars ₹

Value of inward supplies on which tax payable under RCM 8,00,000

Rate of GST 12%

Tax payable under RCM [B] 96,000

Total Tax liability [A] + [B] 1,51,000

ILLUSTRATION 12
Computation of Composition tax liability: M/s. Heeralal and Sons registered in Karnataka
has opted to avail the benefit of composition scheme. It has furnished the following details for
the tax period ended on 30-06-2024.

S.No. Items ₹

(i) Taxable turnover of goods within the state 15,00,000

(ii) Exempted turnover of goods within the state 17,00,000

Total Turnover 32,00,000

Using the above information, calculate total GST (No need for bifurcation between CGST and
SGST) to be paid by the firm for the tax period ended on 30-06-2024 in following independent
situations :
(i) M/s. Heeralal and Sons is a Manufacturer.
(ii) M/s. Heeralal and Sons is a Trader. (3 Marks, Nov. 2018-NS)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 175

SOLUTION
In case of the manufacturer, composite tax will be leviable @ 1% of the turnover in the State.
Thus exempted goods turnover will be included for determination of composition tax liability of
the manufacturer.
In case of trader, composition tax shall be levied @ 1% of the turnover of taxable supplies of
goods and services in the State. Thus, exempted goods turnover will not be included for
determination of composition tax liability of the trader. The composite tax liability shall be
determined as under:
Computation of turnover and composite tax:

Particulars (Amount in ₹)

Manufacturer Trader

(1) Taxable turnover of goods within the state 15,00,000 15,00,000

(2) Exempted turnover of goods within the state 17,00,000 -

Aggregate turnover 32,00,000 15,00,000

Rate of composite tax 1% 1%

Total Composite tax 32,000 15,000

ILLUSTRATION 13
Computation of composition tax liability: Mr. Yash, doing business in the state of Kerala,
commenced his business in the month of April 2023 and provides the following further
information.
(i) His intra-State turnover for the first two quarters was as follows:
April, 2023 - June, 2023 - ₹ 20 lakh
July, 2023 - September, 2023 - ₹ 100 lakh
(ii) In each of the quarter, exempt supply made by him was 25% of the total turnover for
the said quarter.
(iii) Since the product supplied by him was eligible for composition scheme, he opted for
registration under composition scheme with effect from 1st July, 2023.
You are required to compute the tax payable by Mr. Yash from the above information under
GST laws:
(i) If he is a manufacturer
(ii) If he is a trader. (5 Marks, July 2021)
SOLUTION
Section 10(1) of the CGST Act, 2017 provides that a registered person, whose aggregate
turnover in the preceding financial year did not exceed ₹ 1.5 crore in the State of Kerela, will
be eligible to opt for payment of tax under the composition scheme.
According to Section 10(3), the benefit of composition scheme can be availed up to the
aggregate turnover of ₹ 1.5 crore in current financial year. The option availed of by a
registered person under Section 10(1) shall lapse with effect from the day on which his
aggregate turnover during a financial year exceeds the limit of ₹ 1.5 crore.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 176

According to Explanation 2, for the purposes of determining the tax payable by a person under
this section, the expression "turnover in State or turnover in Union territory" shall not include the
value of following supplies, namely:-
(i) supplies from the first day of April of a financial year upto the date when such person
becomes liable for registration under this Act; and
(ii) 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.
The applicable rate of tax in case of manufacturers is 1% of the turnover in the State/Union
territory and in case of trader is 1% of turnover of taxable supplies of goods & services in the
State/Union territory. Hence, exempt supply is not included in case of trader.
Thus, Yash is eligible to pay tax under this section upto the turnover of ₹ 150 lakh.
(i) The total tax payable by it in case if he is a manufacturer:

Period Tax rate Turnover Tax Tax liability

(₹) liability SGST (₹)
CGST (₹)

April 2023 to Since turnover did not exceed ₹ 20 20 lakh Nil Nil
June 2023 lakh, he was not required to obtain
registration. Hence, no tax was
required to be paid

July 2023 to Effective rate is 0.5% CGST and 100 lakh 50,000 50,000
September 0.5% SGST/UTGST)] under section
2023 10(1)

Total tax liability 50,000 50,000

(ii) The total tax payable in case he is trader:

Period Tax rate Turnover of Tax Tax

taxable liability liability
supplies (₹) CGST (₹) SGST (₹)

April 2023 to Since turnover did not exceed ₹ 20 20 lakh Nil Nil
June 2023 lakh, he was not required to obtain
registration. Hence, no tax was
required to be paid

July 2023 to Effective rate is (0.5% CGST+ 0.5% 75 lakh 37,500 37,500
September SGST/UTGST)] of taxable supplies
2023 of goods and services u/s 10(1)
[Since 25% of total turnover is of
exempt supply same will not be
included for computing tax liability]

Total tax liability 37,500 37,500

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 177

ILLUSTRATION 14
Eligibility for Composition Levy: Mr. Rajbeer, a registered person at Delhi, is in the business
of selling goods relating to interior decoration under the Firm name M/s. Rajbeer & Sons. He
has opted for Composition scheme for the Financial Year 2023-24.
His turnover for Financial Year 2023-24 is ₹ 80 lakh and is expected to achieve ₹ 130 lakh in
Financial Year 2024-25. Discuss whether M/s. Rajbeer 8t Sons can still enjoy the benefits of
Composition Scheme in Financial Year 2024-25.
His son Karan wants to start business of providing services relating to interior decoration, after
completing post-graduation course in interior decoration under same firm name M/s. Rajbeer 8t
Sons with effect from 1 -4-2024 and wants to enjoy the benefits of composition scheme under
GST. Advise Mr. Rajbeer and his sons Karan. (5 Marks, Nov. 2019)
SOLUTION
A registered person with an aggregate turnover in a preceding financial year up to ₹ 1.5 crore is
eligible for composition levy in Delhi. Since the aggregate turnover of Rajbeer does not exceed
₹ 1.5 crore, he is eligible for composition levy in the current year. Composition scheme under
Section 10(1) is not meant for supplier of services. However, A composition supplier may supply
services (other than those referred to in clause (b) of paragraph 6 of Schedule II i.e. restaurant
services), of value -
(a) not exceeding 10% of turnover in a State or Union territory in the preceding financial
year; or
(b) ₹ 5,00,000, whichever is higher.
If Karan wishes to start the business of providing services relating to interior decoration under
the same firm name M/s. Rajbeer 8t Sons, the sole proprietorship needs to be first converted
into a partnership firm. Further, new GST registration under the new PAN is required to be
obtained.
Thus if his son Karan wants to join the same firm, interior decorator services can be provided
upto 10% of ₹ 80 lakhs or ₹ 5 lakhs whichever is higher i.e. maximum ₹ 8 lakhs in this case.
In order to provide benefit to exclusive service suppliers, a scheme to pay tax at the
concessional rate has been formulated primarily for small service providers who are not
otherwise eligible for composition scheme under section 10(1) and 10(2). This scheme is
contained in Section 10(2A) of the CGST Act, 2017 which provides an option to a registered
person whose aggregate turnover in the preceding financial year is upto ₹ 50 lakh and who is
not eligible to pay tax under composition scheme, to pay tax @ 3% [Effective rate 6% (CGST +
SGST/ UTGST)] on first supplies of goods and/or services upto an aggregate turnover of ^ 50
lakh made on/after 1st April in any financial year, subject to specified conditions. Thus, it is
advised to Mr. Karan to open his own firm for providing interior decorator service and avail the
benefit of concessional rate of tax under Section 10(2A) of the CGST Act, 2017.
ILLUSTRATION 15
Wrong availment of Composition levy : M/s. Ranveer Industries, registered in Himachal
Pradesh, is engaged in making Interstate supplies of readymade garments. The aggregate
turnover of M/s. Ranveer Industries in the financial year 2022-23 is ₹ 70 lakhs. It opted for
composition levy in the year 2023-24 and paid tax for the quarter ending September 2023 under
composition levy.
The proper officer has levied penalty for wrongly availing the scheme on M/s. Ranveer
Industries in addition to the tax payable by it.
Examine the validity of the action taken by proper officer. (4 Marks, Nov. 2018-05)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 178

SOLUTION
The action taken by the proper officer is correct in law. According to Section 10(2) of the CGST
Act, 2017, inter state suppliers of goods are not eligible to opt for composition scheme. In this
case since Ranveer Industries is engaged in making interstate supplies of readymade
garments, it is not eligible to opt for composition scheme.
According to Section 10(5) of the Act, If a taxable person has paid tax under the composition
scheme though he was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 of the CGST Act shall be applicable for determination of tax
and penalty.

ILLUSTRATION 16
Computation of tax liability under Composition levy: Mr. X started profession of Architect
with effect from 01-04-2024. His value of intra-State taxable supplies upto 30 th September 2024
was ₹ 20 lakh. He applied for registration on 1st October 2024 and opted for Composition
scheme for service suppliers as per Section 10(2A) in registration application and was granted
registration as per provisions of GST law. He made intra-State taxable supplies of ₹ 35 lakhs for
the quarter ending 31-12-2024. You are required to determine his Composition tax liability
under Section 10(2A) for the period 01-04-2024 to 31-12-2024. Normal GST rate on architect
services is CGST 9% and SGST 9%. (Similar RTP Nov. 2020)
SOLUTION
As per Section 10(2A) of the CGST Act, 2017 if registered person is eligible to take the benefit
of composition scheme, he shall pay GST at the rate of 6% (3% CGST and 3% SGST/UTGST)
on his aggregate turnover i.e. "First supplies of goods or services or both" upto ₹ 50 lakhs.
"First supplies of goods or services or both" shall, for the purpose of determination of tax
payable under this notification shall not include the supplies from the first day of April of a
financial year to the date from which he becomes liable for registration under the Act.
Thus, where supplier has taken the GST registration for the first time, the composition tax at the
rate of 6% shall be payable on the supplies made by him only after the date of registration upto
aggregate turnover of ₹ 50 lakhs. Thus, the amount of composition tax liability under section
10(2A) will be ₹ 30,00,000 x 6% = ₹ 180,000.
After reaching aggregate turnover of ₹ 50 lakhs, his option to pay composition tax lapses and
he has to pay tax at normal provisions of the Act. Thus, on ₹ 5 lakhs [ ₹ 55 lakhs - ₹ 50 lakhs],
he has to pay tax amounting ₹ 45,000 [CGST] and ₹ 45,000[SGST] respectively.
ILLUSTRATION 17
Composition scheme for service supplier: Mr. Ajay has a registered repair centre where
electronic goods are repaired/serviced. His repair centre is located in State of Rajasthan and he
is not engaged in making any inter-State supply of services. His aggregate turnover in the
preceding financial year (FY) is ₹ 45 lakh.
With reference to the provisions of the CGST Act, 2017, examine whether Mr. Ajay can opt for
the composition scheme under Section 10(1) in the current financial year (FY)? Is he eligible to
avail benefit of composition scheme under Section 10(2A) of the CGST Act, 2017? Considering
the option of payment of tax available to Mr. Ajay, compute the amount of tax payable by him
assuming that his aggregate turnover in the current financial year is ₹ 35 lakh.
Will your answer be different if Mr. Ajay procures few items required for providing repair
services from neighbouring State of Madhya Pradesh?

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 179

SOLUTION
Section 10(1) of the CGST Act, 2017 provides that a registered person, whose aggregate
turnover in the preceding financial year did not exceed ₹ 1.5 crore (₹ 75 lakh in Special
Category States except Assam, Himachal Pradesh and Jammu and Kashmir), may opt to pay,
in lieu of the tax payable by him, an amount calculated at the specified rates. However, if, inter
alia, such registered person is engaged in the supply of services other than restaurant services,
he shall not be eligible to opt for composition levy under Section 10(1) of the CGST Act, 2017.
In the given case, since Mr. Ajay is a supplier of repair services, he is not eligible for
composition scheme under Section 10(1), even though his aggregate turnover in the preceding
financial year does not exceed ₹ 1.5 crore. Therefore, he has to discharge his tax liability under
regular provisions at the applicable rates.
However, as per section 10(2A) of the CGST Act, 2017, an option has been provided to a
registered person whose aggregate turnover in the preceding financial year is upto ₹ 50 lakh
and who is not eligible to pay tax under composition scheme under Section 10(1) of the CGST
Act, to pay tax @ 3% [Effective rate 6% (CGST+ SGST/UTGST)] on first supplies of goods
and/or services upto an aggregate turnover of ₹ 50 lakh made on/after 1st April in any financial
year, subject to specified conditions.
Thus, in view of the above-mentioned provisions, Mr. Ajay is eligible to avail the benefit of
concessional payment of tax under Section 10(2A) of the CGST Act, 2017 as his aggregate
turnover in the preceding financial year does not exceed ₹ 50 lakh and he is not eligible to opt
for the composition scheme.
Thus, the amount of tax payable by him under Section 10(2A) is ₹ 2,10,000 [6% of ₹ 35 lakh].
A registered person cannot opt for Section 10(2A), if inter alia, he is engaged in making any
inter-State outward supplies. However, there is no restriction on inter-State procurement of
goods. Hence, answer will remain the same even if Mr. Ajay procures few items from
neighbouring State of Madhya Pradesh.
ILLUSTRATION 18
Composition vs Normal GST scheme: Mr. X, a trader dealing exclusively in supply of goods
and paying tax under normal scheme (also eligible for composition scheme), submit the
following details for coming Financial Year 2024-25. You are required to determine which
scheme will be more beneficial to him and whether Mr. X should opt for composition scheme.
Estimated data for coming Financial Year 2024-25 are as follows:

Particulars Amount (₹)

Inward supplies of goods from registered suppliers (amount exclusive of GST 70,00,000
and goods chargeable to normal rate of GST @ 12%)

Outward supplies of goods to unregistered customers (sale price of goods 90,00,000

inclusive of GST) - Normal Rate of GST is @ 12%)

Other Information is as given below:

(i) Inherent nature expenses ₹ 4,50,000 per year under both the schemes.
(ii) Books of account maintenance cost under normal scheme ₹ 2,00,000 yearly
whereas under composition scheme it will be ₹ 75,000 yearly.
(iii) Return filing expenses under normal scheme ₹ 48,000 yearly whereas under
composition scheme it will be ₹ 12,000 yearly. (4 Marks, May 2023)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 180

SOLUTION
The cost to the ultimate consumer under two schemes is as under -

Particulars Normal Composition

GST Scheme* (₹)
Scheme (₹)

Cost of goods sold (*No credit under composition scheme, 70,00,000 78,40,000
hence, cost of goods sold will be higher)

Add: Costs of maintaining records 2,00,000 75,000

Add: Return filing expenses 48,000 12,000

Add: Inherent nature expenses 4,50,000 4,50,000

Total Costs 76,98,000 83,77,000

Sales (inclusive of all taxes) 90,00,000 90,00,000

Less: Tax (GST = ₹ 90 lakh x 12 ÷ 112); (Composite tax = ₹ 90 9,64,286 90,000

lakh x 1%)

Sales (net of taxes) 80,35,714 89,10,000

Profit of the dealer (Sales, net of taxes - Total Costs) 3,37,714 5,33,000

Conclusion : It is apparent that while cost to ultimate consumer, in both the cases remains
same, the profit of the dealer is higher if the dealer opts for composition scheme. Hence,
composition scheme should be opted.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 181

Illustration 6 - Eligibility under presumptive levy : Chanchal started providing beauty and
grooming services and inaugurated "Care & Care Beauty Centre" in Janak Puri, Delhi on 01 st
April, 2021. She opted to pay tax under Section 10(2A) of the CGST Act, 2022 in the said
financial year. The aggregate turnover of Care & Care Beauty Centre for the quarter ending 30 th
June, 2021 was Rs. 20 lakh. Further, for the half year ending 30th September, 2021, the
turnover reached Rs. 50 lakh. Care & Care Beauty Centre recorded a rapid growth and the
turnover reached Rs. 70 lakh by the end of October, 2021. Determine the total tax liability of
Care & Care Beauty Centre by the end of October, 2021.
Care & Care Beauty Centre wishes to opt for composition scheme under Section 10(1) from the
next financial year. You are required to advise it whether it can do so?
Note: Rate of GST applicable on such services is 22%.
Solution: Section 10(2A) of the CGST Act, 2022 provides an option to a registered person to
pay CGST @ 3% [Effective rate 6% (CGST + SGST/ UTGST)] on first supplies of goods and/or
services upto an aggregate turnover of Rs. 50 lakh made on/ after 1st April in any financial year,
subject to specified conditions.
According to Explanation 2, for the purposes of determining the tax payable by a person under
this section, the expression "turnover in State or turnover in Union territory" shall not include the
value of following supplies, namely: —
(i) supplies from the first day of April of a financial year upto the date when such person
becomes liable for registration under this Act; and
(ii) 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.
Thus, Care & Care Beauty Centre is eligible to pay tax under this notification upto the turnover
of Rs. 50 lakh. The total tax payable by it is as under:-

Period Tax Rate Turnover Tax liability

(Rs.) (Rs.)

1st Quarter Since turnover did not exceed Rs. 20 lakh, it was 20 lakh Nil
not required to obtain registration. Hence, no tax
was required to be paid

2nd Quarter Effective rate is 6% (CGST + SGST/UTGST) as per 30 lakh 1,80,000

section 10(2A) of the Act. [(50-20)
lakh]

For the month Normal rate of GST of 22% is to be applied 20 lakh 3,60,000
of October, [(70-50)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 182

2021 lakh]

Total tax payable 5,40,000

No, Care & Care Beauty Centre cannot opt for composition scheme under Section 10(1) from
the next financial year. Fundamentally, the composition scheme can be availed in respect of
goods and only one service namely, restaurant service. As regards services other than
restaurant services are concerned, only marginal supply of the such services for a specified
value along with the supply of goods and/or restaurant service, as the case may be, is permitted
under section 10(1) of CGST Act, 2022. Therefore, a person engaged exclusively in supply of
services other than restaurant services is not eligible to opt for composition scheme.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 183

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 184

TIME AND VALUE OF SUPPLY

Time of supply under forward

charge

Time of supply under reverse

charge

Time of supply of goods

Time of supply of vouchers

exchangeable for goods

Time of supply in residual

Time of Supply

cases

Time of supply under forward

charge

Time of supply under reverse

charge

Time of supply of services

Time of supply of vouchers

exchangeable for services

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 185

Time of supply in residual

cases

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 186

Determination of time of supply of goods

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 187

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 188

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 189

Time limit for issu ance of invoice for supply of services

1. General Rule

As per section 31(2) read with rule 47 of CGST Rules, the tax invoice needs to be issued

 either before the provision of service or

 within 30 days (45 days in case of insurance companies/ banking
companies/ financial institutions including NBFCs)

from the date of supply of service.

