IDT TYK COMPILATION

This compilation covers all TYK question from indirect tax study material so, if you have practiced qns from
study material then you can carry this compilation in exam instead of carrying the 4 module of study
material. It will be more convenient.

Page Number
Sr. No. Chapter Name Pg No.
1 Chapter 1: Supply under GST 2
2 Chapter 2: Charge of GST 16
3 Chapter 3: Place of Supply 38
4 Chapter 4: Exemptions from GST 50
5 Chapter 5: Time of Supply 75
6 Chapter 6: Value of Supply 86
7 Chapter 7: Input Tax Credit 109
8 Chapter 8: Registration 179
9 Chapter 9: Tax Invoice, Credit and Debit Notes 194
10 Chapter 10: Accounts and Records; E-way Bill 198
11 Chapter 11: Payment of Tax 205
12 Chapter 12: Electronic Commerce Transactions Chapter 13: Returns 222
13 Chapter 14: Import and Export under GST 229
14 Chapter 15: Refunds Chapter 16: Job Work 234
15 Chapter 17: Assessment and Audit 240
16 Chapter 18: Inspection, Search, Seizure and Arrest 251
17 Chapter 19: Demands and Recovery 259
18 Chapter 20: Liability to Pay Tax in Certain Cases 264
19 Chapter 21: Offences and Penalties and Ethical aspects under GST 268
20 Chapter 22: Appeals and Revision 275
21 Chapter 23: Advance Ruling 281
22 Chapter 24: Miscellaneous Provisions 286
Custom & FTP
23 Chapter 1: Levy of and Exemptions from Customs Duty 295
24 Chapter 2: Types of Duty 301
25 Chapter 3: Classification of Imported and Export Goods 306
26 Chapter 4: Valuation under the Customs Act, 1962 316
27 Chapter 5: Importation and Exportation of Goods 325
28 Chapter 6: Warehousing 329
29 Chapter 7: Refund 353
30 Chapter 8: Foreign Trade Policy 364

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 SUPPLY UNDER GST 1.101
1.101

6. Composite and mixed supplies

Composite Supply Mixed Supply

•Consist of two or more •Consist of two or more supply
supplies •Not naturally bundled
•Naturally bundled •Though can be supplied
•In conjunction with each independently, still supplied
other together
•One of which is principal •Tax liability shall be the rate
supply applicable to the supply that
•Tax liability shall be rate of attracts highest rate of tax
principal supply •Example: A gift pack comprising
•Example: Charger supplied of choclates, candies, sweets
alongwith mobile phones. and balloons.

TEST YOUR KNOWLEDGE

1. Satyamev Printers is a printing house registered under GST. It receives an order
for printing 5000 copies of a book on yoga and meditation authored by a well-
known yoga guru. The content of the book is to be provided by the yoga guru
to Satyamev Printers. It is agreed that Satyamev Printers will use its own paper
to print the said books.
You are required to determine the rate of GST applicable on supply of printed
books by Satyamev Printers assuming that rate of GST applicable on services is
18% whereas the rate of GST applicable on supply of goods is 12%.

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2. Sudama Associates, a registered supplier, disposes the computers owned by the

business without consideration and it has not claimed input tax credit on such
computers.
Examine whether the disposal of computers by Sudama Associates qualifies as
deemed supply under Schedule I of the CGST Act, 2017.
3. Shivaji Pvt. Ltd., a registered supplier, supplies the following goods and services
for construction of buildings and complexes -

- excavators for required period at a per hour rate

- manpower for operation of the excavators at a per day rate
- soil-testing and seismic evaluation at a per sample rate.

The excavators are invariably hired out along with operators. Similarly,
excavator operators are supplied only when the excavator is hired out.
For a given month, the receipts (exclusive of GST) of Shivaji Pvt. Ltd. are as
follows:
- Hire charges for excavators - ` 18,00,000
- Service charges for supply of manpower for operation of the excavator -
` 20,000
- Service charges for soil testing and seismic evaluation at three sites -
` 2,50,000
Compute the GST payable by Shivaji Pvt. Ltd. for the given month.
Assume the rates of GST to be as under:
Hiring out of excavators – 12%
Supply of manpower services and soil-testing and seismic evaluation services –
18%
4. Mr. Kanjilal Adani is an oil exploration & production contractor and is
registered under GST in the State of Gujarat. He entered into a Production
Sharing Contract (PSC) with Government of Gujarat wherein he gets a license
to explore, exploit and sell the petroleum crude and/or natural gas from the
Government in Aliabet Oilfield in lieu of royalty and a share in profit petroleum.

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In the month of June, Mr. Kanjilal Adani explored the petroleum reserves at
Aliabet Oilfield. He got a portion of the petroleum silt (non-taxable under GST)
worth ` 3,00,000 as part of compensation. This petroleum silt is part of cost
petroleum as per the contract entered with the Government.

Examine the taxability of the petroleum silt received by Mr. Kanjilal Adani under
the GST law.
5. Angad Private Ltd. is engaged in the business of distribution of construction
material. As an incentive, Angad Private Ltd. pays an amount of ` 75,000 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. Angad Private Ltd. is of the view that GST is not leviable
on such incentive paid to the employees. Whether the view taken by Angad
Private Ltd. is correct?

6. 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.
7. Mokshabhumi Industries has its manufacturing unit in the State of
Maharashtra. It stores the finished goods manufactured by it at a depot located
in the State of Gujarat. The depot is owned by Punyabhumi Ltd. – a related
person of Mokshabhumi Industries. Punyabhumi Ltd. has not charged any
consideration from Mokshabhumi Industries for usage of depot for storage
purpose. Whether the storage of goods permitted by Punyabhumi Ltd. to
Mokshabhumi Industries qualifies as supply under GST?
8. Rob Shareholding Ltd., an approved intermediary, has entered into a agreement
wherein certain securities were to be lent to Dhandhan Bank, under Securities
Lending Scheme, 1997. Dhandhan Bank shall pay specified lending fee against

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such lending of securities to it. Explain the taxability of transactions involved in

the Securities Lending Scheme, 1997.
9. Krishnadev is a trader based in India. Ramakrishna, brother of Krishnadev, is
located in China and is also engaged in business of trading of goods.
Krishnadev places an order with Ramakrishna for procurement of certain goods
from local market in China. Before the shipment of goods from China to India,
Krishnadev sold such goods to Christiano, a trader located in Brazil. The goods
were subsequently shipped from China to Brazil. Comment on the taxability of
transaction between Krishnadev and Christiano under GST in India.
10. Mohandas International entered into a transaction for import of goods from a
vendor located in Italy. Due to financial issues, Mohandas International was
not in a situation to clear the goods upon payment of import duty. Mohandas
International sold the goods to Radhakrishnan Export House by endorsement
of title to the goods, while the goods were in high seas. The agreement further
provided that Mohandas International shall purchase back the goods in future
from Radhakrishnan Export House. Discuss the taxability of transaction(s)
involved, under the GST law.
11. Mr. Happy has a huge residential property located at a prime location in
Mumbai, Maharashtra. He has let out the 1st and 2nd floor to Mr. Peace for
residential purposes in April. Mr. Peace surrenders his tenancy rights to
Mr. Serene for a tenancy premium of ` 10,00,000 on 1st June. Mr. Serene has
also paid the applicable stamp duty and registration charges on transfer of
tenancy rights. Moreover, Mr. Serene has agreed to pay a monthly rent of
` 1,00,000 to Mr. Happy (unregistered under GST) from June.
Determine the taxability of the transaction(s) involved in the given case, for the
month of June.
12. (a) Rudraksh Kapoor, owner of Rudraksh Publishing House, Ghaziabad, U.P.,
donated some money to Divyaprakash Charitable Trust in the memory of
his late father. The Divyaprakash Charitable Trust constructed a room in
the school run by it from such donation and wrote “Donated by Rudraksh
Kapoor in the memory of his father” on the door of the room so
constructed. Examine whether the money donated by Rudraksh Kapoor is
leviable to GST.

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(b) In the above question, if Divyaprakash Charitable Trust had written on

the door of the room constructed from the money donated by Rudraksh
Kapoor in the school run by it - “Donated by Rudraksh Publishing House,
Ghaziabad, U.P.”, would the given transaction/activity qualify as supply?
13. Mrs. Kajal, a registered supplier of Jaipur (Rajasthan), has made the following
supplies in the month of January:
(i) Supply of a laptop along with the laptop bag to a customer of Mumbai
for ` 55,000 (exclusive of GST).
(ii) Supply of 10,000 kits (at ` 50 each) amounting to ` 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 are given as free gift to Jaipur customers (all unrelated) on the
occasion of Mrs. Kajal's birthday. Each kit consists of 1 hair oil and
1 beauty soap. Cost of each kit is ` 35. Input tax credit has not been
taken on the goods contained in the kit.
(iv) Event management services provided free of cost to her brother (wholly
dependent on her) for his son’s marriage function in Indore (Madhya
Pradesh). Cost of providing said services is ` 80,000.
(v) 1,400 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 from Mrs. Kajal's godown at Jaipur to Function
Garden, Ajmer. Since Mrs. Kajal is not a GTA, transportation services
provided by her are exempt vide Notification No. 12/2017 CT (R) dated
28.06.2017 46.
Assume rates of GST to be as under:-

S. No. Particulars Rate of GST

1. Laptop 18%

2. Laptop bag 28%

46
Notification No. 12/2017 CT(R) dated 28.06.2017 (containing the list of services exempt
from GST) has been discussed in Chapter 4 – Exemptions from GST in this Module of the Study
Material.

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3. Hair oil 18%

4. Beauty soap 28%

5. Hair comb 12%

6. Event management service 5

7. Service of renting of chairs and coolers 12%

8. Transportation service 5%

From the above information, examine each of the above supplies made by Mrs.
Kajal for the month of January and determine the rate of GST applicable on the
same.
14. Chandragupta Maurya is an artist who makes contemporary paintings. He is
registered in the State of Kolkata. Chandragupta Maurya appoints Dhruv
Kumar to auction his painting in Maharashtra. Dhruv Kumar 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 Dhruv Kumar on the behalf of Chandragupta Maurya but in his
own name and the painting is delivered to the successful bidder.
Examine whether Dhruv Kumar can be considered as an agent of Chandragupta
Maurya under Para 3 of Schedule I of the CGST Act, 2017.

ANSWERS/HINTS

1. Section 2(30) provides that a 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.
Circular No. 11/11/2017 GST dated 20.10.2017 has clarified that supply of
books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons,
boxes etc. printed with logo, design, name, address or other contents
supplied by the recipient of such printed goods, are composite supplies.

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Further, section 8(a) stipulates that a composite supply comprising two or

more supplies, one of which is a principal supply, is treated as a supply of
such principal supply. Hence, one needs to ascertain what constitutes the
principal supply in this supply. As per section 2(90), principal supply is the
supply of goods or services which constitutes the predominant element of a
composite supply and to which any other supply forming part of that
composite supply is ancillary.

The above circular further clarifies that in the composite supply of printing of
books, pamphlets, brochures, annual reports, and the like, where only 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.
Accordingly, in the given case, the supply of printed books by Satyamev
Printers is a composite supply wherein the principal supply is supply of
printing services. Thus, the rate of GST applicable thereon is the rate
applicable on supply of printing services, i.e. 18%.
2. As per section 7(1)(c) read with Schedule I of the CGST Act, 2017, permanent
transfer or disposal of business assets is treated as supply even though the
same is made without consideration. However, this provision would apply only
if input tax credit has been availed on such assets. Therefore, the disposal of
computers by Sudama Associates is not a supply as the input tax credit has
not been availed on the same.
3. Computation of GST payable by Shivaji Pvt. Ltd.

Particulars Value of Rate GST payable

supply (`) of GST (`)

Hiring charges for excavators 18,00,000 12% 2,16,000

Service charges for supply of 20,000 12% 2,400

manpower for operation of
excavators [Refer Note 1]

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Service charges for soil testing 2,50,000 18% 45,000

and seismic evaluation [Refer
Note 2]

GST liability 2,63,400

Notes:

1. Since the excavators are invariably hired out along with operators and
excavator operators are supplied only when the excavator is hired out,
it is a case of composite supply under section 2(30) wherein the
principal supply is the hiring out of the excavator.
As per section 8(a), the composite supply is treated as the supply of the
principal supply. Therefore, the supply of manpower for operation of
the excavators will also be taxed at the rate applicable for hiring out of
the excavator (principal supply), which is 12%.
2. Soil testing and seismic evaluation services being independent of the
hiring out of excavator will be taxed at the rate applicable to them,
which is 18%.
4. Compensation is received by Mr. Kanjilal Adani in the form of petroleum silt
which, as per the contract with the Government of Gujarat, is part of cost
petroleum.
As per Circular No. 32/06/2018 GST dated 12.02.2018, the cost petroleum is
not a consideration received by the oil exploration & production contractors
for the services provided to Government under a Production Sharing Contract
(PSC) and thus not taxable per se. The reason for the same is that the
contractors carry exploration and production of petroleum for themselves
and not as a service to Government. They had acquired the right to explore,
exploit and sell petroleum in lieu of royalty and a share in profit petroleum.

Consequently, the cost petroleum received by Mr. Kanjilal Adani is not taxable
under GST.
5. Yes, Angad Private Ltd.’s view is correct. In terms of section 7(2) read with
Schedule III of the CGST Act, 2017, services by an employee to employer in
the course of or in relation to his employment shall not be treated as supply

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under GST. Further, the amount paid as incentive by Angad Private Ltd. is not
in the nature of gift, and thus, is not covered under Schedule I. Infact, in the
given case, the incentive is part of the salary and is directly linked to the sales
target. Therefore, the services provided in course or in relation to
employment by the employees for which incentives are given to them shall
not be treated as a “supply”.
In the light of above discussion, GST is not leviable on the incentive paid by
Angad Private Ltd. to its employees.
6. 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.
7. As per section 7(1)(c) read with Schedule I, supply of goods or services or
both between related persons without consideration when made in the
course or furtherance of business qualifies as supply. Thus, the storage
services provided by Punyabhumi Ltd. to Mokshabhumi Industries in course
or furtherance of business qualify as supply under GST even though no
consideration has been charged for the same.
8. Securities Lending Scheme, 1997 (hereafter referred to as SLS) facilitates the
lending and borrowing of securities. Securities are neither covered in the
definition of goods nor covered in the definition of services. Therefore, a
transaction in securities which involves disposal of securities is not a supply
in GST and hence not taxable.
However, SLS doesn’t treat lending of securities as disposal of securities and
therefore is not excluded from the definition of services. The lending fee
charged from the borrowers of securities has the character of consideration
and is taxable under GST. Apart from above, the activities of the
intermediaries facilitating lending and borrowing of securities for commission
or fee are also taxable separately [Circular No. 119/38/2019 GST dated
11.10.2019].

9. The transaction between Krishnadev and Christiano is in the nature of

merchant trading. As per Schedule III, transactions involving sale of goods

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from a place in non-taxable territory to another place in non-taxable territory,

without such goods entering into India, shall be treated neither as supply of
goods nor as supply of services under GST. Therefore, the transaction
between Krishnadev and Christiano shall not be treated as supply and is thus
not leviable to GST.
10. As per Schedule III, 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 be treated
neither as supply of goods nor as supply of services under GST. Thus, the
sale of goods by Mohandas International to Radhakrishnan Export House in
high seas shall not be liable to GST.
Further, the import duty including IGST shall be payable by Radhakrishnan
Export House at the time of clearance of goods at port of import. In case the
goods are sold back by Radhakrishnan Export House to Mohandas
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.
11. Circular No. 44/2018 CT dated 02.05.2018 clarifies that the activity of transfer of
tenancy right against consideration [i.e. tenancy premium] is squarely covered
under supply of service liable to GST. It is a form of lease or renting of property
and such activity is specifically declared to be a service in Schedule II i.e. any
lease, tenancy, easement, licence to occupy land is a supply of services.
Although stamp duty and registration charges have been levied on such
transfer of tenancy rights, it shall be still subject to GST. Merely because a
transaction/supply involves execution of documents which may require
registration and payment of registration fee and stamp duty, would not
preclude them from the ‘scope of supply’ and from payment of GST.

The transfer of tenancy rights cannot be treated as sale of land/ building in

Schedule III. Thus, it is not a non-supply under GST and consequently, a
consideration for the said activity shall attract levy of GST. Services provided
by outgoing tenant by way of surrendering the tenancy rights against
consideration in the form of a portion of tenancy premium is liable to GST.

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Hence, in the given case, the tenancy premium of ` 10,00,000 received by Mr.
Peace for surrendering his tenancy rights to Mr. Serene is liable to GST.
The circular further clarifies that since renting of residential dwelling for use
as a residence to an unregistered person is exempt [Entry 12 of Notification
No. 12/2017 CT (R) dated 28.06.2017 47], grant of tenancy rights in a residential
dwelling for use as residence dwelling against tenancy premium or periodic
rent or both to an unregistered person is exempt. Consequently, monthly rent
` 1,00,000 received by Mr. Happy from Mr. Serene is exempt.
12. Circular No. 116/35/2019 GST dated 11.10.2019 has clarified that in case of
donations received by a charitable institution, when the name of the donor is
displayed in recipient institution’s 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). Donations received by the charitable organisations are treated as
consideration only if there exists, quid pro quo, i.e., there is an obligation on
part of recipient of the donation or gift to do anything (supply a service).
Thus, GST is not leviable where all the following three conditions are satisfied
namely:
 Gift or donation is made to a charitable organization
 Payment has the character of gift or donation
 Purpose is philanthropic (i.e., it leads to no commercial gain) and not
advertisement.
(a) In the backdrop of the above discussion, in the given case, the way the
name of Rudraksh Kapoor is displayed on the door of the room
constructed in the school run by Divyaprakash Charitable Trust, it is only
an expression of gratitude and public recognition of Rudraksh’s act of
philanthropy and is not aimed at advertising or promoting his business.

47
Notification No. 12/2017 CT (R) dated 28.06.2017 (containing the list of services exempt
from CGST) has been discussed in Chapter 4 – Exemptions from GST in this Module of the
Study Material.

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There is no reference/mention of his publishing house which otherwise

would have got advertised.
Thus, the money donated by Rudraksh Kapoor is not a leviable to GST.
(b) In the given case, since the name of Rudraksh Publishing House has
been displayed on the door of the room constructed in the school run
by Divyaprakash Charitable Trust, it might be aimed at advertising or
promoting his business. There is a direct mention of his publishing
house which is being advertised. In such a case, it is a supply of service
by Divyaprakash Charitable Trust for a consideration received in the
form of donation.

13.

S. Particulars Rate of
No. GST

(i) Supply of laptop bag along with laptop to Mumbai 18%

customer
[Being naturally bundled, supply of laptop bag along
with the laptop is a composite supply which is treated
as the supply of the principal supply [viz. laptop] in
terms of section 8(a). Accordingly, rate of principal
supply, i.e. laptop will be charged.]

(ii) Supply of kits to Ram Fancy Store 28%

[It is a mixed supply and is treated as supply of that
particular supply which attracts highest tax rate [viz.
beauty soap] in terms of section 8(b).]

(iii) Free gifts to customers Nil

[Cannot be considered as supply under section 7 read
with Schedule I as the gifts are given to unrelated
customers without consideration.]

(iv) Event management services provided free of cost to 5%

her brother [who is a related person] for his son’s

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marriage. Thus, said services shall fall within the

purview of Schedule I and shall be treated as supply
even if made without consideration. Since it is an
individual supply, it will be taxed at the rate applicable
on said service.

(v) Chairs and coolers hired out to Function Garden 12%

[Transportation services provided by Mrs. Kajal are
exempt. However, since chairs and coolers are hired
out along with their transportation, it is a case of
composite supply wherein the principal supply is hiring
out of chairs and coolers. Accordingly, transportation
service will also be taxed at the rate applicable for
renting of chairs and coolers*]

*Note: As per section 2(30), composite supply means a supply made by a

taxable person to a recipient consisting of two or more taxable supplies. Since
in point (v), service of hiring out of chairs & coolers is taxable while
transportation service is exempt, it is possible to take a view that this is not a
case of composite supply.
In that case, the two services will be treated as independent services and taxed
accordingly.
14. An activity/transaction qualifies as supply under GST only if it is undertaken
for a consideration and is in course/furtherance of business. However, supply
of goods by a principal to his agent where the agent undertakes to supply
such goods on behalf of the principal is considered as supply even if made
without consideration provided the invoice for further supply is issued by the
agent in his own name [Section 7(1)(c) read with Para 3 of Schedule I of the
CGST Act, 2017].
Circular No. 57/31/2018 GST dated 04.09.2018 provides that where the
invoice for further supply of goods is being issued by the agent in his name
then, any provision of goods from the principal to the agent would fall within
the fold of Para 3 of Schedule I

In the given case, Dhruv Kumar is not merely providing auctioneering services
to Chandragupta Maurya, but is also supplying the painting on behalf of

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Chandragupta Maurya to the successful bidder and has the authority to

transfer the title of the painting on behalf of Chandragupta Maurya. Dhruv
Kumar issued the invoice in his own name for supply of the painting on the
behalf of Chandragupta Maurya. Thus, Dhruv Kumar can be considered as an
agent of Chandragupta Maurya under Para 3 of Schedule I.

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Other points

Bill of supply shall be issued instead of tax invoice.

Tax shall not be not collected from recipient of supply

Input tax credit shall not be availed

Composition Scheme if availed shall include all registered persons having same
PAN

Penalty shall be imposed in case of irregular availment of the composition

scheme

TEST YOUR KNOWLEDGE

1. Panini Private Limited, Jaipur, agrees to sponsor a sports event organized by
Pink City Club in Jaipur. Panini Private Limited has paid an amount of
` 5,00,000 for such sponsorship of the sports event. Consequently, said event
was named after the brand name of Panini Private Limited. Examine who is
the person liable to pay tax in the given case.
2. Arpan Singhania is an executive director in Narayan Limited, Haryana. The
company paid him the sitting fee amounting to ` 25,000, for the month of
January. Further, salary was paid to Arpan Singhania amounting to
` 1.5 lakh for the month of January on which TDS was also deducted as per
applicable provisions under Income-tax law. Tapasya & Associates, in which
Arpan Singhania is a partner, supplied certain professional services to Narayan
Limited in the month of January for an amount of ` 2 lakh. Discuss the person
liable to pay GST in each of the supplies involved in the given case.

3. 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 2021-22.

His turnover for current FY ` 80 lakh and is expected to achieve ` 130 lakh in
financial year 2022-23. Discuss whether M/s Rajbeer & Sons can still enjoy the
benefits of composition scheme in financial year 2022-23.

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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 & Sons with effect from 1st April of financial year
2022-23 and wants to enjoy the benefits of composition scheme under GST.
Advise Mr. Rajbeer and his son Karan.
4. Varun & Arun Associates started a partnership firm of architects in Bhopal
(Madhya Pradesh) on 1st April of the current financial year. The firm provides
architectural services in Madhya Pradesh only. It provided the following details
of its turnover during the current financial year:
April - June ` 20 lakh
July - Sept ` 30 lakh
Oct - Dec ` 20 lakh
The firm has obtained the registration under section 22 with effect from
1st July and opts to pay tax under composition scheme. Determine the tax
liability of Varun & Arun Associates for the quarters: April – June, Jul-Sept and
Oct-Dec.
Note: The rates of tax on architectural services are CGST- 9% and SGST-9%.
5. Examine whether the suppliers are eligible for composition levy under
section 10 in the following independent cases in the beginning of financial year
2022-23.
(a) Technology Enterprises, registered in Jalandhar, Punjab, is engaged in
manufacturing and supplying computer systems. Its aggregate turnover
in the financial year 2021-22 is ` 125 lakh. Technology 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 Punjab in
the financial year 2022-23.

(b) M/s. Siddharth & Sons, registered in Delhi, owns a restaurant ‘Tasty
Foods’ with a turnover of ` 112 lakh in the financial year 2021-22. In
view of the growing customer demand, it will also start intra-State
trading of juices in Delhi from financial year 2022-23.

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(c) Sitaram Associates, registered in Sikkim, is engaged in running a

restaurant chain ‘Veg Kitchen’ in the State. It has a turnover of
` 73 lakh in the financial year 2021-22. In the financial year 2022-23, 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 from financial year 2022-23.
(d) Deepti Services Ltd., registered in Uttarakhand, is exclusively providing
intra-State hair styling services. It has turnover of ` 34 lakh in the
financial year 2021-22.
Will your answer be different, if Deepti Services Ltd. also start intra-
State supply of beauty products alongwith providing hair styling
services in the financial year 2022-23?
6. B & D Company, a partnership firm, in Nagpur, Maharashtra is a wholesaler of
a taxable product ‘P’ and product ‘Q’ exempt by way of a notification. The firm
supplies these products only in the eastern part of Maharashtra. All the
procurements (both goods and services) of the firm are from the suppliers
registered under regular scheme in the State of Maharashtra. The firm pays tax
under composition scheme.
B & D Company has furnished the following details with respect to its turnover
(exclusive of taxes):

Particulars Turnover for the quarter Turnover for the quarter

ended 30th June (`) ended 30th September (`)

‘P’ 60,00,000 50,00,000

‘Q’ 17,65,000 17,00,000

The extract of the only bill book maintained by the firm showed the following
details-

Bill Date Value of products (exclusive of taxes)

No.
‘P’ (`) ‘Q’ (`) Total (`)

2306 1st October 2,00,000 3,000 2,03,000

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2307 1st October 1,36,000 2,250 1,38,250

2308 2nd October 67000 39,250 1,06,250

2309 3rd October 58,750 33,750 92,500

2310 5th October 1,00,000 - 1,00,000

2311 6th October 94,000 6,000 1,00,000

2312 6th October - 17,000 17,000

2313 8th October 50,000 6,000 56,000

2314 9th October 60,000 9,000 69,000

2315 …………….. …………….. …………….. ……………..

………. …………….. …………….. …………….. ……………..

Further, B & D Company paid freight of ` 1,40,000 to Goods Transport Agency

during the period April to October. Assume equal amount of freight is paid
each month on the 10th day of each month. Also, assume that the goods for
which the freight is paid on 10th day of the month are transported between 11th
to 20thday of the month.
All the above amounts are exclusive of taxes, wherever applicable.

Compute the GST liability (ignoring ITC provisions) of B & D Company for the
period April to October under composition scheme under sub-sections (1) and
(2) of section 10 showing calculations for each quarter separately.
Note: Make suitable assumptions wherever required. Rate of CGST and SGST
on service of transportation of goods by GTA is 2.5% each wherein GTA has not
opted to pay tax itself. Stock is valued at cost price.

7. Shubhlaxmi Foods is engaged in supplying restaurant service in Maharashtra.

In the financial year 2021-22, it had a turnover of ` 140 lakh from the
restaurant service. Further, it had earned the bank interest of ` 20 lakh from
the fixed deposits in said financial year. You are required to advise Shubhlaxmi
Foods whether it is eligible for the composition scheme under sub-sections (1)
and (2) of section 10 in the financial year 2022-23.

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Further, assuming that in the financial year 2022-23, its turnover is ` 130 lakh
from the supply of restaurant services and ` 10 lakh from the supply of farm labour
in Maharashtra. It has also earned the bank interest of ` 30 lakh from the fixed
deposits. Compute the tax payable by Shubhlaxmi Foods in the financial year
2022-23.

8. Bansal and Chandiok started a partnership firm of Chartered Accountants in

Jaipur (Rajasthan) on 1st April in the current financial yera. The firm specializes
in providing audit services to banks in Rajasthan. It provided the following
details of its turnover:

Quarter Amount (in `)

Apr-Jun 10 lakh
Jul-Sep 20 lakh

It crossed the threshold limit of ` 20 lakh on 1st August. Bansal and Chandiok
wishes to opt to pay tax at concessional rate under section 10(2A). Examine
whether the firm is eligible for this scheme in the current financial year? If yes,
then determine the tax payable by it in quarters (i) Apr-Jun & (ii) Jul-Sep?
9. Mr. Prem is running a restaurant in New Delhi. In the financial year 2021-22,
it has an aggregate turnover of ` 120 lakh from the restaurant services. In the
financial year 2022-23, apart from restaurant service, he also wants to provide
food delivery services to other small restaurants. He estimated the turnover of
such services is upto ` 5 lakh.
Mr. Prem wishes to opt for composition scheme under sub-sections (1) and (2) of
section 10 in the financial year 2022-23. You are required to advise him for same.
10. M/s Heeralal and Sons, registered in Karnataka, has opted to avail the benefit
of composition scheme under sub-sections (1) and (2) of section 10 from
1st April, 2022. It has furnished the following details for the quarter ended on
30th June, 2022.

S. No. Items `

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

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(ii) Exempted turnover of goods (exempted by way of

notification) within the State 17,00,000

Total Turnover 32,00,000

Using the above information, calculate tax to be paid by the firm for quarter
ended on 30th June, 2022 in following independent situations:
(i) M/s Heeralal and Sons is a manufacturer
(ii) M/s Heeralal and Sons is a trader
11. M/s All-in-One, a partnership concern and a registered supplier under GST, is
engaged in providing various services under one roof. It is engaged in paying
tax under regular scheme under GST law. The concern provides the following
information pertaining to supply made/input services availed by it during the
month of March:

Particulars `

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

(ii) Provided security services (by way of supply of security 60,000

personnel) to ABC P. Ltd., a registered person under GST

(iii) Provided security services (by way of supply of security 1,00,000

personnel) to PSR Trust, an unregistered person under
GST

(iv) Provided renting of motor vehicle for transportation of 75,000

passengers to Amaze Tours Ltd. and value of supply
included cost of fuel

(v) Provided renting of motor vehicle for transportation of 40,000

passengers to Priti & Co., CA firm and value of supply
included cost of fuel

(vi) Availed representational service from PB and Co., a law 70,000

firm towards a Consumer Court case

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Determine the GST liability of M/s All-in-One for the month of March by giving
necessary explanations for treatment of various items. Rates of GST 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. All the supplies are intra-State only. Ignore the
provisions relating to input tax credit.
12. MN Ltd. has two registered places of business in the State of Haryana. Its
aggregate turnover during the financial year 2021-22 was ` 62 lakh. It wishes
to opt for composition levy under sub-sections (1) and (2) of section 10 for one
of the place of business in the financial year 2022-23 and wants to continue
with registration under regular scheme and pay taxes at the normal rate for
the other place of business. Both the places of business are having the same
Permanent Account Number issued under the Income-tax Act, 1961. Can MN
Ltd. do so? Explain with reason.
13. Ranveer Industries, registered in Himachal Pradesh, is engaged in making inter-
State supplies of readymade garments. The aggregate turnover of Ranveer
Industries in the financial year 2021-22 is ` 70 lakh. It has opted for
composition levy under sub-sections (1) and (2) of section 10 in the financial
year 2022-23 and paid tax for the April – June quarter of financial year 2022-
23 under composition levy.
The proper officer has levied penalty for wrongly availing the scheme on
Ranveer Industries in addition to the tax payable by it.
Examine the validity of the action taken by proper officer.
14. Mr. Yash, doing business in the State of Kerala, commenced his business in the
month of April and provides the following further information.
(i) His intra-State turnover for the first two quarters was as follows:
April - June - ` 20 lakh
July - September - ` 100 lakh
(ii) In each of the quarters, exempt supply made by him was 25% of the total
turnover for the said quarter.

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(iii) Since the product supplied by him was eligible for composition scheme,
he opted for registration under composition scheme with effect from 1st
July.
You are required to compute the tax payable by Mr. Yash under GST law from
the above information:

(i) If he is a manufacturer
(ii) If he is a trader.

ANSWERS/HINTS

1. 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
` 5,00,000 from Panini Private Limited, against the provision of sponsorship
service. Since the recipient of sponsorship services- Panini Private Limited is
a body corporate, GST on said services is payable by the recipient - Panini
Private Limited, under reverse charge.

2. 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 Arpan Singhania by Narayan Limited, is liable to GST
under reverse charge and thus, recipient of service - Narayan Limited – is
liable to pay GST on the same.
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

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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
Arpan Singhania of ` 1.5 lakh is not liable to GST.
Services provided by Tapasya & Associates – Tapasya & Associates have
rendered certain professional services to Narayan Limited. The fact that Arpan
Singhania is a partner in Tapasya & Associates and a director in Narayan
Limited does not have any impact on the taxability of the professional services
supplied by Tapasya & Associates to Narayan Limited. The professional
services provided by Tapasya & Associates to Narayan Limited are liable to
GST under forward charge and thus, supplier - Tapasya & Associates – is liable
to pay GST on the same.
3. As per section 10, a registered person, whose aggregate turnover in the
preceding financial year did not exceed ` 1.5 crore in a State/UT may opt for
composition scheme, provided he is, inter alia, engaged in supply of goods
and/or restaurant service. However, a person who opts for composition
scheme is permitted to supply services other than restaurant service of value
not exceeding 10% of turnover in a State/UT in the preceding financial year
or ` 5 lakh, whichever is higher.
In the given case, M/s. Rajbeer & Sons, engaged in business of selling goods
relating to interior decoration, is eligible for composition scheme in the
financial year 2022-23 since its aggregate turnover in financial year 2021-22
(viz. ` 80 lakh) does not exceed ` 1.5 crore.
If Karan wishes to start the business of providing services relating to interior
decoration under the same firm name M/s Rajbeer & 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.
In such a case, the firm can provide services relating to interior decoration up
to a value of ` 5 lakh (10% of zero turnover of last year or ` 5 lakh, whichever
is higher) to continue enjoying the benefit of composition scheme in financial
year 2022-23.
4. The composition scheme under sub-sections (1) and (2) of section 10 is
available in case of goods and restaurant service. Further, marginal services
upto specified limit can be provided along with the supply of goods or
restaurant service, as the case may be. Since, in the given case, Varun & Arun
Associates is exclusively supplying services other than restaurant services, it

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is not eligible to pay tax under sub-sections (1) and (2) of section 10.
However, section 10(2A) provides an option to a registered person, who is
not eligible to pay tax under sub-sections (1) and (2) of section 10, of paying
tax @ 6% (CGST-3% and SGST/UTGST-3%) provided his aggregate turnover
in the preceding financial year is upto ` 50 lakh. Said person can pay tax
@ 6% of the turnover in State or turnover in Union territory up to an
aggregate turnover of ` 50 lakh, subject to specified conditions.
In the given case, Varun & Arun Associates has started the supply of services
in the financial year 2021-22. Therefore, its aggregate turnover in the
financial year 2021-22 is Nil. Consequently, it is eligible to avail the benefit
of composition scheme under section 10(2A) of the CGST Act in the financial
year 2022-23. It becomes eligible for the registration when its aggregate
turnover exceeds ` 20 lakh. While registering under GST, it has to opt for
composition scheme under section 10(2A).

For determining its turnover of the State for payment of tax under
composition scheme under section 10(2A), turnover of April-June quarter
[` 20 lakh] shall be excluded as the value of supplies from the first day of April
of a financial year up to the date when such person becomes liable for
registration under this Act are to be excluded for this purpose.
On next ` 30 lakh [turnover of July-Sept quarter], it shall pay tax @ 6%
[3% CGST and 3% SGST], i.e. CGST ` 90,000 and SGST ` 90,000.
By the end of July-Sept quarter, its aggregate turnover reaches ` 50 lakh*.
Consequently, its option to avail composition scheme under section 10(2A)
shall lapse by the end of July-Sept quarter and thereafter, it is required to pay
tax at the normal rate. Thus, the tax payable for Oct-Dec quarter is
` 20 lakh × 9%, i.e. CGST - ` 1,80,000 and SGST - ` 1,80,000.

*Note - While computing aggregate turnover for determining Varun & Arun
Associates’ eligibility to pay tax under composition scheme, value of supplies
from the first day of April of a financial year up to the date when such person
becomes liable for registration under this Act (i.e. turnover of April-June
quarter), are also included.

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5. As per section 10(1), the following registered persons, whose aggregate

turnover in the preceding financial year did not exceed ` 1.5 crore, may opt
to pay tax under composition levy:
(i) Manufacturers,
(ii) Persons engaged in making supplies referred to in clause (b) of
paragraph 6 of Schedule II (restaurant services), and
(iii) Any other suppliers eligible for composition levy.
The composition scheme under sub-sections (1) and (2) of section 10 can
essentially be availed in respect of goods and only one service namely,
restaurant service. However, the scheme permits supply of other marginal
services for a specified value along with the supply of goods and restaurant
service, as the case may be. Such marginal services can be supplied for a
value up to 10% of the turnover in the preceding year or ` 5 lakh, whichever
is higher. Further, the registered person should not be engaged in making
any inter-State outward supplies of goods or services.
Furthermore, newly inserted section 10(2A) provides an option to a registered
person, who is not eligible to pay tax under section 10(1) and 10(2), of paying
tax @ 6% (CGST-3% and SGST/UTGST-3%) provided his aggregate turnover
in the preceding financial year is upto ` 50 lakh. Said person can pay tax
@ 6% of the turnover in State or turnover in Union territory up to an
aggregate turnover of ` 50 lakh, subject to specified conditions. One of such
conditions is that the registered person should not be engaged in making
any inter-State outward supplies of goods or services.

In view of the above-mentioned provisions, the answer to the given

independent cases is as under:-
(a) The turnover limit for being eligible for composition scheme under
under sub-sections (1) and (2) of section 10 for Jalandhar (Punjab) is
` 1.5 crore in the preceding financial year. Thus, Technology
Enterprises can opt for said composition scheme in financial year
2022-23 as its aggregate turnover is less than ` 1.5 crore in the
financial year 2021-22 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%

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of the turnover in the preceding year or ` 5 lakh, whichever is higher.

Thus, Technology Enterprises can supply repair services up to a value
of ` 12.5 lakh [10% of `125 lakh] in the financial year 2022-23.
(b) In the given case:-
(i) the turnover in the preceding year is less than the eligible
turnover limit under composition scheme under sub-sections
(1) and (2) of section 10 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. Siddharth & Sons is eligible for composition scheme

under sub-sections (1) and (2) of section 10 from the financial year
2022-23.
(c) The turnover limit for being eligible for composition scheme under
sub-sections (1) and (2) of section 10 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, Sitaram
Associates cannot opt for composition scheme under sub-sections
(1) and (2) of section 10 in the financial year 2022-23.
The benefit of composition scheme under section 10(2A) is available
in case of a registered person who is not eligible to pay tax under
sub-sections (1) and (2) of section 10 provided its aggregate
turnover in the preceding financial year does not exceed ` 50 lakh.
Thus, in view of the above-mentioned provisions, Sitaram Associates
cannot avail the benefit of composition scheme under section 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
sub-sections (1) and (2) of section 10 only if he is engaged in supply

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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 Deepti Services Ltd. is exclusively engaged in supply of services
other than restaurant services, it is not eligible for composition scheme
sub-sections (1) and (2) of section 10 even though its turnover in the
financial year 2021-22 is less than ` 75 lakh, the eligible turnover limit
for Uttarakhand.
However, since Deepti Services Ltd. is not eligible to opt for
composition scheme under sub-sections (1) and (2) of section 10 and
its aggregate turnover in the financial year 2021-22 does not exceed
` 50 lakh, Deepti Services Ltd. is entitled to avail benefit of composition
scheme under section 10(2A) in the financial year 2022-23.
Further, the answer will remain the same even if Deepti Services Ltd.
also start supplying beauty products alongwith providing hair styling
services in the financial year 2022-23 since it fulfils the conditions laid
down for availing the benefit of composition scheme under section
10(2A). It can avail the benefit of composition scheme under section
10(2A) till the time its aggregate turnover in the financial year 2022-23
doesn’t exceed ` 50 lakh.

6. As per section 10(3) read with Notification No.14/2019 CT dated 07.03.2019

as amended, the option availed by a registered person to pay tax under
composition scheme under sub-sections (1) and (2) of section 10 shall lapse
with effect from the day on which his aggregate turnover during a financial
year exceeds ` 1.5 crore [` 75 lakh in case of Special Category States except
Assam, Himachal Pradesh and Jammu and Kashmir].

As per section 2(6), 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
PAN, to be computed on all India basis but excludes CGST, SGST/UTGST, IGST
and GST Compensation Cess.

In the given case, the firm is registered under the composition scheme in the
State of Maharashtra. The aggregate turnover of the firm exceeds ` 1.5 crore

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on 3rd October [aggregate of both taxable and exempt turnover from 1st April
to 3rd October, i.e. ` 1,50,05,000 (` 1,44,65,000 + ` 2,03,000 + ` 1,38,250 +
` 1,06,250 + ` 92,500)]
The inward supplies of goods transportation services in respect of which the
firm has to pay tax under reverse charge have not been included in the
aggregate turnover in terms of section 2(6). The tax is payable under reverse
charge on such services as the applicable rate of tax on such services is given
as 5% and not 12%, in which case the GTA would have been liable to pay tax
under forward charge [Notification No. 13/2017 CT (R) dated 28.06.2017 as
amended].
Thus, the firm will have to pay tax under regular scheme (Section 9) from
3rd October.
Output tax liability of B & D Company under composition scheme
During the period when the firm pays tax under composition scheme, i.e. from
1st April to 2nd October, tax will be payable on quarterly basis and no ITC will be
available [Section 10(4) read with sub-sections (2) and (7) of section 39].
Further, since the firm is trading in goods, tax will be payable @ ½% [Effective
rate - 1% (½% CGST + ½% SGST)] of the turnover of taxable supplies of goods
and services (i.e. ‘P’) in the State [Section 10(1) read with rule 7].

The tax liability for the quarters ended June, September and December under
composition scheme will be computed as under-

Particulars Quarter Quarter Quarter ended

th th st
ended 30 ended 30 31 December
June September (`)
(`) (`)

Turnover of ‘P’ 60,00,000 50,00,000 4,03,000 [2,00,000

(Taxable supplies) + 1,36,000 +
67,000]

CGST @ 0.5% [A1] 30,000 25,000 2,015

SGST @ 0.5% [B1] 30,000 25,000 2,015

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Inward supply on 60,000 60,000 Nil [Paid on 10th

which tax is payable [(1,40,000/7) x [(1,40,000/7) x day for goods
under reverse 3] 3] transported
charge [Service of between 11th to 20th
goods day of the month,
transportation so the same will be
availed from a GTA assessed under
@ 5%] regular scheme]

CGST @ 2.5% [A2] 1,500 1,500 -

SGST @ 2.5% [B2] 1,500 1,500 -

Total CGST [A1 + 31,500 26,500 2,015

A2]

Total SGST [B1 + 31,500 26,500 2,015

B2]

Total CGST liability for the period 60,015 [31,500 + 26,500 + 2015]
from 1st April to 2nd October

Total SGST liability for the period 60,015 [31,500 + 26,500 + 2015]
from 1st April to 2nd October

7. As per section 10(1) read with Notification No. 14/2019 CT dated 7.03.2019, a
registered person, whose aggregate turnover in the preceding financial year
did not exceed ` 1.5 crore, may opt to pay, in lieu of the tax payable by him,
an amount calculated at the specified rates if, inter alia, he is not engaged in
the supply of services other than restaurant services.
However, the scheme permits supply of other marginal services for a specified
value along with the supply of goods and restaurant service, as the case may
be. Such marginal services can be supplied for a value up to 10% of the
turnover in a State/Union Territory in the preceding year or ` 5 lakh,
whichever is higher [Second proviso to section 10(1)].
Although exempt services are included in determining the value of turnover
in a State or Union territory, explanation to section 10(1) clarifies that for the
purposes of second proviso to section 10(1), the value of exempt supply of

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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.
Further, the exempt services are also included in the aggregate turnover
[Section 2(6)]. However, explanation 1 to section 10 excludes 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
from aggregate turnover.
In this backdrop, in the given case, the aggregate turnover of Shubhlaxmi
Foods in the financial year 2021-22 is ` 140 lakh (since bank interest of ` 20
lakh from the fixed deposits will not be taken into account for computing
aggregate turnover). Resultantly, it is eligible to opt for composition scheme
under sub-sections (1) and (2) of section 10 in the financial year 2022-23.

Further, apart from restaurant services, it can provide services upto ` 14 lakh
[i.e. 10% of ` 140 lakh or ` 5 lakh, whichever is higher], in the financial year
2022-23. As already seen, bank interest of ` 20 lakh from fixed deposits will
not be considered while determining this limit.
Further, tax payable @ 5% (2½% CGST+ 2½% SGST) of the turnover in the
State by Shubhlaxmi Foods in the financial year 2022-23 is as follows:
=5% of ` 1,40,00,000 [` 1,30,00,000 + ` 10,00,000]
[(Bank interest of ` 30 lakh from the fixed deposits is not considered while
computing turnover in the State for determining the tax payable under
composition scheme (In terms of explanation 2 to section 10)]
= ` 7,00,000 [CGST = ` 3,50,000 and SGST = ` 3,50,000]
8. The composition scheme under sub-sections (1) and (2) of section 10 is
available in case of goods and restaurant service. Further, marginal services
upto specified limit can be provided along with the supply of goods or
restaurant service, as the case may be. Since, in the given case, Bansal and
Chandiok is supplying services other than restaurant services, it is not eligible
to pay tax under sub-sections (1) and (2) of section 10. However, section
10(2A) provides an option to a registered person, who is not eligible to pay

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tax under sub-sections (1) and (2) of section 10, of paying tax @ 6% (CGST-
3% and SGST/UTGST-3%) provided his aggregate turnover in the preceding
financial year is upto ` 50 lakh. Said person can pay tax @ 6% of the turnover
in State or turnover in Union territory up to an aggregate turnover of ` 50
lakh, subject to specified conditions.

In the given case, Bansal and Chandiok has started the supply of services in
the financial year 2022-23. Therefore, its aggregate turnover in the financial
year 2021-22 is Nil. Consequently, it is eligible to avail the benefit of
composition scheme under section 10(2A) of the CGST Act in the financial
year 2022-23. It becomes liable to the registration when its aggregate
turnover exceeds ` 20 lakh. While registering under GST, it has to opt for
composition scheme under section 10(2A).
Tax payable by the firm is as follows:
(i) Apr-Jun quarter: Tax payable by the firm in first quarter is nil since
the firm’s turnover [` 10 lakh] has not yet exceeded the threshold
limit of ` 20 lakh (viz. the threshold limit applicable for registration
in the State of Rajasthan).
(ii) July-Sep quarter: While computing the tax payable by the firm in
second quarter, the turnover from 1 st April to the date from which
he becomes liable for registration under the Act is to be excluded.
Tax payable will be computed as under-
Total Turnover ` 30,00,000/-
Less: Threshold limit for registration ` 20,00,000/-
Taxable Turnover ` 10,00,000/-
Tax @ 6% ` 60,000/-*
*CGST = ` 30,000 and SGST = ` 30,000
9. As per section 10(1) read with Notification No.14/2019 CT dated 07.03.2019,
a registered person, whose aggregate turnover in the preceding financial year
did not exceed ` 1.5 crore, may opt to pay, in lieu of the tax payable by him,
an amount calculated at the specified rates if, inter alia, he is not engaged in
the supply of services other than restaurant services.

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However, the scheme permits supply of other marginal services for a specified
value along with the supply of goods and restaurant service, as the case may
be. Such marginal services can be supplied for a value up to 10% of the
turnover in a State/Union Territory in the preceding year or ` 5 lakh,
whichever is higher.

In the present case, since the aggregate turnover of Mr. Prem was ` 120 lakh
in financial year 2021-22 (i.e. it did not exceed ` 1.5 crore), he is eligible for
composition scheme in the financial year 2022-23. Further, in the financial
year 2022-23, he can also supply services other than restaurant services for a
value upto ` 12 lakh (10% of ` 120 lakh) or ` 5 lakh, whichever is higher. Thus,
till the time his turnover from food delivery services does not exceed ` 12
lakh, he is eligible for the scheme.

10. Computation of amount payable under composition scheme

(i) If M/s Heeralal and Sons is a manufacturer:

Tax is to be paid @ 1% (½% CGST+ ½% SGST) of the turnover in the

State as under:

1% of ` 32,00,000 [` 15,00,000 + 17,00,000]

= ` 32,000 [CGST = ` 16,000 and SGST = ` 16,000]

(ii) If M/s Heeralal and Sons is a trader:

Tax is to be paid @ 1% (½% CGST + ½%SGST) of the turnover of

taxable supplies of goods and services in the State as under:

= 1% of ` 15,00,000

= ` 15,000 [CGST = ` 7,500 and SGST = ` 7,500]

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11. GST liability of M/s All-in-One

Particulars Value CGST SGST

[`] payable payable
[`] [`]

A. GST liability on outward supply

(i) Direct selling agent service to Y 4,00,000 36,000 36,000

Bank Ltd. [4,00,000 [4,00,000
[Tax is payable under forward x 9%] x 9%]
charge since the supplier of such
service is a partnership firm and
not an individual.]

(ii) Security services to ABC P. Ltd., a -

registered person
[Tax is payable under reverse
charge by the recipient since
security services are provided by
a non-body corporate to a
registered person.]

(iii) Security services to PSR Trust, an 1,00,000 9,000 9,000

unregistered person [1,00,000 [1,00,000
[Tax is payable under forward x 9%] x 9%]
charge since security services are
provided by a non-body
corporate to an unregistered
person.]

(iv) Renting of motor vehicle to -

Amaze Tours Ltd. where value
included cost of fuel
[Tax is payable under reverse
charge by recipient since such
services are provided by a non-

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body corporate to a body

corporate and GST is payable
@ 5%.]

(v) Renting of motor vehicle to Priti 40,000 1,000 1,000

& Co., CA firm, where supply [40,000 x [40,000 x
value included cost of fuel 2.5%] 2.5%]
[Tax is payable under forward
charge since such services are
provided by a non-body
corporate to a non-body
corporate.]

Total GST liability on outward 46,000 46,000

supplies

B. GST liability on inward supplies under reverse charge

(vi) Availed representational service 70,000 - -

from PB and Co, a law firm
[Legal services provided by a
partnership firm of
advocates/individual advocate
other than a senior advocate to
a business entity with an
aggregate turnover up to such
amount in the preceding
financial year as makes it eligible
for exemption from registration,
are exempt from GST.
Since M/s All-in-One started its
business in February, its turnover
in the preceding financial year is
zero making it eligible for
exemption from registration in
the preceding financial year and
hence, the legal services

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provided to it are exempt from

GST.]

GST liability on inward supplies - -

under reverse charge

12. As per proviso to section 10(2), where more than one registered persons are
having the same PAN issued under the Income-tax Act, 1961, the registered
person shall not be eligible to opt for the composition scheme under section
10(1) unless all such registered persons opt to pay tax under said composition
scheme.
In the given case, since MN Ltd. has two places of business (they are not
separate entities under the Income-tax Act, 1961), they would be registered
under the same PAN. Therefore, MN Ltd. cannot opt for composition levy for
only one of the places of business and pay tax under regular scheme for other
place of business.
13. As per section 10(1), a registered person, whose aggregate turnover in the
preceding financial year did not exceed ` 1.5 crore in a State/UT [` 75 lakh in
case of Special Category States except Assam, Himachal Pradesh and Jammu
and Kashmir], may opt for composition scheme.
However, he shall not be eligible to opt for composition scheme if, inter alia,
he is engaged in making any inter-State outward supplies of goods or
services.
In the given case, since Ranveer Industries is engaged in making inter-State
supplies of readymade garments, it is not eligible to opt for composition
scheme in current year irrespective of its turnover not exceeding the
threshold limit of ` 75 lakh in the preceding FY.

Further, 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 payable, be liable to a penalty and the provisions
of section 73 or section 74 shall, mutatis mutandis, apply for determination
of tax and penalty.

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Thus, the action taken by the proper officer of levying the penalty for wrongly
availing the composition scheme is valid in law.

14. As per section 10 read with rule 7, a registered person opting for composition
levy for goods pays tax at the rates mentioned below during the current FY,
in lieu of the tax payable by him under regular scheme:

Manufacturers, other 1% (½% CGST+ ½% SGST/UTGST) of the turnover

than manufacturers in the State/ Union territory
of notified goods

Trader 1% (½% CGST+ ½% SGST/UTGST) of turnover of

taxable supplies of goods & services in the State/
Union territory

Turnover prior to getting registered will not be considered for determining

the turnover in a State/Union Territory.
(i) If Mr. Yash is a manufacturer
CGST = ` 100 lakh x 0.5% = ` 50,000
SGST = ` 100 lakh x 0.5% = ` 50,000
(ii) If Mr. Yash is a trader
CGST = ` 75 lakh (as 25% of turnover is exempt) x 0.5% = ` 37,500
SGST = ` 75 lakh (as 25% of turnover is exempt) x 0.5% = ` 37,500

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Default provision for the cross-border supply of services other

than nine specified services

S. No. Description of Place of Supply

supply

1. Any  Location of the recipient of service

 Location of the supplier of service, if
location of recipient is not available
in the ordinary course of business

(iv) Place of supply of services notified under section 13(13)

S. Services notified Place of supply

No.

1. Specified research and development Location of

services related to pharmaceutical recipient of services
sector supplied by a person located in subject to
taxable territory to a person located in fulfillment of
the non-taxable territory specified conditions

2. B2B maintenance, repair or overhaul Location of

services of aircrafts, aircraft recipient of service
engines/components/parts

3. B2B MRO services of ships and other Location of

vessels, their engines and other recipient of service
components/ parts

TEST YOUR KNOWLEDGE

1. XY Ltd. (registered in Rajasthan) received legal services from an attorney in UK
(unrelated person) in relation to registration of a trademark in UK. A
consideration of £ 8,000 was paid by the company to the attorney in UK.
Determine the place of supply for the service and suggest if XY Ltd. is required
to pay tax under reverse charge on this transaction.

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2. Damani Industries has recruited Super Events Pvt. Ltd., an event management
company of Gujarat, for organising the grand party for the launch of its new
product at Bangalore. Damani Industries is registered in Mumbai. Determine
the place of supply of the services provided by Super Events Pvt. Ltd. to Damani
Industries.

Will your answer be different if the product launch party is organised at Dubai?
3. Priyank Sales of Pune, Maharashtra enters into an agreement to sell goods to
Bisht Enterprises of Bareilly, Uttar Pradesh. While the goods were being packed
in Pune godown of Priyank Sales, Bisht got an order from Sahil Pvt. Ltd. of
Shimoga, Karnataka for the said goods. Bisht Enterprises agreed to supply the
said goods to Sahil Pvt. Ltd. and asked Priyank Sales to deliver the goods to
Sahil Pvt. Ltd. at Shimoga.
You are required to determine the place of supply(ies) in the above situation.
4. Musicera Pvt. Ltd. owned by Nitish Daani - a famous classical singer - wishes
to organise a ‘Nitish Daani Music Concert’ in Gurugram (Haryana). Musicera
Pvt. Ltd. (registered in Ludhiana, Punjab) enters into a contract with an event
management company, Supriya (P) Ltd. (registered in Delhi) for organising the
said music concert at an agreed consideration of ` 10,00,000. Supriya (P) Ltd.
books the lawns of Hotel Dumdum, Gurugram (registered in Haryana) for
holding the music concert, for a lump sum consideration of ` 4,00,000.
Musicera Pvt. Ltd. fixes the entry fee to the music concert at ` 5,000. 400 tickets
for ‘Nitish Daani Music Concert’ are sold.
You are required to determine the gross GST liability in respect of the
supply(ies) involved in the given scenario.
Will your answer be different if the price per ticket is fixed at ` 450?
Note: Rate of CGST and SGST is 9% each and IGST is 18%. All the amounts
given above are exclusive of taxes, wherever applicable.
5. RST Inc., a corn chips manufacturing company based in USA, intends to launch
its products in India. However, the company wishes to know the taste and
sensibilities of Indians before launching its products in India. For this purpose,
RST Inc. has approached ABC Consultants, Mumbai, (Maharashtra) to carry out
a survey in India to enable it to make changes, if any, in its products to suit
Indian taste.

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The survey is to be solely based on the oral replies of the surveyees; they will
not be provided any sample by RST Inc. to taste. ABC Consultants will be paid
in convertible foreign exchange for the assignment.
With reference to the provisions of GST law, determine the place of supply of
the service. Also, explain whether the said supply will amount to export of
service?
6. ABC Pvt. Ltd., New Delhi, provides support services to foreign customers in
relation to procuring goods from India. The company identifies the prospective
vendor, reviews product quality and pricing and then shares the vendor details
with the foreign customer.
The foreign customer then directly places purchase order on the Indian vendor
for purchase of the specified goods. ABC Pvt. Ltd. charges its foreign customer
cost plus 10% mark up for services provided by it.
The company has charged US $ 1,00,000 (exclusive of GST) to its foreign
customer for the services provided by it. With reference to the provisions of
GST law, examine whether the said supply will amount to export of service?
7. Mr. Murthy, an unregistered person and a resident of Pune, Maharashtra hires
the services of Sun Ltd. an event management company registered in Delhi, for
organising of the new product launch in Bengaluru, Karnataka.
(i) Determine the place of supply of services provided by Sun Ltd.

(ii) What would be your answer if the product launch takes place in Bangkok?
(iii) What would be your answer if Mr. Murthy is a registered person and
product launch takes place in-

(a) Bengaluru
(b) Bangkok?
8. 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:

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Case Location of Mr. Location of Mr. Harish Property situated at

Mahendra Goyal Jain

I Delhi Maharashtra New York (USA)

II Delhi New York Paris (France)

Explain the relevant provisions of law to support your conclusions.

9. Asha Enterprises, supplier of sewing machines, is located in Kota (Rajasthan)
and registered for purpose of GST in the said State. It receives an order from
Deep Traders, located in Jalandhar (Punjab) and registered for the purpose of
GST in the said State. The order is for the supply of 100 sewing machines with
an instruction to ship the sewing machines to Jyoti Sons, located in Patiala
(Punjab) and registered in the said State for purpose of GST. Jyoti Sons is a
customer of Deep Traders. Sewing machines are being shipped in a lorry by
Asha Enterprises.
Briefly explain the following:
(a) the place of supply;
(b) the nature of supply:- whether inter-State or intra-State and

(c) whether CGST/SGST or IGST would be applicable in this case.

10. Determine the place of supply for the following independent cases:
(i) Grand Gala Events, an event management company at Kolkata, organises
two award functions for Narayan Jewellers of Chennai (Registered in
Chennai, Tamil Nadu) at New Delhi and at Singapore.
(ii) Perfect Planners (Bengaluru, Karnataka) is hired by Dr. Kelvin
(unregistered person based in Kochi, Kerala) to plan and organise his
son's wedding at Mumbai, Maharashtra.
Will your answer be different if the wedding is to take place in Malaysia?

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ANSWERS/HINTS

1. In the given case, the service provider is outside India, and the service
recipient is in India. Thus, the place of supply will be determined on the basis
of the provisions of section 13. Since the given service does not get covered
under any of the specific provisions of section 13, the place of supply thereof
will be governed by the default provision, i.e. place of supply of services will
be the location of the recipient of service, which in this case is Rajasthan
(India).
Further, the given case is import of service in terms of section 2(11) as the
supplier of service is located outside India, the recipient of service is located
in India and the place of supply of service is in India. Since the services are
imported for a consideration from an unrelated person, the same
tantamounts to supply in terms of section 7(1)(b) of CGST Act and are liable
to GST.
As per reverse charge Notification No. 10/2017 IT(R) dated 28.06.2017, if a
service is supplied by a person located in a non-taxable territory to a person
located in the taxable territory, other than non-taxable online recipient, the
tax is payable by the recipient of service under reverse charge.
Therefore, XY Ltd. will pay GST under reverse charge on £ 8000 paid by it to
the attorney in UK.
2. Section 12(7)(a)(i) stipulates that when service by way of organization of an
event is provided to a registered person, place of supply is the location of
such person.
Since, in the given case, the product launch party at Bangalore is organized
for Damani Industries (registered in Mumbai), place of supply is the location
of Damani Industries, i.e. Mumbai, Maharashtra.
In case the product launch party is organised at Dubai, the answer will remain
the same, i.e. the place of supply is the location of recipient (Damani
Industries)– Mumbai, Maharashtra.
3. The supply between Priyank Sales (Pune) and Bisht Enterprises (Bareilly) is a
bill to ship to supply where the goods are delivered by the supplier [Priyank
Sales] to a recipient [Sahil Pvt. Ltd. (Shimoga)] or any other person on the

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direction of a third person [Bisht Enterprises]. The place of supply in case of

domestic bill to ship to supply of goods is determined in terms of section
10(1)(b).
As per section 10(1)(b), where the goods are delivered by the supplier to a
recipient or any other person on the direction of a third person, 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, it shall be
deemed that the said third person has received the goods and the place of
supply of such goods shall be the principal place of business of such person.
Thus, in the given case, it is deemed that the Bisht Enterprises has received
the goods and the place of supply of such goods is the principal place of
business of Bisht Enterprises. Accordingly, the place of supply between
Priyank Sales (Pune) and Bisht Enterprises (Bareilly) will be Bareilly, Uttar
Pradesh.
This situation involves another supply between Bisht Enterprises (Bareilly) and
Sahil Pvt. Ltd. (Shimoga). The place of supply in this case will be determined
in terms of section 10(1)(a).
Section 10(1)(a) stipulates that where the supply involves movement of
goods, whether by the supplier or the recipient or by any other person, the
place of supply of such goods shall be the location of the goods at the time
at which the movement of goods terminates for delivery to the recipient.
Thus, the place of supply in second case is the location of the goods at the
time when the movement of goods terminates for delivery to the recipient
(Sahil Pvt. Ltd.), i.e. Shimoga, Karnataka.
4. In the given situation, three supplies are involved:
(i) Services provided by Musicera Pvt. Ltd. to audiences by way of
admission to music concert.
(ii) Services provided by Supriya (P) Ltd. to Musicera Pvt. Ltd. by way of
organising the music concert.
(iii) Services provided by Hotel Dumdum to Supriya (P) Ltd. by way of
accommodation in the Hotel lawns for organising the music concert.
The CGST and SGST or IGST liability in respect of each of the above supplies
is determined as under:

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(i) As per the provisions of section 12(6), the place of supply of services
provided by way of admission to, inter alia, a cultural event shall be the
place where the event is actually held.
Therefore, the place of supply of services supplied by Musicera Pvt. Ltd.
(Ludhiana, Punjab) to audiences by way of admission to the music
concert is the location of the Hotel Dumdum, i.e. Gurugram, Haryana.
Since the location of the supplier (Ludhiana, Punjab) and the place of
supply (Gurugram, Haryana) are in different States, IGST will be leviable.
Therefore, IGST leviable will be computed as follows:
Consideration for supply (400 tickets @ ` 5,000 per ticket)
= ` 20,00,000
IGST @ 18% on value of supply = ` 20,00,000 x 18% = ` 3,60,000.
(ii) Section 12(7)(a)(i) stipulates that the place of supply of services
provided by way of organization of, inter alia, a cultural event to a
registered person is the location of such person.
Therefore, the place of supply of services supplied by Supriya (P) Ltd.
(Delhi) to Musicera Pvt. Ltd. (Ludhiana, Punjab) by way of organising the
music concert is the location of the registered person, i.e. Ludhiana
(Punjab).
Since the location of the supplier (Delhi) and the place of supply
(Ludhiana, Punjab) are in different States, IGST will be leviable.
Therefore, IGST leviable will be computed as follows:
Consideration for supply = ` 10,00,000

IGST @ 18% on value of supply = ` 10,00,000 x 18% = ` 1,80,000

(iii) As per the provisions of section 12(3)(c) of the IGST Act, 2017, the
place of supply of services, by way of accommodation in any
immovable property for organizing, inter alia, any cultural function
shall be the location at which the immovable property is located.
Therefore, the place of supply of services supplied by Hotel Dumdum
(Gurugram, Haryana) to Supriya (P) Ltd. (Delhi) by way of
accommodation in Hotel lawns for organising the music concert shall
be the location of the Hotel Dumdum, i.e. Gurugram, Haryana.