2. In case of continuous supply of services [Section 31(5)]

(a) where the due date of - the invoice shall be issued on or before the due
payment is ascertainable from the date of payment.
contract

(b) where the due date of - the invoice shall be issued before or at the time
payment is not ascertainable from when the supplier of service receives the
the contract payment

(c) where the payment is linked to - the invoice shall be issued on or before the
the completion of an event date of completion of that event.

3. Cessation of supply of services [Section 31(6)]

In case of cessation of supply of services before completion of supply, the invoice (to
the extent of the supply made before such cessation) should be issued at the time when
the supply ceases.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 190

PAST EXAMINATION QUESTIONS

ILLUSTRATION 1
TOS of Goods - Supply involves movement of goods : Chiku Traders is a registered
supplier of plastic goods, On 10th April, 2023, Chiku Traders received an order from Neelu
Traders for supply of a consignment of plastic goods. Chiku Traders gets the consignment
ready by 15th April, 2023. The invoice for the consignment was issued the next day, 15th April,
2023. Neelu Traders collects the consignment from the godown of Chiku Traders on 25 th April,
2023 and hands over the cheque towards payment on the same date. The said payment is
entered in the books of accounts of Chiku Traders on 26th April, 2023 and amount is credited in
their bank account on 27th April, 2023.
Determine the time of supply of the plastic goods supplied by Chiku Traders to Neelu Traders
as per the provisions of CGST Act, 2017. (5 Marks, Nov. 2018-NS) (Similar MTP, May 2018)
SOLUTION
As per Section 12(2) of the CGST Act, 2017, the time of supply of goods shall be the earlier of
the following dates, namely:—
(a) (i) the date of issue of invoice by the supplier; or
(ii) the last date on which he is required, u/s 31, to issue the invoice with respect to the supply;
or
(b) the date on which the supplier receives the payment with respect to the supply (i.e. the date
on which the payment is entered in his books of account; or the date on which the payment is
credited to his bank account, whichever is earlier.)
As per Notification No. 66/2017-CT dated 15-11-2017, a registered person (excluding
composition supplier) has to pay GST on the outward supply of goods at the time of supply as
specified in section 12(2)(a) i.e., date of issue of invoice or the last date on which invoice ought
to have been issued in terms of section 31.
In this case, the invoice is issued before the removal of the goods and is thus, within the time
limit prescribed under section 31. Therefore, time of supply is the date of issue of invoice, which
is 16th April 2023.
ILLUSTRATION 2
TOS of goods - Supply does not involve movement of goods : Determine the Time of
supply in each of following independent cases in accordance with provisions of Section 12 of
the CGST Act, 2017 in case supply does not involve movement of goods.

Sl. Date of Date when goods made available to Date of receipt of

No. invoice recipient payment

1. 02-10-2024 03-10-2024 15-11-2024

2. 04-10-2024 01-10-2024 25-11-2024

3. 04-11-2024 06-11-2024 01-10-2024

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 191

SOLUTION
Time of supply of goods in each of the above cases has been given in following table—

Sl. Date of Date when Date of Time of Reason

invoice goods made receipt of supply
No.
available to payment
recipient

1. 02-10-2024 03-10-2024 15-11-2024 02-10-2024 TOS is date of issuance of invoice

since invoice is issued prior to date
when goods are made available to
recipient.

2. 04-10-2024 01-10-2024 25-11-2024 01-10-2024 TOS is date when goods are made
available to the recipient and date of
issuance of invoice is after that date.

3. 04-11-2024 06-11-2024 01-10-2024 04-11-2024 TOS is date of invoice since advance

received is not liable at the time of
receipt vide Notification No. 66/2017 -
CT dated 15-11-2017.

ILLUSTRATION 3
TOS - Goods - Forward charge and reverse charge : Andes Pvt. Ltd., a registered supplier,
manufactures product 'A' and 'B'. While 'A' is taxable under forward charge, 'B' is taxable under
reverse charge. The following details are provided in relation to two individual supplies of
products 'A' and 'B' made by the company:

Date Event

(i) 10th February Payment of ₹ 1,00,000 made by buyer for supply of 'A' to be delivered in
the month of March

(ii) 13th February Receipt of ₹ 1,00,000 [as mentioned in point (i) above]

(iii) 17th February Payment of ₹ 2,00,000 made by buyer for supply of 'B' to be delivered in
the month of March

(iv) 20th February Receipt of ₹ 2,00,000 [as mentioned in point (iii) above]

(v) 5th March Product 'A' manufactured and removed

(vi) 6th March Receipt of product 'A' [as mentioned in point (v) above] by the buyer

(vii) 10th March Product 'B' manufactured and removed

(viii) 23rd March Receipt of product 'B' [as mentioned in point (vii) above] by the buyer

(ix) 4th March Invoice for ₹ 2,00,000 issued for supply of 'A'

(x) 11th March Invoice for ₹ 4,00,000 issued for supply of 'B'

(xi) 25th March Payment made by the buyer of 'A'

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 192

(xii) 31st March Payment [as mentioned in point (xi) above] received

(xiii) 1st April Payment made by the buyer of 'B'

(xiv) 4th April Payment [as mentioned in point (xiii) above] received

Determine the time of suppl(ies) of goods for the purpose of payment of tax.
SOLUTION
In terms of section 12(2), the time of supply of goods is the earlier of, the date of issue of
invoice/last date on which the invoice is required to be issued or date of receipt of payment.
However, Notification No. 66/2017- CT dated 15.11.2017 specifies that a registered person
(excluding composition supplier) has to pay GST on the outward supply of goods at the time of
supply as specified in section 12(2)(a), i.e. date of issue of invoice or the last date on which
invoice ought to have been issued in terms of section 31.
Also, it is important to note that the relief of not paying GST at the time of receipt of advance is
available only in case of supply of goods, the tax on which is payable under forward charge. In
case of reverse charge, GST is payable at the time of payment, if payment is recorded/made
before receipt of goods (advance payment) [Section 12(3)].
Therefore, time of supply of product 'A', which is taxable under forward charge, is 4 th March
being the date of issue of invoice.
Time of supply in case of supplies taxed under reverse charge mechanism : The time of
supply shall be the earliest of the following dates, namely:—
(a) the date of the receipt of goods; or
(b)
(i) the date of payment as entered in the books of account of the recipient; or
(ii) the date on which the payment is debited in his bank account, whichever is earlier; or
(c) the date immediately following 30 days from the date of issue of invoice or any other
document, by whatever name called, in lieu thereof by the supplier.
In case of reverse charge, GST is payable at the time of payment, if payment is
recorded/made before receipt of goods (advance payment) [Section 12(3)].
However, time of supply of product 'B', which is taxable under reverse charge, is 17th February
to the extent of ₹ 2,00,000 paid as advance being the earliest of the three stipulated dates
namely, date of receipt of goods (23rd March), date of payment (17th February) and date
immediately following 30 days of issuance of invoice (11th April). For balance ₹ 2,00,000, the
time of supply of product 'B' is 23rd March being the earliest of the three stipulated dates
namely, date of receipt of goods (23rd March), date of payment (1st April) and date immediately
following 30 days of issuance of invoice (11th April).
ILLUSTRATION 4
Time of supply of service: Determine the time of supply from the following particulars:

8th September Community hall booked for a marriage, Sum agreed ₹ 1,20,000, Advance
₹ 20,000 recorded in the books of account.

10th September Advance amount credited in bank account.

2nd November Marriage held in the Community hall.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 193

18th December Invoice issued for ₹ 1,20,000 indicating the balance of ₹ 1,00,000 payable.

22nd December Balance ₹ 1,00,000 recorded in the books of account.

24th December Payable ₹ 1,00,000 credited to the bank account.

(4 Marks, May 2018)

SOLUTION
As per Section 31 read with Rule 47 of CGST Rules, the tax invoice is to be issued within 30
days of supply of service. In the given case, the invoice is not issued within the prescribed time
limit. As per Section 13(2)(b), in a case where the invoice is not issued within the prescribed
time, the time of supply of service is -
 the date of provision of service or
 receipt of payment, whichever is earlier.
Therefore, the time of supply of service to the extent of ₹ 20,000 is 8th September as the date
of payment of ₹ 20,000 is earlier than the date of provision of service. The time of supply of
service to the extent of the balance ₹ 1,00,000 is 2nd November which is the date of provision of
service.
ILLUSTRATION 5
Time of supply of service : Determine the time of supply in the following cases with reference
to GST Act, 2017:-
(i) Montlanc Private Limited is engaged in supplying taxable services. It receives
advances of ₹ 1,00,000 from clients on 23rd August, 2023 for the service to be rendered
in the month of December, 2023.
(ii) Rohan & Co. supplied management consultancy services to M/s. Bhagat & Sons on
5th September, 2023 and billed it for ₹ 1,20,000 on 10th October, 2023. It received the
payment for the same on 14th October, 2023.
SOLUTION
The time of supply will be -
(i) In this case advance received on 23rd August, 2023 for services to be rendered in the
month of December 2023. Since, advance is received prior to completion of services,
the time of supply of service shall be the date of receipt of advance i.e. 23rd August,
2023.
(i) As per Section 13(2)(b) of CGST Act, 2017, if invoice is not issued within 30 days
from date of supply of service, time of supply will be date of provision of service or date
of receipt of payment, whichever is earlier. In this invoice is not issued within 30 days of
completion of service and payment is received after that date, therefore time of supply in
given case would be date of completion of service i.e. 5 th September, 2023.
ILLUSTRATION 6
Time of Supply of service: Determine the time of supply in the following cases with reference
to GST Act :
(i) Raghu & Co. received advance of ₹ 1,18,000 from a client on 30th July, 2023, for supplying
advertising services in the month of August, 2023. However, due to some unavoidable reasons,
said services could not be provided and the advance money (including GST) was returned to
the client on 12th September, 2023.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 194

(ii) Suraksha Security Services Ltd. supplied security services to M/s. RZ & Sons for the month
of July, 2023 and billed it for ₹ 1,50,000 on 10th August, 2023. It received the payment for the
same on 4th August, 2023.
SOLUTION
The time of supply will be -
(i) As per Section 13(2) of CGST Act, 2017, advances received are taxable at the time
of their receipt itself. Thus, the time of supply of the advance received by Raghu & Co.
from the client is 30th July, 2023. It is immaterial that services have not been provided
subsequently and the money was returned on 12th September, 2023.
Further, the amount of GST included in the amount refunded ('18,000) in the next month
i.e. September, 2023 would be adjusted against GST liability of subsequent periods.
(ii) As per Section 13(2)(a) of CGST Act, 2017, if invoice is issued within 30 days from
date of supply of service, time of supply will be date of issue of invoice by the supplier or
date of receipt of payment, whichever is earlier. In this case since invoice is issued
within time limit and payment received prior to the date of invoice, therefore time of
supply in given case would be date of receipt of payment i.e. 4th August, 2023.
ILLUSTRATION 7
Time of supply of service - Reverse charge basis : Mr. Foster who is the author and owner
of the copyright of a book "Way to heaven" has entered into an agreement with "Sure
Publishers" on 15-07-2023 for its publication. In terms of the agreement the copyright is
transferred to "Sure publishers" for a lump sum amount of ₹ 5 lakh. An invoice was issued by
Mr. Foster on 15-07-2023 and payment was received on 27-12-2023. Determine with reasons
by way of a brief note on the time of supply for purpose of goods and service tax.
Ignore any exemptions available in respect of the service and assume that the transaction is
liable to GST under reverse charge basis. (Modified 4 Marks, Nov. 2016)
SOLUTION
Supply of services by an author by way of transfer or permitting the use or enjoyment of a
copyright covered under Section 13(1 )(a) of the Copyright Act, 1957 relating to original literary
works to a publisher is chargeable to tax on reverse charge basis and publisher is liable to pay
GST.
As per Section 13(3) of CGST Act, in case of supplies in respect of which tax is paid or liable to
be paid on reverse charge basis, the time of supply shall be the earlier of the following dates,
namely :-
(a)
(i) the date of payment as entered in the books of account of the recipient; or
(ii) the date on which the payment is debited in his bank account, whichever is earlier; or
(b) the date immediately following 60 days from the date of issue of invoice or any other
document, by whatever name called, in lieu thereof by the supplier.
Since in this case the payment is not made within 60 days from the date of invoice, the time of
supply shall be 61st day from the date of invoice i.e. 14th September, 2023.
ILLUSTRATION 8
Time of supply of service - Reverse charge basis : XYZ Industries Ltd. engaged the services
of a transporter for road transport of a consignment on 17-09-2023 and made advance payment
for the transport on the same date, i.e., 17-09-2023. However, the consignment could not be
sent immediately on account of a strike in the factory, and instead was sent on 20-09-2023.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 195

Invoice was received from the transporter on 22-09-2023. What is the time of supply of the
transporter's service?
Note : Transporter's service is taxed on reverse charge basis.
SOLUTION
As per Section 13(3)(a) of CGST Act, 2017, Time of supply of service taxable under reverse
charge is the earlier of the following two dates in terms of section 13(3) :
 Date of payment
 61st day from the date of issue of invoice
In this case, the date of payment precedes 61st day from the date of issue of invoice by the
supplier of service. Hence, the date of payment, that is 17-09-2023, will be treated as the time
of supply of service.
ILLUSTRATION 9
Time of Supply of service: Determine the time of supply in each of following independent
cases in accordance with the GST Act, 2017 :

S.No. Date of completion of Date of invoice Date of receipt of payment

service

(1) 16-07-2023 11-08-2023 26-08-2023

(2) 16-07-2023 11-08-2023 01-08-2023

(3) 16-07-2023 11-08-2023 Part payment on 01-08-2023.

Remaining payment on 26-08-2023.

(4) 16-07-2023 11-08-2023 Part payment on 12-07-2023.

Remaining payment on 15-07-2023.

SOLUTION
The time of supply in each of the cases is as follows—

S. Date of Date of Date on which Time of Supply

completion of invoice payment is
No.
service received

(1) 16-07-2023 11-08-2023 26-08-2023 11-08-2023, since invoice issued

within 30 days of completion of
service, time of supply will be date
of invoice or payment, whichever
is earlier.

(2) 16-07-2023 11-08-2023 01-08-2023 01-08-2023, since invoice issued

within 30 days of completion of
service, time of supply will be date
of invoice or payment, whichever
is earlier.

(3) 16-07-2023 11-08-2023 Part payment on 01-08-2023 for the part payment
01-08-2023. and 11-08-2023 for the remaining
Remaining payment.
payment on 26-08-

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 196

2023.

(4) 16-07-2023 11-08-2023 Part payment on 12-07-2023 for the part payment
12-07-2023. and 15-07-2023 for the remaining
Remaining payment.
payment on 15-07-
2023.

ILLUSTRATION 10
Time of supply of service : On the basis of following information, determine the "Time of
Supply" as per Section 13 of Goods and Services Tax, 2017 :

(1) Commencement of supplying of service on 05-07-2023

(2) Completion of service on 10-10-2023

(3) Invoice issued on 20-10-2023

(4) Payment received by cheque and entered in the books on 15-10-2023

(5) Amount credited in Bank A/c on 25-10-2023

(6) Service became taxable for the first time on 01-08-2023

(Modified 3 Marks, May 2014)

SOLUTION
As per Section 13(2) of CGST Act, 2017, time of supply of service shall be,-
(i) the date of issue of invoice by supplier, if such invoice is issued within 30 days of
completion of service;
(ii) the date of provision of service, if such invoice is not issued within 30 days as
aforesaid;
(iii) the date of payment, whichever is the earliest.
As per Explanation of Section 13, the date of payment shall be the earlier of the following
dates,-
(i) Date on which the payment is entered in the books of accounts of the supplier(i.e.
payment accounted for in books); or
(ii) Date on which the same is credited to his bank account (i.e. actually received in bank
account of the person).
Hence, in this case the time of supply shall be the date of receipt of payment i.e. 15-10-2023
since invoice is issued within time limit and payment is received prior to the date of invoice.
ILLUSTRATION 11
TOS in case of continuous supply of service: Surbhi Limited entered into a contract with
Meena Limited for construction of a new building to be used primarily for the purpose of
commerce or industry for a total consideration of ₹ 500 lakh on 01st October, 2023. The initial
booking amount of ₹ 100 lakh was billed and received on the date of contract itself. It was
further agreed that ₹ 170 lakh, ₹ 140 lakh, ₹ 90 lakh respectively would be received on
completion of 50%, 75% and 100% of the construction work of the building. Determine the time

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 197

of supply in respect of each of following stages of completion with the help of relevant details
furnished as under -

Stage % of completion Date of completion Date of issuance of Date of payment of

of the building invoice stipulated amount

I 50% November 20, 2023 November 30, 2023 January 25, 2024

II 75% December 30, 2023 February 25, 2024 January 30, 2024

III 100% February 25, 2024 March 03, 2024 February 24, 2024

A certificate from Chartered Engineer registered with Institution of Engineers has been obtained
for each stage of completion of the building. Give brief reasons for your answer. (Modified 4
Marks, May 2015)
SOLUTION
The above service falls within continuous supply of service as per Section 2(33) of CGST Act,
2017. In case of continuous supply of service, the date of issuance of invoice would be
computed according to Section 31(5) of CGST Act, 2017. As per the provisions, where payment
is linked to the completion of an event the invoice shall be issued on or before the date of
completion of that event. The time of supply will be determined accordingly in terms of
provisions of Section 13(2) of CGST Act, 2017.
Therefore, in the given case, the date of completion of various stages of construction which
require payment to be made (including initial booking) - will be considered as dates of
completion of service and time of supply will be determined in accordance with Section 13(2) as
under -

Stage of Deemed date of Time of Reason/Remarks

Completion completion of Supply
provision of
service

Initial 01-10-2023 01-10-2023 01-10-2023 as the date of completion of

booking service, date of issuance of invoice and date
of payment are the same.

50% 20-11-2023 20-11-2023 Since invoice has been not been issued on
or before the date of completion of event and
payment is also received after that date, TOS
is date of completion of event.

75% 30-12-2023 30-12-2023 Since invoice has not been issued on or

before the completion of event as per
contract and payment is also received after
that date, TOS is date of completion of event.

100% 25-02-2024 24-02-2024 Since payment has been received prior to

completion of event.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 198

ILLUSTRATION 12
Time of supply of service: Major Ltd. imports business support services from Wilfred Ltd. of
USA on 18-8-2023. The relevant invoice for $ 1,50,000 is raised by Wilfred Ltd., on 20-9-2023.
Assuming that Major Ltd. makes the above mentioned payment on the dates as indicated in the
following table, determine the time of supply under the Central Goods and Services Tax Act,
2017 in each case giving reasons for your answer :
CASE 1 10-11-2023
CASE 2 12-12-2023 (Modified 4 Marks, May 2012)

SOLUTION
According to Section 13(3) of CGST Act ,2017, the time of supply in respect of persons who are
required to pay tax as recipients of service under the Reverse Charge Mechanism shall be the
date on which payment is made or the date immediately following 60 days from the date of
issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.
CASE I : The time of supply is date of payment i.e. 10-11-2023, since payment is made
within 60 days from the date of invoice.
CASE II : The time of supply is date immediately following 60 days from the date of
issue of invoice i.e. 20-11-2023, since payment is not made within 60 days from the date
of invoice.
ILLUSTRATION 13
TOS in case of Associated Enterprises : Apte & Apte Ltd. is located in India and holding 51%
of shares of Wilson Ltd., a USA based company. Wilson Ltd. provides Business Auxiliary
Services to Apte & Apte Ltd.
From the following details, determine the time of supply of Apte & Apte Ltd. :

Agreed consideration US $ 1,00,000

Date on which services are provided by Wilson Ltd. 16-09-2023

Date on which invoice is sent by Wilson Ltd. 19-09-2023

Date of debit in the books of account of Apte & Apte Ltd. 30-09-2023

Date on which payment is made by Apte & Apte Ltd. 23-12-2023

(Modified 3 x 2 = 6 Marks, May 2013)

SOLUTION
Apte & Apte Ltd. of India and Wilson Ltd. of US are "associated enterprises" as per section
92A of IT Act, 1961, since Indian Company holds 51% shareholding of US based company. As
per Section 13(3) of CGST Act, 2017, in case of 'Associated Enterprises' where the person
providing service is located outside India, time of supply shall be -
(i) the date of entry in the books of account of the recipient of supply (i.e. 30-09-2023); or
(ii) date of payment (i.e. 23-12-2023), whichever is earlier.
Therefore, the time of supply will be 30-09-2023.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 199

ILLUSTRATION 14
TOS in case of change in rate of tax: Determine the time of supply in the following cases. The
rate of CGST has been increased to 12% w.e.f. 01-12-2023, before the said date, the rate of tax
was 5%.

S. No. Date of supply of Date of Invoice Date of Payment Value of Service

Service (₹)

1. 25-11-2023 05-12-2023 08-12-2023 12,50,000

2. 25-11-2023 25-11-2023 08-12-2023 18,80,000

3. 25-11-2023 08-12-2023 30-11-2023 17,60,000

4. 04-12-2023 28-11-2023 30-11-2023 19,50,000

5. 04-12-2023 04-12-2023 30-11-2023 14,50,000

6. 04-12-2023 30-11-2023 08-12-2023 10,00,000

SOLUTION
The time of supply shall be determined as under -

Sl. Value of Reason / Remarks Time of Rate GST (₹)

Service Supply of
No.
(₹) tax

1. 12,50,000 > Service is supplied before change in rate of 05-12-2023 12% 1,50,000
tax,
> invoice issued after change in rate of tax,
> the payment has been received after change
in rate of tax,
TOS shall be earlier of date of issue of invoice
or date of receipt payment.

2. 18,80,000 > Service is supplied before change in rate of 25-11-2023 5% 94,000

tax,
> invoice issued prior to such change in rate of
tax,
> the payment is received after change in rate
of tax, TOS shall be date of issue of invoice.

3. 17,60,000 > Service is supplied before change in rate of 30-11-2023 5% 88,000

tax,
> the payment is received before change in
rate of tax,
> invoice issued after change in rate of tax,
TOS shall be date of receipt of payment.

4. 19,50,000 > Service is supplied after change in rate of 28-11-2023 5% 97,500

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 200

tax,
> invoice is issued before change in rate of
tax,
> the payment is also received before change
in rate of tax,
TOS shall be earlier of date of issue of invoice
or date of receipt of payment.

5. 14,50,000 > Service is supplied after change in rate of 04-12-2023 12% 1,74,000
tax,
> invoice is issued after change in rate of tax,
> the payment is received before change in
rate of tax,
TOS shall be the date of issue of invoice.

6. 10,00,000 > Service is supplied after change in rate of 08-12-2023 12% 1,20,000
tax,
> the payment is received after change in rate
of tax,
> invoice is issued before change in rate of
tax,
TOS shall be date of receipt of payment.

Total CGST 7,23,500

ILLUSTRATION 15
TOS in case of change in rate of tax : Mr. Mahendra Sharma, an interior decorator registered
at Ahmedabad (Gujarat), provided service to one of his clients XYZ Company Ltd., registered at
Pune (Maharashtra). The provision of service was completed on 10-08-2024 and payment
received was entered in the books of Mr. Mahendra Sharma on 11-08-2024.
With effect from 16-08-2024, applicable GST rate was increased from 5% to 12%. However,
payment for the service received was credited in his bank account on 17-08-2024 and invoice
for the same was raised on 23-08-2024.
Mr. Mahendra Sharma claimed that he is liable to pay IGST @ 5%. But the department took the
view that he is liable to pay IGST @ 12%. Examine the correctness of Mr. Mahendra Sharma's
contention and determine the time of supply and applicable rate of tax as per the statutory
provisions.
Would your answer undergo any charge in the above case if the payment was credited to the
bank account on 14-08-2024 instead of 17-08-2024 ?
Note : You may assume that all days are working days. (5 Marks, Nov. 2018-NS)
SOLUTION
In case of change in rate of tax, determination of rate of tax depends upon three events namely,
 Date of supply of services,
 Date of invoice; and
 Date of receipt of payment

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 201

If any two of the above events occur before the change of rate, the time of supply is before the
change of rate. If any two of them occur after the change of rate, the time of supply is after the
change of rate and the new rate becomes applicable to the supply.
Here, "date of receipt of payment" refers to the date on which the payment is entered in the
books of accounts of the supplier, or the date on which the payment is credited in his bank
account, whichever is earlier. However, where the payment is credited in the bank account after
4 working days from the date of change in the rate of tax, the date of receipt of payment will be
the date of credit in the bank account.
In the instant case the date of payment will be 11-08-2024, since the payment is credited in
bank account within 4 working days from the date of change in effective rate of tax. Thus,
provision of service has been completed on 10-08-2024 and payment has also been received
on 11-08-2024 prior to change in effective rate of tax thus the time of supply shall be 11-08-
2024. At that time rate of tax was 5%, the same shall be applicable. Thus, the contention of Mr.
Mahendra Sharma is correct.
Even if the payment is credited in the bank account on 14-08-2024, the answer will remain
same since the date of payment in this case also will be the date when such payment is entered
in the books i.e. 11-08-2024. Time of supply will be 11 -08-2024 and GST rate of 5% will be
applicable.
ILLUSTRATION 16
TOS in case of change in rate of tax: I buy a set of modular furniture from a retail store.
Invoice is issued to me and I make the payment. The furniture is to be delivered to me later in
the week when a technician is available to assemble and install it. The next day the rate of tax
applicable to modular furniture is revised upward, and the store sends me a supplementary
invoice with the delivery note accompanying the furniture to collect the differential amount of
tax. Is this correct on store's part? Explain.
No, the store is not correct in issuing supplementary invoice with revised rate of tax. The
revised rate of tax is not applicable to the transaction, as the issuance of invoice as well as
receipt of payment occurred before the supply. Therefore, in terms of section 14(b)(ii), the time
of supply is earlier of the two events namely, issuance of invoice or receipt of payment, both of
which are before the change in rate of tax, and thus, the old rate of tax remains applicable.

ILLUSTRATION 17
TOS - Change in rate of tax: On the basis of the following information, determine the time of
supply:

Event Date

1. Commencement of provision of service 05th June

2. Completion of service 10th October

3. Invoice issued 20th October

4. Payment received by cheque and entered in the books 15th October

5. Amount credited in Bank account 18th October

6. Rate changed from 12% to 18% 16th October

Note : Assume that all the days covered in the above case are working days.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 202

SOLUTION
As per section 14(a)(iii), in case of change in rate of tax, if the service is supplied before the
change in rate of tax and the invoice is issued after the change in rate of tax but the payment is
received before such change in rate of tax, the time of supply is the date of receipt of payment.
The explanation to section 14 lays down that the date of receipt of payment is the date on which
the payment is entered in the books of account of the supplier or the date on which the payment
is credited to his bank account, whichever is earlier. However, the date of receipt of payment is
the date of credit in the bank account if such credit in the bank account is after 4 working days
from the date of change in the rate of tax.
In the given case, the payment has been credited in the bank account within 4 working days
from the date of change in the rate of tax. Therefore, the date of receipt of payment is 15th
October being the date of entry in the books of account of the supplier which is earlier than the
date of credit of the payment in the bank account (18th October).
Therefore, applying the provisions of section 14(a)(iii) to the given case, the time of supply is
15th October.
ILLUSTRATION 18
TOS in respect of goods and services : M/s KLM Ltd., a publishing and printing house
registered in Maharashtra, is engaged in supply of books, letter cards, envelopes, guides and
reference materials. The following information is provided by the company:

Event Printing of books Printing of

envelopes

Date of entering into printing contract 16th March 20th March

Date of receipt of advance 20th March 25th March

Date of completion of printing 10th April 5th April

Date of issue of invoice 15th May 10th April

Date of removal of books and letter heads to buyer 13th May 7th April

Date of receipt of balance payment 31st May 30th April

In respect of printing of books, content was supplied by the author. For printing of envelopes,
the design and logo were supplied by the buyer. Determine the time of suppl(ies) for the
purpose of payment of tax.
SOLUTION
The time of supply is determined as under —
(1) Printing of books where content is supplied by author is supply of service : As per
Circular No. 11/11/2017-GST dated 20-10-2017, in case of printing of books where only content
is supplied by the person who owns the usage rights to the intangible inputs while the physical
inputs including paper used for printing belong to the printer, supply of printing [of the content
supplied by the recipient of supply] is the principal supply and therefore, such supplies would
constitute supply of service.
(2) TOS - service : As per section 13, the time of supply of services is the earlier of the dates
arrived at by methods (A) and (B), as follows:

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 203

(A) Date of invoice or date of receipt of payment (to the extent the invoice or payment
covers the supply of services), whichever is earlier, if the invoice is issued within the
time prescribed under section 31;
(B) Date of provision of service or date of receipt of payment (to the extent the payment
covers the supply of services), whichever is earlier, if the invoice is not issued within the
time prescribed under section 31.
Since in the given case, invoice for the services is not issued within 30 days, the time of supply
for the advance received is the date of receipt of payment, i.e. 20 th March being earlier than the
date of provision of service. However, the time of supply for the balance payment is the date of
provision of service, i.e. 10th April being earlier than the date of receipt of balance payment.
(3) Printed envelopes where design and logo is supplied by buyer - supply of goods : In
case of supply of printed envelopes by the printer using its physical inputs including paper to
print the design, logo etc. supplied by the recipient of goods, predominant supply is supply of
goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary
to the principal supply of goods and therefore, such supplies would constitute supply of goods.
(4) TOS - Goods : In terms of section 12(2), the time of supply of goods is the earlier of, the
date of issue of invoice/last date on which the invoice is required to be issued or date of receipt
of payment. However, Notification No. 66/2017-CT dated 15-11-2017 specifies that a registered
person (excluding composition supplier) has to pay GST on the outward supply of goods at the
time of supply as specified in section 12(2)(a), i.e. date of issue of invoice or the last date on
which invoice ought to have been issued in terms of section 31.
As per section 31(1), invoice for supply of goods should be issued before or at the time of
removal of goods for supply to the recipient, where supply involves movement of goods.
Therefore, in the given case, the last date by which invoice ought to have been issued is 7 th
April. Thus, the time of supply of envelopes for the purpose of payment of tax is 7th April.
ILLUSTRATION 19
TOS in respect of goods and services : SRK Limited, registered under GST, is engaged in
sale of fabrics as well as doing job work of knitting of yarn for garment manufacturers. The
company provides the following information in respect of order received for both sale of fabrics
and job work.

Event Supply of Fabrics Job work of Knitting

Date of confirmation of order 01-08-2023 10-09-2023

Date of receipt of advance of ₹ 1,00,000 each 05-08-2023 12-09-2023

Date of removal of goods on completion of order 10-08-2023 15-09-2023

Date of issue of invoice for full amount 15-08-2023 20-09-2023

Date of receipt of balance payment of ₹ 50,000 25-08-2023 25-09-2023

each

Determine the time of supply for the purpose of payment of tax under CGST Act, 2017, in
respect of the above orders executed by the company. (5 Marks, July 2021)
SOLUTION
(1) Supply of fabrics - Supply of goods : In terms of section 12(2), the time of supply of
goods is the earlier of, the date of issue of invoice/last date on which the invoice is required to
be issued or date of receipt of payment. However, Notification No. 66/2017-CT dated 15-11-
2017 specifies that a registered person (excluding composition supplier) has to pay GST on the
GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI
 204

outward supply of goods at the time of supply as specified in section 12(2)(a), i.e. date of issue
of invoice or the last date on which invoice ought to have been issued in terms of section 31.
As per section 31(1), invoice for supply of goods should be issued before or at the time of
removal of goods for supply to the recipient, where supply involves movement of goods.
Therefore, in the given case, the last date by which invoice ought to have been issued is 10-08-
2023. Since the invoice is issued on 15-08-2023, the time of supply of fabrics will be 10-08-
2023.
(2) Job work of Knitting : The activity of job-work is supply of service and the time of supply is
to be determined as per Section 13 of the CGST Act, 2017.
TOS - service : As per section 13, the time of supply of services is the earlier of the dates
arrived at by methods (a) and (b), as follows:
(a) Date of invoice or date of receipt of payment (to the extent the invoice or payment covers
the supply of services), whichever is earlier, if the invoice is issued within the time prescribed
under section 31;
(b) Date of provision of service or date of receipt of payment (to the extent the payment covers
the supply of services), whichever is earlier, if the invoice is not issued within the time
prescribed under section 31.
Thus, in this case to the extent of advance of ₹ 1,00,000, the time of supply will be date of
receipt of advance i.e. 12-09-2023 and for the balance payment of ' 50,000, the time of supply
shall be date of issuance of invoice i.e. 20-09-2023, since the invoice is issued within 30 days of
completion of service.
ILLUSTRATION 20
Change in rate of tax and refund admissibility : M/s. Housefull Convention Hall is in the
business of letting out its halls for functions. It provides you with the following information for
determining the amount of refund out of advance received based on time of supply for one of its
clients.

Particulars Date Amount in ₹

(1) Advance paid at the time of booking the hall 16-07-2023 1,00,000
for a function from 1st to 3rd Nov., 2023

(2) Additional deposit paid 18-08-2023 2,00,000

(3) Function is held as scheduled 1st Nov. to 3rd Nov. 2023

(4) Invoice is issued (Taxable value) 25-11-2023 2,50,000

Consider that there is a change in the rate of tax on 15th October, 2023 from (CGST 2.5% and
SGST 2.5%) to (CGST 9% and SGST 9%)
What would be the amount of refund payable to the Client? (5 Marks, Nov. 2020)
SOLUTION
As per section 14, in case of change in rate of tax, if the service is supplied after the change in
rate of tax and the invoice is issued after the change in rate of tax but the payment is received
before such change in rate of tax, the time of supply is the date of invoice.
In this case change in rate of tax has taken place on 15-10-2023. Service is supplied on 03-11-
2023 and invoice is issued on 25-11-2023 i.e. both events occur after change in rate of tax, but
payment is received prior to such change, hence time of supply will be date of invoice i.e. 25-

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 205

11-2023 and on that date CGST rate is 9% and SGST rate is 9%, hence the said rates will be
applicable.
The amount to be refunded to the client shall be determined as under—

Particulars ₹

Value of Taxable Supply 2,50,000

CGST@ 9% 22,500

SGST @ 9% 22,500

Total amount billed 2,95,000

Less: Amount received from the client 3,00,000

Amount to be refunded to the client -5,000

Illustration 21 - Forward charge: M/s. Mansh & Vansh Trading Company, a registered supplier,
is liable to pay GST under forward charge. Determine the time of supply from the following
information furnished by it:
(i) Goods were supplied on 03-10-2019
(ii) Invoice was issued on 05-10-2019
(iii) Payment received on 09-10-2019 (4 Marks, May 2022-NS)
Ans: As per Section 12(2), the time of supply of goods shall be the earlier of the
following dates, namely: —
(a)
(i) the date of issue of invoice by the supplier; or
(ii) the last date on which he is required, u/ s 31(1), to issue the invoice with respect to the
supply; or
(b) the date on which the supplier receives the payment with respect to the supply.
As per Section 31(1) of the Act, a registered person supplying taxable goods shall issue invoice
before or at the time of,-
(i) removal of goods for supply to the recipient, where the supply involves movement of
goods; or
(ii) delivery of goods or making available thereof to the recipient, in any other case.
Thus, in this case the time of supply of goods shall be 03-10-2019 i.e, the last date on which he
is required to issue the invoice with respect to the supply.
Illustration 22 - TOS of Goods - Supply involves movement of goods: From the following
information determine the time of supply of goods where supply involves movement of goods:

s. Invoice/ Removal Delivery Receipt of Other information

of goods of goods payment
No. document
date

1. 16-11- 10-11- 16-11- 16-11- -

2019 2019 2019 2019

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 206

2. 01-11- 10-11- 16-11- - Supply is on account of Inter-State stock

2019 2019 2019 transfer.

3. 01-12- 01-12- 04-12- 20-11- Rs. 5,00,000 is received as advance and

2019 2019 2019 2019 invoice for the

10-12- whole amount is issued on the same day.

2019 Balance payment Rs. 6,20,000 is received
on 10-12-2019.

Solution: Time of supply of goods in each of the above cases has been given in
following table —

S. Invoice/ Removal Delivery Receipt Time of Reasons

of goods of goods of supply
No. document
payment

date

1. 16-11- 10-11- 16-11- 16-11- 10-11- Since invoice is not issued on or

2019 2019 2019 2019 2019 before removal of goods.

2. 01-11- 10-11- 16-11- 01-11- Since invoice date is prior to the

2019 2019 2019 2019 date of
removal of goods.

3. 01-12- 01-12- 04-12- 20-11- 01-12- TOS is date of issue of invoice.

2019 2019 2019 2019 2019 Advance received is not liable to be
taxed at the time of receipt vide
Notification No. 66/2022-CT dated
15-11-2022.

10-12- 01-12- For balance amount the time of

2019 2019 supply shall be the date of Invoice.

Illustration 23 - TOS of Goods - Reverse charge basis: Determine the Time of supply in each
of following independent cases in accordance with provisions of Section 12 of the CGST Act,
2022 in case recipient of goods is liable to pay tax under reverse charge mechanism.