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Since the location of the supplier (Gurugram, Haryana) and the place of
supply (Gurugram, Haryana) are in the same State, CGST and SGST will
be leviable. Therefore, CGST and SGST leviable will be computed as
follows:
Consideration for supply = ` 4,00,000

CGST @ 9% on value of supply = ` 4,00,000 x 9% = ` 36,000

SGST @ 9% on value of supply = ` 4,00,000 x 9% = ` 36,000
If the price for the entry ticket is fixed at ` 450, answer will change in respect
of supply of service provided by way of admission to music concert, as
mentioned in point (i) above. There will be no IGST liability if the
consideration for the ticket is ` 450 as the inter-State services by way of
right to admission to, inter alia, musical performance are exempt from IGST
vide Notification No. 9/2017 IT (R) dated 28.06.2017, if the consideration for
right to admission to the event is not more than ` 500 per person. However,
there will be no change in the answer in respect of supplies mentioned in
point (ii) and (iii) above.
5. As per section 13(2), in case where the location of the supplier of services
or the location of the recipient of services is outside India, the place of
supply of services except the services specified in sub-sections (3) to (13)
shall be the location of the recipient of services. Sub-sections (3) to (13)
provide the mechanism to determine the place of supply in certain specific
situations.
The given case does not fall under any of such specific situations and thus,
the place of supply in this case will be determined under sub-section (2) of
section 13. Thus, the place of supply of services in this case is the location
of recipient of services, i.e. USA.
As per section 2(6), export of services means the supply of any service
when,–
(a) the supplier of service is located in India;
(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;

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(d) the payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian rupees wherever
permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely
establishments of a distinct person in accordance with Explanation 1 in
section 8.
Since all the above five conditions are fulfilled in the given case, the same will
be considered as an export of service.

6. Section 2(13) defines “intermediary” to mean a broker, an agent or any other

person, by whatever name called, who arranges or facilitates the supply of
goods or services or both, or securities, between two or more persons, but
does not include a person who supplies such goods or services or both or
securities on his own account.
In this case, since ABC Pvt. Ltd. is arranging or facilitating supply of goods
between the foreign customer and the Indian vendor, the said services can
be classified as intermediary services.
If the location of the supplier of services or the location of the recipient of
service is outside India, the place of supply is determined in terms of
section 13. Since, in the given case, the recipient of supply is located outside
India, the provisions of supply of intermediary services will be determined in
terms of section 13.
As per section 13(8)(b), the place of supply in case of intermediary services is
the location of the supplier, i.e. the location of ABC Pvt. Ltd. which is New
Delhi.
As per section 2(6) of the IGST Act, 2017, export of services means the supply
of any service when,–

(a) the supplier of service is located in India;

(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;

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(d) the payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian rupees wherever
permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely
establishments of a distinct person in accordance with Explanation 1
in section 8.
Since, in the given case, place of supply is in India, this transaction does not
tantamount to export of service.

7. (i) As per section 12(7)(a)(ii), when service by way of organization of an

event is provided to an unregistered person, the place of supply is the
location where the event is actually held and if the event is held outside
India, the place of supply is the location of recipient.
Since, in the given case, the service recipient [Mr. Murthy] is
unregistered and event is held in India, place of supply is the location
where the event is actually held, i.e. Bengaluru, Karnataka. The location
of the supplier and the location of the recipient is irrelevant in this case.
(ii) However, if product launch takes place outside India [Bangkok], the
place of supply will be the location of recipient, i.e. Pune, Maharashtra.
(iii) When service by way of organization of an event is provided to a
registered person, place of supply is the location of such person in
terms of section 12(7)(a)(i).
Therefore, if Mr. Murthy is a registered person, then in both the cases,
i.e. either when product launch takes place in Bengaluru or Bangkok,
the place of supply will be the location of recipient, i.e. Pune,
Maharashtra.
8. Case I
As per section 12(3), where both the service provider and the service
recipient are located in India, the place of supply of services directly in
relation to an immovable property, including services provided by interior
decorators is the location of the immovable property. However, if the
immovable property is located outside India, the place of supply is the
location of the recipient.

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Since in the given case, both the service provider (Mr. Mahendra Goyal) and
the service recipient (Mr. Harish Jain) are located in India and the immovable
property is located outside India (New York), the place of supply will be the
location of recipient, i.e. Maharashtra.
Case II
As per section 13(4), where either the service provider or the service
recipient is located outside India, the place of supply of services directly in
relation to an immovable property including services of interior decorators
is the location of the immovable property.
Since in the given case, service provider (Mr. Mahendra Goyal) is located in
India and service recipient (Mr. Harish Jain) is located outside India (New
York), the place of supply will be the location of immovable property, i.e.
Paris (France).
9. The supply between Asha Enterprises (Kota, Rajasthan) and Deep Traders
(Jalandhar, Punjab) is a bill to ship to supply where the goods are delivered
by the supplier [Asha Enterprises] to a recipient [Jyoti Sons (Patiala, Punjab)]
on the direction of a third person [Deep Traders].
In case of such supply, it is deemed that the said third person has received
the goods and the place of supply of such goods is the principal place of
business of such person [Section 10(1)(b)]. Thus, the place of supply
between Asha Enterprises (Rajasthan) and Deep Traders (Punjab) will be
Jalandhar, Punjab.
Since the location of supplier and the place of supply are in two different
States, the supply is an inter-State supply in terms of section 7, liable to
IGST.
This situation involves another supply between Deep Traders (Jalandhar,
Punjab) and Jyoti Sons (Patiala, Punjab). In this case, since the supply
involves movement of goods, place of supply will be the location of the
goods at the time at which the movement of goods terminates for delivery
to the recipient, i.e. Patiala, Punjab [Section 10(1)(a)].
Since the location of supplier and the place of supply are in the same State,
the supply is an intra-State supply in terms of section 8, liable to CGST and
SGST.
10. (i) When service by way of organization of an event is provided to a
registered person, place of supply is the location of such person in

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terms of section 12(7)(a)(i).

Since, in the given case, the award functions at New Delhi and
Singapore are organized for Narayan Jewellers (registered in Chennai),
place of supply in both the cases is the location of Narayan Jewellers,
i.e. Chennai, Tamil Nadu.

(ii) As per section 12(7)(a)(ii), when service by way of organization of an

event is provided to an unregistered person, the place of supply is the
location where the event is actually held and if the event is held
outside India, the place of supply is the location of recipient.
Since, in the given case, the service recipient [Dr. Kelvin] is
unregistered and event is held in India, place of supply is the location
where the event is actually held, i.e. Mumbai, Maharashtra.
However, if the wedding is to take place outside India [Malaysia], the
place of supply is the location of recipient, i.e. Kochi, Kerala.

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TEST YOUR KNOWLEDGE

1. Examine whether the following independent intra-State services are exempt

from GST:
(a) Legal services provided by BMC & Partners, Delhi, a partnership firm of
advocates, to Vastukaar Enterprises, Delhi, providing architect services
(with preceding financial year’s aggregate turnover as ` 21 lakh).
(b) Minimum balance charges collected by Dhanvarsha Bank from current
account and saving account holders.
2. Shiva Medical Centre, a Multi-speciality hospital, is a registered supplier in
Mumbai. It hires senior doctors and consultants independently, without
entering into any employer-employee agreement with them. These doctors and
consultants provide consultancy to the in-patients (patients who are admitted
to the hospital for treatment) without there being any contract with such
patients. In return, they are paid the consultancy charges by Shiva Medical
Centre.
However, the money actually charged by Shiva Medical Centre from the
in-patients is higher than the consultancy charges paid to the hired doctors and
consultants. The difference amount retained by the hospital, i.e. retention
money, includes charges for providing ancillary services like nursing care,
infrastructure facilities, paramedic care, emergency services, checking of
temperature, weight, blood pressure, etc.
The Department took a stand that senior doctors and consultants are providing
services to Shiva Medical Centre and not to the patients. Hence, their services
are not the health care services and must be subject to GST. Further, GST is
applicable on the retention money kept by Shiva Medical Centre.

You are required to examine whether the stand taken by the Department is
correct.
3. Vedanta Hospital, Gurgaon has its own restaurant in the basement of hospital
premises - Annapurna Bhawan - which supplies food to its in-patients (patients
admitted in the hospital) as per the advice of the doctor/nutritionist. Annapurna
Bhawan also supplies food to other patients (who are not admitted) or their

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attendants or visitors. The food is prepared by the employees of the hospital

and nothing is outsourced to any third-party vendors. Vedanta Hospital is of
the view that all services provided by a clinical establishment are exempt from
GST and thus, it is not liable to pay any tax. You are required to test the
correctness of the view taken by Vedanta Hospital.

4. Indian Institutes of Management (IIM), Indore organizes a placement drive for

the students studying in the campus. Many multinational companies register
for the placement program and pay the registration fee of ` 1,00,000. IIM,
Indore is of the view that such consideration received from multinational
companies for participating in the placement program is exempt from GST.
Explain whether the view taken by IIM, Indore is correct.
5. India Corporations Ltd., a Public Sector Undertaking (PSU), has taken loan from
a banking company - Wellness Bank Ltd. The loan was guaranteed by the
Central Government. India Corporations Ltd. defaulted in the repayment of
such loan. Examine whether the services of guaranteeing of loan by the Central
Government, in the given case, is liable to GST.
6. British High Commission, chief diplomatic mission of the United Kingdom, is
located in India and is providing advisory services to the students willing to
travel to UK for further studies. The mission has organized a seminar for such
students and a registration fee of ` 5,000 per student has been charged from
the students for the same. You are required to determine whether the advisory
services provided by British High Commission are liable to GST.
7. Explain in brief whether the below mentioned independent cases of supply of
services provided are exempt or taxable under GST law, providing very brief
reasoning:
(i) Himalayan Wanderers Campsite, a registered entity under GST, has fixed
up various tents in Shimla, for lodging purposes being offered to tourists
and trekkers. The details of tents rented by Himalayan Wanderers
Campsite on 8th December is as under:

No. of tents Amount of rent charged Nature of

rented per tent per day occupancy
10 ` 600 Single
15 ` 1000 Double

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(ii) Fables Infotech LLP, a limited liability partnership firm having registered
place of business in Hyderabad under GST, entered into a contract with
Neeta Services for providing air-conditioned mini vans for 1 year for
transportation of its female employees working in night shifts to be picked
up from designated spots every day at 9.00 p.m. except weekends and
dropped to the office. The same female employees were again picked up
from office at 6.30 a.m. every morning except weekends and dropped
back at the same spots from where they were picked up.
(iii) HumTum Services Limited, registered under GST, provided catering
services to Baljatan Anganwadi, an educational institute providing pre-
school education amounting to ` 2,50,000 in the month of February.
(iv) 50 women from different cities pursuing diploma in management
courses, participated in the 'Leadership Program' designed especially for
women for a duration of 9 months by IIM, Bangalore (a certificate as to
their participation was awarded to each one of them after the completion
of the programme).
(v) Mr. Ashok rented his residential flat to his friend Dr. Kishore, who is not
registered under GST for use as his medical clinic at a monthly rent of
` 15000.
8. Determine whether GST is payable in respect of each of the following
independent services provided by the registered persons:
(1) Fees of ` 10,000 charged from office staff for in-house personality
development course conducted by Mungerilal College providing
education as part of a curriculum for obtaining a qualification recognised
by Indian law.

(2) Bus fees of ` 2,500 per month collected from students by Rosemary
College providing education as part of a curriculum for obtaining a
qualification recognised by Indian law.

(3) Housekeeping service provided by M/s. Clean Well to Himavarsha

Montessori school, a play school, for cleaning its playground and
classrooms for ` 25,000 per month.
(4) Info link supplied ‘Tracing Alphabets’, an online educational journal, to
students of UKG class of Sydney Montessori School for ` 2,000.

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9. Sarva Sugam Charitable Trust, a trust registered under section 12AB of the
Income – tax Act, 1961, provides the following information relating to supply
of its services for the month of August:

Particulars Amount
(`)

Renting of residential dwelling for use as a residence to 18,00,000

Mr. Soham, an unregistered person

Renting of rooms for devotees (Charges per day ` 750) 6,00,000

Renting of kalyanamandapam (Charges per day ` 15,000) 12,00,000

Renting of community halls and open space (Charges per day 10,75,000
` 7,500)

Renting of shops for business (Charges per month ` 9,500) 4,75,000

Renting of shops for business (Charges per month ` 12,000) 7,50,000

Compute the GST liability of Sarva Sugam Charitable Trust for the month of
August assuming that the above amounts are exclusive of GST and rate of GST,
wherever applicable, is 18%.

Note: The rooms/ Kalyanamandapam/ halls/ open space/ shops owned by the
trust are located within the precincts of a religious place, meant for general
public, owned by the trust.

10. Mr. Nagarjun, a registered supplier of Chennai, has received the following
amounts in respect of the activities undertaken by him during the month of
September:

S. No. Particulars Amount

(` )

(i) Amount charged for service provided to recognized 50,000

sports body as selector of national team

(ii) Commission received as an insurance agent from 65,000

insurance company

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(iii) Amount charged as business correspondent for the 15,000

services provided to the urban branch of a
nationalized bank with respect to savings bank
accounts

(iv) Service to foreign diplomatic mission located in India 28,000

(v) Funeral services 30,000

He received the services from an unregistered goods transport agency for his
business activities and paid freight of ` 45,000.
Note: All the transactions stated above are inter-State transactions and also
are exclusive of GST.
You are required to calculate gross GST liability (ignoring ITC provisions) of
Mr. Nagarjun for the month of September assuming that the rate of GST,
wherever applicable, is 18% except the GTA services where the applicable rate
of GST is 5%. Working notes should form part of your answer.
11. Vividh Pvt. Ltd. is a supplier of goods and services at Bangalore, registered in
the State of Karnataka, having turnover of ` 200 lakh in the last financial year.
It has furnished the following information for the month of June.

Particulars Amount (`)

excluding GST
Services provided by way of a labour contract for 13,00,000
repairing a single residential unit otherwise than as a
part of residential complex

Fee received from students of a competitive exam 5,40,000

training academy run by Vividh Pvt. Ltd.
4 buses each with a seating capacity of 72 passengers 6,00,000
given on hire to State Transport Undertaking

Rent paid to Local Municipal Corporation for premises 2,50,000

taken on rent for competitive exam training academy
Goods transport services received from a registered 1,80,000
GTA which has opted to pay tax itself @ 12%

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Compute gross GST liability including tax payable under reverse charge
(ignoring ITC provisions) of Vividh Pvt. Ltd. for the month of June assuming that
the above amounts are exclusive of GST and rate of GST, wherever applicable,
is 18% unless otherwise mentioned.
12. “Chanakya Academy” is registered under GST in the State of Uttar Pradesh.
The Academy runs the following educational institutions:
(i) ‘Keshav Institute of Technology’ (KIT), a private engineering college in
Ghaziabad. KIT also runs distance learning post graduate engineering
programmes. Exams for such programmes are conducted in select cities
at centres appointed by the KIT. All the engineering courses including the
distance learning post graduate engineering programme run by KIT are
recognised by the law [The All India Council for Technical Education
(AICTE)].
(ii) ‘Little Millennium’, a pre-school in Lucknow.
(iii) ‘Bright Minds’, a coaching institute in Kanpur. The Institute provides
coaching for Institute of Banking Personnel Selection (IBPS) Probationary
Officers Exam.

(iv) ‘Spring Model’ a higher secondary school affiliated to CBSE Board.

The Academy provides the following details relating to the expenses incurred
by the various institutions run by it during the period April to September:

S. Particulars KIT Little Bright Spring

No. Millennium Minds Model

(`) (`) (`) (`)

(i) Printing services for 2,50,000 1,50,000 2,00,000

printing the question
papers (paper and
content are provided
by the Institutions)

(ii) Paper procured for 4,30,000 2,58,000 3,44,000

printing the question
papers

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(iii) Honorarium to paper 5,00,000

setters and
examiners (not on
the rolls of the
Institution)

(iv) Rent for exam 8,00,000 1,00,000

centers taken on rent
like schools etc., for
conducting
examination

(v) Subscription for 4,00,000 80,000 2,20,000 2,40,000

online educational
journals
[Little Millennium
has taken the
subscription for
online periodicals on
child development
and experiential
learning]

(vi) Hire charges for 4,80,000 5,50,000 1,30,000 7,50,000

buses used to
transport students
and faculty from
their residence to the
institutions and back

(vii) Catering services for 3,20,000 2,60,000 1,80,000 5,00,000

running a canteen in
the campus for
students
(Catering services for
KIT include a sum of
` 60,000 for catering
at a student event
organised in a

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banquet hall outside

the campus)

(viii) Security and 6,00,000 4,00,000 3,75,000 4,65,000

housekeeping
services for the
institution(s)
(Security and
housekeeping
services for Spring
Model include a sum
of ` 80,000 payable
for security and
housekeeping at the
student event
organised in a
banquet hall outside
the campus)

With the help of the above details, determine the amount of GST payable, if
any, (ignoring ITC provisions) on goods and services received during April to
September by the various educational institutions run by the ‘Chanakya
Academy’; all the amounts given above are exclusive of taxes, wherever
applicable.
Note: Rate of GST on goods is 12%, catering service is 5% and on other services
is 18%.
13. M/s A2Z, a proprietary firm registered under GST, is engaged in providing
various services under one roof. The firm provides the following information
pertaining to supplies made/input services availed by it during the month of
March:

S. Particulars Amount
No.
(` )

1. Amount collected for loading, unloading, packing and 15,000

warehousing of potato chips

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2. Fees paid for yoga camp conducted by a charitable 20,000

trust registered under section 12AB of the Income-tax
Act, 1961 for employees of the firm

3. Interest received on fixed deposits with APNA Bank by 30,000

the firm

4. Professional services provided to foreign diplomatic 50,000

mission located in India

5. Recovery agent services provided to ABC Finance Ltd. - 1,00,000

an NBFC located in Delhi

6. Security services (by way of supply of security 80,000

personnel) provided to XYZ Ltd. - a registered person
under GST

7. Receipts from running an educational institution (a 35,00,000

Senior Secondary School) for services provided to its
students (including receipts for providing residential
dwelling service of ` 18,20,000 by the institution to the
students)

8. Supply value including cost of fuel for provision of 88,000

renting of motor vehicle for transportation of
passengers’ service to NPS Ltd.

Determine the GST liability (inclusive of liability for the supplies received also)
of M/s A2Z for the month of March with necessary explanation for treatment of
each item. Rate of tax for both inward and outward supply is CGST and SGST
@ 9% each except for the service of renting a vehicle for transportation of
passengers for which CGST and SGST @ 2.5% each is applicable. All the
supplies are intra-State only. All amounts given hereunder are exclusive of
GST.

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14. A2X Services Limited, registered under GST, is engaged in providing various
services to various educational institutions. The company provides the
following information in respect of services provided during the month of April:

S. No. Description of services provided

(i) Transportation of students & staff of ‘Shiksha University', a

Deemed University

(ii) Catering services provided to 'Rank CBSE School'

(iii) Security personnel services provided to 'Win CBSE School', for its
annual sports day held at SAI Sports Complex owned by
Government of India

(iv) Supply of online periodical science journal to 'Merit CBSE School'

for its higher secondary students

(v) Services, in relation to placement of students, to 'SKILL', a

Government recognized vocational training college

Comment on the taxability or otherwise of the above transactions under GST

law. State the correct legal provisions for the same.

ANSWERS

1. (a) Services provided by a partnership firm of advocates or an individual as

an advocate other than a senior advocate, by way of legal services to a
business entity with an aggregate turnover up to such amount in the
preceding financial year as makes it eligible for exemption from
registration under the CGST Act, 2017, are exempt from GST vide
Notification No. 12/2017 CT (R) dated 28.06.2017 (hereinafter referred
to as exemption notification).
Since in the given case, services are being provided by the partnership
firm of advocates - BMC & Partners to a business entity - Vastukaar
Enterprises whose aggregate turnover in the preceding FY exceeded

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` 20 lakh i.e. the threshold limit for registration applicable to a service

provider in Delhi, said services are not exempt from GST.

(b) Services by way of extending deposits, loans or advances in so far as

the consideration is represented by way of interest or discount (other
than interest involved in credit card services) are exempt from GST vide
exemption notification.
However, service charges/ fees, documentation fees, broking charges,
administrative charges, entry charges or such like fees or charges
collected over and above interest on loan, advance or a deposit are not
exempt and are liable to GST.
In view of the above, minimum balance charges collected by
Dhanvarsha Bank from current account and saving account holders are
not exempt and are liable to GST.
2. No, the stand taken by the Department is not correct.

Services by way of health care services by a clinical establishment, an

authorised medical practitioner or para-medics are exempt from GST vide
exemption notification.

Health care services have been defined to mean any service by way of
diagnosis or treatment or care for illness, injury, deformity, abnormality or
pregnancy in any recognised system of medicines in India and includes
services by way of transportation of the patient to and from a clinical
establishment, but does not include hair transplant or cosmetic or plastic
surgery, except when undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
Circular No. 32/06/2018 GST dated 12.02.2018 has clarified that the entire
amount charged by the hospitals from the patients including the retention
money and the fee/payments made to the doctors etc., is towards the
healthcare services provided by the hospitals to the patients and is exempt
from GST. In view of the same, GST is not applicable on the retention money
kept by Shiva Medical Centre.
The circular also clarifies that services provided by senior doctors/
consultants/ technicians hired by the hospitals, whether employees or not,

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are also healthcare services exempt from GST. Hence, services provided by
the senior doctors and consultants hired by Shiva Medical Centre, being
healthcare services, are also exempt from GST.
3. Services by way of health care services by a clinical establishment, an
authorised medical practitioner or para-medics are exempt from GST vide
exemption notification. Circular No. 32/06/2018 GST dated 12.02.2018 has
clarified that food supplied by the hospital canteen to the in-patients as
advised by the doctor/nutritionists is a part of composite supply of healthcare
services and is not separately taxable. Thus, it is exempt from GST. However,
other supplies of food by a hospital to patients (not admitted) or their
attendants or visitors are taxable.
In view of the same, GST is not applicable on the food supplied by Annapurna
Bhawan to in-patients as advised by doctors/nutritionists while other supplies
of food by it to patients (not admitted) or their attendants/visitors are taxable.

4. Indian Institutes of Management Act, 2017 (IIM Act, 2017) empowers IIMs to
(i) grant degrees, diplomas, and other academic distinctions or titles, (ii)
specify the criteria and process for admission to courses or programmes of
study, and (iii) specify the academic content of programmes. Resultantly, all
the IIMs fall under purview of “educational institutions” as they provide
education as a part of a curriculum for obtaining a qualification recognized
by law for the time being in force.
Further, the services provided by an educational institution to its students 71,
faculty and staff are exempt from GST vide exemption notification.

However, in the given case, services have been provided by the educational
institution (viz. IIM, Indore), to the multinational companies. Therefore, the
same is not exempt from GST.

5. Services supplied by Central Government, State Government, Union territory

to their undertakings or Public Sector Undertakings (PSUs) by way of

71
As per Circular No. 82/01/2019 GST dated 01.01.2019, services provided by IIMs to their
students who are enrolled for long duration programs (1 year or more) for which they are
awarded diploma/ degree certificate duly recommended by Board of Governors as per the
power vested in them under the IIM Act, 2017, under such long duration programs are exempt
from GST.

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guaranteeing the loans taken by such undertakings or PSUs from the banking
companies and financial institutions are exempt from GST vide exemption
notification.
In the present case, Central Government has guaranteed the loan taken by
India Corporations Ltd. [a PSU], from Wellness Bank Ltd., [a banking
company]. Consequently, services provided by the Central Government, in the
form of guarantee of loan, are exempt from tax.
6. Services by a foreign diplomatic mission located in India are exempt from GST
vide exemption notification. Hence, in the given case, advisory services by
British High Commission located in Delhi to the students are exempt from
GST.

7. (i) Taxable: Since there is no specific exemption with respect to services

provided by a campsite for lodging purposes, services provided by
Himalayan Wanderers Campsite are liable to GST.

(ii) Taxable: Service of transport of passengers provided by Neeta Services

are liable to GST since such services are being provided in a contract
carriage which is air-conditioned.

(iii) Exempt: Since catering services provided to an educational institution

providing pre-school education are exempt from GST, HumTum
Services Limited is not liable to pay GST.

(iv) Taxable: Since short duration programs provided by IIMs are not any
qualification recognized by law, GST is payable in the given case.

(v) Taxable: Since residential dwelling is rented for use other than
residence, GST is payable on the same.
8. (1) Services provided by an educational institution to its students, faculty
and staff are exempt from GST vide exemption notification. Educational
Institution has been defined to mean, inter alia, an institution providing
services by way of education as a part of a curriculum for obtaining a
qualification recognised by any law for the time being in force.
Since Mungerilal College provides education as part of a curriculum for
obtaining a qualification recognised by Indian law, the services

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provided by it to its staff by way of conducting personality development

course would be exempt from GST, it being an educational institution.

(2) Since Rosemary College provides education as a part of a curriculum

for obtaining a qualification recognised by Indian law, the transport
services provided by Rosemary College to its students are exempt from
GST.
(3) Services provided to an educational institution, by way of, inter alia,
house-keeping services performed are exempt from GST vide
exemption notification provided such services are performed in such
educational institution. However, such exemption is available only
when the said services are provided to an educational institution
providing services by way of pre-school education and education up to
higher secondary school or equivalent.
In view of the above discussion, house-keeping services provided to
Himavarsha Montessori Play School are exempt from GST since
housekeeping services have been performed in such play school itself.
(4) Services provided to an educational institution by way of supply of
online educational journals or periodicals is exempt from GST vide
exemption notification. However, such exemption is not available to an
educational institution providing services by way of pre-school
education and education up to higher secondary school or equivalent.
Therefore, supply of online journal to students of UKG class of Sydney
Montessori School is not exempt from GST.

9. Renting of precincts of a religious place meant for general public,

owned/managed by, inter alia, an entity registered as a charitable trust under
section 12AA/12AB of the Income-tax Act are exempt from GST vide
exemption notification. However, said exemption is not available if:
(i) charges for rented rooms are ` 1,000 per day or more;
(ii) charges for rented community halls, Kalyan mandapam, open area are
` 10,000 per day or more;
(iii) charges for rented shops are ` 10,000 per month or more.

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Further, services by way of renting of residential dwelling for use as residence

to an unregistered person are also exempt vide exemption notification.
Computation of GST liability of Sarva Sugam Charitable Trust for August

Particulars Value (`) GST @

18% (`)

Renting of residential dwelling for use as 18,00,000 Nil

residence to an unregistered person
[Exempt vide exemption notification]

Renting of rooms for devotees 6,00,000 Nil

[Exempt since charges per day are below `1,000]
Renting of Kalyanamandapam 12,00,000 2,16,000
[Taxable since charges per day exceed `10,000]

Renting of community halls and open spaces 10,75,000 Nil

[Exempt since charges per day are below ` 10,000]
Renting of shops for business 4,75,000 Nil
[Exempt since charges per month are below
`10,000]

Renting of shops for business 7,50,000 1,35,000

[Taxable since charges per month exceed
` 10,000]
Total 3,51,000

10. Computation of gross GST liability of Mr. Nagarjun

Particulars Value (`) IGST (`)

Supplies on which Mr. Nagarjun is liable to pay

GST under forward charge

Amount charged for service provided to 50,000 9,000

recognized sports body as selector of national
team [Note 1]

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Commission received as an insurance agent Nil Nil

from insurance company [Note 2]

Amount charged as business correspondent for 15,000 2,700

the services provided to the urban branch of a
nationalised bank with respect to savings bank
accounts [Note 3]

Services provided to foreign diplomatic mission 28,000 5,040

located in India [Note 4]

Funeral services [Note 5] Nil Nil

Supplies on which Mr. Nagarjun is liable to pay

GST under reverse charge

Services received from GTA [Note 6] 45,000 2,250

IGST payable (Since all the transactions are 18,990

inter-State transactions, IGST is payable on the
same.)

Notes:
(1) Services provided to a recognized sports body by an individual only as
a player, referee, umpire, coach or team manager for participation in a
sporting event organized by a recognized sports body are exempt from
GST vide exemption notification. Thus, service provided as selector of
team is liable to GST.
(2) Commission for providing insurance agent’s services is liable to GST.
However, the tax payable thereon is to be paid by the recipient of
service i.e., insurance company, under reverse charge in terms of
Notification No. 13/2017 CT (R) dated 28.06.2017 72. Thus, Mr. Nagarjun
will not be liable to pay GST on such commission.
(3) Services provided by business correspondent to a banking company
with respect to accounts in its rural area branch are exempt from GST

72
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.

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vide exemption notification. Thus, such services provided in respect of

urban area branch will be taxable.
(4) While services provided by a foreign diplomatic mission located in India
are exempt from GST vide exemption notification, services provided to
such mission are taxable.
(5) Funeral services being covered in Schedule III of CGST Act are not a
supply and thus, are outside the ambit of GST.
(6) GST on services provided by a GTA to, inter alia, a registered person is
payable by the recipient of service i.e., the registered person, under
reverse charge in terms of Notification No. 13/2017 CT (R) dated
28.06.2017 except where GTA is registered and has exercised the option
to itself pay tax on said services 73. Since in the given case, GTA is
unregistered, it could not have exercised the option to pay tax and thus,
GST is payable @ 5% under reverse charge mechanism by the recipient
– Mr. Nagarjun.
11. Computation of gross GST liability of Vividh Pvt. Ltd.

Particulars Value of GST @

supply (`) 18% (`)
Services provided by way of labour contracts 13,00,000 2,34,000
for repairing a single residential unit
otherwise than as a part of residential
complex
[Services by way of pure labour contracts of
construction, erection, commissioning, or
installation of original works pertaining to a
single residential unit otherwise than as a part
of a residential complex are exempt vide
exemption notification. Labour contracts for
repairing, are thus, taxable.]

Fee received from students of competitive 5,40,000 97,200

exam training academy

73
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.

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 EXEMPTIONS FROM GST 4.151

[Fee received from students of competitive

exam training academy is taxable as it is not
an educational institution since competitive
exam training does not lead to grant of a
recognized qualification.]
Buses each with seating capacity of 72 6,00,000 Nil
passengers given on hire to State Transport
Undertaking
[Services by way of giving on hire to a state
transport undertaking (STU), a motor vehicle
meant to carry more than 12 passengers, are
exempt from GST vide exemption
notification.]

Services on which tax is payable under reverse

charge:
Rent paid to Local Municipal Corporation 2,50,000 45,000
[GST is payable under reverse charge in case
of renting of immovable property services
supplied by a local authority to a registered
person.]

GTA services availed 1,80,000 Nil

[Since GTA has opted to pay tax @ 12%, tax
is payable under forward charge by GTA only
and not by Vividh Pvt. Ltd.]
Gross GST payable 3,76,200

12. Exemption notification exempts select services provided to an educational

institution. Here, the “educational institution” means an institution
providing services by way of-
(i) pre-school education and education up to higher secondary school or
equivalent;

(ii) education as a part of a curriculum for obtaining a qualification

recognised by any law for the time being in force;

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(iii) education as a part of an approved vocational education course;

The select services which are exempt when provided to an educational
institution are-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central
Government, State Government or Union territory;
(iii) security or cleaning or house-keeping services performed in such
educational institution;
(iv) services relating to admission to, or conduct of examination by, such
institution;
(v) supply of online educational journals or periodicals.
However, the services mentioned in points (i), (ii) and (iii) are exempt only
when the same are provided to an educational institution providing services
by way of pre-school education and education up to higher secondary school
or equivalent.
Also, the supply of online educational journals or periodicals is not exempt
from GST when provided to-

(i) pre-school education and education up to higher secondary school or

equivalent; or
(ii) education as a part of an approved vocational education course.