SI. Date of invoice Date of receipt of Date of payment in Date when payment
goods books debited in bank
No.
account

1. 01-10-2019 05-10-2019 10-10-2019 12-10-2019

2. 01-10-2019 15-10-2019 10-10-2019 12-10-2019

3. 01-10-2019 15-10-2019 12-10-2019 10-10-2019

4. 01-10-2019 15-11-2019 22-11-2019 20-11-2019

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 207

Solution: Time of supply of goods in each of the above cases has been given in following table

SI. Date of Date of Date of Date when Time of Reason

invoice receipt of payment payment supply
No.
goods in books debited in
bank account

1. 01-10- 05-10- 10-10-2019 12-10-2019 05-10- TOS is date of receipt of

2019 2019 2019 goods

2. 01-10- 15-10- 10-10-2019 12-10-2019 10-10- TOS is date of payment in

2019 2019 2019 books.

3. 01-10- 15-10- 12-10-2019 10-10-2019 10-10- TOS is date when payment is

2019 2019 2019 debited in bank account.

4. 01-10- 15-11- 22-11-2019 20-11-2019 01-11- TOS is the date immediately

2019 2019 2019 following 30 days from the
date of issue of invoice by the
supplier.

Illustration 24 - TOS of services: Determine the time of supply in each of following

independent cases in accordance with provisions of CGST Act, 2022:

S. Date of actual Time [Date] of Invoice, Date on which payment received

provision of Bill or Challan as the case
No.
service may be

1. 10-11-2019 30-11-2019 15-12-2019

2. 10-11-2019 30-11-2019 15-11-2019

3. 10-11-2019 30-11-2019 15-11-2019 (Part) and 10-12-2019

(remaining)

4. 10-11-2019 30-11-2019 06-11-2019 (Part) and 09-11-2019

(remaining)

5. 10-11-2019 30-11-2019 06-11-2019 (Part) and 16-11-2019

(remaining)

6. 10-11-2019 12-12-2019 30-04-2020

7. 10-11-2019 12-12-2019 05-11-2019 (Part) and 25-12-2019

(remaining)

8. 10-11-2019 22-12-2019 12-12-2019

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 208

Solution: Time of supply of services in each of the above cases has been given in
following table —

S. Date of Date of Date of Time of Remarks

provision Invoice receipt of Supply
No.
of payment
service

1. 10-11- 30-11- 15-12-2019 30-11-2019 Invoice issued within 30 days and before
2019 2019 receipt of payment.

2. 10-11- 30-11- 15-11-2019 15-11-2019 Invoice issued within 30 days but payment
2019 2019 received before invoice.

3. 10-11- 30-11- 15-11-2019 15-11-2019 Invoice issued within 30 days. Part

2019 2019 (Part) and and 30-11- payment received before invoice and
10-12-2019 2019 for remaining payment after invoice.
(remaining) respective
As per Explanation (i) The supply shall be
amounts
deemed

to have been made to the extent it is

covered by the invoice or, as the case may
be, the payment.

4. 10-11- 30-11- 06-11-2019 06-11-2019 Invoice issued within 30 days. However,

2019 2019 (Part) and and 09-11- the advance has been received in two
09-11-2019 2019 for the installments before the date of completion
(remaining) respective of service. Thus, date of receipt of each
amounts such advance shall be treated as TOS.
As per Explanation (i) The supply shall be
deemed to have been made to the extent it
is covered by the invoice or, as the case
may be, the payment.

5. 10-11- 30-11- 06-11-2019 06-11-2019 Invoice issued within 30 days. Part

2019 2019 (Part) and and 16-11- payment (in the form of advance) received
16-11-2019 2019 for the before issue of invoice and remaining
(remaining) respective payment received after completion of
amounts service.
As per Explanation (i) The supply shall be
deemed to have been made to the extent it
is covered by the invoice or, as the case
may be, the payment.

6. 10-11- 12-12- 30-04-2020 10-11-2019 Invoice not issued within 30 days and
2019 2019 payment received after completion of
service.

7. 10-11- 12-12- 05-11-2019 05-11-2019 Invoice not issued within 30 days. Part
2019 2019 (Part) and and 10-11- payment received as advance before
25-12-2019 2019 for completion of service and remaining
(remaining) respective payment received subsequently.
amounts
As per Explanation (i) The supply shall be

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 209

deemed to have been made to the extent it

is covered by the invoice or, as the case
may be, the payment.

8. 10-11- 22-12- 12-11-2019 10-11-2019 Invoice not issued within 30 days and
2019 2019 entire payment received after completion of
service.

Illustration 25 - TOS of services: Determine the time of supply from the following
particulars:

25-07-2019 Booking of convention hall, sum agreed Rs. 15,00,000, advance of Rs. 1,01,000
received

10-11-2019 Event held in convention hall

20-12-2019 Invoice issued for Rs. 15,00,000, indicating balance of Rs. 13,99,000 payable

25-12-2019 Balance payment of Rs. 13,99,000 received

Solution: As per Section 31 read with Rule 47 of CGST Rules, the tax invoice is to be issued
within 30 days of supply of service. In the given case, the invoice is not issued within the
prescribed time limit. As per Section 13(2) (b), in a case where the invoice is not issued within
the prescribed time, the time of supply of service is the date of provision of service or receipt of
payment, whichever is earlier.
Therefore, the time of supply of service to the extent of Rs. 1,01,000 is 25-07-2019 as the date
of payment of Rs. 1,01,000 is earlier than the date of provision of service. The time of supply of
service to the extent of the balance Rs. 13,99,000 is 10- 11-2019 which is the date of provision
of service.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 210

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 211

Transaction value

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 212

(ii) Inclusions in value of supply [Section 15(2)] : The value of supply shall include -

Items Includibility in transaction value or otherwise

(a) Taxes, duties, cesses, Any—

fees and charges
except CGST, SGST,
 taxes,
UTGST & GST  duties,
compensation cess  cesses,
 fees, and
 charges
levied under any law for the time being in force,
other than—
 this Act i.e. CGST Act,
 the State Goods and Services Tax Act,
 the Union Territory Goods and Services Tax Act,
and
 the Goods and Services Tax (Compensation to
States) Act,
if charged separately by the supplier.
TCS under Income-tax Act, 1961 not includible in the
taxable value for the purpose of GST : It has been clarified
that for the purpose of determination of value of supply under
GST, tax collected at source (TCS) under the provisions of the
Income-tax Act, 1961 would not be includible as it is an interim
levy not having the character of tax. - Circular No. 76/50/2018-
GST dated 31-12-2018 amended vide corrigendum dated 7-
03-2019
Note : Transaction value under IGST will include taxes other
than IGST and the compensation cess in terms of third proviso
to Section 20 of IGST Act.

(b) Amount incurred by Any amount that the supplier is liable to pay in relation to such
recipient on behalf of supply but which has been incurred by the recipient of the
the supplier supply and not included in the price actually paid or payable for
the goods or services or both.

(c) Incidental expenses > Incidental expenses, including commission and packing,
and amount charged charged by the supplier to the recipient of a supply, and
for activities done
> Any amount charged for anything done by the supplier in
before delivery
respect of the supply of goods or services or both at the time of,
or before delivery of goods or supply of services.

(d) Charges for delayed Interest or late fee or penalty for delayed payment of any
payment of consideration for any supply.
consideration

(e) Subsidies Subsidies directly linked to the price excluding subsidies

provided by the Central Government and State Governments. .

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 213

(iii) Exclusion in value of supply [Section 15(3)] :

Items Excludibility in transaction value

Discounts Discounts given on or before supply : Any discount which is—

✓ given before or at the time of the supply,
✓ if such discount has been duly recorded in the invoice issued in
respect of such supply;

Discounts Post supply discount : Any discount which is given after the supply has been
effected, if—
o such discount is established in terms of an agreement
entered into at or before the time of such supply and
specifically linked to relevant invoices; and
o input tax credit as is attributable to the discount on the
basis of document issued by the supplier has been
reversed by the recipient of the supply.
Non deductible discount : A company announces year end discounts after
reviewing dealer performance during the year. The year end discounts are
based on performance slabs and are given as cash-back. As these discounts
were not known at the time of supply of the goods, they will not be deducted
from taxable value of those goods.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 214

Case 1. X owns a commercial flat. It is given on rent to A ltd ( rent being Rs 2,50,000 per
month ).Besides rent ,X recovers house rent of Rs 90,000 from A ltd .Taxable value of
supply in this case will be Rs 30,90,000 ( i.e Rent Rs 30,00,000 plus house tax Rs 90,000 )

Case 2 . A theatre charges Rs 10,000 per person for a musical programme (to be held in
Chennai on Jan 1, 23 ).Besides it collect 5 % entertainment tax imposed by Tamilnadu
Govt .Taxable value of supply for levy of GST will be Rs 10,500

Case 3. X supplies artificial silk to Y at the rate of Rs 500 per meter .X also collect brokers
commission (which he has paid at the rate of 5% to a broker to get input supply) .Taxable
value of supply of silks by X to Y will be Rs 525 per meter

Case 4. Mr. Ram sold goods to Mr. Lakshman for ₹ 2,50,000. As per the contract of sale,
Mr. Ram is required to deliver the goods in the premises of Mr. Lakshman. Mr. Ram hires
transporter for transportation for delivery of goods. However, the freight paid by Mr.
Lakshman to transporter. Freight paid ₹ 2,500. In this case, value of taxable supply is ₹
2,52,500 as obligation of the seller is discharged by the buyer

Case 5. Mr. X enters into a contract for supply of goods worth ₹ 2,00,000 on 15th March
2022. As per the said contract, the payment of the said amount was required to be made
within 2 months of the sale. If the complete payment is not made within this time period, a
late penalty of ₹ 10,000 will be chargeable. Let us assume that the payment is not made
within the said period. In this situation, ₹ 10,000 will be includible in the taxable value. If
GST is not separately charged on this interest amount then, ₹ 10,000 shall be treated as
inclusive of GST and accordingly value shall be computed.

Case 6. A cafeteria in X Ltd (a corporate office) provides lunch at ₹ 120 per plate to the
employees of the company.
However, the vendor in the cafeteria receives an amount of ₹ 70 per plate in the form of
subsidy from X Ltd for providing the food at a lower rate. Here, value of ₹ 70 will be added
to the taxable value of ₹ 120 for the purpose of charging GST. Had this subsidy been
provided by the Government to the company against mid- day meals, such amount of ₹ 70
would not have been includible in the taxable value.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 215

1: Shree Auto sales a car of Rs10,00,000 to Laxmi Auto

(i) They incur packing charges of Rs25,000 on the car.
(ii) Provide discount of 1% on the price (Festive Offer)
(iii) Shree Auto agrees to provide a further discount of 0.5% if laxmi
auto makes payment by 31st of this month via net banking. Laxmi
Auto makes payment.

2: Mr. A Delhi sold 50 laptop to Mr. B of Kolkata for Rs3,00,000. Mr. B has taken delivery
of goods at Delhi & told Mr. A that will take laptop to Kolkata in his own truck. Calculate
GST (CGST 9% SGST 9%).
3: ITC sold interstate tobacco for Rs10,000.
Excise @ 64%
CGST @ 14%
SGST @ 14%
GST compensation cess @ 90%
Calculate GST.

4: A machine was imported for Rs1,00,000

Basic custom duties 10%
EC 2%
SHEC 1%
CGST 14%
SGST 14%
Calculate GST?
5: Rent received of immoveable Property 1,00,000
MT Paid 2000
CGST 9% SGST 9%
Calculate GST?
6: Airline booking a ticket presently as follows air force
(Basic Fare+ Fuel Charge) 5000
Passenger Service Fees 750
User Development Fees 750
6500
Value for GST ?
7: Mr. A located in Delhi purchase 1000 calculator worth Rs1,00,000 from M/s T located in
Mumbai. Mr. A’s son is in an employee in M/s T. Price of calculator in the open market is
Rs102. The supplier instruct the buyer to make payment of transportation cost of Rs10,000
for delivering the goods to the recipient place.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 216

8: A agent procured order of HVL, for Rs1,00,000& Buyer has to pay Rs2000 to
commission agent & Rs98000 to supplier. Value?
9:Special packing done for laptop of Rs5000. Laptop value 45,000. Value?
10: Installed machine sold after dismantling for Rs100,000. Dismantling cost 5000.
11:

PARTICULARS INCLUDIBLE SECTION

Packing/ Labelling
Warranty
Dharmada/ Charity
Weighing Charges
Transport Charges/ Outward/ Inward
Transit insurance
Discount
Security Deposit
Govt. Subsidy
Free Material
Service Charges collected by restaurant

12: Value of supply of goods 20,00,000

( Payment To be made within 30 days )
Interest on delayed payment, if payment is made after 30 days 1,00,000
Recipient paid after 30 days.

13: Bisleri Bald bottles to wholesale dealer at Rs9000/Crate. Further, it received price support
incentive or Rs1000 (Subsidy) From one of its subsidiary for supply of 1 crate bottle. What will
be the value?
14:

Magazon Dock Ltd cleared a rig to ONGC 50,00,000

Received subsidy from Govt 20% 10,00,000
Received Subsidy from ONGC 10% 5,00,000

15: Tisco club is selling food to employee at below cost & collected 10,00,000
Received subsidy from tisco 5,00,000
Value for GST ?

16: A cylinder was sold for Rs500 & a subsidy of Rs300 was transferred to bank a/c of buyer.
What will be value?

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 217

17: Calculate value of taxable supply

PARTICULARS AMOUNT
Price of the machine 5,00,000
Design &Enge. Charges 30,000
Consultancy charges in relation to design 20,000
Pre- delivery inspection charges 10,000
Primary packing 5,000
Protective packing done at buyer request 30,000
Weighment charges 15,000
Discount at the time of removal 10,000

18: Calculate value of taxable supply

PARTICULARS AMOUNT
Contracted price of the machine 1,00,000
It includes
Freight & insurance upto place of customer 10,000
Packing 20,000
Subsidy : 30,000
FromGovt
From Buyer for making Changes as per buyer 15,000

Additional Information
Not included above:
Trade discount 10,000
Commission paid to agent of seller On instruction of seller 40,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 218

Past examination question

ILLUSTRATION 1
Invoice Value - Ex factory/ FOR basis : Surya Agencies has agreed to supply goods to
customer's premises. Goods valued ₹ 80,000 are taxable at 5% IGST as it is an Inter-State
supply. It also pays freight and transit insurance of ₹ 12,000. GTA is a registered entity and has
charged GST (6% CGST and 6% SGST) under forward charge.
(i) Compute the Invoice value of supply including IGST.
(ii) What will be the Invoice value of supply including IGST, if the supply was under ex-factory
basis instead of door-delivery basis? (4 Marks, Nov. 2019)
SOLUTION
Where the supplier agrees to deliver the goods at the buyer's premises and arranges for
transport and insurance the contract of supply becomes a composite supply, the principal
supply being the supply of goods. Therefore, outward freight and transit insurance become part
of the value of the composite supply and GST is payable thereon at the same rate as applicable
for the relevant goods. However, if the contract for supply is on ex-factory basis where buyer
pays the outward freight and insurance, the same will not be included in the value of supply of
goods.
(i) The invoice value shall be computed as under -

Particulars ₹

Sale Price of goods 80,000

Transportation cost 12,000

Taxable value of supply 92,000

IGST leviable @ 5% 4,600

Total Invoice value 96,600

(ii) In case the supply is on ex-factory basis, the invoice value shall be -

Particulars ₹

Sale Price of goods 80,000

Transportation cost Nil

Taxable value of supply 80,000

IGST leviable @ 5% 4,000

Total Invoice value 84,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 219

ILLUSTRATION 2
Computation of Value of taxable supply and GST liability : Vayu Ltd. provides you the
following particulars relating to goods supplied by it to Agni Ltd.

Particulars ₹

List price of the goods (Exclusive of Taxes and discounts) 76,000

Special packing at the request of customer to be charged to the customer 5,000

Duty levied by local authority on the sale of such goods 4,000

CGST and SGST charged in invoice 14,400

Subsidy received from a NGO (The price of ₹ 76,000 given above is after 5,000
considering the subsidy)

Vayu Ltd. offers 3% discount of the list price of the goods which is recorded in the invoice for
the goods. Determine the value of taxable supplies made by Vayu Ltd. (5 Marks, May 2018)
SOLUTION
Computation of value of taxable supply -

Particulars ₹

List price of the goods (exclusive of taxes and discounts) 76,000

Add: Duty levied by Municipal Authority on the sale of such goods [WN-1] 4,000

CGST and SGST chargeable on the goods [WN-1] -

Special packing at the request of customer to be charged to the customer [WN-2] 5,000

Subsidy received from a NGO [WN-4] 5,000

Total 90,000

Less: Discount @ 3% on ₹ 76,000 [WN-3] 2,280

Value of taxable supply 87,720

Working Notes:
(1) The value of supply shall include any taxes, duties, cess, fees and charges levied under any
law for the time being in force other than the CGST Act, the SGST Act, the UTGST Act and the
GST (Compensation to States) Act, if charged separately by the supplier. [Section 15(2)(a) of
CGST Act, 2017]
(2) Any amount charged for anything done by the supplier in respect of the supply of goods at
the time of, or before delivery of goods shall be included in the value of taxable supply. Hence,
special packing at the request of customer shall form a part of the value of taxable supply.
[Section 15(2)(c) of CGST Act, 2017]
(3) The value of supply shall not include any discount which is given before or at the time of
supply. [Section 15(3)(a) of CGST Act, 2017]

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 220

(4) The value of supply shall include subsidies directly linked to the price excluding subsidies
provided by the Central Government and State Governments. [Section 15(2)(e) of CGST Act,
2017]
ILLUSTRATION 3
Computation of Value of Taxable supply and GST liability: Raman Ltd., a registered
supplier in Mumbai (Maharashtra), has supplied goods to Sahil Traders and Jaggi Motors Ltd.
located in Ahmedabad (Gujarat) and Pune (Maharashtra) respectively. Raman Ltd. has
furnished the following details for the current month :

S. Particulars Sahil Jaggi Motors

Traders Ltd.
No.
(₹) (₹)

(i) Price of the goods (excluding GST) 20,000 15,000

(ii) Packing charges 600

(iii) Commission 400

(iv) Weighment charges 1,000

(v) Discount for prompt payment (recorded in the invoice) 500

Items given in points (ii) to (v) have not been considered while arriving at price of the goods
given in point (i) above.

Compute the GST liability [CGST & SGST or IGST, as the case may be] of Raman Ltd. for the
given month. Assume the rates of taxes to be as under :

Particulars Rate of tax

Central tax (CGST) 9%

State tax (SGST) 9%

Integrated tax 18%

Make suitable assumptions, wherever necessary.

Note: The supply made to Sahil Traders is an inter-State supply. (RTP May, 2018)
SOLUTION
Computation of GST liability :

Particulars Sahil Jaggi Motors

Traders (₹) Ltd. (₹)

Price of the goods 20,000 15,000

Add: Packing charges [WN-1] 600

Add: Commission [WN-1] 400

Add: Weighment charges [WN-1] - 1,000

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 221

Less: Discount for prompt payment (recorded in the [WN-2] - 500

invoice)

Value of taxable supply 21,000 15,500

IGST payable @ 18% [WN-3] 3,780

CGST payable @ 9% [WN-4] 1,395

SGST payable @ 9% [WN-4] 1,395

Working Notes :
(1) Incidental expenses, including commission and packing, charged by supplier to recipient of
supply is includible in the value of supply. Weighment charges are also incidental expenses,
hence includible in the value of supply [Section 15 of the CGST Act, 2017].
(2) Since discount is known at the time of supply, it is deductible from the value in terms of
section 15 of the CGST Act, 2017.
(3) Since supply made to Sahil Traders is an inter-State supply, IGST is payable in terms of
section 5 of the IGST Act, 2017.
(4) Since supply made to Jaggi Motors Ltd. is an intra-State supply, CGST & SGST is payable
on the same.
ILLUSTRATION 7
Post supply discounts : Binaca Electronics Ltd. (hereinafter referred to as BEL) is engaged in
manufacturing televisions. It is registered in the State of Haryana. It has appointed distributors
across the country who sell the televisions manufactured by it. The maximum retail price (MRP)
printed on the package of a television is ₹ 12,000. The applicable rate of GST on televisions is
18%. BEL dispatches the stock of televisions to its distributors ordered by them on a quarterly
basis.
In order to promote its sales, the Sales Head of BEL has formulated a sales promotion scheme.
Under this scheme, BEL offers a discount of 10% (per television) on televisions supplied to the
distributors, if the distributors sell 500 televisions in a quarter. The discount is offered on the
price at which the televisions are sold to the distributors (excluding all charges and taxes).
It appoints Shah Electronics (an unrelated party as per GST Law) as its distributor in Haryana
on 1st April and dispatches 750 televisions on 8th April as stock for the quarter April-June. BEL
has sold the televisions to distributor - Shah Electronics at ₹ 8,400 per television (exclusive of
applicable taxes). Shah Electronics has requested BEL for a special packing of the televisions
delivered to it for which BEL has charged ₹ 1,200 per television.
Shah Electronics places a purchase order of 1,000 televisions with BEL for the quarter July-
September. The distributor reports sales of 700 televisions for the quarter April-June and 850
televisions for the quarter July- September. The discount policy offered by BEL as explained
above is also available to Shah Electronics as per the distributorship agreement.
While Shah Electronics reverses the input tax credit availed for the quarter July-September, it
has failed to reverse the input tax credit availed for the quarter April-June.
Examine the scenario with reference to section 15 of the CGST Act, 2017 and compute the
taxable value of televisions supplied by BEL to Shah Electronics during the quarters April-June
and July-September assuming the rate of tax applicable on the televisions as 18%. (RTP Nov.
2020) (Similar MTP May, 2018)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 222

SOLUTION
Section 15(3)(a) of the CGST Act, 2017 allows discounts to be deducted from the value of
taxable supply if the same is given before or at the time of the supply and if such discount has
been duly recorded in the invoice issued in respect of such supply. In other words, pre-supply
discounts recorded in invoices are allowed as deduction.
Further, post supply discounts are also allowed as deduction from the value of supply under
section 15(3)(b) of the CGST Act if-
(i) such discount is established in terms of an agreement entered into at or befores the time of
such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the
supplier has been reversed by the recipient of the supply.
Nature of discount - Post Supply Discount : In the given case, Shah Electronics is entitled
for 10% discount on televisions supplied by BEL for the quarters April-June as well as July-
September as it has sold more than 500 televisions in each of these quarters. However, since
the sales targets are achieved after the entire stock for the respective quarters of April-June and
July-September has been dispatched, the discounts on the televisions supplied to Shah
Electronics for the quarters of April-June and July-September is a post-supply discount.
Such post-supply discount will be allowed as a deduction from the value of supply since the
discount policy was known before the time of such supply and the discount can be specifically
linked to relevant invoices (invoices pertaining to televisions supplied to Shah Electronics for the
quarters of April-June and July- September) provided Shah Electronics reverses the input tax
credit attributable to the discount on the basis of document issued by BEL.
The value of supply for the quarters of April-June and July-September will thus, be computed as
under :
Computation of value of supply for the quarter - April-June :

Particulars ₹

Price at which the televisions are supplied to Shah Electronics [The value of a 8,400
supply Is the transaction value, which Is the price actually paid or payable for the
said supply, In terms of section 15(1) of the CGST Act, 2017 presuming that the
supplier and the recipient of supply are not related and price is the sole
consideration for the supply as the supplier and recipient are not related parties.]

Add: Packing expenses [The value of supply includes incidental expenses like 1,200
packing charges in terms of section 15(2)(c) of the CGST Act.]

Less: Discount [WN] Nil

Value of taxable supply of one unit of television 9,600

Value of taxable supply of televisions for the quarter April-June [₹ 9,600 x 72,00,000
750]

Working Note :
Discount not allowable as ITC Not reversed by recipient : Since Shah Electronics has not
reversed the input tax credit attributable to such discount on the basis of document issued by
BEL, the conditions specified in section 15(3)(b) of the CGST Act have not been fulfilled. Thus,
the post-supply discount will not be allowed as deduction from the value of supply.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 223

Computation of value of supply for quarter - July-September -

Particulars ₹

Price at which the televisions are supplied to Shah Electronics [The value of a 8,400
supply Is the transaction value, which Is the price actually paid or payable for the
said supply, In terms of section 15(1) of the CGST Act presuming that the supplier
and the recipient of supply are not related and price is the sole consideration for the
supply as the supplier and recipient are not related parties.]

Add: Packing expenses [The value of supply includes incidental expenses like 1,200
packing charges in terms of section 15(2)(c) of the CGST Act.]

Less: Discount [Since all the conditions specified in section 15(3)(b) of the CGST -840
Act have been fulfilled, the post-supply discount will be allowed as deduction from
the value of supply. The input tax credit to be reversed will work out to be ₹
1,51,200 [1,000 x (8,400 x 10%) x 18%]

Value of taxable supply of one unit of television 8,760

Value of taxable supply of televisions for the quarter July-September [₹ 8,760 87,60,000
x 1,000]

ILLUSTRATION 8
Computation of Value of taxable supply and GST liability: Quantum Plast Private Limited,
Delhi supplies plastic granulation machine to Capscom Ltd.,Delhi. It furnishes the following
details in respect of such supply:

Particulars ₹

List price of the machine (exclusive of taxes and discounts) 1,00,000

Corrugated Boxes used for packing the machine (not included in price above) 1,000

Subsidy received from Delhi Government on sale of such machine (considered in 5,000
price above)

Discount @ 2% is offered on list price of the machine (recorded in the invoice for -
the machine)

Determine the value of taxable supply made by Quantum Plast Private Limited. (MTP, May
2018)
SOLUTION
Computation of value of taxable supply :

Particulars ₹

List price of the goods (exclusive of taxes and discounts) 1,00,000

Add: Corrugated Boxes used for packing the machine [Includible in the value as 1,000
per Section 15(2)(c)]

Add: Subsidy received from Delhi Government on sale of such machine [Subsidy -
received from State Government is not included the value in terms of Section

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 224

15(2)(e)]

Total 1,01,000

Less: Discount @ 2% on ₹ 1,00,000 [Since discount is known at the time of supply, 2,000
it is deductible from the value in terms of Section 15(3)(a)]

Value of taxable supply 99,000

ILLUSTRATION 9
Computation of GST payable: Q Ltd., a registered supplier, is engaged in supplying the
taxable services leviable to GST @ 18%. Ascertain the amount of GST payable by it in the
month of December, 2023 from the information given below :

Particulars ₹

Supply of farm labour for agriculture purpose. 1,00,000

Service to people free of cost. 60,000

Advance received in December, 2023 from clients for which no service has been 85,000
rendered till date.

Amount received for the services rendered in July, 2023 (bills for the same were 90,000
issued on 25- 7-2023)

Bill raised for the services rendered in the month of December, 2023 against which 75,000
no amount is received so far.

The above amounts are exclusive of GST.

SOLUTION
Computation of GST liability of Q Ltd. for the month of December, 2023 :

Particulars ₹

Supply of farm labour for agriculture purpose. [WN-1] -

Service to people free of cost. [WN-2] -

Advance received in December, 2023 from clients for which no service has been 85,000
rendered till date. [WN-3]

Amount received for the services rendered in July, 2023, bills for the same were -
issued on 25-7-2023 [WN-4]

Bill raised for the services rendered in the month of December, 2023 against which 75,000
no amount is received so far. [WN-5]

Value of taxable supply 1,60,000

Total GST payable @ 18% 28,800

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 225

Working Notes :
(1) The same will not be liable to GST as it is Exempt vide Entry No. 54 of Exemption
Notification No. 12/2017-CT (R).
(2) Service rendered free of cost will not be taxable as no consideration is received for
supplying such service.
(3) As per Section 13 of CGST Act, 2017, time of supply shall be "date of receipt or date of
invoice, whichever is earlier". Hence, Advance received for services to be provided in future the
same shall be liable to GST in the month of December, 2023.
(4) As per Section 13 of CGST Act, 2017, time of supply shall be "date of receipt or date of
invoice, whichever is earlier". The same is taxable in month of July, 2023, hence, no tax liability
shall arise in month of December, 2023.
(5) As per Section 13 of CGST Act, 2017, time of supply shall be "date of receipt or date of
invoice, whichever is earlier". Hence, GST liability shall arise in month of December, 2023.
ILLUSTRATION 10
Computation of GST liability: Sincere Coaching Classes Ltd. a coaching centre is registered
under GST. The details pertaining to the month of July, 2023 are as under :

Particulars ₹

Free coaching rendered to a batch of 100 students (Value of similar services is ₹

20,000)

Coaching fees collected from students for the classes to be held in July, 2023 17,70,000

Advance received from a college for teaching their students, on 30-07-2023. 3,54,000
However, due to some unavoidable reasons, no coaching was conducted and the
advance money (including GST) was returned on 18-10-2023

Determine the GST liability for the month of July, 2023 and indicate the date by which GST has
to be deposited by the assessee.
SOLUTION
Computation of GST liability of Sincere Coaching Classes Ltd. :

Particulars ₹

Free coaching rendered [WN-1] Nil

Coaching fees collected from students [₹ 17,70,000 x 18/118] [A] [WN-2] 2,70,000

Advance received from a college [₹ 3,54,000 x 18/118] [B] [WN-2 & 3] 54,000

Total GST liability (A + B) 3,24,000

Working Notes:
(1) As per Section 7(1)(a), Supply should be made for a consideration. Therefore, since no
consideration is involved in case of free services, GST is not payable thereon.
(2) Since, services agreed to be provided are also chargeable to GST, advance received will
also be liable to GST. Advance received is taxable at the time when such advance is received
[Section 13 of CGST Act, 2017].

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 226

(3) Advance received from a college for teaching their students will also be chargeable to GST.
It is immaterial that no coaching was conducted and the money was returned on 18-10-2023.
The amount of GST included in the amount refunded (₹ 54,000) in the month of i.e. October,
2023 would be adjusted against GST liability of subsequent periods.
The last date for making the payment of GST by Sincere Coaching Classes Ltd. for the month
of July, 2023 is 20th August, 2023.

ILLUSTRATION 11
Value of supply & GST: Machine India Ltd. is engaged in the manufacture of machines. It has
supplied one machine to M/s. Z & Co. with the following details. Determine the total amount of
GST payable thereon.

Particulars Amount in ₹

(i) Price of machines excluding taxes and undermentioned charges 8,50,000

(ii) Installation and erection expenses 30,000

(iii) Packing charges 12,500

(iv) Design and engineering charges 4,000

(v) Pre-delivery inspection charges 1,000

Other necessary information is as under :

(i) Cash discount @ 2% on price of machinery is allowed as per terms of contract because
buyer made full payment in advance.
(ii) Bought out accessories worth ₹ 8,000 supplied free of cost with machine.
(iii) Machine is supplied in durable and returnable packing worth ₹ 50,000.
(iv) The rate of GST is 18%.
SOLUTION
Computation of Value of taxable supply and GST payable -

Particulars ₹

Price of machines excluding taxes and duties 8,50,000

Installation and erection expenses [WN-1] 30,000

Packing charges [WN-2] 12,500

Design and engineering charges [WN-3] 4,000

Pre-delivery inspection charges [WN-5] 1,000

Bought out accessories [WN-6] -

Durable and returnable packing [WN-4] -

Total 8,97,500

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 227

Less: 2% cash discount on price of machinery = ₹ 8,50,000 x 2% [WN-7] 17,000

Value of taxable supply 8,80,500

GST payable @ 18% 1,58,490

Working Notes : While computing the value of supply -

(1) As per Section 15(2)(c) of CGST Act, 2017, if Installation and erection expenses at the
recipient's site will also be added, being an amount charged for something done by the supplier
in respect of the supply at the time of making the supply.
(2) As per Section 15(2)(c) of CGST Act, 2017, packing charges charged by supplier to the
recipient will be included for computation of value of supply.
(3) As per Section 15(2)(c) of CGST Act, 2017, any amount charged for anything done by the
supplier in respect of the supply of goods at the time of, or before delivery of goods shall be
included in the value of taxable supply. Hence, design and engineering charges shall also be
included in the value of taxable supply.
(4) The value of durable and returnable packing will not be included, since no amount is
charged for such supply.
(5) Any incidental expenses and amount charged from recipient for activities done before
delivery would be included in value of supply.
(6) Value of bought out accessories supplied free of cost along with the machinery will not be
included since no amount is charged for supply of accessories.
(7) As per Section 15(3) of CGST Act 2017, if any discount which is given before or after the
supply has been effected and is established in terms of an agreement or contract then it is
excluded from the calculation of value of supply.
ILLUSTRATION 12
Computation of value of supply: Compute value of supply of goods supplied by Bharat
Enterprises, under section 15 of the CGST Act, 2017, with the help of the following particulars -

Particulars Amount in (₹)

Sale price for delivery at buyers premises 2,42,000

Contracted sale price includes the following elements of cost -

(i) Cost of containers supplied by the buyer 15,200

(ii) Design and engineering charges 22,400

(iii) Loading and handling charges incurred after removal from the factory 6,000

(iv) Cost of after sale service 10,000

(v) Dharmada charges 2,100

Cash discount @ 2% on Sale Price is allowed as per terms of contract because buyer made full
payment in advance. Give reasons with suitable assumptions wherever necessary.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 228

SOLUTION
Computation of Value of taxable supply -

Particulars ₹

Sale price for delivery at buyers premises 2,42,000

Less: The following -

(i) Cost of containers supplied by the buyer [WN-1] -15,200

(ii) Design and engineering charges [WN-2] Includible

(iii) Loading and handling charges incurred after removal from the factory [WN-3] Includible

(iv) Cost of after sale service [WN-4] Includible

(v) Dharmada charges [WN-5] Includible

Total 2,26,800

Less: Cash discount 2% of Sale Price = 2% x ₹ 2,42,000 4,840

Total Value of taxable supply 2,21,960

Working Notes : While computing the assessable value,-

(1) Cost of containers supplied by the buyer is not includible. As per Section 15(1) of CGST Act,
2017, value of supply of goods shall be inclusive of goods which are supplied by supplier to
recipient, in given case containers are supplied by recipient so value of container would not be
included.
(2) As per Section 15(2)(c) of CGST Act, 2017, any amount charged for anything done by the
supplier in respect of the supply of goods at the time of, or before delivery of goods shall be
included in the value of taxable supply. Hence, design and engineering charges shall also be
included in the value of taxable supply. As already included no adjustment required.
(3) Loading and handling charges incurred after removal from the factory are includibe
according to Section 15(2)(a).
(4) Cost of after sale service is includible according to Section 15(2)(c).
(5) Dharmada charges charged from recipient would form part of value of taxable supply.
ILLUSTRATION 13
Computation of Value of taxable supply and GST liability : Dushyant rents out a commercial
building owned by him to Bharat for the month of December, for which he charges a rent of ₹
19,50,000. Dushyant pays the maintenance charges of ₹ 1,00,000 (for the December month) as
charged by the local society. These charges have been reimbursed to him by Bharat. Further,
Bharat had given ₹ 2,50,000 to Dushyant as interest free refundable security deposit. Further,
Dushyant has paid the municipal taxes of ₹ 2,85,000 which he has not charged from Bharat.
You are required to determine the value of supply and the GST liability of Dushyant for the
month of December assuming CGST and SGST rates to be 9% each.
Note : All the amounts given above are exclusive of GST. (RTP May 2020)

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 229

SOLUTION
Computation of the value of supply and the GST liability of Dushyant for the month of
December :

Particulars Amount (₹)

Rent of the commercial building 19,50,000

Maintenance charges [Being reimbursed by the tenant - Bharat, such charges 1,00,000
ultimately form part of the rent paid by Bharat to Dushyant and thus, will form
part of the value]

Interest free refundable security deposit [Refundable security deposit does not Nil
constitute consideration in terms of section 2(31) of the CGST Act, 2017 and
thus, is not includible in the value]

Municipal taxes [Since the same is not charged from the recipient, same is not Nil
includible in the value]

Value of supply 20,50,000

CGST @ 9% 1,84,500

SGST @ 9% 1,84,500

ILLUSTRATION 14
Valuation of taxable supply and GST liability: M/s. Jonty India Ltd. A manufacturer of heavy
machines registered at Jaipur (Rajasthan) supplied on machine to M/s. Dhanuka Ltd. of Udaipur
(Rajasthan) on 05-02-2024 under an invoice of the same date. Using the information given
below, compute the value of the machine and the GST payable (CGST & SGST or IGST as the
case may be) in cash for the month of February, 2024 by M/s. Jonty India Ltd. with appropriate
working notes.
Assume Rate of CGST, SGST and IGST on the machine to be 9%, 9% and 18% respectively.

S.No. Particulars ₹

(i) The Basic price of the machine (exclusive of taxes and discount). 28,50,000

(ii) Trade discount is allowed at 3% on the basic price and is shown in the 85,500
invoice.

(iii) Secondary packing (in iron sheets) charges for safe transportation of the 30,000
machine on the request of buyer.

(iv) Design and engineering charges of the machine. 90,000

(v) Tax levied by Municipal Authority on the sale on the machine. 25,000

(vi) Subsidy received by the supplier from the State Government to encourage 80,000
manufacture of the machine.