Further, services by way of giving on hire motor vehicle for transport of

students, faculty and staff, to a person providing services of transportation of
students, faculty and staff to an educational institution providing services by
way of pre-school education and education upto higher secondary school or
equivalent is exempt 74.
In the given case, all the engineering courses including the distance learning
post graduate engineering programme run by KIT are recognised by the law
[The All India Council for Technical Education (AICTE)]. Therefore, since KIT
imparts education as a part of a curriculum for obtaining a qualification

74
as per Entry 22 of Notification No. 12/2017 CT (R)

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recognised by the Indian law, the same is an educational institution in terms

of the exemption notification.

Similarly, Little Millennium and Spring Model, being a pre-school and a higher
secondary school respectively are also educational institutions in terms of the
exemption notification.

However, Bright Minds, being a coaching centre, training candidates to secure

a banking job, is not an educational institution in terms of the exemption
notification. Hence, none of the select services (mentioned above) will be
exempt when provided to Bright Minds.
In the light of the foregoing provisions, the amount of GST payable on goods
and services received by these educational institutions during April to
September is computed as under:

Particulars KIT Little Bright Spring

Millennium Minds Model
(`) (`) (`) (`)
Printing services for Exempt 27,000 Exempt
printing the [Services [1,50,000
question papers provided to x 18%]
(paper and content educational
are provided by the institution in
Institutions) relation to
conduct of
examination]
Paper procured for 51,600 30,960 41,280
printing the [4,30,000 x [2,58,000 [3,44,000
question papers 12%] x 12%] x 12%]
[Supply of select
services to
educational
institutions is
exempt and not
supply of goods to
such educational
institutions]

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Honorarium to Exempt
paper setters and [Services
examiners (not on provided to
the rolls of the educational
educational institution in
institution) relation to
conduct of
examination]
Rent for exam Exempt 18,000
centres taken on [Services [1,00,000
rent like schools provided to x 18%]
etc., for conducting educational
examination institution in
relation to
conduct of
examination]
Subscription for Exempt 14,400 39,600 43,200
online educational [80,000 x [2,20,000 [2,40,000
journals 18%] x 18%] x 18%]
[Little Millennium
has taken the
subscription for
online periodicals
on child
development and
experiential
learning]
Hire charges for 86,400 Exempt 23,400 Exempt
buses used to [4,80,000 x [1,30,000
transport students 18%] x 18%]
and faculty from
their residence to
the institutions and
back
Catering services for 16,000 Exempt 9,000 Exempt
running a canteen in

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the campus for [3,20,000 x [1,80,000

students 5%] x 5%]
[Catering service
provided to pre-
school and the
higher secondary
school is exempt
irrespective of
whether the same is
provided within or
outside the
premises of the pre-
school and the
higher secondary
school]
Security and 1,08,000 Exempt 67,500 14,400
housekeeping [6,00,000 x [3,75,000 [80,000 x
services for the 18%] x 18%] 18%]
institution(s)
[Security and
housekeeping
service provided to
pre-school and the
higher secondary
school for the
student event
organised in a
banquet hall will be
taxable as only the
security and
housekeeping
service provided
within the premises
of the pre-school
and the higher
secondary school
are exempt.]

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Total GST payable 2,62,000 14,400 2,15,460 98,880

on goods and
services received

13. Computation of GST liability of M/s A2Z for the month of March:

S. Particulars CGST SGST

No. (`) (`)

1. Loading, unloading, packing and 1,350 1,350

warehousing of potato chips [15,000 × [15,000
[Loading, unloading, packing and 9%] × 9%]
warehousing of agricultural produce is
exempt. However, potato chips is not an
agricultural produce.]

2. Fees paid for yoga camp -- --

[Services provided by a charitable trust
registered under section 12AB of the
Income-tax Act by way of advancement
of yoga are exempt.]

3. Interest received on fixed deposits -- --

[Services of extending fixed deposits in
so far as the consideration is
represented by way of interest are
exempt.]

4. Professional services provided to 4,500 4,500

foreign diplomatic mission located in [50,000 × [50,000
India 9%] × 9%]
[Not specifically exempt.]

5. Recovery agent services provided to -- --

ABC Finance Ltd., an NBFC
[Since such services are being provided
to an NBFC, tax on the same is payable

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by recipient - ABC Finance Ltd. - under

reverse charge (RCM). 75]

6. Security services provided to XYZ Ltd., a -- --

registered person
[Since such services are being provided
by a non-body corporate to a registered
person, tax on the same is payable by
recipient - XYZ Ltd. - under reverse
charge (RCM) 76.]

7. Receipts from running an educational -- --

institution (including receipts for
residential dwelling service)
[Services provided by an educational
institution and services by way of
renting of residential dwelling for use as
residence are exempt.]

8. Renting of motor vehicle service

[Since services of renting of motor
vehicle including cost of fuel with tax -- --
payable @ 2.5% CGST/SGST is being
provided by a non-body corporate to a
body corporate, tax on the same is
payable by recipient – NPS Ltd. – under
RCM 77.]

Total GST liability 5,850 5,850

75
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST.
76
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.
77
Provisions relating to reverse charge mechanism have already been discussed in detail in
Chapter 2 – Charge of GST in this Module of the Study Material.

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 1.158 4.158 GOODS AND SERVICES TAX

14.

S. No. Particulars Taxability

(i) Transportation of students and staff of deemed Taxable
university
[Taxable since transportation services provided to an
educational institution are exempt only if such
institution provides pre-school education or education
up to higher secondary school or equivalent.]
(ii) Catering services provided to “Rank CBSE School” Exempt
[Catering services provided to an educational
institution providing pre-school education or
education up to higher secondary school or equivalent
are exempt.]
(iii) Security services to “Win CBSE School” for its annual Taxable
sports day held at SAI Sports complex
[Security services provided to an educational
institution providing pre-school education or
education up to higher secondary school are exempt
provided such services are performed in the premises
of such institution. However, in this case, security
services are being provided outside the school
campus, and hence the same are taxable.]
(iv) Supply of online periodical science journal to school Taxable
for its higher secondary students
[Taxable since educational institutions providing
service by way of pre-school education and education
upto higher secondary school or equivalent are not
eligible for exemption in respect of supply of online
educational journals.]
(v) Services in relation to placement of students, to Taxable
Government recognized vocational training college
[Taxable since only services related to admission and
conducting exams are exempt for vocational
educational institutions.]

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 5.46 GOODS AND SERVICES TAX

TEST YOUR KNOWLEDGE

1. Kanchenjunga Pvt. Ltd. supplies taxable goods to Sutlej Pvt. Ltd. for ` 2,50,000
on 23rd June and issues the invoice on 25th June. Payment for the goods is made
by Sutlej Pvt. Ltd. on 15th July.
Determine the time of supply of goods for the purpose of payment of tax.
2. 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.

3. An online portal, Best Info, raises invoice for database access on

21st February on Roy & Bansal Ltd. The payment is made by Roy & Bansal Ltd.
by a demand draft sent on 25th February, which is received and entered in the
accounts of Best Info on 28th February. Best Info encashes the demand draft
and thereafter, gives access to the database to Roy & Bansal Ltd from 3rd March.
In the meanwhile, the rate of tax is changed from 1st March.
Determine the time of supply of the service of database access by Best Info.
4. Trust Industries Ltd. has entered into a contract with VST Ltd. to supply gas by
a pipeline to VST Ltd. for a period of one year. As per the terms of the contract-
(i) VST Ltd. shall make monthly payments [Payment for a month shall be
made by 7th day of the next month]
(ii) Every quarter, Trust Industries Ltd. shall issue a statement of account
showing the quantity and value of goods dispatched, payments received
and payment due.
(iii) The differential amount, if any, as mentioned in the statement of account
shall be paid by VST Ltd.

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The details of the various events are:

August 5, Payments of ` 2 lakh made in each month for the quarter

September 5, July-September
October 6
October 3 Statement of accounts for the quarter July – September
issued by the supplier showing amount of ` 2,56,000 as
unpaid
October 17 Balance payment of ` 56,000 received by supplier for the
quarter July – September

Determine the time of supply of goods for the purpose of payment of tax.
5. Renudhoot Ltd. enters into a contract with XYZ Ltd. on 2nd July 2022 for a period
of 2 years for construction of a new building - to be used for commercial
purposes - for a total consideration of ` 150 lakh. As per the terms of contract,
Renduhoot Ltd. is required to make payment at different stages of completion
of the building namely, 50%, 75% and 100%.
Determine the time of supply using relevant details given as under:

Stage Date of Date of Date of Amount

various issuance of payment paid (`)
stages invoice

Initial 02.07.2022 02.07.2022 02.07.2022 15 lakh

booking

50% 15.03.2023 22.03.2023 29.03.2023 60 lakh

completion of
building

75% 20.06.2023 24.07.2023 23.07.2023 35 lakh

completion of
building

100% 30.09.2023 30.09.2023 20.09.2023 40 lakh

completion of
building

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6. Mint Industries Ltd., a registered supplier, imports business support services

from Green Inc. of USA on 13th August. The relevant invoice for $ 1,20,000 is
raised by Green Inc on 18th August. Mint Industries Ltd. makes the payment
against the said invoice as follows:

Case I 22nd September

Case II 27th December

Determine time of supply in each of the aforesaid cases.

7. Kothari Ltd., Mumbai, holds 51% of shares of Wilson Inc., a USA based company.
Wilson Inc. provides business auxiliary services to Kothari Ltd. From the
following details, determine the time of supply of service provided by Wilson
Inc:

Agreed consideration US $1,00,000

Date on which services are provided by Wilson Inc. 16th June

Date on which invoice is issued by Wilson Inc. 19th August

Date of debit in the books of account of Kothari Ltd. 30th September

Date on which payment is made by Kothari Ltd. 23rd December

8. Basis the following information, determine the time of supply:

S. No. 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 15th October

books

(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.

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9. 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 Printing of

books 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 13th May 7th April
buyer

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.
10. 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:

S. No. 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]

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(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’

(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.

ANSWERS/HINTS

1. 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, time of supply of goods is 23 rd June

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1.51 5.51

being the last date on which invoice ought to have been issued and not
25th June when the invoice is actually issued.
2. 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.
3. As issuance of invoice and receipt of payment (entry of the payment in Best
Info’s accounts) occurred before the change in rate of tax, the time of supply
of service by the online portal is earlier of the date of issuance of invoice
(21st February) or date of receipt of payment (28th February) i.e., 21st February.
This would be so even though the service commences after the change in rate
of tax [Section 14(b)(ii)].
4. 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. As per section 31(4), in case of continuous supply of
goods, where successive statements of accounts or successive payments are
involved, the invoice is issued before or at the time of each such statement is
issued or, as the case may be, each such payment is received.
Therefore, invoices should be issued for ` 2 lakh each on or before August 5,
and September 5, when monthly payments of ` 2 lakh are received. Further,
invoice should also be issued for differential payment of ` 2,56,000 on or
before October 3, when statement of account is issued
Thus, assuming that the invoice is issued on August 5, September 5 and
October 3, the time of supply for the purpose of payment of tax will be August
5 and September 5 respectively for goods valued at ` 2 lakh each and October
3 for the goods valued at ` 2,56,000.

5. 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:

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(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 present case, the construction services are provided under a
contract for a period exceeding three months with periodic payment
obligations, such services would fall within the ambit of term “continuous
supply of services” as defined under section 2(33).
As per section 31(5), in case of continuous supply of services, the invoice
should be issued either (i) on/ before the due date of payment or (ii) before/
at the time when the supplier of service receives the payment, if the due date
of payment is not known (iii) on/ before the date of completion of the
milestone event when the payment is linked to completion of an event
[Section 31(5)].
Accordingly, the time of supply with respect to each of the stages of completion
is as follows:

Stages of Time of supply

completion

Initial Since invoice is issued within the prescribed time limit,

booking earlier of the date of issue of invoice or date of receipt of
payment is the time of supply. However, date of issuance
of invoice (02.07.2022) and date of receipt of payment
(02.07.2022) are the same. Therefore, time of supply is
02.07.2022.

50% Since invoice has not been issued on or before the date of
50% completion, earlier of date of provision of service
(15.03.2023) or date of receipt of payment (29.03.2023), i.e.
15.03.2023 is the time of supply.

75% Since invoice has not been issued on or before the date of
75% completion, earlier of date of provision of service

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(20.06.2023) or date of receipt of payment (23.07.2023), i.e.

20.06.2023 is the time of supply.

100% Since invoice is issued within the prescribed time limit,

earlier of the date of issue of invoice (30.09.2023) or date of
receipt of payment (20.09.2023), i.e. 20.09.2023 is the time
of supply.

6. In case of services supplied by any person located in a non-taxable territory

to any person other than non-taxable online recipient, tax is payable under
reverse charge by the person located in the taxable territory [Notification No.
10/2017 IT (R) dated 28.06.2017]. Hence, in the given case, since the business
support services are provided by Green Inc (located in non-taxable territory)
to Mint Ltd. (person other than non-taxable online recipient and located in
taxable territory), tax is payable under reverse charge by Mint Ltd.
The time of supply of services taxable under reverse charge is the earlier of
the following:
 Date of payment, or
 Date immediately following 60 days since issue of invoice (or any other
document in lieu of invoice) by the supplier.
If it is not possible to determine the time of supply by using these parameters,
then the time of supply will be the date of entry of the service in the books
of account of the recipient of supply.
In view of the aforesaid provisions, the time of supply in each of the given
cases will be as under:

CASE Time of supply

CASE I Since Mint Ltd makes the payment within 60 days of the date of
issue of invoice, the time of supply is the date of payment,
i.e. 22nd September.

CASE II As Mint Ltd. makes the payment after 60 days from the date of
invoice, time of supply is the date immediately following the said
period of 60 days, i.e. 61st day which is 18th October.

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7. Since Kothari Ltd. holds 51% shares of Wilson Inc., Kothari Ltd. and Wilson
Inc. are ‘associated enterprises’ as per section 92A of the Income-tax Act,
1961. As per second proviso to section 13(3), in case of supply by associated
enterprises, where the supplier of service is located outside India, the time of
supply is the earlier of the following two dates:

Date of entry in the books of 30th September

account of the recipient of supply
[which is Kothari Ltd. in the
present case]

OR OR

Date of payment [by Kothari Ltd. 23rd December

in the present case]

Thus, time of supply is 30th September.

8. 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).
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.
Therefore, applying the provisions of section 14(a)(iii) to the given case, the
time of supply is 15th October.

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9. 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.
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.
Accordingly, the time of supply of books and envelopes will be governed by
sections 12 and 13 respectively.

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 7th April. Thus, the time of supply
of envelopes for the purpose of payment of tax is 7th April.
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;

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(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. 20th 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.
10. 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 4th March being the date of issue of invoice. 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).

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TEST YOUR KNOWLEDGE

1. Income tax collected at source should be included in value of the supply in
terms of section 15(2)(a). Examine the correctness of the statement.
2. How should the supply made by a component manufacturer be valued, when
he uses moulds and dies owned by the original equipment manufacturer sent
free of cost to him? Explain.
3. Examine whether the following discounts ought to be excluded to determine
the value of supply:
(i) Company offering 20% discount for single purchase above ` 10,000
(ii) Company offering additional discount of 1% on purchase of 10,000 pieces
in a year
(iii) After selling a product, the company re-valued the product at a lower
value and issued credit note to the buyer for the differential amount.
4. Rajesh & Co., a partnership firm, provides financial and management
consultancy to a group of companies for an annual retainership fee of ` 15
lakh. Further, the firm is provided with a car (along with a driver) for its
exclusive use throughout the year. The fuel cost is also borne by the Group.
Rajesh & Co. pays GST on the amount of ` 15 lakh.
Is the value for the service provided by Rajesh & Co. correct under GST law? If
not, please elaborate.
5. The supplies of commodity ‘y’ to the market are channelled through a State
Marketing Corporation which conducts an auction each day to arrive at the
price. Gupta and Co. supplies commodity ‘y’ through the State Marketing
Corporation.
How will the supply of ‘y’ made by Gupta and Co. to State Marketing
Corporation be valued for paying tax?
6. Easy Coupons Ltd. sells coupons that are redeemable against specified luxury
food products at retail outlets. Each coupon is sold for value of ` 900 but is
redeemable for supplies worth ` 1000.
What is the value of supply of such coupon under GST law?

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7. A pharmaceutical company supplies a drug intermediate to its own unit in

another State for conversion into formulations. The drug intermediate is
exclusive to this company, and there is no market sale in India of this drug
intermediate. Goods of like kind and quality are also not available. After
conversion, the finished product is sold from the said unit itself by the company.

How will the value of the supply of this drug intermediate be determined under
GST law?
8. 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.
Also, Dushyant has paid municipal tax 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.
9. Vayu Ltd. provides you the following particulars relating to goods supplied by
it to Agni Ltd.:

Particulars Amount
(`)

List price of the goods (exclusive of taxes/duties and 76,000

discounts)

Special packing at the request of customer to be charged to 5,000

the customer

Duty levied by local authority on the sale of such goods 4,000

CGST and SGST charged separately in invoice 14,400

Price linked subsidy received from an NGO in relation to the 5,000

goods sold (The price of ` 76,000 given above is after
considering the subsidy)

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Vayu Ltd. offers 3% discount on 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.

10. 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 on 1st April. 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.

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Examine the scenario with reference to section 15 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%.
11. Prada Forex Private Limited, registered in Delhi, is a money changer. It has
undertaken the following purchase and sale of foreign currency:
(i) 1,000 US $ are purchased from Nandi Enterprises at the rate of ` 74 per
US $. RBI reference rate for US $ on that day is ` 74.60.
(ii) 2,000 US $ are sold to Menavati at the rate of ` 74.50 per US$. RBI
reference rate for US $ for that day is not available.
Determine the value of supply in each of the above cases in terms of rule
32(2)(a) and rule 32(2)(b).
12. Rolly Polly Manufacturers Ltd., registered in Mumbai (Maharashtra), is a
manufacturer of footwear. It imports a footwear making machine from USA.
Rolly Polly Manufacturers Ltd. enters into a contract with Rudra Logistics, a
licensed customs broker with its office at Ahmedabad (Gujarat), to meet all the
legal formalities in getting the said machine cleared from the customs station.

Apart from this, Rolly Polly Manufacturers Ltd. authorises Rudra Logistics to
incur, on its behalf, the expenses in relation to clearance of the imported
machine from the customs station and bringing the same to the warehouse of
Rolly Polly Manufacturers Ltd. which shall be reimbursed by Rolly Polly
Manufacturers Ltd. to Rudra Logistics on the actual basis in addition to agency
charges.

Rudra Logistics provided following details in the invoice issued by it to Rolly

Manufacturers Ltd.:

S. No. Particulars Amount

(` )

(i) Agency charges 5,00,000

(ii) Unloading of machine at Kandla port, Gujarat 50,000

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(iii) Charges for transportation of machine from Kandla 25,000

port, Gujarat to its Rudra Logistics’ godown in
Ahmedabad, Gujarat

(iv) Charges for transportation of machine from Rudra 28,000

Logistics’ Ahmedabad godown to the warehouse of
Rolly Polly Export Import House in Mumbai,
Maharashtra

(v) Prepared and submitted Bill of Entry and paid 5,00,000

customs duty

(vi) Dock dues paid 50,000

(vii) Port charges paid 50,000

(viii) Hotel expenses 45,000

(ix) Travelling expenses 50,000

(x) Telephone expenses 2,000

Compute the value of supply made by Rudra Logistics with the help of given
information.

Would your answer be different if Rudra Logistics has charged ` 13,00,000 as

a lump sum consideration for getting the imported machine cleared from the
customs station and bringing the same to the warehouse of Rolly Polly
Manufacturers Ltd.?
13. Rustagi & Co. manufactures customized products at its unit situated and
registered in Madhya Pradesh. Cost of production of 1,000 products for Rustagi
& Co. is ` 20,00,000.
These products require further processing before sale, and for this purpose
products are transferred from its Madhya Pradesh unit to its another unit
situated and registered in Himachal Pradesh. The value declared on the invoice
for such transfer is the cost of production of such products.
The Himachal Pradesh unit, apart from processing its own products, engages
in processing of similar products of other persons who supply the products of

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the same kind and quality. Thereafter, the Himachal Pradesh unit sells these
processed products to wholesalers. There are no other factories in the
neighbouring area which are engaged in the same business as that of Himachal
Pradesh unit.
1,000 units of the products of same kind and quality are supplied to Himachal
Pradesh unit, at the time when goods are sent by Madhya Pradesh unit, by
another manufacturer located in Himachal Pradesh.
The ex-factory price of such goods is ` 19,00,000. The Himachal Pradesh unit
of Rustagi & Co. is eligible for full ITC.
Determine the value of 1000 products supplied by Rustagi & Co. to its Himachal
Pradesh unit.
14. Dev Enterprises is the supplier of water coolers. Dev Enterprises supplied water
coolers to an unrelated party, Vimal Traders for consideration of ` 2,95,000
(inclusive of GST @ 18%). Vimal Traders also gave some materials to Dev
Enterprises [valuing ` 10,000 (exclusive of GST)] as an additional consideration
for such supply.
At the same time, Dev Enterprises has supplied the same goods to another
unrelated person at price of ` 2,97,360 (inclusive of GST@18%).
You are required to:
(1) Determine the value of goods supplied by Dev Enterprises to Vimal
Traders.
(2) What would your answer be if price of ` 2,97,360 is not available at the
time of supply of goods to Vimal Traders? Explain briefly.

15. Chirayu Life Insurance Company Limited (CLICL) has collected premium from
policy subscribers. It does not intimate the amount allocated for investment to
subscribers of the policy at the time of supply of insurance services. The
company has provided the following details in relation to its receipts:

SI. No. Particulars Amount

1. Premium for only risk cover 25,00,000

2. Premium from new policy subscribers 40,00,000

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3. Renewal premium 80,00,000

4. Single premium on annuity policy 1,00,00,000

All amounts are exclusive of tax. You are required to compute the value of
supply by CLICL in terms of rule 32(4).
16. Aviant Ltd., registered in Noida (Uttar Pradesh), is a supplier of machinery used
for making bottle caps. The supply of machinery is effected as under:
− The wholesale price of the machinery (excluding all taxes and other
expenses) at which it is supplied in the ordinary course of the business to
various customers is ` 42,00,000.
However, the actual price at which the machinery is supplied to an
individual customer varies within a range of ± 10% depending upon the
terms of contract of supply with the particular customer.

− Apart from the price of the machinery, Aviant Ltd. charges from the
customer the following incidental expenses:
♦ associated handling and loading charges of ` 10,000
♦ installation and commissioning charges of ` 1,00,000
− The machinery can be dismantled and erected at another site, if required.
The above charges are compulsorily levied in case of each supply of
machinery.
− Transportation of machinery to the customer’s premises is arranged by
Aviant Ltd. through a third-party service provider [Goods Transport
Agency (GTA)].
The customer enters into a separate service contract with the GTA and
pays the freight directly to it.
− A cash discount of 2% on the price of the machinery is offered at the time
of supply, if the customer agrees to make the payment within 15 days of
the receipt of the machinery at his premises.

In the event of failure to make the payment within the stipulated time,
the company-

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♦ recovers the discount given at the time of receiving payment from

the customer (no separate amount of GST is recovered); and

♦ charges simple interest @ 1% per month or part of the month (no

separate amount of GST is recovered) on the total amount due from
the customer (towards the machinery supplied) from the date of
making the supply till the date of payment. However, no interest is
charged on the tax dues.
− For every machinery supplied, Aviant Ltd. receives a price linked subsidy
of ` 2,00,000 from its holding company Diligent Ltd.
Aviant Ltd. has supplied a machinery to an unrelated party, Daffodil Pvt. Ltd.
on 29th August at a price of ` 40,00,000 (excluding all taxes). Invoice was issued
on 29th August by Aviant Ltd.
The corporate office of Daffodil Ltd., which is at New Delhi, has entered into
contract with Aviant Ltd. for supply of machinery. However, the machinery has
been installed at Daffodil Pvt. Ltd’s registered manufacturing unit located in
Gurugram (Haryana). Daffodil Pvt. Ltd. has paid the freight directly to the GTA.
Discount @ 2% on the price of machinery excluding taxes was given to Daffodil
Pvt. Ltd. as it agreed to make the payment within 15 days. However, Daffodil
Pvt. Ltd. paid the consideration on 30th September.
Assume the rates of taxes to be as under:

Bottle cap making machine

CGST – 6% SGST – 6% IGST – 12%
Service of transportation of goods
CGST – 2.5% SGST – 2.5% IGST – 5%
Other services involved in the above supply
CGST – 9% SGST – 9% IGST – 18%

Calculate the GST liability [CGST, SGST or IGST, as the case may be] with
respect to the supply of machinery and support your conclusions with legal
provisions in the form of explanatory notes.
Make suitable assumptions, wherever needed.

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ANSWERS/HINTS

1. The statement is not correct. CBIC vide Circular No. 76/50/2018 GST dated
31.12.2018 (amended vide corrigendum dated 7.03.2019) has 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.
2. Circular No. 47/21/2018 GST dated 08.06.2018 has clarified that while
calculating the value of the supply made by the component manufacturer
using moulds and dies owned by Original Equipment Manufacturers (OEM)
sent free of cost (FOC) to him, the value of such moulds and dies shall not be
added to the value of supply made by him because the cost of moulds/dies
was not to be incurred by the component manufacturer and thus, does not
merit inclusion in the value of supply in terms of section 15(2)(b).

However, if the contract between OEM and component manufacturer was for
supply of components made by using the moulds/dies belonging to the
component manufacturer, but the same have been supplied by the OEM to
the component manufacturer on FOC basis, the amortised cost of such
moulds/dies shall be added to the value of the components.
3. (i) The given case is a case of staggered discounts where rate of discount
increases with increase in purchase volume. Such discounts are shown
on the invoice itself. Therefore, the same are excluded to determine the
value of supply.

(ii) The given case is a case of volume discount which are offered by the
suppliers to their stockists, etc. Such discounts are established in terms
of an agreement entered into at or before the time of supply which can
be specifically linked to the relevant invoices though not shown on the
invoice as the actual quantum of such discounts gets determined after
the supply has been effected and generally at the year end. Such type
of volume discounts are excluded/deducted to determine the value of
supply provided they satisfy the parameters laid down in section 15(3)
including the reversal of ITC by the recipient of the supply as is

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attributable to the discount on the basis of document (s) issued by the

supplier.

(iii) This is a case of secondary discounts. These are the discounts which are
not known at the time of supply or are offered after the supply is already
over as per the agreement made at or before the time of supply.Therefore,
such discounts shall not be excluded while determining the value of
supply.
4. Rajesh & Co. gets a car along with driver (including the fuel) for the whole
year, which is an additional non-monetary consideration for its services. The
equivalent monetary value of such additional consideration must be added
to the retainership fee (` 15 lakh) in order to arrive at the value of the taxable
service provided by Rajesh & Co, as per rule 27 relating to valuation.
5. The State Marketing Corporation is an ‘agent’ in the meaning of the
expression as defined in section 2(5), which includes an auctioneer.
Therefore, the value of supply of ‘y’ will be determined in terms of rule 29
relating to valuation.
There is no open market for the first supply of commodity ‘y’, as it is compulsorily
supplied to the State Marketing Corporation. However, Gupta & Co. has the
option of valuing the supply of ‘y’ at 90% of price of goods of like kind and
quality sold by the State Marketing Corporation to its unrelated customers.

If the value cannot be determined by this method, it needs to be determined

on the basis of the cost plus 10% mark up as per rule 30 or on the basis of
Best Judgement Method as per rule 31, in that order.
6. In terms of rule 32(6) relating to valuation, the value of a coupon is equal to
the money value of the goods redeemable against it. Therefore, though the
coupon is sold for ` 900, its value is ` 1000.

7. Since the supply is made to a distinct person, the same will be valued in
accordance with rule 28 relating to valuation.
There is no open market value of the drug intermediate as also there are no
like goods. Therefore, value of supply of such drug intermediate will be
determined in terms of clause (c) of rule 28 i.e., by using rule 30. Thus, the
value of supply of such drug intermediate will be 110% of its cost of
production or manufacture.

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However, if the recipient unit is eligible for full ITC, the value declared in the
invoice by the supplier will be deemed to be the open market value of the
drug intermediate and thus, the invoice value will be the value of taxable
supply.
8. Computation of the value of supply and the GST liability of Dushyant for
the month of December

Particulars Amount (`)

Rent of the commercial buiding 19,50,000

Maintenance charges paid to the local society, reimbursed 1,00,000

by Bharat [Note 1]

Municipal tax paid by Dushyant [Note 2] Nil

Value of supply 20,50,000

CGST @ 9% 1,84,500

SGST @ 9% 1,84,500

Notes:
(1) Since such charges are reimbursed by the tenant (Bharat), such charges
ultimately form part of the rent paid by Bharat to Dushyant and thus,
form part of the value as per section 15(2)(c).
(2) Since municipal tax is paid by the supplier (Dushyant) and not charged
to the recipient, the same is not includible in the value.
9. Computation of value of taxable supplies by Vayu Ltd.

Particulars `

List price of the goods 76,000

Add: Special packing [Note 1] 5,000
Duty levied by local authority on sale of goods [Note 2] 4,000
CGST and SGST charged [Note 2] -
Subsidy received from an NGO [Note 3] 5,000

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Less: Discount offered (2,280)

= 3% of List price = ` 76,000 × 3% [Note-4]
Value of taxable supplies 87,720

Notes:
1. Being incidental expenses charged by the supplier to the recipient of
supply, packing charges are includible in the value as per section
15(2)(c).
2. Taxes, duties, etc. levied under any law for the time being in force other
than CGST, SGST/UTGST, IGST are includible in the value as per section
15(2)(a).
3. Subsidy directly linked to the price received from a non-Government
body is includible in the value in terms of section 15(2)(e).

4. Since discount is known at the time of supply, it is deductible from the

value in terms of section 15(3)(a).
10. Section 15(3)(a) 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) if-
(i) 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
(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.
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

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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 Amount
(`)

Price at which the televisions are supplied to Shah 8,400

Electronics [Note 1]

Add: Packing expenses [Note 2] 1,200

Less: Discount [Note 3] Nil

Value of taxable supply of one unit of television 9,600

Value of taxable supply of televisions for the quarter 72,00,000

April-June [` 9,600 x 750]

Notes:
(1) The value of a supply is the transaction value, which is the price actually
paid or payable for the said supply, in terms of section 15(1) 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.
(2) The value of supply includes incidental expenses like packing charges
in terms of section 15(2)(c).
(3) Since Shah Electronics has not reversed the input tax credit attributable

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to such discount on the basis of document issued by BEL, the conditions

specified in section 15(3)(b) have not been fulfilled. Thus, the post-
supply discount will not be allowed as deduction from the value of
supply.
Computation of value of supply for quarter - July-September

Particulars Amount
(`)

Price at which the televisions are supplied to Shah 8,400

Electronics [Note 1]

Add: Packing expenses [Note 2] 1,200

Less: Discount [Note 3] (840)

Value of taxable supply of one unit of television 8,760

Value of taxable supply of televisions for the quarter 87,60,000

July-September [` 8,760 x 1,000]

Notes:
(1) The value of a supply is the transaction value, which is the price actually
paid or payable for the said supply, in terms of section 15(1) 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.
(2) The value of supply includes incidental expenses like packing charges
in terms of section 15(2)(c).
(3) Since all the conditions specified in section 15(3)(b) 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%].
11. Rule 32(2) prescribes the provisions for determining the value of supply of
services in relation to the purchase or sale of foreign currency, including
money changing.

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Determination of value under rule 32(2)(a)

(i) Value of supply of services for a currency, when exchanged from, or to,
Indian Rupees, shall be equal to the difference in the buying rate or the
selling rate, as the case may be, and the Reserve Bank of India (RBI)
reference rate for that currency at that time, multiplied by the total units
of currency. Thus, value of supply is:
= (RBI reference for US $ - Buying rate of US $) × Total number of units
of US $ bought

= (74.6 – 74) × 1,000

= ` 600/-
(ii) When the RBI reference rate for a currency is not available, the value
shall be 1% of the gross amount of Indian Rupees provided or received
by the person changing the money. Thus, value of supply is:
= 1% of the gross amount of Indian Rupees received

= 1% of (74.50 × 2,000) = ` 1,490/-

Determination of value under rule 32(2)(b)
Rule 32(2)(b) provides that value in relation to the supply of foreign currency,
including money changing shall be deemed to be –

S. No. Currency exchanged Value of supply

1. Upto` 1,00,000 1% of the gross amount of currency

exchanged
OR
` 250 whichever is higher

2. Exceeding ` 1,00,000 ` 1,000 + 0.50% of the (gross amount

and upto` 10,00,000 of currency exchanged - 1,00,000)

3. Exceeding ` 10,00,000 ` 5,500 + 0.1% of the (gross amount

of currency exchanged - 10,00,000)
OR
` 60,000 whichever is lower

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Thus, the value of supply in the given cases would be computed as under:
(i) Gross amount of currency exchanged = ` 74 × 1,000 = ` 74,000.

Since the gross amount of currency exchanged is less than ` 1,00,000,

value of supply is 1% of the gross amount of currency exchanged i.e.
1% of ` 74,000 or ` 250, whichever is higher, i.e. = ` 740/-

(ii) Gross amount of currency exchanged = ` 74.50 × 2,000 = ` 1,49,000.

Since the gross amount of currency exchanged exceeds ` 1,00,000 but
is less than ` 10,00,000, value of supply is ` 1,000 + 0.50% of (` 1,49,000
- ` 1,00,000), i.e. = ` 1,245/-
12. As per explanation to rule 33, a “pure agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act
as his pure agent to incur expenditure or costs in the course of supply
of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or
both so procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured;
and

(d) receives only the actual amount incurred to procure such goods or
services in addition to the amount received for supply he provides on
his own account.

The supplier needs to fulfil all the above conditions in order to qualify as a
pure agent.
In the given case, Rudra Logistics has entered into a contractual agreement
with recipient of supply, Rolly Polly Manufacturers Ltd., to incur, on behalf of
such recipient, the expenses mentioned in S. No. (ii) to (vii) incurred in
relation to clearance of the imported machine from the customs station and
bringing the same to the warehouse of the recipient. Further, Rudra Logistics
does not hold any title to said services and does not use them for his own
interest.

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Lastly, Rudra Logistics receives only the actual amount incurred to procure
such services in addition to agency charges. Thus, Rudra Logistics qualifies
as a pure agent.
Further, rule 33 stipulates that notwithstanding anything contained in the
provisions of Chapter IV – Determination of Value of supply, the expenditure
or costs incurred by a supplier as a pure agent of the recipient of supply shall
be excluded from the value of supply, if all the following conditions are
satisfied, namely-

(I) the supplier acts as a pure agent of the recipient of the supply, when
he makes the payment to the third party on authorisation by such
recipient;

(II) the payment made by the pure agent on behalf of the recipient of
supply has been separately indicated in the invoice issued by the pure
agent to the recipient of service; and
(III) the supplies procured by the pure agent from the third party as a pure
agent of the recipient of supply are in addition to the services he
supplies on his own account.

Since conditions (I) to (III) mentioned above are satisfied in the given case,
expenses (ii) to (vii) incurred by Rudra Logistics as a pure agent of Rolly Polly
Manufacturers Ltd. shall be excluded from the value of supply.

Accordingly, value of supply made by Rudra Logistics is as follows:

Particulars Amount
(`)

Agency charges 5,00,000

Add: Unloading of machine at Kandla port, Gujarat Nil

Charges for transport of machine from Kandla port, Nil

Gujarat to its godown in Ahmedabad, Gujarat

Charges for transport of machine from Rudra Logistics’ Nil

Ahmedabad godown to the warehouse of Rolly Polly
Export Import House in Mumbai, Maharashtra

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Customs duty Nil

Dock charges Nil

Port charges Nil

Hotel expenses 45,000

Travelling expenses 50,000

Telephone expenses 2,000

Value of supply 5,97,000

Yes, the answer would be different. If lump sum amount of ` 13,00,000 is paid
then the value of supply shall be ` 13,00,000 and tax shall be charged on
value of supply since individual cost are not given.

13. As per section 25(4), a person who has obtained or is required to obtain more
than one registration, whether in one State or Union territory or more than
one State or Union territory shall, in respect of each such registration, be
treated as distinct persons for the purposes of this Act. Therefore, units of
Rustagi & Co. in Madhya Pradesh and Himachal Pradesh are distinct persons
under GST.

As per rule 28, the value of the supply of goods between distinct persons,
other than where the supply is made through an agent, shall –
(a) be the open market value of such supply;

(b) if open market value is not available, be the value of supply of goods of
like kind and quality;
(c) if value cannot be determined under the above methods, be cost of the
supply plus 10% mark-up or be determined by other reasonable means,
in that sequence.
Rule 28 also provides that where the goods are intended for further supply
as such by the recipient, the value shall, at the option of the supplier, be an
amount equivalent to 90% of the price charged for the supply of goods of
like kind and quality by the recipient to his customer not being a related
person.

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Further, rule 28 provides that where the recipient is eligible for full input tax
credit, the value declared in the invoice by the supplier shall be deemed to
be the open market value of the goods or services.
In the given case, the option of valuing the goods @ 90% of the price charged
by the recipient to his unrelated customer is not available as the goods are
not further supplied ‘as such’ but only after processing at Himachal Pradesh
unit. However, since the Himachal Pradesh unit is eligible for full ITC, the
value declared by the Madhya Pradesh unit in the invoice for transfer of such
products, i.e. ` 20,00,000 shall be deemed to be the open market value of the
products.
Thus, the value of 1000 products supplied by Rustagi & Co. to its Himachal
Pradesh unit in terms of rule 28 is the open market value of such products
which is ` 20,00,000.
14. (1) In the given case, price is not the sole consideration for the supply.
Apart from monetary consideration, the buyer has given some material
to the supplier as consideration for such supply. Hence, the value of the
supply cannot be determined on the basis of the transaction value in
terms of section 15(1).
Here, the value will be determined with the help of rule 27 which
specifies that where the consideration for a supply is not wholly in
money, the value will be the open market value.
Open market value of a supply means the full value in money, excluding
the applicable GST, where the supplier and the recipient of the supply
are not related and the price is the sole consideration, to obtain such
supply at the same time when the supply being valued is made.
Therefore, in the given case, the open market value of the goods
supplied is ` 2,52,000 (` 2,97,360 x 100/118) and is therefore, the value
of such goods.
(2) Rule 27 further provides that if open market value of the supply is not
known, the value of the supply will be the consideration in money plus
the money equivalent to the non-monetary consideration, if such
amount is known at the time of supply.

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Therefore, the value in the given case will be (` 2,95,000 x 100/118) +

` 10,000, which is ` 2,60,000.

15. As per rule 32(4), the value of supply of services in relation to life insurance
business, when the amount allocated for investment/ savings on behalf of the
policy holder is not intimated to the policy holder at the time of supply of
service, is-
(i) in case of single premium annuity policies,10% of single premium
charged from the policy holder;

(ii) in all other cases, 25% of the premium charged from the policy holder
in the first year and 12.5% of the premium charged from the policy
holder in subsequent years;
(iii) in case the entire premium paid by the policy holder is only towards the
risk cover in life insurance, the premium so paid.
Therefore, in the given case, the value of the services provided by CLICL will
be computed as under:
Computation of value of supply for CLICL

Particulars Amount (`)

Premium for only risk cover 25,00,000

Premium from new policy subscribers 25% of ` 40,00,000 10,00,000

Renewal premium 12.5% of ` 80,00,000 10,00,000

Single premium on annuity policy10% of ` 1,00,00,000 10,00,000

Total value of supply 55,00,000

16. Computation of GST liability of Aviant Ltd.

Particulars (`)

Price of machine [Note 1] 40,00,000

Add: Handling and loading charges [Note 2] 10,000

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Installation and commissioning charges [Note 3] 1,00,000

Transportation cost [Note 4] Nil

Price linked subsidy from Diligent Ltd. [Note 5] 2,00,000

Total price of the machine 43,10,000

Less: 2% cash discount on price of machinery (80,000)

= ` 40,00,000 × 2% [Note 6]

Taxable value of supply 42,30,000

Tax liability for the month of August [Note 10]

IGST @ 12% [Note 7 and Note 8] – [A] 5,07,600

Tax liability for the month of September [Note 10]

Interest collected @ 2% on ` 41,10,000 [Note 9] 82,200

Add: Cash discount recovered [Note 9] 80,000

Value of interest and cash discount inclusive of tax 1,62,200

IGST = (`1,62,200/112) x 12 - [B] 17,379

Total IGST payable on the machinery [A] + [B] 5,24,979

Notes:
(1) As per section 15(1), the value of a supply is the transaction value i.e.,
the price actually paid or payable for the said supply when the supplier
and the recipient of the supply are not related and the price is the sole
consideration for the supply.
(2) All incidental expenses charged by the supplier to the recipient of a
supply are includible in the value of supply in terms of section 15(2)(c).
(3) 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 in terms of section 15(2)(c).

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(4) Transportation cost has not been included in the value of supply of the
machinery as it is a separate service contract between the customer and
the third-party service provider. The customer pays the freight directly
to the service provider.
The supplier (Aviant Ltd), in this case, merely arranges for the transport
and does not provide the transport service on its own account.
Therefore, there will be no impact from valuation point of view on
transport expenses incurred for supply of machinery as the supplier is
not the party to such supply of services.
(5) Subsidies directly linked to the price excluding subsidies provided by
the Central Government and State Governments are includible in the
value of supply in terms of section 15(2)(e).
(6) Cash discount was deducted by Aviant Ltd. upfront at the time of supply
on 1st August, and hence, the same is excluded from the value of supply
as it did not form part of the transaction value.
(7) In the given case-
♦ the location of the supplier is in Noida (UP); and
♦ the place of supply of machinery is the place of installation of
the machinery i.e., Gurugram (Haryana) in terms of section
10(1)(d) of the IGST Act, 2017.

Therefore, the given supply is an inter-State supply as the location of

the supplier and the place of supply are in two different States [Section
7(1)(a) of IGST Act, 2017]. Thus, the supply will be leviable to IGST in
terms of section 5(1) of the IGST Act, 2017.
(8) The given supply is a composite supply involving supply of goods
(machinery) and services (handling and loading and installation and
commissioning) where the principal supply is the supply of goods.
As per section 8(a), a composite supply is treated as a supply of the
principal supply involved therein and charged to tax accordingly. Thus,
tax rate applicable to the goods (machinery) has been considered.
(9) Interest for the delayed payment (which excludes subsidy related
amount of Rs 2,00,000 as the same was not recoverable from the

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recipient) of any consideration for any supply is includible in the value

of supply in terms of section 15(2)(d). Further, cash discount recovered
will also be includible in the value of supply as now the transaction value
i.e., the price actually paid for the machinery is devoid of any discount.
The cash discount recovered and interest respectively are inclusive of
tax. Thus, tax payable thereon has to be computed by making back
calculations in terms of rule 35.
(10) Invoice for the supply has been issued on 29th August. Thus, the time of
supply of goods is 29th August in terms of section 12(1)(a).
As per section 12(6), 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. Thus, the time of supply of interest received and cash
discount recovered on account of delayed payment of consideration is
30th September, the date when the full payment was made. The supplier
may issue a debit note for such interest and cash discount recovered.

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TEST YOUR KNOWLEDGE

1. Xenon Pvt. Ltd., a registered supplier in Agra, is engaged in the manufacture of

taxable goods. Goods valued at ` 10,50,000 were supplied by the company to
Freshbite Pvt. Ltd., a registered supplier located at Firozabad, without the cover
of an invoice with a fraudulent intent. Since the company evaded tax by not
issuing the invoice for the supply, a show cause notice was issued by the proper
officer under section 74 requiring the company to pay tax @ 12% [ ` 1,26,000]
and applicable interest and penalty. The company paid the tax, interest and
penalty after the order was passed by the proper officer.
Examine the ITC entitlement of Freshbite Pvt. Ltd. in respect of tax of ` 1,26,000
paid by Xenon Pvt. Ltd.
2. Flamingo Ltd. is an airlines providing passenger transportation services by air.
The company offers meals of premium quality to passengers on board the
aircraft. The value of such meals is compulsorily included in the price of the
air ticket. The company avails outdoor catering services of Dhaniaram Pvt. Ltd.
for providing such meals to its customers.
Examine whether Flamingo Ltd. can avail ITC on such outdoor catering service
availed by it.
3. Jumbo Sales Pvt. Ltd., a supplier of readymade garments, announced ‘Buy One
get Two free’ offer on Men’s T-Shirts on Diwali to boost its sales.
You are required to advise the company on the availability of ITC in respect of
inward supplies used in relation to such supply.
4. A garment factory receives a Government order for making uniforms for a
commando unit. This supply is exempt from tax under a notification issued
under section 11 of the CGST Act. The fabric is exclusively procured for such
supply, but thread and lining material for the collars are the ones which are
used for other taxable products of the factory as well.
The turnover (exclusive of taxes) of the other products of the factory and
exempted uniforms in July is ` 4 crore and ` 1 crore respectively, the ITC on
thread and lining material procured in July is ` 5000 and ` 15000 respectively.
Calculate the amount of eligible ITC in respect of procurement of thread and
lining material.

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5. Ceramity Ltd. has following units:

A: Factory in Tumkur, Karnataka; turnover of ` 27 crores in F.Y. 2020-23;
B: Service centre in Hyderabad, Telangana; turnover of ` 1 crore in F.Y.
2022-23;
C: Service centre in Chennai, Tamil Nadu; turnover of 2 crores in F.Y. 2022-23;
Ceramity Ltd.’s corporate office functions as an ISD. It has to distribute ITC of
` 9 lakh for May, 2023. Of this, an invoice involving tax of ` 3 lakh pertains to
technical consultancy for Tumkur unit.
Explain in brief in what manner should the ITC be distributed?
6. A registered supplier of taxable goods supplied goods valued at
` 2,24,000 (inclusive of CGST ` 12,000 and SGST ` 12,000) to Mohan Ltd. under
forward charge on 15th August for which tax invoice was also issued on the
same date. The inputs were received by Mohan Ltd. on 15th August. Mohan
Ltd. availed credit of ` 24,000 on 20th September by filing Form GSTR-3B for
August month. However, Mohan Ltd. did not make any payment towards such
supply along with tax thereon to the supplier. Is Mohan Ltd. eligible to avail
ITC on such supply?
Discuss ITC provisions if Mohan Ltd. makes the payment of
` 2,24,000 to the supplier on 18th March of next calendar year.
7. State the conditions that need to be followed by an input service distributor for
distribution of credit.
8. With reference to the provisions of section 17, examine the availability of ITC
in the following independent cases:
(i) MBF Ltd., an automobile company, has availed works contract service
for construction of a foundation on which a machinery (to be used in
the production process) is to be mounted permanently.
(ii) Shah & Constructions procured cement, paint, iron rods and services of
architects and interior designers for construction of a commercial
complex for one of its clients.
(iii) ABC Ltd. availed maintenance & repair services from “Jaggi Motors” for
a truck used for transporting its finished goods.

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9. On 25th August, M/s Agarwal & Agarwal, a registered supplier of taxable goods
located in Bengaluru (Karnataka), purchased one machine for
` 12,39,000 (including IGST) from one supplier of Maharashtra who issued the
invoice on the same date. M/s Agarwal & Agarwal received the machinery on
the same day and availed ITC for the eligible amount.
M/s Agarwal & Agarwal used the machine in the process of manufacture of
taxable goods. However, M/s Agarwal & Agarwal sold this machine to
Mr. Suresh Kumar of Andhra Pradesh on 20 th August of next year for ` 7,50,000
(excluding lGST).
With reference to section 18(6), determine the amount payable, if any, by
M/s Agarwal & Agarwal at the time of sale of the machine.
Note: The applicable rate of IGST is 18%.
10. Krishna Motors is a car dealer selling cars of an international car company. It
also provides maintenance and repair services of the cars sold by it as also of
other cars. It seeks your advice on availability of ITC in respect of the following
expenses incurred by it during the course of its business operations:
(i) Cars purchased from the manufacturer for making further supply of such
cars. Two of such cars are destroyed in accidents while being used for
test drive by potential customers.
(ii) Works contract services availed for constructing a car parking shed in its
premises
11. With the help of information given below in respect of a manufacturer for the
month of September, compute the ITC credited to the Electronic Credit Ledger,
for the month. Also, compute the amount of ITC to be added to the output tax
liability for the month of September. Ignore interest, if any.

Particulars Amount
(`)
Outward supply of taxable goods (exclusive of taxes) 70,000
Outward supply of exempt goods 40,000
Total turnover 1,10,000
Inward supplies GST paid (`)
Capital goods used exclusively for taxable outward supply 2,000

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Capital goods used exclusively for exempt outward supply 1,800

Capital goods used for both taxable and exempt outward 4,200
supply

Subject to the information given above, assume that all the other conditions
necessary for availing ITC have been fulfilled.
12. X, a manufacturer of roofing sheets, is having ` 1,60,000 as opening balance of
ITC for June month. He provides the following information pertaining to the
goods and services procured during the month of June:
(1) Input tax on raw materials is ` 40,000. The raw material is used for
making both taxable and exempt supplies.
(2) Input tax on catering services procured from ‘Harvest Caterers’ in
connection with his housewarming ceremony is ` 10,000.
(3) Input tax on raw materials used exclusively in manufacture of exempt
supplies of ` 2 lakh is ` 20,000.
(4) Input tax on cosmetic and plastic surgery of manager of the factory is
` 30,000.
Total taxable turnover for the month of June is ` 60 lakh exclusive of tax.
Compute the ITC credited for the month of June to the Electronic Credit Ledger
and net GST payable from Electronic Cash Ledger by X for the month of June.
Rate of GST is 18% (Ignore CGST, SGST or IGST and provisions of rule 86B for
the sake of simplicity).
Subject to the information given above, assume that all the other conditions
necessary for availing ITC have been fulfilled. All the purchases are made from
registered suppliers.
13. Sarani Weavers, at Pune, Maharashtra is a registered input service distributor
and intends to distribute ITC for the month of March. The following are the
details available for such distribution:

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Branch Turnover of the last ITC specifically attributable

quarter (`) to the branch (`)

Ganganagar Branch 10,00,000 IGST – ` 12,000

(Rajasthan) CGST – ` 3,000
SGST –` 3,000

Madhugiri Branch 5,00,000 Nil

(Karnataka)

Kosala Branch (UP) 15,00,000 Nil

Mumbai Branch 20,00,000 IGST – ` 1,50,000

(Maharashtra) CGST– ` 15,000
SGST– ` 15,000

lTC available on input services used commonly for all branches is as under:
CGST - ` 60,000

SGST - ` 60,000
IGST - ` 1,20,000
lTC (IGST) of ` 10,000 pertaining to March (last year) was inadvertently not
distributed. Whether the same can be considered for distribution in March this
year?
Madhugiri, Karnataka branch uses input services to manufacture exempted
products. Turnover excludes duties & taxes payable to Central and State
Government.
Determine the manner of input tax distribution.
14. George Pvt. Ltd., a registered supplier of goods at Kerala who pays GST under
regular scheme, has made the following transactions (exclusive of tax) during
a tax period:

Purchases (` ) Sales (` ) Tax Rate

5,00,000 10,00,000 IGST - 18%

[Sale made to registered CGST – 9%
person in New Delhi]

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[Purchases made from SGST- 9%

registered person in New
Delhi]

2,50,000 8,00,000
[Purchases made from [Sales made to registered
registered person in person in Trivandrum]
Trivandrum, Kerala]

The company has complied with all the conditions for availing the ITC. The
following further information regarding various opening balances available
with it for the tax period, is provided by the company:

CGST (` ) SGST (` ) IGST (`)

50,000 30,000 1,00,000

Compute the net CGST, SGST and IGST payable from the Electronic Cash Ledger
by George Pvt. Ltd. for the tax period as also ITC to be carried forward to next
tax period, if any.
15. Quanto Enterprises is not required to register under CGST Act. However, it
applied for voluntary registration on 17th September. Registration certificate
has been granted to the firm on 25 th September. The CGST and SGST liability
of the firm for the month of September is ` 24,000 each. The firm is not
engaged in making inter-State outward taxable supplies.
Quanto Enterprises provides the following information regarding capital goods
and inputs held in stock by it as on 24th September:

Particulars Amount (`)

Inputs procured on 2nd September lying in stock
- CGST @ 6% 4,500
- SGST @ 6% 4,500
Input received on 21st July contained in semi-finished goods
held in stock:
- CGST @ 6% 7,500

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- SGST @ 6% 7,500
Value of inputs contained in finished goods held in
stock- ` 2,00,000 [Such inputs were procured on 19th
September last year. Invoice for the goods was also issued
on the same day]
- IGST @ 18% 36,000
Inputs valued at ` 50,000 procured on 13 th September lying
in stock:
- IGST @ 18% 9,000
Capital goods procured on 12th September
-CGST @ 6% 12,000
-SGST @ 6% 12,000

You are required to compute the net GST payable from Electronic Cash Ledger
by Quanto Enterprises for the month of September assuming that conditions
for availing ITC are fulfilled subject to the information given above.
You are also required to mention reasons for treatment of all above items.
16. B & D Company, a partnership firm, registered in Nagpur, Maharashtra is a
wholesaler of taxable product ‘P’ and product ‘Q’ exempted by way of a
notification. The firm supplies these products only in the eastern part of
Maharashtra. All the procurements (both goods and services) of the firm are
from the suppliers registered under regular scheme in the State of Maharashtra.
The firm pays tax under composition scheme.

B & D Company has furnished the following details with respect to its turnover
(exclusive of taxes) and stock (exclusive of taxes):

Particulars Turnover for the quarter Turnover for the quarter

ended 30th June (`) ended 30th September (`)

‘P’ 60,00,000 50,00,000

‘Q’ 17,65,000 17,00,000

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Particulars Stock as on 30th Stock as on 30th Stock as on 31st

June (`) September (`) October (`)

‘P’ 25,00,000 10,00,000 3,60,000

‘Q’ 10,00,000 2,00,000 1,20,000

The entire stock of the products ‘P’ and ‘Q’ available with the firm as on 30th
September is purchased during the said half year except a consignment of
product ‘P’ valuing ` 3,00,000, which was purchased in the April month of the
preceding financial year. The said stock could not be sold during the month of
October. In the current financial year, in the month of October, no purchases
were made, and the products were sold with a profit margin of 20% on sales
[exclusive of taxes].
The extract of the only bill book maintained by the firm showed the following
details-

Bill Date Value of products (exclusive of taxes)

No.
‘P’ (`) ‘Q’ (` ) Total (`)

2306 1st October 2,00,000 3,000 2,03,000

2307 1st October 1,33,000 5,250 1,38,250

2308 2nd October 67000 39,250 1,06,250

2309 3rd October 58,750 33,750 92,500

2310 5th October 1,00,000 - 1,00,000

2311 6th October 94,000 6,000 1,00,000

2312 6th October - 17,000 17,000

2313 8th October 50,000 6,000 56,000

2314 9th October 60,000 9,000 69,000

2315 …………….. …………….. …………….. ……………..

………. …………….. …………….. …………….. ……………..

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All the above amounts are exclusive of taxes, wherever applicable

Compute the ITC to be credited to the Electronic Credit Ledger of the B & D
Company, when it exits composition scheme and becomes liable to pay tax
under regular scheme, in accordance with the provisions of section 18(1)(c).
Note: Make suitable assumptions wherever required. Stock is valued at cost
price.
17. XYZ Pvt. Ltd. is a manufacturing company registered under GST in the State of
Uttar Pradesh. It manufactures two taxable products ‘Alpha’ and ‘Beta’ and
one exempt product ‘Gama’. On 1st October, while product ‘Beta’ got exempted
through an exemption notification, exemption available on ‘Gama’ got
withdrawn on the same date. The turnover (exclusive of taxes) of ‘Alpha’, ‘Beta’
and ‘Gama’ in the month of October was ` 9,00,000, ` 10,00,000 and
` 6,00,000 respectively.
XYZ Pvt. Ltd. has furnished the following details:

S. No. Particulars Price (`) GST (`)

(a) Machinery ‘U’ purchased on 1st October for 2,00,000 36,000

being used in manufacturing all the three
products

(b) Machinery ‘V’ purchased on 1st October for 1,00,000 18,000

being used in manufacturing product
‘Alpha’ and ‘Gama’

(c) Machinery ‘W’ purchased on 1st October for 3,00,000 54,000

being exclusively used in manufacturing
product ‘Beta’

(d) Machinery ‘Y’ purchased on 1st October four 4,00,000 72,000

years ago for being exclusively used in
manufacturing product ‘Beta’. From 1 st
October, such machinery will also be used
for manufacturing product ‘Gama’.

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(e) Machinery ‘Z’ purchased on 1 st October two 3,00,000 54,000

years ago for being used in manufacturing
all the three products

(f) Raw Material used for manufacturing 1,50,000 27,000

‘Alpha’ purchased on 5th October

(g) Raw Material used for manufacturing ‘Beta’ 2,00,000 36,000

purchased on 10th October

(h) Raw Material used for manufacturing 1,00,000 18,000

‘Gama’ purchased on 15th October

Compute the following:

(i) Amount of ITC to be credited to Electronic Credit Ledger, for the month
of October
(ii) Amount of aggregate value of common credit (Tc)
(iii) Common credit attributable to exempt supplies, for the month of
October
(iv) GST liability of the company payable through Electronic Cash Ledger,
for the month of October if opening balance of ITC is nil.
Note: Assume that all the procurements made by the company are from States
other than Uttar Pradesh. Similarly, the company sells all its products in States
other than Uttar Pradesh. Rate of IGST is 18%. Subject to the information
given above, assume that all the other conditions necessary for availing ITC
have been fulfilled. Ignore interest, if any and make suitable assumptions
wherever required.
18. ‘All-in-One Store’ is a retail chain of departmental store having presence in
almost all metro cities across India. Both exempted as well as taxable goods
are sold in such Stores. The Stores operate in rented properties. All-in-One
Stores pay GST under regular scheme.
In Mumbai, the Store operates in a rented complex, a part of which is used by
the owner of the Store for personal residential purpose.
All-in-One Store, Mumbai furnishes following details for a month:

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(i) Aggregate value of various items sold in the Store:

Taxable items – ` 42,00,000

Items exempted vide a notification – ` 12,00,000

Items not leviable to GST – ` 3,00,000
(ii) Mumbai Store transfers to another All-in-One Store located in Goa
certain taxable items for the purpose of distributing the same as free
samples. The value declared in the invoice for such items is ` 5,00,000.
Such items are sold in the Mumbai Store at ` 8,00,000.
(iii) Aggregate value of various items procured for being sold in the Store:
Taxable items – ` 55,00,000
Items exempted vide a notification – ` 15,00,000

Items not leviable to GST – ` 5,00,000

(iv) Freight paid to goods transport agency (GTA) for inward transportation
of taxable items – ` 1,00,000
(v) Freight paid to GTA for inward transportation of exempted items –
` 80,000
(vi) Freight paid to GTA for inward transportation of non-taxable items -
` 20,000
(vii) Monthly rent payable for the complex – ` 5,50,000 (one third of total
space available is used for personal residential purpose).

(viii) Activity of packing the items and putting the label of the Store along with
the sale price has been outsourced. Amount paid for packing of all the
items – ` 2,50,000
(ix) Salary paid to the regular staff at the Store – ` 2,00,000
(x) GST paid on inputs used for personal purpose – ` 5,000
(xi) GST paid on rent a cab services availed for transportation of employees,
which is not obligatory under any law – ` 4,000
(xii) GST paid on items given as free samples – ` 4,000

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Given the above available facts, you are required to compute the following:
A. Input tax credit (ITC) credited to the Electronic Credit Ledger

B. Common Credit
C. ITC attributable towards exempt supplies out of common credit
D. Eligible ITC out of common credit
E. Net GST payable from Electronic Cash Ledger for the month if opening
balance of ITC is nil.
Note:
(1) GTA has not exercised the option to pay tax itself. Tax is payable on such
services @ 5%. Rate of GST in all other cases is 18% (Ignore CGST, SGST
or IGST for the sake of simplicity).

(2) All the inward supplies are procured from registered suppliers.
(3) Wherever applicable, the amounts given are exclusive of taxes.
(4) Subject to the information given above, assume that all the other
conditions necessary for availing ITC have been fulfilled.
19. Vansh Shoppe is a retail supplier of both taxable and exempted goods,
registered under GST in the State of Rajasthan. Vansh Shoppe has furnished
the following details for a month:

(`)

(1) Details of sales:

Supply of taxable goods 50,00,000
Supply of goods not leviable to GST 10,00,000
(2) Details of goods purchased for being sold in the
shop:
Taxable goods 45,00,000
Goods not leviable to GST 4,00,000

(3) Details of expenses:

Monthly rent payable for the shop 3,50,000

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Telephone expenses paid 50,000

(` 30,000 for bills of land line phone installed at the
shop and ` 20,000 towards mobile phone bills of the
employees – Mobile phones are also given to
employees for official use)
Audit fees paid to a Chartered Accountant 60,000
(` 35,000 for filing of income tax return & the
statutory audit of preceding financial year and
` 25,000 for filing of GST return)
Premium paid on health insurance policies taken for 10,000
specified employees of the shop as per company
policy.
Freight paid to goods transport agency (GTA) [service 50,000
taxable @ 5%] for inward transportation of goods not
leviable to GST
Freight paid to goods transport agency (GTA) [service 1,50,000
taxable under reverse charge @ 5%] for inward
transportation of taxable goods
Goods given as free samples (Not included in taxable 5,000
goods value of 45,00,000)

All the above amounts are exclusive of all kind of taxes, wherever applicable.
All the inward and outward supplies made by Vansh Shoppe are from/to
registered suppliers within Rajasthan.
Assume, wherever applicable, for purpose of reverse charge payable by Vansh
Shoppe, the CGST, SGST and IGST rates as 2.5%, 2.5% and 5% respectively.
CGST, SGST and IGST rates to be 6%, 6% and 12% respectively in all other
cases.
There is no opening balance in the electronic cash ledger or electronic credit
ledger. Subject to the information given above, assume that all the other
conditions necessary for availing ITC have been fulfilled.
You are required to compute the following:

(1) Input Tax Credit (ITC) credited to Electronic Credit Ledger

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(2) Common credit available for apportionment

(3) ITC attributable towards exempt supplies out of common credit

(4) Net GST payable from Electronic Cash Ledger for the month
20. Mr. Rajesh Surana has a proprietorship firm in the name of Surana & Sons in
Jaipur. The firm, registered under GST in the State of Rajasthan, manufactures
three taxable products ‘M’, ‘N’ and ‘O’. Tax on ‘N’ is payable under reverse
charge. The firm also provides taxable consultancy services.
The firm has provided the following details for a tax period:

Particulars (` )

Turnover of ‘M’ (excluding export sales) 14,00,000

Turnover of ‘N’ 6,00,000

Turnover of ‘O’ (excluding export sales) 10,00,000

Export of ‘M’ with payment of IGST (not eligible to avail 2,50,000

benefit of merchant exports under Notification No. 41/2017)

Export of ‘O’ under letter of undertaking 10,00,000

Consultancy services provided to unrelated clients located in 20,00,000

foreign countries. In all cases, the consideration has been
received in convertible foreign exchange

Sale of building (excluding stamp duty of ` 2.50 lakh, being 1,20,00,000

2% of value) [Entire consideration is received post issuance
of completion certificate; building was occupied thereafter]

Interest received on investment in fixed deposits with a 4,00,000

bank

Sale of shares (Purchase price ` 2,40,00,000/-) 2,50,00,000

Legal services received from an advocate in relation to 3,50,000

product ‘M’

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Common inputs and input services used for supply of goods 50,00,000
and services mentioned above [Inputs - ` 35,00,000; Input
services - ` 15,00,000]

With the help of the above-mentioned information, compute the net GST
liability of Surana & Sons, payable from Electronic Credit Ledger and/or
Electronic Cash Ledger, as the case may be, for the tax period.