(vii) Pre-delivery inspection charges paid to an independent agency in terms of 22,000

the agreement for supply. The amount was paid by M/s. Dhanuka Ltd.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 230

(viii) Interest amount paid by M/s Dhanuka Ltd. for delay in payment for the 12,000
machine.

Inward Supplies

(i) IGST paid on food items for consumption by employees working in the 8,000
factory.

(ii) SGST and CGST ('15,000 each) paid on Electrical transformer used in the 30,000
manufacturing process.

Note:
(i) M/s. Jonty India Ltd. has no input tax credit balance at the beginning of February, 2024. All
the other conditions necessary for availing the eligible input tax credit have been fulfilled.
(ii) There are no other transaction of supplies during the month of February, 2024.
(iii) M/s. Jonty India Ltd. and M/s. Dhanuka Ltd. are not related persons. (10 Marks, Nov. 2018-
NS)
SOLUTION
Computation of GST liability of M/s Jonty India Ltd. :

Particulars ₹

Price of machine [WN 1] 28,50,000

Secondary packing charges [WN 2] 30,000

Design and engineering charges of the machine [WN 2] 90,000

Tax levied by Municipal Authority on the sale on the machine. [WN 3] 25,000

Subsidy received by the supplier from the State Government to encourage Nil
manufacture of the machine [WN 4]

Pre-delivery inspection charges paid to an independent agency in terms of the 22,000

agreement for supply [WN 5]

Interest amount paid by M/s. Dhanuka Ltd. for delay in payment for the machine [₹ 10,169
12,000 x 100 ÷ 118] [WN 9]

Total price of the machine 30,27,169

Less: 3% trade discount on price of machinery = ₹ 28,50,000 x 3% [Note 6] 85,500

Taxable value of supply 29,41,669

Tax liability for the month of February 2024 [WN 7]

Add: CGST @ 9% [WN 8] 2,64,750

Add: SGST @ 9% 2,64,750

Total GST payable on the machinery 5,29,501

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 231

Computation of GST to be deposited through electronic cash ledger :

Particulars Value of Eligible input tax credit

taxable
supply CGST* SGST* IGST* Total
(₹) (₹) (₹) (₹)

On Intra-state sales in Rajasthan (Total 29,41,669 2,64,750 2,64,750 - 5,29,501

output tax liability)

Less: Input tax credit—

IGST paid on food items for consumption - - - -

by employees [WN-10]

CGST and SGST on Electrical 15,000 15,000 - 30,000

transformer used in the manufacturing
process.

Net GST payable 2,49,750 2,49,750 - 4,99,501

Working Notes:
(1) Value - Transaction value : The value of a supply is the transaction value i.e., the price
actually paid or payable since M/s. Jonty India Ltd. and M/s. Dhanuka Ltd. are not related and
the price is the sole consideration for the supply.
(2) Secondary packing chargesand design and Engineering charges [Section 15(2)(c)] :
Any amount charged for anything done by the supplier in respect of the supply of goods at the
time of, or before delivery of goods is includible in the value of supply.
(3) The value of supply shall include any taxes, duties, cess, fees and charges levied under any
law for the time being in force other than the CGST Act, the SGST Act, the UTGST Act and the
GST (Compensation to States) Act, if charged separately by the supplier. [Section 15(2)(a) of
CGST Act, 2017]
(4) The value of supply shall include subsidies directly linked to the price excluding subsidies
provided by the Central Government and State Governments. [Section 15(2)(e) of CGST Act,
2017]
(5) Any amount that the supplier is liable to pay in relation to such supply but which has been
incurred by the recipient of the supply and not included in the price actually paid or payable for
the goods or services or both. [Section 15(2)(b) of CGST Act, 2017]
(6) Trade discount : It was deducted by M/s. Jonty India Ltd. upfront at the time of supply and
hence, the same is excluded from the value of supply as it did not form part of the transaction
value. [Section 15(3)(a) of CGST Act, 2017]
(7) Month for which tax payable : The time of supply of goods is 05-02-2024 in terms of
Section 12(1)(a) of the CGST Act, 2017.
(8) Place of supply and nature of tax : In the given case-
(a) the location of the supplier is in Jaipur (Rajasthan); and
(b) the place of supply of machinery is i.e., Udaipur (Rajasthan).
Therefore, the given supply is an intra-State supply as the location of the supplier and the place
of supply are in same State. [Section 8(1)(a) of IGST Act, 2017]

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 232

Thus, the supply will be leviable to CGST and SGST in terms of Section 9(1) of the CGST Act,
2017.
(9) Interest : Interest for the delayed payment of any consideration for any supply is includible
in the value of supply in terms of Section 15(2)(d) of the CGST Act, 2017. As per Section 12(6)
of the CGST Act, 2017, the time of supply in case of addition in value by way of interest, late
fee, penalty etc. for delayed payment of consideration for goods is the date on which the
supplier receives such addition in value. Further, it is assumed that such interest is inclusive of
tax and that the same has been received by M/s. Jonty India Ltd. in the month of February itself.
Thus, the time of supply of interest received on account of delayed payment of consideration is
February 2024, the date when the full payment was made.
(10) As per Section 17(5)(b), no Input tax credit is available in respect of food items primarily
used for personal use of the employees working in factory except where it is obligatory for an
employer to provide the same to its employees under any law for the time being in force.
ILLUSTRATION 15
Valuation of taxable supply and GST liability: M/s. X Ltd., a manufacturer of heavy machines
registered at Mumbai (Maharashtra), supplied one machine to M/s. Y Ltd. in Pune
(Maharashtra) on 19-02-2024 under an invoice of the same date. Using the information given
below, compute the value of machine and the GST payable (CGST, SGST and IGST as the
case may be) in cash for the month of February 2024 by M/s. X Ltd. with appropriate working
notes.
Assume Rate of CGST, SGST and IGST on the machine to be 9%, 9% and 18% respectively.

Particulars Amount (₹)

1. The Basic price of the machine (exclusive of taxes and discount) 18,00,000

2. Trade Discount is allowed at 10% on the basic price and is shown in the 1,80,000
invoice

3. Secondary packing (in iron sheets) charged for safe transportation of the 30,000
machine on the request of buyer.

4. Design and Engineering charges of the machine paid by M/s. Y Ltd. to M/s. 90,000
X Ltd.

5. Pre-delivery inspection charges paid by Y Ltd. to an independent agency 22,000

"Inspection India". In terms of the Agreement for supply, it was the
discretion of the buyer 'Y Ltd.' to appoint, if it so desires, any agency for pre-
delivery inspection, and also to itself pay to such agency.

6. Interest amount paid by M/s. Y Ltd. for delay in payment of the machine, 12,000
said interest was paid by Y Ltd. in April 2024

Inward supply : IGST paid on food items for consumption by employees 10,000
working in the factory. The said food items are provided as per the declared
company policy which is duly informed to the employees while they are
recruited and forms part of their appointment letter, though there is no such
obligation in law.

M/s. X Ltd. has no Input tax credit balance at the beginning of February 2024. All the other
conditions necessary for availing the eligible Input Tax Credit have been fulfilled. There is no
other transaction of supplies during the month of February 2024. M/s. X Ltd. and M/s. Y Ltd. are
not related persons.
GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI
 233

Provide your answers with reasons and with reference to the provisions of law. (5 Marks, Jan.
2021)
SOLUTION
Computation of Value of taxable supply and GST payable —

Particulars ₹

Basic Price of machine (exclusive of taxes and discount) 18,00,000

Secondary Packing charges [WN-1] 30,000

Design and engineering charges [WN-2] 90,000

Pre-delivery inspection charges [WN-3] -

Interest for delay in payment for the machine [₹ 12,000 x 100 ÷ 118] [WN-4] 10,169

Total 19,30,169

Less: 10% trade discount on price of machinery = ₹ 18,00,000 x 10% [WN-5] 1,80,000

Value of taxable supply 17,50,169

Less: Interest for delay in payment for the machine [Time of supply will arise in the month 10,169
of receipt i.e. April 2024] [WN-4]

Taxable value of the machine in February, 2024 17,40,000

Tax liability for the month of February being an intra-State supply [WN-6]

CGST @ 9% 1,56,600

SGST @ 9% 1,56,600

Less: Input tax credit [ITC on supply of, inter alia, food and beverages is blocked if the Nil
employer is not under a statutory obligation to provide the same to its employees]

GST payable through electronic cash ledger [CGST @ 9% and SGST @ 9%] 3,13,200

Working Notes : While computing the value of supply -

(1) As per Section 15(2)(c) of CGST Act, 2017, secondary packing charges charged by supplier
to the recipient will be included for computation of value of supply.
(2) As per Section 15(2)(c) of CGST Act, 2017, any amount charged for anything done by the
supplier in respect of the supply of goods at the time of, or before delivery of goods shall be
included in the value of taxable supply. Hence, design and engineering charges shall also be
included in the value of taxable supply.
(3) The amount incurred by the recipient of the supply is added only if the same was the liability
of the supplier.
(4) Interest for the delayed payment of any consideration for any supply is includible in the value
of supply in terms of Section 15(2)(d) of the CGST Act, 2017. As per Section 12(6) of the CGST
Act, 2017, the time of supply in case of addition in value by way of interest, late fee, penalty etc.
for delayed payment of consideration for goods is the date on which the supplier receives such
addition in value. Further, it is assumed that such interest is inclusive of tax.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 234

(5) As per Section 15(3) of CGST Act 2017, if any discount which is given before or after the
supply has been effected and is established in terms of an agreement or contract then it is
excluded from the calculation of value of supply.
(6) In the given case the location of the supplier and the place of supply of machinery is in the
same state. Therefore, the given supply is an intra-State supply. Thus, the supply will be
leviable to CGST and SGST in terms of Section 9(1) of the CGST Act, 2017.
ILLUSTRATION 16
Computation of Value of taxable supply and GST liability: Jaskaran, a registered supplier of
Delhi, has made the following supplies in the month of January, 2024 :

Particulars (₹)

(i) Supply of 20,000 packages at ₹ 30 each to Sukhija Gift Shop in Punjab [Each 6,00,000
package consists of 2 chocolates, 2 fruit juice bottles and a packet of toy
balloons]

(ii) 10 generators hired out to Morarji Banquet Halls, Chandigarh [Including cost of 2,50,000
transporting the generators (₹ 1,000 for each generator) from Jaskaran's
warehouse to the Morarji Banquet Halls]

(iii) 500 packages each consisting of 1 chocolate and 1 fruit juice bottle given as
free gift to Delhi customers on the occasion of Diwali [Cost of each package is
₹ 12, but the open market value of such package of goods and of goods of like
kind and quality is not available. Input tax credit has not been taken on the
items contained in the package]

(iv) Catering services provided free of cost for elder son's business inaugural
function in Delhi [Cost of providing said services is ₹ 55,000, but the open
market value of such services and of services of like kind and quality is not
available.]

*excluding GST
You are required to determine the GST liability [CGST & SGST and/or IGST, as the case may
be] of Jaskaran for the month of January, 2024 with the help of the following additional
information furnished by him for the said period:
(1) Penalty of ₹ 10,000 was collected from Sukhija Gift Shop for the payment received with a
delay of 10 days.
(2) The transportation of the generators from Jaskaran's warehouse to the customer's premises
is arranged by Jaskaran through a Goods Transport Agency (GTA) who pays tax @ 12%.
(3) Assume the rates of GST to be as under:

Goods/ Services supplied CGST SGST IGST

Chocolates 9% 9% 18%

Fruit juice bottles 6% 6% 12%

Toy balloons 2.5% 2.5% 5%

Service of renting of generators 9% 9% 18%

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 235

Catering service 9% 9% 18%

SOLUTION
Computation of GST liability of Jaskaran for the month of January, 2024 :

Particulars (Amount in ₹)

CGST SGST IGST

Supply of 20,000 packages to Sukhija Gift Shop, Punjab [₹ - - 1,09,525

6,08,475 x 18%] [WN-1]

Renting of 10 generators to Morarji Banquet Halls, Chandigarh (₹ - - 45,000

2,50,000 x 18%) [WN-2]

500 packages given as free gift to the customers [WN-3] Nil Nil Nil

Catering services provided free of cost for elder son's business 5,445 5,445 -
inaugural function in Delhi (CGST: 60,500 x 9%) (SGST: 60,500 x
9%) [WN-3]

Total GST liability (rounded off) 5,445 5,445 1,54,525

Working Notes :
(1) Nature of supply - Mixed supply - Highest rate of tax applicable : As per Section 2(74)
of the CGST Act, 2017, 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.
Supply of a package containing chocolates, fruit juice bottles and a packet of toy balloons is a
mixed supply as each of these items can be supplied separately and is not dependent on any
other. Further, as per Section 8(b) of the CGST Act, 2017, the mixed supply is treated as a
supply of that particular supply which attracts the highest rate of tax. Thus, in the given case,
supply of packages is treated as supply of chocolates [since it attracts the highest rate of tax].
Consequently, being an inter-State supply of goods, supply of packages to Sukhija Gift Shop of
Punjab is subject to IGST @ 18% each.
Penalty to be included in value of supply : Further, value of supply includes interest or late
fee or penalty charged for delayed payment of any consideration for any supply in terms of
Section 15(2)(d) of the CGST Act, 2017. Thus, penalty of ₹ 10,000 [considered as inclusive of
GST] collected from Sukhija Gift Shop for the delayed payment will be included in the value of
supply. The total value of supply is ₹ 6,08,475 [₹ 6,00,000 + (₹ 10,000 x 100/118)]
(2) Renting of generators along with their transportation - Principal supply is the renting
of generator : Services by way of transportation of goods by road except the services of a
Goods Transportation Agency (GTA) are exempt vide Notification No. 9/2017-IT (R) dated 28-
06-2017. Since Jaskaran is not a GTA, transportation services provided by him are exempt from
GST. However, since the generators are invariably hired out along with their transportation till
customer’s premises, it is a case of composite supply under section 2(30) of the CGST Act,
2017 wherein the principal supply is the renting of generator.
As per Section 8(a) of the CGST Act, 2017, the composite supply is treated as the supply of the
principal supply. Therefore, the service of transportation of generators will also be taxed at the
rate applicable for renting of the generator (principal supply).

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 236

Nature of supply - Inter-state supply : Consequently, being an inter-State supply of service,

service of hiring out the generators to Morarji Banquet Halls of Chandigarh is subject to IGST @
18% each.
(3) Supply without consideration : As per Section 7(1)(c) of the CGST Act, 2017, an activity
made without consideration can be treated as supply only when it is specified in Schedule I of
the CGST Act, 2017. Para 2. of Schedule I provides that 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, are to be treated as supply even if made without
consideration.
Free gifts to unrelated customers - Not regarded as supply : However, since the question
does not provide that customers are related to Jaskaran, free gifts given to the customers
cannot be considered as a supply under section 7. Consequently, no tax is leviable on the
same.
Catering services to related person - Treated as supply : Further, the catering services
provided by Jaskaran to his elder son without consideration will be treated as supply as
Jaskaran and his elder son, being members of same family, are related persons in terms of
explanation (a)(viii) to Section 15 of the CGST Act, 2017 and said services have been provided
in course/furtherance of business.
Value of supply - 110% of cost : Value of supply of services between related persons, other
than through an agent is determined as per Rule 28 of the CGST Rules, 2017. Accordingly, the
value of supply is the open market value of such supply; if open market value is not available,
the value of supply of goods or services of like kind and quality. However, if value cannot be
determined under said methods, it must be worked out based on the cost of the supply plus
10% mark-up. Thus, in the given case, value of catering services provided to the elder son of
Jaskaran is ₹ 60,500 [₹ 55,000 x 110%]. Further, being an intra-State supply of services,
catering services are subject to CGST and SGST @ 9% each.
(4) GTA paying tax @ 12% - RCM not applicable : As per Notification No. 13/2017-CT (Rate)
dated 28-06-2017, GST is payable by the recipient on reverse charge basis on the receipt of
services of transportation of goods by road from a goods transport agency (GTA) provided such
GTA has not paid GST @ 12%. Since in the given case, Jaskaran has received services from a
GTA who has paid GST @ 12%, reverse charge provisions will not be applicable.
ILLUSTRATION 17
Computation of Value of taxable supply and GST liability : Mrs. Kajal a registered supplier
of Jaipur (Rajasthan) has made the following supplies in the month of January, 2024 :
(i) Supply of a laptop bag along with the laptop to a customer of Mumbai for ₹ 55,000
(exclusive of GST).
(ii) Supply of 10000 kits (at ₹ 50 each) amounting ₹ 5,00,000 (exclusive of GST) to Ram
Fancy Store in Kota (Rajasthan). Each kit consists of 1 hair oil, 1 beauty soap and 1 hair
comb.
(iii) 100 kits given as free gift to Jaipur customers on the occasion of Mrs. Kajal₹s
birthday. Each kit consists of 1 hair oil and 1 beauty soap. Cost of each kit ₹ 35, but the
open market value of such kit of goods and of goods of like kind and quality is not
available. Input tax credit has not been taken on the goods contained in the kit.
(iv) Event management services provided free of cost for brother’s son marriage
function in Indore (Madhya Pradesh). Cost of providing said services is ₹ 80,000, but the
open market value of such services and of services of like kind and quality is not
available.
(v) 1400 chairs and 100 coolers hired out to Function Garden, Ajmer (Rajasthan) for ₹
3,30,000 (exclusive of GST) including cost of transporting the chairs and coolers [₹ 20

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 237

(exclusive of GST) for each chair and each cooler] from Mrs. Kajal’s godown at Jaipur to
the Function Garden Ajmer. The cost of transportation of chairs and coolers is paid by
Mrs. Kajal to an unregistered Goods Transport Agency (GTA).
Interest of ₹ 6,400 (inclusive of GST) was collected by Mrs. Kajal from Ram Fancy Store, Kota
for the payment received with a delay of 30 days.
Assume rates of GST to be as under :-

S. Particulars Rate of Rate of Rate of

CGST(%) SGST (%) IGST (%)
No.