Note: Assume that rate of GST on goods and services are 12% and 18%
respectively (Ignore CGST, SGST or IGST for the sake of simplicity). Subject to
the information given above, assume that all the other conditions necessary for
availing ITC have been fulfilled. Turnover of Surana & Sons was ` 85,00,000 in
the preceding financial year.
21. M/s XYZ, a registered supplier, supplies the following goods and services for
construction of buildings and complexes -
- excavators for required period at a per hour rate
- manpower for operation of the excavators at a per day rate

- soil-testing and seismic evaluation at a per sample rate.

The excavators are invariably hired out along with operators. Similarly,
excavator operators are supplied only when the excavator is hired out.
M/s XYZ receives the following services:
- Maintenance services for excavators;
- Health insurance for operators of the excavators;

- Scientific and technical consultancy for soil testing and seismic

evaluation.
For a given month, the receipts (exclusive of GST) of M/s XYZ are as follows:
- Hire charges for excavators - ` 18,00,000
- Service charges for supply of manpower for operation of the excavator -
` 20,000
- Service charges for soil testing and seismic evaluation at three sites -
` 2,50,000

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The GST paid during the said month on services received by M/s XYZ is as
follows:
- Maintenance for excavators - ` 1,00,000
- Health insurance for excavator operators - ` 11,000
- Scientific and technical consultancy for soil testing and seismic
evaluation - ` 1,00,000
Compute the net GST payable by M/s XYZ from Electronic Cash Ledger for the
given month.
Assume the rates of GST to be as under:
Hiring out of excavators – 12%
Supply of manpower services and soil-testing and seismic evaluation
services – 18%
(Ignore CGST, SGST or IGST for the sake of simplicity).
Note: - Opening balance of ITC of GST is nil.
22. V-Supply Pvt. Ltd. is a registered manufacturer of auto parts in Kolkata, West
Bengal. The company has a manufacturing facility registered under Factories
Act, 1948 in Kolkata. It procures its inputs indigenously from both registered
and unregistered suppliers located within as well as outside West Bengal as
also imports some raw material from China.
The company reports the following details for a tax period:

Payments (`) Receipts (`)

(in lakh) (in lakh)

Raw material 3.5 Sales 15

Consumables 1.25

Transportation charges for 0.70

bringing the raw material to
factory

Salary paid to employees on rolls 5.0

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Premium paid on life insurance 1.60

policies taken for specified
employees

Audit fee 0.50

Telephone expenses 0.30

Bank charges 0.10

All the above amounts are exclusive of all kinds of taxes, wherever applicable.
However, the applicable taxes have also been paid by the company.
Further, following additional details are furnished by the company in respect of
the payments and receipts reported by it:
(i) Raw material amounting to ` 0.80 lakh is procured from Bihar and
` 1.5 lakh is imported from China. Basic customs duty of ` 0.15 lakh,
social welfare surcharge of ` 0.015 lakh and integrated tax of ` 0.2997
lakh are paid on the imported raw material.

Remaining raw material is procured from suppliers located in West

Bengal. Out of such raw material, raw material worth ` 0.30 lakh is
procured from unregistered suppliers; the remaining raw material is
procured from registered suppliers.
Further, raw material worth ` 0.05 lakh purchased from registered supplier
located in West Bengal has been destroyed due to seepage problem in the
factory and thus, could not be used in the manufacturing process.
(ii) Consumables are procured from registered suppliers located in Kolkata
and include diesel worth ` 0.25 lakh for running the generator in the
factory.
(iii) Transportation charges comprise of ` 0.60 lakh paid to Goods Transport
Agency (GTA) in Kolkata and ` 0.10 lakh paid to horse pulled carts. GST
applicable on the services of GTA is 5% payable under reverse charge.
(iv) Life insurance policies for specified employees have been taken by the
company to fulfill a statutory obligation in this regard. The life insurance
service provider is registered in West Bengal.

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(v) Audit fee is paid to M/s Goyal & Co., a firm of Chartered Accountants
registered in West Bengal, for the statutory audit of the preceding
financial year.
(vi) Telephone expenses pertain to bills for landline phone installed at the
factory and mobile phones given to employees for official use. The
telecom service provider is registered in West Bengal.
(vii) Bank charges are towards company’s current account maintained with a
Private Sector Bank registered in West Bengal.

(viii) The breakup of sales is as under:

Sales in West Bengal – ` 7 lakh
Sales in States other than West Bengal – ` 3 lakh

Export under LUT – ` 5 lakh

(ix) The opening balance of ITC with the company for the tax period is:
CGST - ` 0.15 lakh

SGST - ` 0.08 lakh

IGST - ` 0.09 lakh
Compute (i) Total ITC available with V-Supply Pvt. Ltd. for the tax period; and
(ii) Net GST payable [CGST, SGST or IGST, as the case may be] from Electronic
Cash Ledger by V-Supply Pvt. Ltd. for the tax period.
Note-
(i) CGST, SGST & IGST rates to be 9%, 9% and 18% respectively, wherever
applicable.
(ii) The necessary conditions for availing ITC have been complied with by V-
Supply Pvt. Ltd., wherever applicable.

You are required to make suitable assumptions, wherever necessary.

23. ABC Company Ltd. of Bengaluru is a manufacturer and registered supplier of
machineries. It has provided the following details for a tax period:

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Inward supplies GST paid

(` )
Health insurance of factory employees as required by the 20,000
Factories Act, 1948
Raw materials for which invoice has been received and GST 18,000
has also been paid for full amount but only 50% of material
has been received, remaining 50% will be received in next
month
Work contractor’s service used for installation of plant and 12,000
machinery
Purchase of manufacturing machine sent directly to job 50,000
worker’s premises under delivery challan
Purchase of car used by director exclusively for the purpose of 25,000
business meetings
Outdoor catering service availed for business meetings 8,000

ABC Company Ltd. also provides service of hiring of machines along with
manpower for operation. As per trade practice, machines are always hired out
along with operators and also operators are supplied only when machines are
hired out.
Outward supply (exclusive of GST) for the tax period are as follows:

Particulars Value (`)

Hiring receipts for machine 5,25,000

Service charges for supply of manpower operators 2,35,000

Assume the rates of GST to be as under:

(i) Service of hiring of machine 12%
(ii) Supply of manpower operator service 18%
(Ignore CGST, SGST or IGST for the sake of simplicity)

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Compute the amount of ITC available as also the net GST payable from the
Electronic Cash Ledger for the tax period by giving necessary explanations for
treatment of various items.
Note: Opening balance of ITC is Nil.
24. Pari Ltd. of Jodhpur (Rajasthan) is a registered manufacturer of cosmetic
products. Pari Ltd. has furnished following details for a tax period:

Particulars (`)

Details of Outward supplies

(i) Supplies in Rajasthan 8,75,000
(ii) Supplies in States other than Rajasthan 3,75,000
(iii) Export under LUT 6,25,000

Details of expenses

(i) Raw materials purchased from registered suppliers 1,06,250

located in Rajasthan

(ii) Raw materials purchased from unregistered suppliers 37,500

located in Rajasthan

(iii) Raw materials purchased from Punjab from registered 1,00,000

supplier

(iv) Integrated tax paid on raw materials imported from 22,732

USA

(v) Consumables purchased from registered suppliers 1,56,250

located in Rajasthan including high speed diesel
(Excise and VAT paid) valuing ` 31,250 for running the
machinery in the factory

(vi) Monthly rent for the factory building to the owner in 1,00,000
Rajasthan

(vii) Salary paid to employees on rolls 6,25,000

(viii) Premium paid on life insurance policies taken for 2,00,000

specified employees. Life insurance policies for

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specified employees have been taken by Pari Ltd. to

fulfill a statutory obligation in this regard. The life
insurance service provider is registered in Rajasthan.

All the above amounts are exclusive of all kinds of taxes, wherever
applicable. However, the applicable taxes have also been paid by Pari Ltd.

The opening balance of ITC with Pari Ltd. for the given tax period is-
CGST ` 20,000
SGST ` 15,000
IGST ` 15,000

Assume CGST, SGST and lGST rates to be 9%, 9% and 18% respectively,
wherever applicable.
Assume that all the other necessary conditions to avail the ITC have been
complied with by Pari Ltd., wherever applicable.
Compute (i) ITC available with Pari Ltd. for the tax period; and (ii) Net GST
payable [CGST, SGST or IGST, as the case may be] from Electronic Cash Ledger
by Pari Ltd. for the tax period.
25. Flowchem Palanpur (Gujarat) has entered into a contract with R Refinery, Abu
Road (Rajasthan) on 1stJuly to supply 10 valves on FOR basis. The following
information is provided in this regard:
(1) List price per valve is ` 1,00,000, exclusive of taxes.
(2) One of the conditions of the contract is that Flowchem should ensure a
two stage third party inspection for the valves during the manufacturing
process. Cost of two stage inspection of ` 15,000 (for 10 valves) is directly
paid by R Refinery to testing agency.
(3) R Refinery requires a special packing for the valves. Cost of special
packing is ` 10,000 (for 10 valves).
(4) Flowchem arranges for erection and testing of the valves supplied by it at
R Refinery’s site. Cost of erection etc. is ` 15,000 (for 10 valves).
(5) Goods are dispatched with tax invoice on 20th July and they reach the
destination at Abu-Road on 21stJuly. Lorry freight of` 5,000 has been
paid by R Refinery directly to the lorry driver.

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Assume CGST and SGST rates to be 9% each and IGST rate to be 18%. Opening
balance of ITC of IGST is Nil, CGST is ` 20,000 and SGST is ` 20,000. All the
given amounts are exclusive of GST, wherever applicable.
Flowchem has also undertaken following local transactions during the month
of July on which it has paid CGST and SGST as under:

S. Particulars Amount Amount

No. paid paid
CGST SGST
(` ) (` )

1. Availed services of works contractor to erect 5,000 5,000

foundation for fixing the machinery to earth,
in the factory.
2. Laid pipelines (from the water source outside 10,000 10,000
the factory) upto the gate of the factory for
the purpose of production facility.

3. For the purpose of smooth and convenient 5,000 5,000

mobile communication in its factory, it has
installed telecommunication tower of a
mobile company (with due permission)

4. It has entered into an agreement with a 2,500 2,500

travel company to provide home travel
facility to its employees when they are on
leave.

5. It has entered into an agreement with a 2,000 2,000

fitness center to provide wellness services to
its employees after office hours

Work out the net GST [CGST, SGST or IGST, as the case may be] payable from
Electronic Cash Ledger of Flowchem, Palanpur (Gujarat) for the month of July
after making suitable assumptions, if any.

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ANSWERS/HINTS

1. As per section 17(5), tax paid under sections 74, 129 and 130 is not available
as ITC. Further, rule 36(3) also lays down that tax paid in pursuance of any
order where any demand has been confirmed on account of any fraud, willful
misstatement or suppression of facts cannot be availed as ITC by a registered
person.
In the given case, Xenon Pvt. Ltd. has paid tax in pursuance of an order issued
under section 74. Therefore, Freshbite Pvt. Ltd. cannot avail ITC of such tax.
2. As per section 17(5)(i)(b), ITC on supply of inter alia food and beverages and
outdoor catering is blocked. However, ITC in respect of such goods or
services or both shall be available where an inward supply of such goods or
services or both is used by a registered person for making an outward taxable
supply of the same category of goods or services or both or as an element of
a taxable composite or mixed supply.
In the given case, Flamingo Ltd. is availing outdoor catering service to provide
outdoor catering (meals) to the passengers on board the aircraft. Since ITC
in respect of outdoor catering is available if the same is used for making an
outward taxable supply as an element of a taxable composite or mixed supply,
Flamingo Ltd. can avail ITC on outdoor catering service procured by it as it
will be considered as supply of an ancillary service to the passenger
transportation services supplied by it (principal supply).
3. It may appear at first glance that in case of offers like “Buy One, Get One
Free”, one item is being “supplied free of cost” without any consideration.
As per clause (a) of section 7(1) read with clause (c) thereof, goods or services
which are supplied free of cost (without any consideration) shall not be
treated as supply except in case of activities mentioned in Schedule I.
Circular No. 92/11/2019 GST dated 07.03.2019 has clarified the entitlement of
ITC in the hands of supplier in respect of sales promotional scheme like ‘buy
one get one free’. Such promotional offers are not individual supplies of free
goods, but a case of two or more individual supplies where a single price is

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being charged for the entire supply. It can at best be treated as supplying
two goods for the price of one.

Taxability of such supply will be dependent upon as to whether the supply is

a composite supply or a mixed supply and the rate of tax shall be determined
as per the provisions of section 8.

ITC shall be available to the supplier for the inputs, input services and capital
goods used in relation to supply of goods or services or both as part of such
offers.

Therefore, the given case is not the case of individual supplies of free goods,
but a case of three individual supplies where a single price is being charged
for the entire supply. Thus, Jumbo Sales Pvt. Ltd. will be entitled to avail ITC
on inputs, input services and capital goods used in relation to supply of T-
Shirts as part of such offer.
4. Thread and lining material are inputs which are used for making taxable as
well as exempt supplies. Therefore, credit on such items will be apportioned
and credit attributable to exempt supplies will be reversed in terms of
rule 42.

Credit attributable to exempt supplies = Common credit x (Exempt turnover/

Total turnover)
Common credit = ` 15,000 + ` 5,000 = ` 20,000
Exempt turnover = ` 1 crore
Total turnover = ` 5 crore [` 1 crore + ` 4 crore]
Credit attributable to exempt supplies = (` 1 crore /` 5 crore) x ` 20,000 =
` 4,000.
Ineligible credit of ` 4,000 will be reversed in Form GSTR-3B. Credit of
` 16,000 will be eligible credit for the month of July.

5. As per rule 39(d) relating to ITC, -

• ` 3 lakh is attributable to Tumkur unit, and will be transferred to Tumkur
unit only.

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• ` 6 lakh have to be distributed among Tumkur unit and the service

centres in Hyderabad and Chennai in proportion of their turnover in the
previous FY, that is, in 2020-21
o Tumkur unit will get (27 crore / 30 crore) x 6 lakh = ` 5.4 lakh;
o Hyderabad service centre will get (1 crore /30 crore) x 6 lakh =
` 20,000; and
o Chennai service centre will get (2 crore /30 crore) x 6 Lakh =
` 40,000.
Ceramity Ltd. should issue ISD invoices (from GSTN obtained separately for
ISD) for distributing ITC (as calculated above) to its units. It should be clearly
indicated in the invoices that the same are issued only for distribution of ITC.
6. As per section 16, Mohan Ltd. is eligible to avail ITC of the tax paid on inputs
received by it on the basis of the invoice issued by the supplier provided other
conditions for availing ITC are fulfilled.
Payment of value of the goods along with the tax to the supplier is not a pre-
requisite at the time of availing credit, but Mohan Ltd. has to pay the said
amount within 180 days from the date of issue of invoice. If Mohan Ltd, fails
to do so, Mohan Ltd. shall pay or reverse an amount equal to the ITC availed
in respect of such supply (ITC of ` 24,000), proportionate to the amount not
paid to the supplier, along with interest payable thereon under section 50,
while furnishing the return in Form GSTR-3B for the tax period immediately
following the period of 180 days from the date of the issue of the invoice will
be added to its output tax liability with interest under section 50 [Second
proviso to section 16(2) read with rule 37].
If Mohan Ltd. makes the payment of ` 2,24,000 (Value + tax) to the supplier
on 18th March of next calendar year, i.e. after the expiry of 180 days from date
of issue of invoice, Mohan Ltd. can avail the credit of ` 24,000 while filing
form GSTR-3B for the month of March.

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7. The following conditions need to be followed by an input service distributor

(ISD) for distribution of credit:

(i) The ISD is required to obtain a separate registration for distribution of

credit.
(ii) The credit can be distributed to the recipients of credit against an ISD
invoice containing prescribed details.
(iii) The amount of the credit distributed shall not exceed the amount of
credit available for distribution.

(iv) The credit related to an input service must be distributed only to the
particular recipient to whom that input service is attributable.
(v) If the input service is attributable to more than one recipient, the
relevant ITC is distributed pro rata to such recipients in the ratio of
turnover of the recipient in a State/ Union Territory to the aggregate
turnover of all the recipients to whom the input service is attributable
and which are operational during the current year.
(vi) ITC pertaining to input services which are common for all units, is
distributed to all the recipients in the ratio of turnover in the prescribed
manner.
(vii) ITC available for distribution in a month shall be distributed in the same
month and the details thereof shall be furnished in the prescribed form.

(viii) Both ineligible and eligible ITC are to be distributed separately.

(ix) ITC of CGST, SGST/UTGST and IGST are to be distributed separately.
(x) ITC of CGST, SGST/UTGST in respect of recipient located in the same
State/Union Territory is distributed as CGST and SGST/UTGST
respectively.
(xi) ITC of CGST and SGST/UTGST, in respect of a recipient located in a
different State/Union territory, is distributed as IGST (total of ITC of
CGST and SGST/UTGST which were to be distributed to such recipient).
(xii) ITC on account of IGST is distributed as IGST.
8. (i) Section 17(5)(c) blocks input tax credit in respect of works contract
services when supplied for construction of an immovable property

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(other than plant and machinery) except where it is an input service for
further supply of works contract service.
Further, the term “plant and machinery” means apparatus, equipment
and machinery fixed to earth by foundation or structural support that
are used for making outward supply of goods and/or services and
includes such foundation or structural support but excludes land,
building or other civil structures, telecommunication towers, and
pipelines laid outside the factory premises.
Thus, in view of the above-mentioned provisions, ITC is available in
respect of works contract service availed by MBF Ltd. as the same is
used for construction of plant and machinery which is not blocked
under section 17(5)(c). It is assumed that the expenditure incurred
towards works contract service is capitalised in the books of MBF Ltd.
and no depreciation has been claimed on the tax component.
(ii) Section 17(5)(d) blocks ITC on goods and/or services received by a
taxable person for construction of an immovable property (other than
plant and machinery) on his own account including when such goods
and/or services are used in the course or furtherance of business. Thus,
ITC on goods and/or services used in the construction of an immovable
property is blocked only in those cases where the taxable person
constructs the immovable property for his own use notwithstanding the
fact that the immovable property being constructed will be used in the
course or furtherance of his business.
In the given case, Shah & Constructions has used the goods and
services for construction of immovable property for some other person
and not on its own account. Hence, ITC in this case will be allowed.
(iii) On a conjoint reading of section 17(5)(a) and 17(5)(ab), it can be
concluded that ITC is allowed on repair and maintenance services
relating to motor vehicles, which are eligible for input tax credit.
Further, as per section 17(5)(a) ITC is allowed on motor vehicles which
are used for transportation of goods.
Thus, ITC on maintenance & repair services availed from “Jaggi Motors”
for a truck used for transporting its finished goods is allowed to ABC
Ltd.

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9. As per section 18(6), if capital goods/ plant and machinery on which ITC has
been taken are supplied (outward) by a registered person, he must pay an
amount that is higher of the following:
(a) ITC taken on such goods reduced by 5% per quarter or part thereof
from the date of issue of invoice for such goods or

(b) tax on transaction value of such outward supply determined under

section 15.
Accordingly, the amount payable on supply of machinery by M/s Agarwal &
Agarwal shall be computed as follows:

Particulars Amount (`)

ITC taken on the machinery (` 12,39,000 × 18/118) 1,89,000

Less: Input tax credit to be reversed @ 5% per quarter for

the period of use of machine
(i) For the previous year = (` 1,89,000 × 5%) × 3 28,350
quarters
(ii) For the current year = (` 1,89,000 × 5%) × 2 18,900
quarters

Amount required to be paid by adding the reversal 1,41,750

amount to the output tax liability) (A) **

Duty leviable on transaction value (` 7,50,000 × 18%) (B) 1,35,000

Amount payable towards disposal of machine is higher 1,41,750

of (A) and (B)

Thus, M/s Agarwal & Agarwal is required to pay an amount of ` 1,41,750

at the time of sale of machinery by adding the same to the output tax
liability.

** In the above solution, amount payable towards disposal of machine has

been computed on the basis of rule 40(2), i.e. ITC to be reversed for the period
of use of capital goods/machine has been computed @ 5% for every quarter
or part thereof from the date of the issue of invoice.

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However, the said amount can also be computed in accordance with rule
44(6), i.e. ITC involved in the remaining useful life (in months) of the capital
goods/ machine can be reversed on pro-rata basis, taking the useful life as 5
years.
10. As per section 16(1), every registered person can take credit of input tax
charged on any supply of goods or services or both to him which are used or
intended to be used in the course or furtherance of his business. However,
section 17(5) specifies certain goods and services on which the input tax
credit is not available.
In the light of the foregoing provisions, the availability of ITC in respect of
the various expenses incurred by Krishna Motors is discussed below:

(i) Section 17(5)(a) specifically blocks ITC on motor vehicles for

transportation of passengers having approved seating capacity of not
more than thirteen persons. However, the same is allowed when the
motor vehicles are used, inter alia, for further supply of such vehicles.
Thus, ITC on cars purchased from the manufacturer for making further
supply of such cars will be allowed.

However, ITC on the cars fully destroyed in accident will not be allowed
as the ITC on goods destroyed for whichever reason is specifically
blocked under section 17(5)(h).

(ii) Section 17(5)(c) specifically blocks ITC on works contract services when
supplied for construction of an immovable property (other than plant
and machinery) except where it is an input service for further supply of
works contract service. Since, in this case the car parking shed is not a
plant and machinery but a civil structure (excluded from “plant and
machinery”) and the works contract service is not used for further
supply of works contract service, ITC thereon will not be allowed.
11. Computation of ITC credited to Electronic Credit Ledger and amount of
ITC to be added to the output tax liability for the month of September

Particulars ITC (`)

Capital goods used exclusively for taxable supply 2,000

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[Since used exclusively for taxable supply, full ITC is

available under rule 43(1)(b)]

Capital goods used exclusively for exempt supply Nil

[Since used exclusively for exempt supply, ITC is not
available under rule 43(1)(a)]

Capital goods used for both taxable and exempt supply -

Common credit (Tc) 4200
[Commonly used for taxable and exempt supplies – Rule
43(1)(c)]

Total ITC credited to Electronic Credit Ledger for the 6,200

month of September

Common credit for the month of September (Tm) 70

= Tc ÷ 60 = 4,200 ÷ 60 [Rule 43(1)(e)]

Common credit attributable to exempt supplies in a month 25.45

(Te)
= (E ÷ F) x Tr* where,
‘E’ is the aggregate value of exempt supplies, made, during
the tax period, and
‘F’ is the total turnover in the State of the registered
person during the tax period [Rule 43(1)(g)]
= (40,000/1,10,000) × ` 70 (rounded off)

Amount to be added to the output tax liability for the 25.45

month of September [Rule 43(1)(h)]

Note: *Prior to the amendment vide Notification No. 16/2020 CT dated

23.03.2020 clause (f) of rule 43(1) provided that the amount of ITC, at the
beginning of a tax period, on all common capital goods whose useful life
remains during the tax period, be denoted as ‘Tr‘ and shall be the aggregate of
‘Tm‘ for all such capital goods. However, clause (f) has been omitted vide the
said notification. Consequently, the term “Tr” becomes redundant in the
formula provided in rule 43(1)(g). However, for the sake of computation of
common credit attributable to exempt supply, value of ‘Tm’ has been used here.

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It may be noted that as per the erstwhile clause (f) of rule 43(1) value of ‘Tr’ was
the aggregate of ‘Tm.’.

12. Computation of ITC available and net GST payable from Electronic Cash
Ledger for the month of June

Particulars Amount (`)

GST on taxable turnover for the month of June 10,80,000
[` 60,00,000 × 18%]
Less: ITC available for June month in terms of rule 42
Opening balance of ITC available in the ` 1,60,000
Electronic Credit Ledger
Add: ITC credited to the Electronic Credit ` 40,000
Ledger for the month of June [Refer working
note below]
Less: ITC out of common credit attributable (` 1,290) 1,98,710
to exempt supply [Refer working note below]
Net GST payable from Electronic Cash Ledger 8,81,290

Working Note:

Computation of ITC (out of common credit) attributable to exempt

supplies

Particulars Amount (`)

Input tax on raw materials [Note1] 40,000

Input tax on catering for housewarming [Note 2] Nil

Input tax on inputs contained in exempt supplies [Note 3] Nil

Input tax on cosmetic and plastic surgery of CEO of Nil

company [Note 4]

ITC credited to the Electronic Credit Ledger in terms of 40,000

rule 42 in the month of June

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Common credit [Note 5] 40,000

ITC attributable towards exempt supplies to be 1,290

reversed [Note 6]

Notes:
(1) Being used in the course or furtherance of business, input tax on raw
materials is available as ITC and is credited to the Electronic Credit
Ledger [Section 16(1)].
(2) ITC on outdoor catering is blocked in terms of section 17(5) if the same
is not used for making an outward supply of outdoor catering or as an
element of a taxable composite/mixed supply. Hence, the same is not
credited to the Electronic Credit Ledger [Rule 42].
(3) Input tax on inputs used exclusively for making exempt supplies is not
available as ITC and thus, not credited to the Electronic Credit Ledger
in terms of rule 42.
(4) ITC on cosmetic and plastic surgery is blocked in terms of section 17(5)
if the same are not used for making the same category of outward
supply or as an element of a taxable composite/ mixed supply. Hence,
the same is not credited to the Electronic Credit Ledger [Rule 42].
(5) Since there are no inputs and input services which are used exclusively
for effecting taxable supplies, the entire ITC credited to Electronic Credit
Ledger, i.e. ` 40,000 will be the common credit [Rule 42].
(6) ITC attributable towards exempt supplies = Common credit x
(Aggregate value of exempt supplies during the tax period / Total
turnover in the State during the tax period)
= ` 40,000 × ` 2,00,000/ ` 62,00,000 - (rounded off)
= ` 1,290 (rounded off)
13. As per section 20 read with rule 39:

(i) Total GST credit (CGST+ SGST + IGST) of ` 18,000 specifically

attributable to Ganganagar Branch, Rajasthan will be distributed as IGST
credit of ` 18,000 only to Ganganagar Branch, Rajasthan [Since recipient
and ISD are located in different states].

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(ii) IGST credit of ` 1,50,000, CGST credit of ` 15,000 and SGST credit of
` 15,000 specifically attributable to Mumbai Branch, Maharashtra will
be distributed as IGST credit of ` 1,50,000, CGST credit of ` 15,000 and
SGST credit of ` 15,000 respectively, only to Mumbai Branch,
Maharashtra [Since recipient is located in the same State in which ISD
is located].
(iii) CGST credit of ` 60,000, SGST credit of ` 60,000 and IGST credit of
`1,20,000 have to be distributed among the three branches and
Mumbai Branch, Maharashtra in proportion of their turnover of the last
quarter.
- Ganganagar Branch, Rajasthan will get: ` 48,000 [` 2,40,000 x
(` 10,00,000/ ` 50,00,000)] as IGST credit.
- Madhugiri Branch, Karnataka will get: ` 24,000 [` 2,40,000 x
(` 5,00,000/ ` 50,00,000)] as IGST credit.
- The credit attributable to a recipient is distributed even if such
recipient is making exempt supplies.
- Kosala Branch, UP will get: ` 72,000 [` 2,40,000 x (` 15,00,000/
` 50,00,000)] as IGST credit.
- Mumbai Branch, Maharashtra will get:
` 24,000 [` 60,000 x (` 20,00,000/ ` 50,00,000)] as CGST credit,

`24,000 [` 60,000 x (` 20,00,000/ ` 50,00,000)] as SGST credit and

` 48,000 [` 1,20,000 x (` 20,00,000/ ` 50,00,000)] as IGST credit.
(iv) ITC of ` 10,000 of March (last year) cannot be distributed in March this
year as ITC available for distribution in a month is to be distributed in
the same month.

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14. Computation of net CGST, SGST and IGST payable from the electronic
cash ledger by George Pvt. Ltd. for the tax period

Particulars Amount CGST @ SGST @ IGST @

(`) 9% (`) 9% (`) 18% (`)
Sales made outside Kerala 10,00,000 1,80,000
(New Delhi) –
[Being inter-State sale, the
same is liable to IGST]
Sales made in Trivandrum 8,00,000 72,000 72,000
[Being intra-State sale, the
same is liable to CGST &
SGST]
Less: ITC available during (72,000) (10,000) (1,80,000)
the tax period for set off CGST IGST
[Refer Working Note
(52,500)
Below]
SGST
Net tax liability payable Nil 9,500 Nil
in cash
ITC to be carried forward 500 Nil Nil
to next tax period (72,500- (52,500- (1,90,000-
72,000) 52,500) 1,90,000
Working Note:
ITC available during the tax period is computed as under:
Opening balance of ITC 50,000 30,000 1,00,000
Purchases from New Delhi 5,00,000 90,000
[Being inter-State
purchase, IGST would
have been paid on it.]
Purchases from 2,50,000 22,500 22,500
Trivandrum
Total input tax credit 72,500 52,500 1,90,000

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Note: Since sufficient balance of ITC of CGST is available for paying CGST
liability and cross-utilization of ITC of CGST and SGST is not allowed, ITC
of IGST has been used to pay SGST (after paying IGST liability) as credit of
CGST and SGST can be utilized only after IGST credit has been fully utilized.

15. Computation of net GST payable from Electronic Cash Ledger by Quanto
Enterprises for the month of September

Particulars CGST (Rs) SGST (Rs)

Output tax liability for the month 24,000 24,000

Less: ITC [Notes 1 & 2] 9,000 12,000 (SGST)

(IGST)
12,000 (CGST)

Net GST payable (from electronic 3,000 12,000

cash ledger)

Notes:
1. Credit of IGST is first utilized towards payment of IGST and thereafter
for CGST and SGST in any order and in any proportion. Credit of CGST
and SGST can be utilized only after IGST credit has been fully utilized
[Rule 88A read with sections 49(5), 49A and 49B].
Since Quanto Enterprises does not make any inter-State supply, in the
above answer, entire credit of IGST has been utilized towards payment
of CGST. Credit of IGST can also be utilised against SGST liability or
against both CGST and SGST liabilities in any proportion and thus, the
final answer will change accordingly.
2. As per section 18(1)(b) a person who takes voluntary registration is
entitled to take credit of input tax in respect of inputs held in stock and
inputs contained in semi-finished/ finished goods held in stock on the
day immediately preceding the date of grant of registration.

However, he cannot take ITC in respect of capital goods held on the day
immediately preceding the date of grant of registration.

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ITC on inputs needs to be availed within 1 year from the date of issue
of the invoice by the supplier [Section 18(2)].

In this case, since Quanto Enterprises has been granted voluntary

registration on 25th September, it will be entitled to ITC on inputs held in
stock and inputs contained in semi-finished/ finished goods held in stock,
on 24th September. In view of the said provisions, eligible ITC for Quanto
Enterprises is computed as follows:

Particulars CGST (`) SGST (`) IGST

(`)
Inputs held in stock since 2nd September 4,500 4,500
Inputs received on 21st July contained in 7,500 7,500
semi-finished goods held in stock
Inputs contained in finished goods held Nil
in stock which were procured on 19th
September last year [Invoice issued prior
to one year, hence ITC cannot be availed]
Inputs held in stock since 9,000
th
13 September
Capital goods procured on Nil Nil
12th September
Total ITC 12,000 12,000 9,000

16. As per section 10(3) read with Notification No.14/2019 CT dated 07.03.2019
as amended, the option availed of by a registered person to pay tax under
composition scheme shall lapse with effect from the day on which his
aggregate turnover during a financial year exceeds ` 1.5 crore [` 75 lakh in
case of Special Category States except Assam, Himachal Pradesh and Jammu
and Kashmir].
As per section 2(6), 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

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PAN, to be computed on all India basis but excludes CGST, SGST/UTGST, IGST
and GST Compensation Cess.

In the given case, the firm is registered under the composition scheme in the
State of Maharashtra. The aggregate turnover of the firm exceeds
rd
` 1.5 crore on 3 October [aggregate of both taxable and exempt turnover
from 1st April to 3rd October, i.e. ` 1,50,05,000 (` 1,44,65,000 +
` 2,03,000 + ` 1,38,250 + ` 1,06,250 + `92,500)].
Thus, the firm will pay tax under regular scheme (Section 9) from 3rd October.
As per section 18(1)(c) read with rule 40, where any registered person ceases
to pay tax under section 10, he shall be entitled to take credit of input tax in
respect of inputs held in stock, inputs contained in semi-finished or finished
goods held in stock and on capital goods on the day immediately preceding
the date from which he becomes liable to pay tax under section 9.
Further, ITC on supplies of inputs and capital goods shall not be available
after the expiry of one year from the date of issue of tax invoice
[Section 18(2)].
In the light of the above-mentioned provisions, the ITC credited to the
Electronic Credit Ledger of the B & D Company on inputs held in on
2nd October will be computed as under:

Particulars Amount (`)

Stock of taxable inputs as on 30th September 10,00,000
[Since no tax is paid on exempt purchases, there does not
arise any question of availing ITC on the same. Hence,
stock of only taxable inputs is considered]
Add: Purchases Nil
[No purchases are made in October]
Less: Cost of taxable goods sold from 1st October to 3,20,000
2nd October
[(2,00,000 + 1,33,000 + 67,000]) x 80%]
Stock of taxable inputs as on 2nd October 6,80,000
[Since the bill numbers are in continuation, it can be
concluded that no sales are missing from the extract]

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Less: Stock with invoice issued prior to one year 3,00,000

Stock of inputs on which ITC can be claimed 3,80,000
ITC of CGST @ [Since all purchases are intra-State 34,200
9% and from the suppliers registered
under regular scheme]
ITC of SGST @ 34,200
9%

17.

S. No. Particulars ITC (`)

(i) Amount of ITC credited to Electronic Credit

Ledger, for the month of October

Machinery ‘U’ - ‘A’ [Note 1] 36,000

Machinery ‘V’ [Note 2] 18,000

Machinery ‘W’ [Note 3] -

Machinery ‘Y’ [Note 4] -

Machinery ‘Z’ [Note 5] -

Raw Material used for manufacturing ‘Alpha’ [Note 6] 27,000

Raw Material used for manufacturing ‘Beta’ [Note 6] -

Raw Material used for manufacturing ‘Gama’ [Note 6] 18,000

Amount of ITC credited to Electronic Credit 99,000

Ledger, for the month of October

(ii) Aggregate value of common credit (Tc) – Note 7

Value of ‘A’ for Machinery ‘U’ purchased on 1st 36,000

October

Value of ‘A’ for Machinery ‘Z’ purchased on 1st October 54,000

2 years ago for effecting both taxable and exempt
supplies

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Input tax claimed on Machinery ‘Y’ purchased on 1st 72,000

October 4 years ago for effecting taxable supplies but
used for effecting both taxable and exempt supplies
from 1st October in the current year [Note 8]

Aggregate value of common credit (Tc) 1,62,000

(iii) Common credit attributable to exempt supplies,

for the month of October

Common credit for the month of October (Tm) [Note 9] 2,700

Common credit attributable to exempt supplies, 1,080

for the month of October (Te) – Note 10

(iv) Computation of GST liability of the company for

October payable through Electronic Cash Ledger

IGST payable on ‘Alpha’ [` 9,00,000 x 18%] 1,62,000

IGST payable on ‘Beta’ [Exempt] Nil

IGST payable on ‘Gama’ [` 6,00,000 x 18%] 1,08,000

Total IGST payable on outward supply 2,70,000

Common credit attributable to exempt supplies for 1,080

the month of October [Note 11]

Total output tax liability of October 2,71,080

Less: ITC available in the Electronic Credit Ledger 99,000

IGST payable from Electronic Cash Ledger 1,72,080

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Notes:
(1) ITC in respect of capital goods used commonly for effecting taxable
supplies and exempt supplies denoted as ‘A’ shall be credited to the
electronic credit ledger [Rule 43(1)(c)].
(2) ITC in respect of capital goods used or intended to be used exclusively
for effecting supplies other than exempted supplies but including zero
rated supplies shall be credited to the electronic credit ledger [Rule
43(1)(b)].

(3) ITC in respect of capital goods used or intended to be used exclusively

for effecting exempt supplies shall not be credited to electronic credit
ledger [Rule 43(1)(a)].

(4) Machinery ‘Y’ is being used for effecting both taxable and exempt
supplies from 1st October. Prior to that it was exclusively used for
effecting taxable supplies. Therefore, ITC in respect of such machinery
would have already been credited to the electronic credit ledger.
(5) Machinery ‘Z’ is being used for effecting both taxable and exempt
supplies from 1st October two years ago. Therefore, ITC in respect of
such machinery would have already been credited to the electronic
credit ledger.
(6) ITC in respect of inputs used for effecting taxable supplies will be credited
in Electronic Credit Ledger. ITC in respect of inputs used for effecting
exempt supplies will not be credited in the electronic credit ledger
[Rule 42].

(7) The aggregate of the amounts of ‘A’ credited to the electronic credit
ledger in respect of common capital goods whose useful life remains
during the tax period, to be denoted as ‘Tc’, shall be the common credit
in respect of such capital goods [Rule 43(1)(d)].
(8) Where any capital goods which were used exclusively for effecting
taxable supplies are subsequently also used for effecting exempt
supplies, the ITC claimed in respect of such capital goods shall be added
to arrive at the aggregate value of common credit ‘Tc’ [Proviso to rule
43(1)(d)].

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(9) ITC attributable to a month on common capital goods during their

useful life (Tm) shall be computed in accordance with rule 43(1)(e) as
under:
= Tc ÷ 60
= ` 1,62,000 ÷ 60

= ` 2,700
The useful life of any capital goods shall be considered as five years
from the date of invoice and the said formula shall be applicable during
the useful life of the said capital goods
(10) The amount of common credit attributable towards exempted supplies,
be denoted as ‘Te’, and shall be calculated as:
Te= (E÷ F) x Tr* where,
‘E’ is the aggregate value of exempt supplies, made, during the tax
period, and
‘F’ is the total turnover in the State of the registered person during the
tax period [Rule 43(1)(g)].
Turnover of exempt supplies during the month of October
=Tr х
Total turnover of XYZ Pvt. Ltd. during the month of October

= ` 2,700 х 25,00,000 = ` 1,080

10,00,000

(11) Common credit attributable to the exempt supplies (Te) along with the
applicable interest (which is to be ignored in this case) shall, during
every tax period of the useful life of the concerned capital goods, be
added to the output tax liability of the person making such claim of
credit [Rule 43(1)(h)].
*Prior to the amendment vide Notification No. 16/2020 CT dated 23.03.2020
clause (f) of rule 43(1) provided that the amount of ITC, at the beginning of a
tax period, on all common capital goods whose useful life remains during the
tax period, be denoted as ‘Tr‘ and shall be the aggregate of ‘Tm‘ for all such
capital goods. However, clause (f) has been omitted vide the said notification.
Consequently, the term “Tr” becomes redundant in the formula provided in rule
43(1)(g). However, for the sake of computation of common credit attributable

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to exempt supply, value of ‘Tm’ has been used here. It may be noted that as per
the erstwhile clause (f) of rule 43(1) value of ‘Tr’ was the aggregate of ‘Tm.’
18. A. Computation of ITC credited to Electronic Credit Ledger
As per rule 42, the ITC in respect of inputs or input services being partly
used for the purposes of business and partly for other purposes, or
partly used for effecting taxable supplies and partly for effecting
exempt supplies, shall be attributed to the purposes of business or for
effecting taxable supplies.
ITC credited to the electronic credit ledger of registered person [‘C1’] is
calculated as under-
C1 = T - (T1+T2+T3)
Where,

T = Total input tax involved on inputs and input services in a tax

period.
T1 = Input tax attributable to inputs and input services intended to
be used exclusively for non-business purposes
T2 = Input tax attributable to inputs and input services intended to
be used exclusively for effecting exempt supplies
T3 = Input tax in respect of inputs and input services on which
credit is blocked under section 17(5)

Computation of total input tax involved [T]

Particulars (`)

GST paid on taxable items [` 55,00,000 x 18%] 9,90,000

Items exempted vide a notification [Since exempted, Nil

no GST is paid]

Items not leviable to tax [Since non-taxable, no GST is Nil

paid]

GST paid under reverse charge on freight paid to GTA 5,000

for inward transportation of taxable items - [` 1,00,000
x 5%]

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GST paid under reverse charge on freight paid to GTA 4,000

for inward transportation of exempted items -
[` 80,000 x 5%]

GST paid under reverse charge on freight paid to GTA 1,000

for inward transportation of non-taxable items -
[` 20,000 x 5%]

GST paid on monthly rent - [` 5,50,000 x 18%] 99,000

GST paid on packing charges [` 2,50,000 x 18%] 45,000

Salary paid to staff at the Store Nil

[Services by an employee to the employer in the course
of or in relation to his employment is not a supply in
terms of para 1 of the Schedule III and hence, no GST is
payable thereon].

GST paid on inputs used for personal purpose 5,000

GST paid on rent a cab services availed for business 4,000

purpose

GST paid on items given as free samples 4,000

Total input tax involved during the month [T] 11,57,000

Computation of T1, T2, T3

Particulars (`)

GST paid on monthly rent attributable to personal 33,000

purposes [1/3 of ` 99,000]

GST paid on inputs used for personal purpose 5,000

Input tax exclusively attributable to non-business 38,000

purposes [T1]

GST paid under reverse charge on freight paid to GTA 4,000

for inward transportation of exempted items

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[As per section 2(47), exempt supply means, inter alia,

supply which may be wholly exempt from tax by way of
a notification issued under section 11. Hence, input
service of inward transportation of exempt items is
exclusively used for effecting exempt supplies.]

GST paid under reverse charge on freight paid to GTA 1,000

for inward transportation of non-taxable items
[Exempt supply includes non-taxable supply in terms of
section 2(47). Hence, input service of inward
transportation of non-taxable items is exclusively used
for effecting exempt supplies.]

Input tax exclusively attributable to exempt supplies 5,000

[T2]

GST paid on rent a cab services availed for business 4,000

purpose
[ITC on rent a cab service is blocked under section
17(5)(b)(i) as the same is not used by All-in-One Store
for providing the rent a cab service or as part of a taxable
composite or mixed supply.

GST paid on items given as free samples 4,000

[ITC on goods inter alia, disposed of by way of free
samples is blocked under section 17(5)(h)].

Input tax for which credit is blocked under section 8,000

17(5) [T3] **

**Since GST paid on inputs used for personal purposes has been
considered while computing T1, the same has not been considered again
in computing T3.
ITC credited to the electronic credit ledger

C1 = T - (T1+T2+T3)
= ` 11,57,000 – (` 38,000 + ` 5,000 + ` 8,000) = ` 11,06,000

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B. Computation of Common Credit

C2 = C1 - T4

where C2 = Common Credit

T4 = Input tax credit attributable to inputs and input services intended
to be used exclusively for effecting taxable supplies
Computation of T4,
Particulars (`)

GST paid on taxable items 9,90,000

GST paid under reverse charge on freight paid to GTA 5,000

for inward transportation of taxable items

Input tax exclusively attributable to taxable 9,95,000

supplies [T4]

Common Credit C2 = C1 - T4

=` 11,06,000 – ` 9,95,000 = ` 1,11,000

C. Computation of ITC attributable towards exempt supplies out of
common credit
ITC attributable towards exempt supplies is denoted as ‘D1’ and
calculated as-
D1 = (E ÷ F) x C2
where,
‘E’ is the aggregate value of exempt supplies during the tax period, and
‘F’ is the total turnover in the State of the registered person during the
tax period
Aggregate value of exempt supplies during the month
= ` 15,00,000 (` 12,00,000 + `3,00,000)

Total turnover in the State during the tax period

= ` 65,00,000 (` 42,00,000 + ` 12,00,000 + `3,00,000 + ` 8,00,000)

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Note: Transfer of items to Store located in Goa is inter-State supply in

terms of section 7 of the IGST Act, 2017 and hence includible in the total
turnover. Such supply is to be valued as per rule 28. However, the value
declared in the invoice cannot be adopted as the value since the
recipient Store at Goa is not entitled for full credit because the goods
are to be distributed as free samples, ITC on which is blocked. Therefore,
open market value of such goods, which is the value of such goods sold
in Mumbai Store, is taken as the value of items transferred to Goa Store.

D1 = (15,00,000 ÷ 65,00,000) x 1,11,000

= ` 25,615 (rounded off)
D. Computation of Eligible ITC out of common credit

Eligible ITC attributed for effecting taxable supplies is denoted as ‘C3’,

where-
C3 = C2 - D1
= ` 1,11,000 - ` 25,615
= ` 85,385
E. Computation of Net GST liability for the month

Particulars GST (`)

GST liability under forward charge

Taxable items sold in the store [` 42,00,000 x 18%] 7,56,000

Taxable items transferred to Goa Store [` 8,00,000 x 1,44,000

18%]

Total output tax liability under forward charge 9,00,000

Less: ITC credited to the electronic ledger 10,80,385

ITC carried forward to the next month (1,80,385)

Net GST payable [A] Nil

GST liability under reverse charge

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Freight paid to GTA for inward transportation of 5,000

taxable items [` 1,00,000 x 5%]

Freight paid to GTA for inward transportation of 4,000

exempted items [` 80,000 x 5%]

Freight paid to GTA for inward transportation of non- 1,000

taxable items [` 20,000 x 5%]

Total tax liability under reverse charge [B] 10,000

Net GST liability to be paid in cash [A] + [B] 10,000

As per section 49(4), amount available in the
electronic credit ledger may be used for making
payment towards output tax. However, tax payable
under reverse charge is not an output tax in terms of
section 2(82). Therefore, tax payable under reverse
charge cannot be set off against the ITC and thus, will
have to be paid in cash.

Note: While computing net GST liability, ITC credited to the electronic
ledger can alternatively be computed as follows:

Particulars (`)

GST paid on taxable items [` 55,00,000 x 18%] 9,90,000

Items exempted vide a notification [Since exempted, Nil

no GST is paid]

Items not leviable to tax [Since non-taxable, no GST is Nil

paid]

GST paid under reverse charge on freight paid to GTA 5,000

for inward transportation of taxable items [` 1,00,000
x 5%]

GST paid under reverse charge on freight paid to GTA Nil

for inward transportation of exempted items [` 80,000
x 5%]

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[As per section 2(47), exempt supply means, inter alia,

supply which may be wholly exempt from tax by way
of a notification issued under section 11. Hence, input
service of inward transportation of exempt items is
exclusively used for effecting exempt supplies. Input
tax exclusively attributable to exempt supplies is to be
excluded]

GST paid under reverse charge on freight paid to GTA Nil

for inward transportation of non-taxable items
[` 20,000 x 5%]
[Exempt supply includes non-taxable supply in terms
of section 2(47). Hence, input service of inward
transportation of non-taxable items is exclusively
used for effecting exempt supplies. Input tax
exclusively attributable to exempt supplies is to be
excluded]

GST paid on monthly rent – for business purposes 66,000

[(` 5,50,000 x 18%) – 1/3 of [(` 5,50,000 x 18%)]

GST paid on packing charges [` 2,50,000 x 18%] 45,000

Salary paid to staff at the Store Nil

[Services by an employee to the employer in the
course of or in relation to his employment is not a
supply in terms of para 1 of the Schedule III to CGST
Act and hence, no GST is payable thereon]

GST paid on inputs used for personal purpose Nil

[ITC on goods or services or both used for personal
consumption is blocked under section 17(5)(g)]

GST paid on rent a cab services availed for business Nil

purpose
[ITC on rent a cab service is blocked under section
17(5)(b)(i) as the same is not used by All-in-One Store

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for providing the rent a cab service or as part of a

taxable composite or mixed supply.]

GST paid on items given as free samples Nil

[ITC on goods inter alia, disposed of by way of free
samples is blocked under section 17(5)(h)]

Total ITC credited to the electronic ledger 11,06,000

Less: ITC reversal [ITC of common credit, attributable (25,615)

to exempt supplies]

Net ITC available for credit 10,80,385

19. (1) Computation of ITC credited to Electronic Credit Ledger

ITC of input tax attributable to inputs and input services intended to be
used for business purposes is credited to the electronic credit ledger.
Input tax attributable to inputs and input services intended to be used
exclusively for non-business purposes, for effecting exclusively exempt
supplies and on which credit is blocked under section 17(5) is not
credited to electronic credit ledger [Sections 16 and 17].
In the light of the aforementioned provisions, the ITC credited to
electronic credit ledger of Vansh Shoppe is calculated as under:

Particulars Amount CGST @ SGST @

(`) 6% (`) 6% (`)
GST paid on taxable goods 45,00,000 2,70,000 2,70,000
Goods not leviable to GST 4,00,000 Nil Nil
[Since non-taxable, no GST is
paid]
GST paid on monthly rent for 3,50,000 21,000 21,000
shop
GST paid on telephone 50,000 3,000 3,000
expenses
GST paid on audit fees 60,000 3,600 3,600

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GST paid on premium of 10,000 Nil Nil

health insurance policies as
per company policy
[ITC on health insurance
service is allowed only if it is
obligatory for employers to
provide such services to its
employees under any law for
the time being in force-Proviso
to section 17(5)(b)].
Taxable Goods given as free 5,000 Nil Nil
samples
[ITC on goods disposed of by
way of free samples is blocked
under section 17(5)(h)]

Particulars Amount CGST @ SGST @

(`) 2.5% (`) 2.5% (`)
Freight paid to GTA for inward 50,000 Nil Nil
transportation of non-taxable
goods under reverse charge
[Since definition of exempt
supply under section 2(47)
specifically includes non-
taxable supply, the input
service of inward
transportation of non-taxable
goods is being exclusively used
for effecting exempt supplies.]
Freight paid to GTA for inward 1,50,000 3,750 3,750
transportation of taxable
goods under reverse charge
ITC credited to the electronic 3,01,350 3,01,350
ledger

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Less: ITC reversal [ITC out of (4,600) (4,600)

common credit, attributable to
exempt supplies] (Refer point
no. 2 & 3 below)
Net ITC available 2,96,750 2,96,750

(2) Computation of common credit available for apportionment

Common Credit = ITC credited to Electronic Credit Ledger – ITC

attributable to inputs and input services intended to be used exclusively
for effecting taxable supplies [Section 17 read with rule 42].

Particulars CGST (`) SGST (`)

ITC credited to Electronic Credit Ledger 3,01,350 3,01,350

Less : ITC on taxable goods 2,70,000 2,70,000

Less: ITC on freight paid to GTA for inward 3,750 3,750

transportation of taxable goods

Common credit 27,600 27,600

(3) Computation of ITC attributable towards exempt supplies out of

common credit
ITC attributable towards exempt supplies = Common credit x
(Aggregate value of exempt supplies during the tax period/ Total
turnover during the tax period)[Section 17 read with rule 42].

Particulars CGST (`) SGST (`)

ITC attributable towards exempt supplies 4,600 4,600

[` 27,600 x (` 10,00,000/` 60,00,000)]

(4) Computation of net GST liability for the month

Particulars CGST (`) SGST (`)

GST liability under forward charge

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Supply of taxable goods [` 50,00,000 x 3,00,000 3,00,000

6%]

Total output tax liability under forward 3,00,000 3,00,000

charge

Less: ITC 2,96,750 2,96,750

Net GST payable [A] 3,250 3,250

GST liability under reverse charge

Freight paid to GTA for inward 3,750 3,750

transportation of taxable goods
[` 1,50,000 x 2.5%]

Freight paid to GTA for inward 1,250 1,250

transportation of non-taxable goods
[` 50,000 x 2.5%]

Total tax liability under reverse charge [B] 5,000 5,000

Net GST liability [A] + [B] 8,250 8,250

Note: Amount available in the electronic credit ledger may be used

for making payment towards output tax [Section 49]. However, tax
payable under reverse charge is not an output tax in terms of
definition of output tax provided under section 2(82). Therefore, tax
payable under reverse charge cannot be set off against the input tax
credit and thus, will have to be paid in cash.

20. Computation of net GST liability of Surana & Sons for the tax period

Particulars (`)

GST payable on outward supply [Refer Working Note 1] 3,18,000

Less: Input tax credit (ITC) [Refer Working Note 3] 2,78,180

GST payable from Electronic Cash Ledger [A] 39,820

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Add: GST payable on legal services under reverse charge 63,000

[` 3,50,000 X 18%] [B]
[Tax on legal services provided by an advocate to a
business entity, is payable under reverse charge by the
business entity in terms of Notification No. 13/2017 CT
(R) dated 28.06.2017. Further, such services are not
eligible for exemption provided under Notification No.
12/2017 CT (R) dated 28.06.2017 as the turnover of the
business entity (Surana & Sons) in the preceding
financial year exceeds ` 20 lakh.]

Total GST paid from Electronic Cash Ledger [A] + 1,02,820

[B]
[As per section 49(4) amount available in the electronic
credit ledger may be used for making payment towards
output tax. However, tax payable under reverse charge
is not an output tax in terms of section 2(82). Therefore,
input tax credit cannot be used to pay tax payable under
reverse charge and thus, tax payable under reverse
charge will have to be paid in cash.]

Working Note 1
Computation of GST payable on outward supply

Particulars Value (`) GST (`)

Turnover of ‘M’ [liable to GST @ 12%] 14,00,000 1,68,000

Turnover of ‘N’ [Tax on ‘N’ is payable under 6,00,000 Nil

reverse charge by the recipient of such goods]

Turnover of ‘O’ [liable to GST @ 12%] 10,00,000 1,20,000

Export of ‘M’ with payment of IGST @ 12% 2,50,000 30,000

Export of ‘O’ under letter of undertaking (LUT) 10,00,000 Nil

[Export of goods is a zero rated supply in terms of
section 16(1)(a) of the IGST Act, 2017. A zero
rated supply can be supplied without payment of

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tax under a LUT in terms of section 16(3)(a) of that

Act.]

Consultancy services provided to independent 20,00,000 Nil

clients located in foreign countries.
[The activity is an export of service in terms of
section 2(6) of the IGST Act, 2017 as-
• the supplier of service is located in India;
• the recipient of service is located outside
India;
• place of supply of service is outside India (in
terms of section 13(2) of the IGST Act, 2017);
• payment for the service has been received in
convertible foreign exchange or in Indian
rupees wherever permitted by the Reserve
Bank of India; and
• supplier of service and recipient of service
are not merely establishments of distinct
person.
[Export of services is a zero rated supply in
terms of section 16(1)(a) of the IGST Act, 2017.
A zero rated supply can be supplied without
payment of tax under a LUT in terms of section
16(3)(a) of that Act.]
It is assumed that export has been made under
LUT

Sale of building 1,20,00,000 Nil

[Sale of building is neither a supply of goods nor
a supply of services in terms of para 5 of
Schedule III to the CGST Act, provided the entire
consideration has been received after issue of
completion certificate by the competent
authority or after its occupation, whichever is
earlier. Hence, the same is not liable to GST]

Interest received on investment in fixed 4,00,000 Nil

deposits with a bank

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[Exempt vide Notification No. 12/2017 CT (R)

dated 28.06.2017]

Sale of shares 2,50,00,000 Nil

[Shares are neither goods nor services in terms
of section 2(52) and 2(102). Hence, sale of
shares is neither a supply of goods nor a supply
of services and hence, is not liable to any tax.]

Total GST payable on outward supply 3,18,000

Working Note 2

Computation of common credit attributable to exempt supplies during

the tax period

Particulars (`)

Common credit on inputs and input services [Tax on inputs - 6,90,000

` 4,20,000 (` 35,00,000 x 12%) + Tax on input services –
` 2,70,000 (` 15,00,000 x 18%)]

Common credit attributable to exempt supplies (rounded off) 4,74,820

= Common credit on inputs and input services x (Exempt
turnover during the period / Total turnover during the period)
= ` 6,90,000 x ` 1,33,50,000/ ` 1,94,00,000
Exempt turnover = ` 1,33,50,000 and total turnover =
`1,94,00,000 [Refer note below]

Note:
As per section 17(3), value of exempt supply includes supplies on which the
recipient is liable to pay tax on reverse charge basis, transactions in securities,
sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of
building. As per explanation to Chapter V of the CGST Rules, the value of
exempt supply in respect of land and building is the value adopted for paying
stamp duty and for security is 1% of the sale value of such security.
Further, as per explanation to rule 42, the aggregate value of exempt supplies
inter alia excludes the value of services by way of accepting deposits,

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extending loans or advances in so far as the consideration is represented by

way of interest or discount, except in case of a banking company or a financial
institution including a non-banking financial company, engaged in supplying
services by way of accepting deposits, extending loans or advances.
Therefore, value of exempt supply in the given case will be the sum of value
of output supply on which tax is payable under reverse charge (` 6,00,000),
value of sale of building (` 2,50,000 / 2 x 100 = ` 1,25,00,000) and value of
sale of shares (1% of ` 2,50,00,000 = ` 2,50,000), which comes out to be
` 1,33,50,000.
Total turnover = ` 1,94,00,000 (` 14,00,000 + ` 6,00,000 + ` 10,00,000 +
` 2,50,000 + ` 10,00,000 + ` 20,00,000 + ` 1,25,00,000 + ` 4,00,000 +
` 2,50,000)
Working Note 3
Computation of ITC available in the Electronic Credit Ledger of the
Surana & Sons for the tax period

Particulars (`)

Common credit on inputs and input services 6,90,000

Legal services used in the manufacture of taxable product ‘M’ 63,000

ITC available in the Electronic Credit Ledger 7,53,000

Less: Common credit attributable to exempt supplies during 4,74,820

the tax period [Refer Working Note 2]

Net ITC available 2,78,180

21. Computation of net GST payable by M/s XYZ

Particulars GST payable

(`)
Gross GST liability [Refer Working Note 1 below] 2,63,400
Less: ITC [Refer Working Note 2 below] 2,00,000
Net GST payable from Electronic Cash Ledger 63,400

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Working Notes
(1) Computation of gross GST liability

Particulars Value Rate GST

received of GST payable
(`) (`)

Hiring charges for excavators 18,00,000 12% 2,16,000

Service charges for supply of 20,000 12% 2,400

manpower for operation of
excavators [Refer Note 1]

Service charges for soil testing 2,50,000 18% 45,000

and seismic evaluation [Refer
Note 2]

Gross GST liability 2,63,400

Notes:
(i) Since the excavators are invariably hired out along with operators
and excavator operators are supplied only when the excavator is
hired out, it is a case of composite supply under section 2(30)
wherein the principal supply is the hiring out of the excavator.
As per section 8(a), the composite supply is treated as the supply
of the principal supply. Therefore, the supply of manpower for
operation of the excavators (ancillary supply) will also be taxed at
the rate applicable for hiring out of the excavator (principal
supply), which is 12%.
(ii) Soil testing and seismic evaluation services being independent of
the hiring out of excavator will be taxed at the rate applicable to
them, which is 18%.

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(2) Computation of ITC available for set off

Particulars GST ITC

paid available
(`) (`)

Maintenance services for excavators 1,00,000 1,00,000

[Refer Note 1]

Health insurance for excavator 11,000 -

operators [Refer Note 2]

Scientific and technical consultancy 1,00,000 1,00,000

[Refer Note 1]

Total ITC available 2,00,000

Notes:
(i) Section 17(5)(d) blocks credit on goods/ or services received by a
taxable person for construction of an immovable property on his
own account. Here, though the excavators are used for building
projects, the same are not used by M/s. XYZ on its own account
for construction of immovable property instead they are used for
outward taxable supply of hiring out of machinery. Further,
excavators are special purpose vehicles whose credit is not
restricted under section 17(5)(a), therefore, ITC on maintenance
service for excavators shall be allowed.
Therefore, the maintenance service for the excavators does not
get covered by the bar under section 17 and the credit thereon
will be available. The same applies for scientific & technical
consultancy for construction projects because in this case also,
the service is used for providing the outward taxable supply of
soil testing and seismic evaluation service and not for
construction of immovable property.
(ii) Section 17(5)(b)(i) allows input tax credit on health insurance only
where an inward supply of such services is used by a registered
person for making an outward taxable supply of the same

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category of goods or services or both or as an element of a

taxable composite or mixed supply or where it is obligatory for an
employer to provide the same to its employees under any law for
the time being in force.
In the given case, it is assumed that it is not obligatory for
employer to provide health insurance to its employees under any
law for the time being in force, therefore the credit thereon will
not be allowed.

22. Computation of ITC available with V-Supply Pvt. Ltd. for the tax period

S. Particulars ITC
No.
CGST* SGST* IGST* Total
` ` ` `

1. Opening balance of ITC 15,000 8,000 9,000 32,000

2. Raw Material

Raw material purchased 14,400 14,400

from Bihar [Refer Note
1(i)]

Raw material imported 29,970 29,970

from China [Refer Note
1(ii)]

Raw material purchased Nil Nil Nil

from unregistered
suppliers within West
Bengal [Refer Note 1(iii)]

Raw material destroyed Nil Nil Nil

due to seepage [Refer
Note 1(iv)]

Remaining raw material 7,650 7,650 15,300

purchased from West
Bengal [Refer Note 1(i)]

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[` 3.5 - ` 1.5 – ` 0.80 –

` 0.30 – ` 0.05] = ` 0.85]

Total ITC for raw material 7,650 7,650 44,370 59,670

3. Consumables 9,000 9,000 18,000

[Refer Note 2]

4. Transportation charges 1,500 1,500 3,000

for bringing the raw
material to factory [Refer
Note 3]

5. Salary paid to employees Nil Nil Nil Nil

on rolls [Refer Note 4]

6. Premium paid on life 14,400 14,400 - 28,800

insurance policies taken
for specified employees
[Refer Note 5]

7. Audit fee [Refer Note 6] 4,500 4,500 - 9,000

8. Telephone expenses 2,700 2,700 5,400

[Refer Note 6]

9. Bank charges [Refer 900 900 1,800

Note 6]

Total ITC available for the tax 55,650 48,65 53,370 1,57,67
period 0 0

Computation of net GST payable

Particulars CGST* SGST* IGST* Total

` ` ` `

On Intra-state sales in West 63,000 63,000 1,26,000

Bengal

On Inter-state sales other 54,000 54,000

than West Bengal

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On exports under LUT Nil Nil Nil Nil

[Note 7]

Total output tax liability 63,000 63,000 54,000 1,80,000

Less: ITC available for being (55,650) (48,650) (53,370) (1,57,670)

set off [Note 8 and Note 9]

Net GST payable from 7,350 14,350 630 22,330

Electronic Cash Ledger [A]

GST payable on inward 1,500 1,500 3,000

supply of GTA services under
reverse charge through
Electronic Cash Ledger [Note
3 and 10] [B]

Net GST payable through 8,850 15,850 630 25,330

Electronic Cash Ledger [A]
+ [B]

Notes:
(1) (i) Credit of input tax (CGST & SGST/ IGST) paid on raw materials
used in the course or furtherance of business is available in terms
of section 16(1).
(ii) IGST paid on imported goods qualifies as input tax in terms of
section 2(62)(a). Therefore, credit of IGST paid on imported raw
materials used in the course or furtherance of business is available
in terms of section 16(1).
(iii) Tax on intra-State procurements made by a registered person
from an unregistered supplier is levied only on notified categories
of goods and services. [Section 9(4)].

(iv) ITC is not available on destroyed inputs in terms of section

17(5)(h).
2. Consumables, being inputs used in the course or furtherance of
business, input tax credit is available on the same in terms of section
16(1). However, levy of CGST on diesel has been deferred till such date

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as may be notified by the Government on recommendations of the GST

Council [Section 9(2)]. Hence, there being no levy of GST on diesel,
there cannot be any ITC.
3. GST is payable under reverse charge on transportation service received
from GTA. Tax payable under section 9(3) of the CGST/SGST Act
qualifies as input tax in terms of clauses (b) and (d) of section 2(62).
Thus, input tax paid under reverse charge on GTA service will be
available as ITC in terms of section 16(1) as the said service is used in
course or furtherance of business.
Furthermore, intra-State services by way of transportation of goods by
road except the services of a GTA and a courier agency are exempt from
CGST vide Notification No. 12/2017 CT (R) dated 28.06.2017. Therefore,
since no GST is paid on such services, there cannot be any ITC on such
services.