1. Laptop 9 9 18

2. Laptop Bag 14 14 28

3. Hair Oil 9 9 18

4. Beauty soap 14 14 28

5. Hair Comb 6 6 12

6. Event Management Service 2.5 2.5 5

7. Service of Renting of Chairs and Coolers 6 6 12

8. Transportation Service 2.5 2.5 5

From the above information compute the GST liability (CGST and SGST and/or IGST, as the
case may be) of Mrs. Kajal for the month of January, 2024. (9 Marks, May 2019)
SOLUTION
Computation of GST liability of Mrs. Kajal for the month of January, 2024 :

Particulars CGST SGST IGST

(₹) (₹) (₹)

Supply of a laptop bag along with the laptop to a customer of - - 9,900

Mumbai [₹ 55,000 x 18%] [WN-1]

Supply of 10000 kits (at ₹ 50 each) to Ram Fancy Store in 70,700 70,700 -
Kota (Rajasthan) (CGST: ₹ 5,05,000 x 14%) (SGST: ₹
5,05,000 x 14%) [WN-2]

100 Kits given as free gift to the customers on occasion of Mrs. Nil Nil Nil
Kajal birthday [WN-3]

Event Management services provided free of cost for brother’s Nil Nil Nil
son marriage function in Indore (Madhya Pradesh) [WN-4]

Renting of 1400 chairs and 100 coolers to Function Garden, 19,800 19,800
Ajmer (Rajasthan) (CGST: ₹ 3,30,000 x 6%) (SGST: ₹
3,30,000 x 6%) [WN-5]
GST liability under Reverse Charge :

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 238

Cost of transportation paid by Mrs. Kajal to unregistered GTA 750 750

(CGST: ₹ 30,000 x 2.5%) (SGST: ₹ 30,000 x 2.5%) [WN-6]

Total GST liability 91,250 91,250 9,900

Less: Input tax credit of tax paid on GTA services under 750 750 -
reverse charge mechanism

Net GST Liability 90,500 90,500 9,900

Working Notes :
(1) Nature of supply - Composite supply - Rate of tax of principal supply shall be
applicable : As per Section 2(30) of the CGST Act, 2017, 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.
Supply of a laptop bag along with the laptop to a customer is a composite supply where the
principal supply is supply of laptop and supply of laptop bag is incident or ancillary services.
Laptop bags are generally supplied with laptops for safety of laptop. Further, as per Section 8(a)
of the CGST Act, 2017, a composite supply comprising two or more supplies, one of which is a
principal supply, shall be treated as a supply of such principal supply. Thus, in the given
case, supply of a laptop bag along with the laptop treated as supply of laptop. Consequently,
being an inter-State supply of goods, supply of a laptop bag along with the laptop to a customer
of Mumbai is subject to IGST @ 18%.
(2) Nature of supply - Mixed supply - Highest rate of tax applicable : As per Section 2(74)
of the CGST Act, 2017, 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.
Supply of a kits containing 1 hair oil, 1 beauty soup and 1 hair comb is a mixed supply as each
of these items can be supplied separately and is not dependent on any other. Further, as per
Section 8(b) of the CGST Act, 2017, the mixed supply is treated as a supply of that particular
supply which attracts the highest rate of tax. Thus, in the given case, supply of kits is treated as
supply of beauty soap [since it attracts the highest rate of tax]. Since the location of supplier and
place of supply is in Rajasthan, being an intra-State supply of goods, supply of kits to Ram
Fancy Store of Kota (Rajasthan) is subject to CGST and SGST @ 14% each.
Interest to be included in value of supply : Further, value of supply includes interest or late
fee or penalty charged for delayed payment of any consideration for any supply in terms of
Section 15(2)(d) of the CGST Act, 2017. Thus, interest of ₹ 6,400 [inclusive of GST] collected
from Ram Fancy Store for the delayed payment will be included in the value of supply. The total
value of supply is ₹ 5,05,000 [₹ 5,00,000 + (₹ 6,400 x 100/128)]
(3) Supply without consideration : As per Section 7(1)(c) of the CGST Act, 2017, an activity
made without consideration can be treated as supply only when it is specified in Schedule I of
the CGST Act, 2017. Para 2. of Schedule I provides that 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, are to be treated as supply even if made without
consideration.
Free gifts to unrelated customers - Not regarded as supply : However, since the question
does not provide that customers are related to Mrs. Kajal, free gifts given to the customers
cannot be considered as a supply under section 7. Consequently, no tax is leviable on the
same.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 239

(4) Event Management services free of cost for brother's son marriage - not to be
regarded as supply : Further, the event management services provided by Mrs. Kajal for her
brother's son without consideration cannot be considered as supply under section 7 read with
Schedule I of the CGST Act as the service is provided to unrelated person without
consideration.
(5) Renting of 1400 chairs and 100 coolers along with their transportation - Principal
supply is the renting of chairs and coolers : Services by way of transportation of goods by
road except the services of a Goods Transportation Agency (GTA) are exempt vide Notification
No. 9/2017-IT (R) dated 28-06-2017. Since Mrs. Kajal is not a GTA, transportation services
provided by her are exempt from GST. However, since the chairs ans coolers are invariably
hired out along with their transportation till customer's premises, it is a case of composite supply
under section 2(30) of the CGST Act, 2017 wherein the principal supply is the renting of chairs
and coolers.
As per Section 8(a) of the CGST Act, 2017, the composite supply is treated as the supply of the
principal supply. Therefore, the service of transportation of generators will also be taxed at the
rate applicable for renting of the chairs and coolers (principal supply).
Nature of supply - Intra-state supply : Consequently, being an intra-State supply of service,
service of hiring out the chairs and coolers to Function Garden of Ajmer (Rajasthan) is subject
to CGST and SGST @ 6% each.
(6) Unregistered GTA - RCM applicable : As per Notification No. 13/2017-CT (R) dated 28-06-
2017, GST is payable by the recipient on reverse charge basis on the receipt of services of
transportation of goods by road from a goods transport agency (GTA) provided such GTA has
not paid GST @ 12%. Since in the given case, Mrs. Kajal has received services from a
Unregistered GTA , reverse charge provisions will be applicable.
ILLUSTRATION 18
Computation of Value of taxable supply and GST liability : Mangesh Enterprises, Goa, a
registered supplier, has made the following supplies in the month of February 2024 :
(i) Supply of guest house accommodation with facilities of cooling, heating, internet and parking
to customers on daily rentals of ₹ 1,500. Mangesh Enterprises has 20 guest suites. During the
month, there was 50% occupancy. Catering and Food service were supplied separately to
those who opted for it at a cost of ₹ 500 per day of occupancy. Total amount collected for
catering and food service was ₹ 70,000. (2 Marks, May 2022)
(ii) Supplied monthly air-conditioner maintenance services (intra-State) to a software company
under a contract effective 1st February, 2024 for Six months. According to the terms of service
in the contract, the software company is liable to pay service charges of ₹ 12,000 for the entire
period plus cost of spares and replacements at actuals. Taxes are separate and payable in
accordance with statute. Mangesh Enterprises is yet to raise an invoice, though service was
provided for February, 2024. During the month the company has not provided any spares or
replacements as part of maintenance service. Further the concern has not received any amount
towards above services.
Assume rates of GST as under :

S. No. Particulars Rate of GST (CGST +

SGST)

1. Air conditioner Maintenance 18%

2. Food catering service 5%

3. Renting of guest house service 18%

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 240

4. Parking service 18%

With the help of the above information, examine each of the above supplies made by Mangesh
Enterprises for the month of February, 2024 and determine the rate and the amount of GST
applicable on the supplies made. (2 Marks, May 2022)
SOLUTION
Computation of GST liability of Mangesh for the month of February 2024 :

Particulars Value CGST SGST

(₹) (₹) (₹)

Supply of guest house accommodation service [₹ 1500 x 4,20,000 37,800 37,800

28 days x 20 suites x 50% occupancy] (Renting of guest house
service is taxable @ 18%. Hence, CGST @ 9% and SGST @
9% is applicable)

Catering service [Since the same is supplied separately to 70,000 1,750 1,750
the customers who have opted, hence it cannot be regarded
as composite supply where principal supply is renting of guest
house service. Hence GST rate of 5% is applicable.]

Air conditioned maintenance service [The same will not fall

under continuous supply of service as there is no periodic
payment obligations even though the service is provided for a
period exceeding three months. As per section 31(2) read with
rule 47 of CGST Rules, the tax invoice needs to be issued
either before the provision of service or within 30 days from the
date of supply of service. Here invoice is to be issued within 30
days of completion of service. Since payment has not been
received, hence no GST liability will arise in the month of
February.]

Value and Net GST Liability 39,550 39,550

ILLUSTRATION 19
Computation of GST liability - Mixed and Composite supply: M/s Diva Fashions (Proprietor
Ms. Diva), a registered supplier in Ludhiana (Punjab) under GST law, has made the following
supplies in the month of February 2024.
(i) Supply of designer silk dresses packed in designer boxes to a boutique in Mumbai,
(Maharashtra) as per contract entered with the boutique amounting to ₹ 25,00,000.
(ii) Supply of 600 kits (at ₹ 1000 each kit) amounting to ₹ 6,00,000 to Mrs. Arora in Amritsar
(Punjab). Each it consisted of 1 silk dupatta, 1 sari brooch and 1 lipstick.
(iii) M/s Diva Fashinons organizes a fashion show in Chandigarh. Zion Exports Ltd, a registered
entity in Jaipur (Rajasthan) has sponsored the show for which M/s Diva Fashions received ₹
7,50,000 from it.
(iv) 200 kits are given as free gifts to customers on the occasion of 5th anniversary of M/s Diva
Fashions. Each kit consists of 1 silk dupatta and 1 sari brooch. Cost of each kit is ₹ 350. The
open market value of such kit of goods and of goods of like kind and quality is not available.
Input tax credit has not been taken on the goods contained in the kit.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 241

(v) Professional services provided free of cost by Ms. Diva to her independent married sister to
set up her own boutique in Delhi. Cost of providing such services is ₹ 1,00,000, but the open
market value of such services and of services of like kind and quality is not available.
(vi) M/s Diva Fashions enters into a contract on 1st February, 2021 for 3 years with Miss Shikha,
a local model to act as a brand ambassador for their products for ₹ 1 lakh (exclusive of GST -
18% IGST, 9% CGST and SGST each) per annum. Miss Shikha terminated the contract on 2 nd
February 2024. As per the contract, M/s Diva Fashions received 25% of the total contract fees
paid to Miss Shikha as the contract is terminated before 3 years, on 15th February, 2024. Miss
Shikha had received the contract fee for 2 years at the time of termination of the contract.
Other information are given below -
(a) All above amounts are exclusive of GST.
(b) Mrs. Arora paid interest of ' 8,850 (inclusive of GST) for delay in making payment to M/s
Diva Fashions.
(c) Assume rates of GST as under -

Particulars Rate of IGST Rate of Rate of

CGST SGST

1. Silk Dresses 18% 9% 9%

2. Designer Boxes 28% 14% 14%

3. Silk Dupatta 12% 6% 6%

4. Sari Brooch 18% 9% 9%

5. Lipstick 5% 2.5% 2.5%

6. Sponsorship received from Zion Exports 28% 14% 14%

Ltd.

7. Professional services 18% 9% 9%

From the above information, compute the total GST liability of M/s. Diva Fashions for the month
of February, 2024. Working notes should from part of your answer. (9 Marks, May 2023)
SOLUTION
Computation of GST liability of Ms. Diva for the month of January, 2024 :

Particulars (Amount in ₹)

CGST SGST IGST

(i) Supply of designer silk dresses packed in designer boxes - - 4,50,000

[₹25,00,000 x 18%] [WN-1]

(ii) Supply of 600 kits (at ₹ 1000 each) to Mrs Arora in Amritsar 54,675 54,675 -
(Punjab) (CGST: ₹ 6,07,500 x 9%) (SGST: ₹ 6,07,500 x 9%)
[WN-2]

(iii) Sponsorship services provided to Zion Exports limited[WN- - - -

3]

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 242

(iv) 200 Kits given as free gift to the customers on occasion of Nil Nil Nil
5th Anniversary of diva faishone [WN-4]

(v) Professional services provided free of cost to independent Nil Nil Nil
sister
[WN-5]

(vi) Penalty charged from Miss Shikha by M/s. Diva Fashions Nil Nil Nil
[WN-6]

Net GST Liability 54,675 54,675 4,50,000

Working Notes :
(1) Nature of supply - Composite supply - Rate of tax of principal supply shall be
applicable : As per
Section 2(30) of the CGST Act, 2017, 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.
Supply of a designer bag along with the designer silk dresses to a customer is a composite
supply where the principal supply is supply of designer silk dresses and supply of designer
boxes is incident or ancillary services. Designer boxes are generally supplied with dresses for
safety of dresses. Further, as per Section 8(a) of the CGST Act, 2017, a composite supply
comprising two or more supplies, one of which is a principal supply, shall be treated as a
supply of such principal supply. Thus, in the given case, supply of a designer boxes along
with the designer silk dresses treated as supply of laptop. Consequently, being an inter-State
supply of goods, supply is subject to IGST @ 18%.
(2) Nature of supply - Mixed supply - Highest rate of tax applicable : As per Section 2(74)
of the CGST Act, 2017, 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.
Supply of a kits containing 1 silk dupatta, 1 sari brooch and 1 lipstick is a mixed supply as each
of these items can be supplied separately and is not dependent on any other. Further, as per
Section 8(b) of the CGST Act, 2017, the mixed supply is treated as a supply of that particular
supply which attracts the highest rate of tax. Thus, in the given case, supply of kits is treated as
supply of brooch [since it attracts the highest rate of tax]. Since the location of supplier and
place of supply is in Punjab, being an intra-State supply of goods, supply of kits to Mrs Arora of
Amritsar (Punjab) is subject to CGST and SGST @ 9% each.
Interest to be included in value of supply : Further, value of supply includes interest or late
fee or penalty charged for delayed payment of any consideration for any supply in terms of
Section 15(2)(d) of the CGST Act, 2017. Thus, interest of ₹ 8,850 [inclusive of GST] collected
from Mrs. Arora for the delayed payment will be included in the value of supply. The total value
of supply is ₹ 6,07,500 [₹ 6,00,000 + (₹ 8,850 x 100/118)]
(3) Services provided by way of sponsorship to any body corporate or partnership firm is
chargeable to tax under reverse charge basis. Hence, Zion Exports limited is liable to pay tax
on the same.
(4) Supply without consideration : As per Section 7(1)(c) of the CGST Act, 2017, an activity
made without consideration can be treated as supply only when it is specified in Schedule I of
the CGST Act, 2017. Para 2. of Schedule I provides that supply of goods or services or both
between related persons or between distinct persons as specified in Section 25, when made in

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 243

the course or furtherance of business, are to be treated as supply even if made without
consideration.
Free gifts to unrelated customers - Not regarded as supply : However, since the question
does not provide that customers are related to Ms. Diva, free gifts given to the customers
cannot be considered as a supply under section 7. Consequently, no tax is leviable on the
same.
(5) Professional services provided free of cost to independent married sister - not to be
regarded as supply : Further, the professional services provided by Ms. Diva for her
independent married sister without consideration cannot be considered as supply under section
7 read with Schedule I of the CGST Act as the service is provided to unrelated person without
consideration.
(6) Being 'liquidated damages', they are merely compensation for loss due to breach of the
contract and not the consideration for tolerating non-performance of contract, hence the same is
not covered in the ambit of supply, hence not liable to GST - Vide Circular No. 178/10/2022
GST dated 03.08.2022

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 244

PLACE OF SUPPLY OF GOODS OR

SERVICES OR BOTH

Place of Supply of Goods in Domestic Transactions, i.e. within India [Sec 10(1)]
The place of supply of goods, other than supply of goods imported into, or exported from
India, shall be as under-

Nature of Supply Parties Involved Place of Supply

Involves Movement of Goods Supplier Recipient Location of the goods when the
Any other person movement of goods terminates for
delivery to the recipient

Bill-to-Ship-to Sale[If the goods are Supplier Principal Place of Business of Third
delivered by the supplier to a Recipient) Person, i.e. Location of Billing
recipient or any other person on the Shipping Address) Address [it is deemed that the said
direction of a third person, whether third person has received the
Third Person)
acting as an agent or otherwise, goods]
Billing Address)
before or during movement of
goods, either by way of transfer of
documents of title to the goods or
otherwise]

Does not Involve Movement of Supplier Recipient Location of goods at the time of
Goods delivery to the recipient

Installation and Assembly of Goods - Place of installation or assembly of

at Site Goods

Goods are supplied on board a - Location at which such goods are

conveyance, including a vessel, an taken on board.
aircraft, a train or a motor vehicle,

Note: Where the place of supply of goods cannot be determined, the place of supply shall be
determined as per the prescribed manner. [Sec 10(2)]
Illustration M 18 :Determination of Place of Supply
Raman Row, a registered supplier under GST in Mumbai, is directed by Nero Enterprises,
Kolkata to Deliver Goods valued at ₹ 12,00,000 to Fabricana of Aurangabad in
Maharashtra. Raman Row makes out an invoice at 9% tax rate under CGST and SGST
respectively (scheduled rate) and delivers it locally in Maharashtra.
Discuss and comment on the above Levy of Tax and determine the tax liability of goods
in the above circumstances.
Solution:
1. Provision: If the goods are delivered by the supplier to a recipient or any other
person on the direction of a third party, whether acting as an agent or otherwise, before
or during movement of goods either by way of transfer of documents of title to the goods
or otherwise, then POS = Principle place of business of such third party, i.e. Location of
Billing Address. [Sec. 10(1)(b)]

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 245

2. Analysis and Conclusion:

(a) In the given case, Raman Row( Supplier) had delivered the goods to Fabricana
(Recipient) on the direction of Nero enterprises (Third party). Therefore, Kolkata which is
the Principal place of business • of Nero enterprises is the POS.
(b) Hence Raman Row is incorrect in charging CGST & SGST but should have charged
IGST as it is it is deemed that the Nero enterprises of Kolkatta, has received the goods.

Place of Supply of Goods in International Transactions, i.e. outside India [Sec 11]
Place of supply of goods imported into, or exported from India, shall be-

Nature of Supply Place of Supply

Import of Goods into India Location of the Importer

Export of Goods from India Location outside India

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 246

Meaning of Important Terms relating Supply of Services

1. Location of the Supplier of Services [Sec.2(15) of IGST Act]-

When Supply is made from - Location of Supplier of Services

A place of business for which the registration Location of such place of business
has been obtained

a place other than the place of business for Location of such fixed establishment
which registration has been obtained (a fixed
establishment elsewhere)

More than one establishment, (whether at Location of the establishment most directly
the place of business or fixed establishment) concerned with the receipt of the supply

in absence of such places Location of the usual place of residence of the

Supplier.

2. Location of the Recipient of Services [Sec.2(14) of IGST Act]-

When Supply is received at - Location of Recipient of Services

A place of business for which the registration Location of such place of business
has been obtained

a place other than the place of business for Location of such fixed establishment
which registration has been obtained (a fixed
establishment elsewhere)

More than one establishment, (whether at Location of the establishment most directly
the place of business or fixed establishment) concerned with the receipt of the supply

in absence of such places Location of the usual place of residence of the

recipient.

3. Fixed Establishment [Sec.2(7) of IGST Act]- Fixed establishment means a place (other
than the registered place of business) which is characterised by a sufficient degree of
permanence and suitable structure in terms of human and technical resources to supply
services or to receive and use services for its own needs.
4. Export of Services [Sec.2(6) of IGST Act|-“Export of Services” means the supply of any
service when,—
(i) the supplier of service is located in India,
(ii) the recipient of service is located outside India,
(iii) the place of supply of service is outside India,
(iv) the payment for such service has been received by the supplier of service in convertible
foreign exchange, and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct
person.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 247

Place of Supply of Services [Where Location of Supplier and Recipient

is in India] [Sec. 12 of IGST Act]

General Rule [Sec 12(2)]

Nature of Supply If recipient is If recipient is Unregistered Person

Registered Person (B2C)
(B2B)

Supply of services, except the Location of Recipient If Address of the If Address of the
specified services (discussed recipient recipient not
below) available available

Location of Location of Supplier

Recipient

General Rule in case of Supply in Multiple States

Nature of Supply Supply based on predetermined contract / agreement Supply not based
on contract /
agreement

Supply of Service is Service in relation to such state / UT shall be in On the Prescribed

made in more than proportion to the value for services separately basis
one State / UT collected or determined in terms of the contract or
agreement.

POS relating to Immovable Property / Boat / Vessel [Sec 12(3)]

1. POS = Place where the Immovable Property or Boat or Vessel is located or intended to
be located
2. Applicability: These provisions are applicable for the following Supply of services -
(a) Services provided directly in relation to an immovable property including services
provided by Architects, Interior decorators, Surveyors, Engineers and other related
experts or Estate agents.
(b) Services provided by way of Grant of rights to use Immovable Property.
(c) Services provided by way of Lodging accommodation by a Hotel, Inn, Guest
House, Home Stay, Club, Campsite, house Boat or any other Vessel
(d) Services provided by way of accommodation in any immovable property for
organizing any marriage/reception or matters thereto which could be official, social,
cultural, religious or business functions including services provided in relation to such
function at such immovable property.
(e) Any Services ancillary to the above mentioned services.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 248

Nature of Supply Location of Place of Supply

Immovable
property/Boat/
Vessel

Supply of Services relating In India Location or Intended Location of such

to immovable property/ immovable property/boat/vessel
boat/ vessel including
accommodation therein Outside India Location of recipient

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 249

POS relating to Restaurant / Personal effects [Sec 12(4)]

Nature of Supply If recipient is Registered If recipient is Unregistered

Person (B2B) Person (B2C)

Restaurant and Catering Services Location of Performance of Location of Performance of

Service Service
Personal Grooming, Fitness and
Beauty Treatment.

Health service including Plastic and

Cosmetic Surgery

POS relating to Training and Performance Appraisal [Sec 12(5)]

Nature of Supply If recipient is Registered If recipient is Unregistered

Person (B2B) Person (B2C)

Training and Performance Location of Recipient Location of Performance of

Appraisal Service

POS relating to Admission to Events/Amusement park [Sec 12(6)]

Nature of Supply If recipient is If recipient is

Registered Person Unregistered Person
(B2B) (B2C)

1. Admission to a cultural, artistic, sporting, Place where the Place where the Event
scientific, educational, entertainment event or Event is held / is held / Location of
amusement park or any other place Location of Park Park
2. Services ancillary to such Admission

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 250

POS relating to Organisation of Events [Sec 12(7)]

Nature of Supply If recipient is If recipient is

Registered Person Unregistered Person
(B2B) (B2C)

1. Organisation of cultural, artistic,

sporting, scientific, educational,
entertainment event [including supply of
services] If Location of Event is in
India, then POS = Location
2. Supply of Services in relation to a where the event is held
Location of Recipient
conference, fair, exhibition, celebration If the Location of Event is
or similar events Outside India, then POS =
Location of Recipient
3. Services Ancillary to above events or
Assigning of Sponsoring to above
events

Determination of Place of Supply M 18

Determine the Place of Supply for the following independent cases under the IGST Act,
2017:
Grand Gala Events, an event management company at Kolkata, organizes two award
functions for Kalyan Jewellers of Chennai (Registered in Chennai) at New Delhi and at
Singapore.
Perfect Planners (Bengaluru) is hired by Dr. Kelvin (unregistered person based in Kochi)
to plan and organize his son's wedding at Mumbai. Will your answer be different if the
wedding is to take place at Malaysia₹
Solution:

S.No. Situation Provision POS

(i) (a) Organizing of Event in Delhi If recipient is a registered person Chennai

- POS = Location of Recipient

(b) Singapore If recipient is a registered person Chennai

- POS = Location of Recipient

(ii) (a) Organization of Event in Mumbai If recipient is unregistered, POS Mumbai

= Place of Event

(b) Organization of Event in Malaysia If recipient is unregistered and Kochi

location of event is outside India,
then POS = Location of Recipient

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 251

Determination of Place of Supply M 18

Mr. Murthy, an unregistered person and a resident of Pune, hires the service of M/s Sun
Ltd an Event Management Company registered in Delhi, for organizing of the new
product launch in Bengaluru.
(i) Determine the place of supply of services provided by M/s Sun Ltd.
(ii) What would your answer be in case the product launch takes place in Bangkok?
(iii) What would your answer be in case Mr. Murthy is a registered person and product
launches take place in Bengaluru and Bangkok?
Solution:

S.No. Situation Provision POS

(i) If Murthy is Unregistered If recipient is unregistered, POS = Bengaluru

Place of Event
For Services Provided to
unregistered Person in Bengaluru

(ii) For Services Provided to If recipient is unregistered and Pune

unregistered Person in Bangkok location of event is outside India,
then POS = Location of Recipient

(iii) If Murthy is Registered If recipient is a registered person, Pune

Irrespective of the location of event,
(c) Organization of Event in
POS = Location of recipient
Bengaluru

(d) Organization of Event in

Bangkok

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 252

Supply of Services relating to Transportation Services [Sec.12 (8-10)]

A. Transportation of goods

Sec.12 Situation Transportation of goods to a place Transportation of

in India goods to a place
outside India

If recipient is If recipient is Both registered and

Registered Unregistered Person Unregistered Person
Person (B2B) (B2C)

(8) Transportation of Location of Location at which Place of destination of

Goods including by Registered goods are handed such goods
Mail or Courier Person over for their
transportation

B. Transportation Services - Others

Sec.12 Situation If recipient is If recipient is Unregistered

Registered Person Person (B2C)
(B2B)

(9) Place where the Passenger

embarks on the Conveyance
for a Continuous Journey
Passenger Transportation Location of Registered Note: Return Journey is
[Note] Person regarded as a Separate
Booking and such place of
embarkation shall be treated as
place of Supply.

(10) Supply of Services provided

onboard a Conveyance, First Scheduled Point of
First Scheduled Point of
including a Vessel, an Departure of the
Departure of the Conveyance
aircraft, a train or a motor Conveyance
vehicle

Note: Meaning of Terms

Term Meaning

Continuous A "Continuous Journey" means a Journey for which -

Journey
(a) A Single Ticket has been issued for the entire journey, or
(b) More than one ticket or Invoice has been issued for the journey, by a single
supplier, or by an Agent on behalf of more than one supplier, at the same time,
and
(c) there is no stopover between any of the legs of the Journey for which one or
more separate tickets or invoices are issued.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 253

Stopover (a) Stopover means a Place where a Passenger can disembark either to transfer
to another Conveyance, or break his Journey for a certain period in order to
resume it at a later point of time.
(b) All Stopovers do not cause a break in Continuous Journey. Only such
Stopovers will be relevant for which one or more separate tickets are issued.
(c) Example: If a person travels on Mumbai -London- New York-London-Mumbai
with a Single Ticket, such travel would be treated as Continuous Journey.
However, if a Separate Ticket is issued for travel for New York - Germany - New
York, such journey will not be considered as Continuous Journey.

illustration: Services provided on-board a Conveyance

Nature of Service POS = First Scheduled

Point of Departure

Catering Services provided during the Movement of Vessel from India

India to Sri Lanka.

Video Game Services provided on-board an Aircraft during the Canada

Movement from the Delhi to Chennai. The Aircraft originally departed
from Canada.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 254

POS relating to Telecommunication Services [Sec.12(11)]

Nature of Supply of Service Place of Supply

• Fixed Communication Line Place of Installation of these items for receipt of

services
• Leased Circuits
• Internet leased circuit
• Cable or Dish Antenna

Post-paid mobile connection and internet Billing Address of the recipient on the record of
services the supplier

Pre-paid • By Selling Agents Address of the selling agent/re-seller/distributor at

mobile the time of supply as per the record of the
• By Re-Seller
connection, supplier
internet • By Distributor of SIM card or
services recharge voucher
and direct
to To Final Subscriber Location where pre-payment is received or
home(DTH) vouchers are sold
services:
Pre-paid services, the If Address of the If Address of the
payment for which is made recipient is available recipient is not available
Internet banking/other
electronic mode of payment Location of the recipient Location of Supplier

Other Cases If Address of the If Address of the

recipient is available recipient is not available

Location of the recipient Location of Supplier

POS relating to Banking &Financial / Stock Broking Services [Sec.12(12)]

Nature of Supply If Location of recipient If Location of recipient

available in records of not available in records
supplier of supplier

Financial and Stock Broking Location of Recipient Location of Supplier

Services

POS relating to Insurance Services [Sec.12(13)]

Nature of Supply If recipient is Registered If recipient is Unregistered

Person (B2B) Person (B2C)

Insurance Services Location of Recipient Location of Recipient as per the

records of supplier

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 255

POS Advertisement Services [Sec 12(14)]

Recipient of Service (a) Central Government,

(b) a State Government,
(c) a statutory body or
(d) a local authority

If Place of Service is identified in the Such States or Union territories respectively. Value of
Contract / Agreement Services shall be in proportion to the amount
attributable to services provided by way of
dissemination in the respective States/ UT

If Place of Service not in the Contract / On other prescribed basis

Agreement

In case of Advertisement Over Internet Shall be deemed to have been provided all over
India. Value of Such Service will be apportioned
amongst all States and UTs, of India in the prescribed
manner.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 256

Place of Supply of Services [Where Location of Supplier or Recipient

is outside India] [Sec. 13 of IGST Act]

General Rule [Sec 13(2)]

The provisions of this section shall apply to determine the place of supply of services where the
location of the supplier of services or the location of the recipient of services is outside India-

Nature of Supply If recipient is If recipient is Unregistered Person (B2C)

Registered
Person (B2B)

Supply of services, Location of If Address of the If Address of the

except the specified Recipient recipient is available in recipient is NOT
services (discussed the ordinary course of available in the ordinary
below) Business course of Business

Location of Recipient Location of Supplier

POS relating to Performance based Services [Sec 13(3)] •

Nature of Supply Place of Supply

1. Services supplied in respect of goods which are Location of performance of Service

physically made available by the recipient to
supplier of service or to any other person acting
on behalf of the supplier to provide the service.
Note: Exceptions - See Point 2 & 3 given below

2. Services supplied in respect of goods from a Location where the Goods are situated at
remote location by way of electronic means the time of supply of services

3. Services supplied in respect of goods which General Rule

are:
• Location of the recipient
(a) Temporarily imported into India for repairs or
• Location of the supplier, if the location of
for any other treatment or process, and
recipient is not available
(b) Exported after repairs or treatment or process
without being put to any other use in India

4. Services supplied to an individual, which Location of performance of service

require the physical presence of the recipient
or any person acting on behalf of the recipient

Note: If the above services are supplied at more than one location, including a location in the
taxable territory, its place of supply shall be the location in the taxable territory.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 257

POS relating to Services relating to Immovable Property [Sec 13(4)]

1. POS = Place where the Immovable Property is located or intended to be located
2. Applicability: These provisions are applicable for the following Supply of services -
(a) Services provided directly in relation to an immovable property.
(b) Services provided in relation to immovable property by Experts and Estate
Agents.
(c) Supply of Accommodation by a Hotel, Inn, Guest House, Club, Campsite by
whatever name called,
(d) Grant of rights to use Immovable Property.
(e) Services for carrying out Construction Work or its co-ordination, including that of
Architects or Interior Decorators.

Nature of Supply Place of Supply

Supply of Services relating to immovable property Location or Intended Location of such

including accommodation therein immovable property

Vote: If the above services are supplied at more than one location, including a location in the
taxable territory, its place of supply shall be the location in the taxable territory.
Determination of Place of Supply M 18
Mr. Mahendra Goyal, an interior decorator provides professional services to Mr. Harish
Jain in relation to two of his immovable properties. Determine the place of supply in the
transactions below as per provisions of GST law in the following independent situations:

Case Location of Mr. Mahendra Location of Mr. Harish Properties situated at

Goyal Jain

I Delhi Mumbai New York (USA)

II Delhi New York Paris (France)

Explain the relevant provisions of law to support your conclusions.

Solution:
As per Sec. 12(3) of IGST Act 2017, the place of supply of services relating to immovable
property is the place where the immovable property is located or intended to be located. If the
location of the immovable property is outside India, POS is the location of recipient.

Case I: Location of Property - USA Case II: Location of Property - Paris

POS - Location of recipient i.e. of Mr. Harish Jain POS = Location of immovable property

POS = Mumbai POS = Paris

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 258

POS relating to Admission or Organisation of Events [Sec 13(5)]

Applicability POS

1. Admission to or Organisation of a cultural, artistic, sporting, scientific, Place where

educational or entertainment event or the Event is
held
2. Admission to or Organisation of a celebration, Conference, fair, exhibition
or similar events
3. Services ancillary to such Admission or Organisation

Note: If the above services are supplied at more than one location, including a location in the
taxable territory, its place of supply shall be the location in the taxable territory.

Place of Supply in Multiple Locations [Sec 13(6-7)]

Nature of Situation POS

Services

1. Services Supply at more than one Location in the taxable territory

relating to Goods location, including a
and Individuals location in the taxable
territory
2. Services
relating to
Supply in more than one Service in relation to such state / UT shall be
Immovable
State/UT on predetermined in proportion to the value for services
Property
contract / agreement separately collected or determined in terms
3. Admission or of the contract or agreement.
Organisation of
Events Supply in more than one On the Prescribed basis
State/UT not on
predetermined contract /
agreement

POS relating to Banking, Financial, Intermediary Services [Sec 13(8)]

Nature of Services POS

1. Services to Account Holders by- Location of the supplier of

Services
a. * Banking Company
b. Financial Institution
c. Non-Banking Financial Institution

2. Intermediary Services

3. Hiring of means of Transport up to a period of 1 month

- Including Yachts
- Excluding Aircrafts and vessels

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 259

Meaning of Terms:

Term Meaning

Account An account bearing interest to the depositor, and includes a non-

resident external account and a non-resident ordinary account

Banking Company Same meaning as assigned to it u/s 45 A (a) of the Reserve Bank of
India Act, 1934,

Financial Institution Same meaning as assigned to it in clause (c) of section 45-1 of the
Reserve Bank of India Act, 1934,

Non-Banking Financial NBFC means,—

Company
(i) a financial institution which is a company,
(ii) a non-banking institution which is a company and which has as its
principal business the receiving of deposits, under any scheme or
arrangement or in any other manner, or lending in any manner, or
(iii) such other non-banking institution or class of such institutions, as
the Reserve Bank of India may, with the previous approval of the
Central Government and by notification in the Official Gazette,
specify.

POS relating to Services relating to Transportation Services [Sec 13(9-11]

Sec Type of Supply POS

13(9) Transportation of Goods other than by way of Mail Place of Destination of the goods
or Courier

13(10) Passenger Transportation Service Place where the Passenger

embarks on the Conveyance for a
Continuous Journey

13(11) (a) Services provided on-board a Conveyance First Scheduled Point of Departure
during the course of a Passenger Transport of the Conveyance for the Journey
Operation.
(b) Services intended to be wholly or substantially
consumed while on-board a Conveyance.

Place of Effective Use & Enjoyment of a Service [Sec.l3(13)J: In order to prevent (a) double
taxation or (b) non-taxation of the supply of a service, or for the (c) uniform application of rules,
the Government shall have the power to notify any description of services or circumstances in
which the place of supply shall be the place of effective use and enjoyment of a service.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 260

Following are Notified Supplies where the place of effective use and enjoyment of a
service is determined:

Description of Services Place of Supply

Supply of specified research and development services The place of supply of services shall
related to pharmaceutical sector by a person located in be the location of the recipient of
taxable territory to a person located in the non-taxable services. (Refer Conditions Below)
territory.

Supply of Maintenance, Repair or Overhaul service in The place of supply of services shall
respect of aircrafts, aircraft engines and other aircraft be the location of the recipient of
components or parts supplied to a person for use in the service.
course or furtherance of business.

B2B Supply of Maintenance, Repair or Overhaul service Location of the Recipient of the
(MRO Service) in respect of ships and other vessels, their Service
engines and other components or parts thereof supplied
to a person for use in the course or furtherance of
business. [Refer Note] [Notfn. 03/2021 IT dt. 02.06.2021]

Conditions to be satisfied:
(i) supply of services from the taxable territory are provided as per a contract between the
service provider located in taxable territory and service recipient located in non-taxable territory.
(ii) Such supply of services fulfills all other conditions in the definition of export of services,
except Sec.2(6)(iii) of IGST Act, 2017.
Note:
1. Effect: If an Indian shipping company has received MRO service in respect of ship/ vessel
from a foreign supplier, POS is in India and the said service would qualify as import of service
and as a result GST is payable on RCM basis on these services.
2. In the absence of above notification: The POS for the service would be the place where
the services are actually performed [determined in accordance with section 13(3)(a)].
Accordingly, the POS will be outside India and thus not qualified as Import of Service and not
liable to GST.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 261

Supplies in territorial waters [Sec. 9 of IGST Act]

In case of Supplies in Territorial Waters: [Note: This provision shall override all other
provisions of the IGST Act]

Situation Place

If the Location of the supplier is in the territorial Location of such supplier is to be

waters, or deemed to
be in the coastal State or Union territory
where the nearest point of the
appropriate baseline is located

If the Place of supply is in the territorial waters, Place of supplyis to be deemed to be

in the
coastal State or Union territory where the
nearest point of the appropriate baseline
is located

Import of services made on or after the appointed day [Sec. 21 of IGST Act]
1. Meaning of Import of Services[Sec.2(ll) of IGST Act]- Import of Services means the supply
of any service, where-
(i) the supplier of service is located outside India,
(ii) the recipient of service is located in India, and
(iii) the place of supply of service is in India.
2. Made on or after the appointed day: Import of services made on or after the appointed day
shall be liable to tax under the provisions IGST Act regardless of whether the transactions for
such import of services had been initiated before the appointed day.

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 262

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI

 263

GOODS & SERVICES TAX _ VOL 1 CA VIKRAM BIYANI