4. Services by employees to employer in the course of or in relation to his

employment is not a supply in terms of section 7 read with para 1 of
Schedule III to the CGST Act. Therefore, since no GST is paid on such
services, there cannot be any ITC on such services
5. ITC on supply of life insurance service is not blocked if it is obligatory
for an employer to provide such service to its employees under any law
for the time being in force. [Proviso to section 17(5)(b)]. Therefore, GST
paid on premium for life insurance policies will be available as ITC in
terms of section 16(1) as the said service is used in the course or
furtherance of business.
6. Audit fee, telephone expenses and bank charges are all services used in
the course or furtherance of business and thus, credit of input tax paid
on such service will be available in terms of section 16(1).
7. Export of goods is a zero rated supply in terms of section 16(1)(a) of the
IGST Act. A zero rated supply under LUT is made without payment of
integrated tax [Section 16(3)(a) of the IGST Act].
8. Since export of goods is a zero rated supply, there will be no
apportionment of ITC and full credit will be available [Section 16 of the
IGST Act read with section 17(2) of the CGST Act].

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9. As per section 49(5) read with rule 88A, ITC of-

(i) IGST is utilised towards payment of IGST first and then CGST and
SGST in any proportion and in any order.
(ii) CGST is utilised towards payment of CGST and IGST in that order.
ITC of CGST shall be utilized only after ITC of IGST has been
utilised fully.
(iii) SGST is utilised towards payment of SGST and IGST in that order.
ITC of SGST shall be utilized only after ITC of IGST has been
utilised fully.
10. Section 49(4) lays down that the amount available in the electronic
credit ledger may be used for making payment towards output tax.
However, tax payable under reverse charge is not an output tax in terms
of section 2(82). Therefore, tax payable under reverse charge cannot
be set off against the ITC and thus, will have to be paid in cash.

*11. CGST and SGST are chargeable on intra-State inward and outward
supplies and IGST is chargeable on inter-State inward and outward
supplies.
23. Computation of net GST payable by ABC Company Ltd.

Particulars GST payable

(`)

Gross GST liability [Refer working note (2) below] 91,200

Less: Input tax credit [Refer working note (1) below] 82,000

Net GST payable from Electronic Cash Ledger 9,200

Working Notes:
(1) Computation of ITC available with ABC Company Ltd.

Particulars GST (`)

Health insurance of factory employees [Note – 1] 20,000

Raw material received in factory [Note – 2] Nil

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Work’s contractor’s service used for installation of plant 12,000

and machinery [Note -3]
Manufacturing machinery directly sent to job worker’s 50,000
premises under challan [Note -4]
Purchase of car used by director for business meetings Nil
only [Note -5]
Outdoor catering service availed for business meetings Nil
[Note -6]
Total ITC available 82,000

Notes:
1. ITC of health insurance is available in the given case in terms of
proviso to section 17(5)(b) since it is obligatory for employer to
provide health insurance to its employees under the Factories Act,
1948. -
2. Where the goods against an invoice are received in lots/
installments, ITC is allowed upon receipt of the last lot/
installment vide first proviso to section 16(2). Therefore, ABC
Company Ltd. will be entitled to ITC of raw materials on receipt of
second installment in next month.
3. Section 17(5)(c) provides that ITC on works contract services is
blocked when supplied for construction of immovable property
(other than plant and machinery) except when the same is used
for further supply of works contract service.
Though in this case, the works contract service is not used for
supply of works contract service, ITC thereon will be allowed since
such services are being used for installation of plant and
machinery.

4. ITC on capital goods directly sent to job worker’s premises under

challan is allowed in terms of section 19(5) read with rule 45(1).
5. Section 17(5)(a) provides that motor vehicle for transportation of
persons having approved seating capacity of not more than 13

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persons (including the driver), except when they are used for
making taxable supply of-

(i) further supply of such vehicles,

(ii) transportation of passengers,
(iii) imparting training on driving, flying, navigating such
vehicles and
Since ABC Company Ltd is a supplier of machine and it does not
use the car for transportation of passengers or any other use as
specified, ITC thereon will not be available.
6. Section 17(5)(b)(i) provides that ITC on outdoor catering is
blocked except where the same is used for making further supply
of outdoor catering or as an element of a taxable composite or
mixed supply.
Since ABC Company Ltd is a supplier of machine, ITC thereon will
not be available.
(2) Computation of gross GST liability

Value Rate GST

received of GST payable
(`) (`)

Hiring receipts for machine 5,25,000 12% 63,000

Service charges for supply of

manpower operators 2,35,000 12% 28,200

Gross GST liability 91,200

Note:
Since machine is always hired out along with operators and operators
are supplied only when the machines are hired out, it is a case of
composite supply, wherein the principal supply is the hiring out of
machines [Section 2(30) read with section 2(90)]. Therefore, service of
supply of manpower operators will also be taxed at the rate applicable

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for hiring out of machines (principal supply), which is 12%, in terms of

section 8(a).

24. Computation of ITC available with Pari Ltd.

S. Particulars Eligible input tax credit

No. CGST SGST IGST
(`) (`) (`)
1. Raw Material
Purchased from local 9,562.50 9,562.50
registered suppliers [Note
1(i)] (` 1,06,250 x 9%)
Purchased from local Nil Nil
unregistered suppliers
[Note 1(ii)]
Purchased from Punjab 18,000
from registered supplier
[Note 1(i)] (` 1,00,000 x
18%)
Raw material imported 22,732
from USA [Note 1(iii)]
2. Consumables [Note 2] 11,250 11,250
(` 1,56,250- ` 31,250) x
9%]
3. Monthly rent for the 9,000 9,000
factory building to the
owner in Rajasthan [Note
3]
4. Salary paid to employees Nil Nil Nil
on rolls [Note 4]
5. Premium paid on life 18,000 18,000 -
insurance policies taken
for specified employees
[Note 5] (` 2,00,000 x 9%)
Total 47,812.50 47,812.50 40,732

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 INPUT TAX CREDIT 1.
1.203 7.203

Add: Opening balance of ITC 20,000 15,000 15,000

Total ITC [Note 7] 67,812.50 62,812.50 55,732

Computation of net GST payable

Particulars CGST SGST IGST

(`) (`) (`)
Intra-State supply 78,750 78,750
Inter-State supply 67,500
Exports under LUT [Note 6] Nil Nil Nil
Total output tax liability 78,750 78,750 67,500
Less: ITC 67,812.50 62,812.50 55,732
Net GST payable (rounded off) 10,938 15,938 11,768

Notes:
1. (i) Credit of input tax (CGST & SGST/ IGST) paid on raw materials
used in the course or furtherance of business is available in terms
of section 16.
(ii) Tax on procurements made by a registered person from an
unregistered supplier is levied only in case of notified goods and
services in terms of section 9(4). Therefore, since no GST is paid
on such raw material purchased, there does not arise any question
of ITC on such raw material.
(iii) IGST paid on imported goods qualifies as input tax in terms of
section 2(62). Therefore, credit of IGST paid on imported raw
materials used in the course or furtherance of business is available
in terms of section 16.
2. ITC on consumables, being inputs used in the course or furtherance of
business, is available. However, since levy of GST on high speed diesel
has been deferred till a date to be notified by Government, there cannot
be any ITC of the same.
3. ITC on monthly rent is available as the said service is used in the course
or furtherance of business.

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4. Services by employees to employer in the course of or in relation to his

employment is not a supply in terms of section 7 read with Schedule III
to the CGST Act. Therefore, since no GST is paid on such services, there
cannot be any ITC on such services.
5. ITC on life insurance service is available if the same is obligatory for an
employer to provide to its employees under any law for the time being
in force as per proviso to section 17(5)(b).
6. Export of goods is a zero rated supply in terms of section 16(1)(a) of the
IGST Act. A zero rated supply under LUT/bond is made without
payment of IGST in terms of section 16(3)(a).
7. Since export of goods is a zero rated supply, there will be no
apportionment of ITC and full credit will be available as per section 17(2).
25. Computation of net GST payable by Flowchem for the month of July

Particulars CGST @ SGST @ IGST @

9% (`) 9% (`) 18% (`)

Output tax liability [Working Note 1] 1,88,100

Less: ITC of CGST [Working Note 2] (25,000)

Less: ITC of SGST has been utilized (25,000)

only after ITC of CGST has been
utilized fully in terms of proviso to
section 49(5)(c) [Working Note 2]

Net GST payable from Electronic 1,38,100

Cash Ledger

Working Note 1
Computation of output tax liability of Flowchem for the month of July

Particulars Amount (`)

List price of 10 valves (` 1,00,000 x 10) 10,00,000

Add: Amount paid by R Refinery to testing agency [Note 1] 15,000

Add: Special packing [Note 2] 10,000

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 INPUT TAX CREDIT 1.
1.205 7.205

Add: Erection and testing at site [Note 2] 15,000

Add: Freight [Note 3] 5,000
Value of taxable supply 10,45,000
IGST @ 18% [Note 4] 1,88,100

Notes:
(1) As per section 15(2), any amount that the supplier is liable to pay in
relation to a 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 shall be included in the value of supply.
Since, in the given case, arranging inspection was the liability of the
supplier, the same should be included in the value of supply charges for
the same, however, have been paid directly to the third party service
provider by the recipient. Therefore, the value shall be included in
taxable value.
(2) As per section 15(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 supply.
(3) As per section 15(2), any amount that the supplier is liable to pay in
relation to a 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 shall be included in the value of supply.
Since, in the given case, the supply contract is on FOR basis, payment
of freight is the liability of supplier but the same has been paid by the
recipient and thus, should be included in the value of supply.
(4) As per section 10(1) of the IGST Act, 2017, where the supply involves
movement of goods, the place of supply is the location of the goods at
the time at which the movement of goods terminates for delivery to the
recipient, which in the given case is Abu Road (Rajasthan). Since the
location of the supplier (Gujarat) and the place of supply (Rajasthan) are
in two different States, the supply is an inter-State supply liable to IGST.

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Working Note 2
Computation of ITC available with Flowchem for the month of July

Particulars CGST (`) SGST (`)

Opening ITC 20,000 20,000
Work contract services availed for erecting 5,000 5,000
foundation for fixing the machinery to the earth in
the factory [Note 1]
Laying of pipeline up to the gate of factory from Nil Nil
water source located outside the factory [Note 2]
Installation of telecommunication towers [Note 2] Nil Nil
Services of travel company to provide home travel Nil Nil
facility to employees Note 3]
Services of fitness center to provide wellness
services to employees [Note 3] Nil Nil
Total ITC 25,000 25,000

Notes:
(1) As per section 17(5), ITC on works contract services when supplied for
construction of an immovable property (other than plant and
machinery) except where it is an input service for further supply of
works contract service, is blocked. Further, plant and machinery
includes foundation and structural supports used to fix the machinery
to earth.
(2) As per section 17(5), ITC on goods and/ or services received by a taxable
person for construction of an immovable property (other than plant or
machinery) on his own account including when such and/ or services
are used in course/ furtherance of business, is blocked. However, plant
and machinery excludes pipelines laid outside the factory premises and
telecommunication towers.
(3) As per section 17(5), ITC on travel benefits extended to employees on
home travel concession and membership of health and fitness center is
blocked unless it is obligatory for an employer to provide the same to
its employees under any law for the time being in force.

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 1.90 8.90 GOODS AND SERVICES TAX

TEST YOUR KNOWLEDGE

1. Mahadev Enterprises, a sole proprietorship firm, opened a shopping complex

dealing in supply of ready-made garments at multiple locations, i.e. in
Himachal Pradesh, Uttarakhand and Tripura in the month of June.
It has furnished the following details relating to the supply made at such
multiple locations for the month of June:-

Particulars Himachal Uttarakhand Tripura

Pradesh
(`)* (`)* (`)*
Intra-State supply of taxable 22,50,000 - 7,00,000
goods
Intra-State supply of exempted - - 6,00,000
goods
Intra-State supply of non-taxable - 21,00,000 40,000
goods
* excluding GST
With the help of the above mentioned information, answer the following
questions giving reasons:-
(1) Determine whether Mahadev Enterprises is liable to be registered under
GST law and what is the threshold limit of taking registration in this case
assuming that it is not required to pay any tax on inward supplies under
reverse charge.

(2) Explain with reasons whether your answer in (1) will change in the
following independent cases:
(a) If Mahadev Enterprises is dealing exclusively in taxable supply of
goods only from Himachal Pradesh;
(b) If Mahadev Enterprises is dealing in taxable supply of goods and
services only from Himachal Pradesh;

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(c) If Mahadev Enterprises is dealing in taxable supply of goods only

from Himachal Pradesh and has also effected inter-State supplies
of taxable goods (other than notified handicraft goods and notified
hand-made goods) amounting to ` 4,00,000.
2. LMN Pvt. Ltd., Coimbatore, Tamil Nadu, exclusively manufactures and sells
product ‘X’ which is exempt from GST vide a notification issued under relevant
GST legislations. The company sells product ‘X’ only within Tamil Nadu and is
not registered under GST. Further, all the inward supply of the company are
taxable under forward charge. The turnover of the company in the previous
year was ` 45 lakh. The company expects the sales to grow by 30% in the
current year. The company purchased additional machinery for manufacturing
‘X’ on 1st July. The purchase price of the capital goods was
` 30 lakh exclusive of GST @ 18%.
However, effective from 1st November, exemption available on ‘X’ was
withdrawn by the Central Government and GST @ 12% was imposed thereon.
The turnover of the company for the half year ended on 30 th September was
` 45 lakh.
(a) Examine the above scenario and advise LMN Pvt Ltd. whether it needs to
get registered under GST.
(b) If the answer to the above question is in affirmative, advise LMN Pvt. Ltd.
whether it can avail input tax credit on the additional machinery
purchased exclusively for manufacturing “X”?
3. SNP Pvt. Ltd., Coimbatore, Tamil Nadu, exclusively manufactures and sells
product ‘Z’ which is exempt from GST vide notifications issued under relevant
GST legislations. The company sells product ‘Z’ only within Tamil Nadu and it
not registered under GST. Further, all the inward supplies of the company are
taxable under forward charge. The turnover of the company in the previous
year was ` 55 lakh. The company expects the sales to grow by 20% in the
current year. Owing to the growing demand for the product, the company
decided to increase its production capacity and purchased additional
machinery for manufacturing ‘Z’ on 1st July. The purchase price of such capital
goods was ` 20 lakh exclusive of GST @ 18%.

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However, effective from 1st November, exemption available on ‘Z’ was

withdrawn by the Central Government and GST @ 12% was imposed thereon.
The turnover of the company for the half year ended on 30 th September was
` 50 lakh.
(a) The Board of Directors of SNP Pvt. Ltd. wants to know whether they have
to register under GST?
(b) In case in the above question, SNP Pvt. Ltd. is already registered with
respect to certain taxable supplies being made by it along with
manufacture of exempt product ‘Z’, other facts remaining the same, can
it take input tax credit on additional machinery purchased exclusively for
manufacturing ‘Z’? If yes, then how much credit can be availed?
Advice SNP Pvt. Ltd. on the above issues with reference to the provisions of GST
law.
4. Rishabh Enterprises – a sole proprietorship firm – started an air-conditioned
restaurant in Virar, Maharashtra in the month of February wherein the
customers are served cooked food as well as cold drinks/non-alcoholic
beverages. In March, the firm opened a liquor shop in Raipur, Uttarakhand for
trading of alcoholic liquor for human consumption.
Determine whether Rishabh Enterprises is liable to be registered under GST law
with the help of the following information:

Particulars February March

(`)* (`)*
Serving of cooked food and cold drinks/non- 5,50,000 6,50,000
alcoholic beverages in restaurant in Maharashtra
Sale of alcoholic liquor for human consumption 5,00,000
in Uttarakhand
Supply of packed food items from restaurant in 1,50,000 2,00,000
Maharashtra

* excluding GST
You are required to provide reasons for treatment of various items given above.

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5. With the help of the following information in the case of M/s Jayant Enterprises,
Jaipur (Rajasthan) for the financial year, determine the aggregate turnover for
the purpose of registration under the CGST Act.

Sl. Particulars Amount

No. (` )
(i) Sale of diesel on which VAT is levied by Rajasthan 1,00,000
Government.
(ii) Supply of goods, after completion of job work, from the 3,00,000
place of Jayant Enterprises directly by principal by
declaring the place of M/s Jayant Enterprises as its
additional place of business.
(iii) Export of goods to England (U.K.) 5,00,000
(iv) Supply to its own additional place of business in 5,00,000
Rajasthan.
(v) Outward supply of services on which GST is to be paid 1,00,000
by recipient under reverse charge.

All the above amounts are excluding GST.

You are required to provide reasons for treatment of various items given above.
6. Rajesh Dynamics, having its head office in Chennai, Tamil Nadu carries on the
following activities with respective turnovers in a financial year:

Supply of petrol at Chennai, Tamil Nadu 18,00,000

Value of inward supplies on which tax is payable on reverse 9,00,000

charge basis

Supply of transformer oil at Chennai, Tamil Nadu 2,00,000

Value of branch transfer from Chennai, Tamil Nadu to 1,50,000

Bengaluru, Karnataka without payment of consideration

Value of taxable supplies at Manipur branch 11,50,000

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It argues that it does not have taxable turnover crossing threshold limit of
` 40,00,000 either at Chennai, Tamil Nadu, Bengaluru, Karnataka or Manipur
branch. Further, it believes that the determination of aggregate turnover is not
required for the purpose of obtaining registration but is required for
determining the eligibility for composition levy.

Determine the aggregate turnover of Rajesh Dynamics. You are also required
to review the technical veracity of the arguments of Rajesh Dynamics.

ANSWERS/HINTS

1. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a

supplier is liable to be registered in the State/ Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover in
a financial year exceeds the threshold limit. The threshold limit for a person
making exclusive intra-State taxable supplies of goods is as under:-
(i) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) ` 20 lakh for the States of Arunachal Pradesh, Meghalaya, Puducherry,
Sikkim, Telangana and Uttarakhand.

(iii) ` 40 lakh for rest of India.

The threshold limit for a person exclusively making taxable supply of services
or supply of both goods and services is as under:-

(i) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) ` 20 lakh for the rest of India.
As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and

(iv) all inter-State supplies of persons having the same PAN.

The above is to be computed on all India basis.

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 REGISTRATION 8.95

In the light of the afore-mentioned provisions, the aggregate turnover of

Mahadev Enterprises is computed as under:

Computation of State-wise aggregate turnover of Mahadev Enterprises

Particulars Himachal Pradesh Uttarakhand Tripura

(`)* (`)* (`)*

Intra-State supply of 22,50,000 - 7,00,000

taxable goods

Intra-State supply of - - 6,00,000

exempted goods

Intra-State supply of non-

taxable goods (Refer Note
below) - 21,00,000 40,000

Aggregate Turnover 22,50,000 21,00,000 13,40,000

Note: As per section 2(47), exempt supply includes non-taxable supply. Thus,
intra-State supply of non-taxable goods in Uttarakhand, being a non-taxable
supply, is an exempt supply and is, therefore, included in the aggregate
turnover.
In the given case, Mahadev Enterprises is engaged in exclusive intra-State
supply of goods from Himachal Pradesh, Tripura and Uttarakhand. However,
since Mahadev Enterprises makes taxable supply of goods from one of the
specified Special Category States (i.e. Tripura), it will not be eligible for the
higher threshold limit of ` 40 lakh; instead, the threshold limit for registration
will be reduced to ` 10 lakh.
(1) In view of the above-mentioned provisions, Mahadev Enterprises is
liable to be registered under GST law with the aggregate turnover
amounting to ` 56,90,000 (computed on all India basis) of the States of
Himachal Pradesh, Uttarakhand and Tripura since the applicable
threshold limit of registration in this case is ` 10 lakh. Further, he is not
liable to be registered in Uttarakhand since he is not making any taxable
supply from Uttarakhand.

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(2) (a) If Mahadev Enterprises is dealing in supply of goods only from

Himachal Pradesh, the applicable threshold limit of registration
would be ` 40 lakh. Thus, Mahadev Enterprises will not be liable
for registration as its aggregate turnover would be ` 22,50,000.
(b) If Mahadev Enterprises is dealing in taxable supply of goods and
services only from Himachal Pradesh then higher threshold limit
of ` 40 lakh will not be applicable as the same applies only in case
of exclusive supply of goods. Therefore, in this case, the
applicable threshold limit will be ` 20 lakh and hence, Mahadev
Enterprises will be liable to registration.
(c) In case of inter-State supplies of taxable goods other than notified
handicraft goods or notified hand-made products, section 24
requires compulsory registration irrespective of the quantum of
aggregate turnover. Thus, Mahadev Enterprises will be liable to
registration.
2. (a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019
inter alia provides that every supplier who is exclusively engaged in
intra-State supply of goods is liable to be registered under GST in the
State/ Union territory from where he makes the taxable supply of goods
only when aggregate turnover in a financial year exceeds
` 40,00,000.
However, the above provisions are not applicable to few specified
States, i.e. States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand.
Further, a person exclusively engaged in the business of supplying
goods and/or services that are not liable to tax or are wholly exempt
from tax is not liable to registration in terms of section 23(1)(a).
In the given case, the turnover of the company for the half year ended
on 30th September is ` 45 lakh which is more than the applicable
threshold limit of ` 40 lakh. Therefore, as per above mentioned
provisions, the company should be liable to registration. However,
since LMN Pvt. Ltd. supplied exempted goods till 31st October, it was
not required to be registered till that day; though voluntary registration
was allowed under section 25(3).

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However, the position will change from 1st November as the supply of
goods become taxable from that day and the turnover of company is
above ` 40 lakh. It is important to note here that in terms of section
2(6), the aggregate turnover limit of ` 40 lakh includes exempt turnover
also.

Therefore, turnover of ‘X’ prior to 1st November will also be considered

for determining the limit of ` 40 lakh even though the same was exempt
from GST. Therefore, the company needs to register within
30 days from 1st November (the date on which it becomes liable to
registration) in terms of section 25(1).
(b) Section 18(1)(a) provides that a person who has applied for registration
within 30 days from the date on which he becomes liable to registration
and has been granted such registration shall be entitled to take credit
of input tax in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day immediately
preceding the date from which he becomes liable to pay tax under the
provisions of this Act.

Thus, LMN Pvt. Ltd. cannot avail credit for additional machinery
purchased exclusively for manufacturing X as input tax credit of only
inputs is allowed when a person gets registered for the first time.
3. (a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019
inter alia provides that every supplier who is exclusively engaged in
intra-State supply of goods is liable to be registered under GST in the
State/ Union territory from where he makes the taxable supply of goods
only when aggregate turnover in a financial year exceeds ` 40,00,000.
However, the above provisions are not applicable to few specified
States, i.e. States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand.
However, a person exclusively engaged in the business of supplying
goods and/or services that are not liable to tax or are wholly exempt
from tax is not liable to registration in terms of section 23(1)(a).
In the given case, the turnover of the company for the half year ended
on 30th September is ` 50 lakh which is more than the applicable

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threshold limit of ` 40 lakh. Therefore, as per section 22, the company

will be liable to registration. However, since SNP Pvt. Ltd. supplied
exempted goods till 31st October, it was not required to be registered
till that day; though voluntary registration was allowed under section
25(3).

However, the position will change from 1st November as the supply of
goods become taxable from that day and the turnover of company is
above ` 40 lakh. It is important to note here that in terms of section
2(6), the aggregate turnover limit of ` 40 lakh includes exempt turnover
also.
Therefore, turnover of ‘Z’ will be considered for determining the
threshold limit even though the same was exempt from GST. Therefore,
the company needs to register within 30 days from
1st November (the date on which it becomes liable to registration) in
terms of section 25(1).
Further, the company cannot avail exemption of ` 40 lakh from
1st November as the GST law does not provide any threshold exemption
from payment of tax but threshold exemption from obtaining
registration (which in this case had been crossed).
(b) Rule 43(1)(a) of the CGST Rules, 2017 disallows input tax credit on
capital goods used or intended to be used exclusively for effecting
exempt supplies.
However, as per section 18(1)(d), where an exempt supply of goods
and/or services by a registered person becomes a taxable supply, such
person gets entitled to take credit of input tax in respect of inputs held
in stock and inputs contained in semi-finished or finished goods held
in stock relatable to such exempt supply and on capital goods
exclusively used for such exempt supply on the day immediately
preceding the date from which such supply becomes taxable.

Rule 40(1)(a) of the CGST Rules, 2017 lays down that the credit on
capital goods can be claimed after reducing the tax paid on such capital
goods by 5% per quarter of a year or part thereof from the date of the
invoice.

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Therefore, in the given case, SNP Pvt. Ltd. could not claim credit on
machinery till the time the supply of product ‘Z’ for which said
machinery was being used was exempt. However, it can claim credit
from 31st October - the day immediately preceding the date from which
the supply of product ‘Z’ became taxable (1st November).
The credit will be available for the remaining useful life of the machinery
and will be computed as follows:

Date of purchase of machinery 1st July

Date on which credit becomes eligible 31st October

Number of quarters for which credit is to be 2 (including part of

reduced quarter)

GST paid on machinery [` 20,00,000 x 18%] ` 3,60,000

Credit to be reduced [[` 3,60,000 x 5% x 2] ` 36,000

Amount of credit that can be taken ` 3,24,000

[` 3,60,000 – ` 36,000]

4. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a

supplier is liable to be registered in the State/ Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover in
a financial year exceeds the threshold limit. The threshold limit for a person
making exclusive intra-State taxable supplies of goods is as under:-
(i) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) ` 20 lakh for the States of Arunachal Pradesh, Meghalaya, Puducherry,
Sikkim, Telangana and Uttarakhand.
(iii) ` 40 lakh for rest of India.
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-

(i) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) ` 20 lakh for the rest of India.

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As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,

(ii) all exempt supplies,

(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis. Further, the aggregate turnover
excludes central tax, State tax, Union territory tax, integrated tax and cess.
Moreover, the value of inward supplies on which tax is payable under reverse
charge is not taken into account for calculation of ‘aggregate turnover’.
In the given question, since Rishabh Enterprises is engaged in making taxable
supplies of goods and services from Maharashtra and non-taxable supplies
from Uttarakhand, the threshold limit for obtaining registration is
` 20 lakh.
In the light of the afore-mentioned provisions, the aggregate turnover of
Rishabh Enterprises is computed as under:
Computation of aggregate turnover of Rishabh Enterprises

Particulars Turnover Cumulative

of February turnover of
(`) February &
March (`)

Serving of cooked food and cold 5,50,000 12,00,000

drinks/non-alcoholic beverages in [` 5,50,000 +
restaurant in Maharashtra ` 6,50,000]

Add: Sale of alcoholic liquor for human 5,00,000

consumption in Uttarakhand [As per
section 2(47), exempt supply includes
non-taxable supply. Thus, supply of
alcoholic liquor for human consumption in
Uttarakhand, being a non-taxable supply,
is an exempt supply and is, therefore,

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 REGISTRATION 8.101

includible while computing the aggregate

turnover.]

Add: Supply of packed food items from 1,50,000 3,50,000

restaurant in Maharashtra [` 1,50,000 +
` 2,00,000]

Aggregate Turnover 7,00,000 20,50,000

Rishabh Enterprises was not liable to be registered in the month of February

since its aggregate turnover did not exceed ` 20 lakh in that month. However,
since its aggregate turnover exceeds ` 20 lakh in the month of March, it
should apply for registration within 30 days from the date on which it
becomes liable to registration. Further, he is not liable to be registered in
Uttarakhand since he is not making any taxable supply from Uttarakhand. It
should obtain registration in Maharashtra.
5. Computation of aggregate turnover of M/s Jayant Enterprises for the FY

Particulars `

Supply of diesel on which Sales Tax (VAT) is levied by 1,00,000

Rajasthan Government [Note-1]

Supply of goods, after the completion of job work, from the Nil
place of Jayant Enterprises, directly by the principal [Note-2]

Export supply to England [Note-3] 5,00,000

Supply to its own additional place of business in Rajasthan 32 Nil

[Note-4]

Outward supply of services on which GST is to be paid by 1,00,000

recipient under reverse charge [Note-5]

Aggregate turnover 7,00,000

32
The above solution has been worked out on the assumption that supply to another place of
business is without consideration (as per general business practices).

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Notes:-
1. As per section 2(47), exempt supply includes non-taxable supply. Thus,
supply of diesel, being a non-taxable supply, is an exempt supply and
exempt supply is specifically includible in aggregate turnover in terms
of section 2(6).
2. Supply of goods after completion of job work by a principal by declaring
the place of business of job worker its additional place of business shall
be treated as the supply of goods by the principal in terms of
explanation (ii) to section 22.
3. Export supplies are specifically includible in the aggregate turnover in
terms of section 2(6).
4. Supply made without consideration to units within the same State is a
not a supply and hence not includible in aggregate turnover.
5. Outward supplies taxable under reverse charge would be part of the
“aggregate turnover” of the supplier of such supplies. Such turnover is
not included as turnover in the hands of recipient.
As per section 22 read with Notification No. 10/2019 CT dated
07.03.2019, a supplier is liable to be registered in the State/ Union
territory from where he makes a taxable supply of goods and/or
services, if his aggregate turnover in a financial year exceeds the
threshold limit. The threshold limit for a person making exclusive intra-
State taxable supplies of goods is as under:-
(i) ` 10 lakh for the States of Mizoram, Tripura, Manipur and
Nagaland.
(ii) ` 20 lakh for the States of Arunachal Pradesh, Meghalaya,
Puducherry, Sikkim, Telangana and Uttarakhand.

(iii) ` 40 lakh for rest of India.

The threshold limit for a person making exclusive taxable supply of
services or supply of both goods and services is as under:-

(i) ` 10 lakh for the States of Mizoram, Tripura, Manipur and

Nagaland.
(ii) ` 20 lakh for the rest of India.

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 REGISTRATION 8.103

The applicable turnover limit for registration, in the given case, will be
` 20 lakh as Rajasthan is not a Special Category State and M/s. Jayant
Enterprises is engaged in supply of goods and services. Although, the
aggregate turnover of M/s Jayant Enterprises does not exceed
` 20 lakh, it is compulsorily required to register in terms of
section 24(i) irrespective of the turnover limit as it is engaged in making
inter-State supply of goods in the form of exports to England.
6. Computation of aggregate turnover of Rajesh Dynamics:

Particulars `

Supply of petrol at Chennai, Tamil Nadu [Being a non- 18,00,000

taxable supply, it is an exempt supply and thus, includible
in aggregate turnover vide section 2(6)]

Value of inward supplies on which tax is payable on reverse Nil

charge basis

Supply of transformer oil at Chennai, Tamil Nadu 2,00,000

Value of branch transfer from Chennai, Tamil Nadu to 1,50,000

Bengaluru, Karnataka without payment of consideration
[Being a taxable supply, it is includible in aggregate
turnover]

Value of taxable supplies of Manipur Branch 11,50,000

Aggregate turnover 33,00,000

Rajesh Dynamics is not liable to be registered in Chennai, Tamil Nadu, if his

aggregate turnover in a financial year does not exceed ` 40 lakh. However,
since Rajesh Dynamics also makes taxable supplies from Manipur, a specified
Special Category State, the threshold exemption gets reduced to
` 10 lakh in terms of section 22(1) [Notification No.10/2019-CT dated.
07.03.2019].
Rajesh Dynamics’ argument that it is not liable to registration since the
threshold exemption of ` 40 lakh is not being crossed either at Chennai, Tamil
Nadu, Bengaluru, Karnataka or Manipur is not correct as firstly, the aggregate
turnover to be considered in its case is ` 10 lakh and not ` 40 lakh and

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secondly, the same is computed on all India basis and not

State-wise.

Apart from this, Rajesh Dynamics is also wrong in believing that aggregate
turnover is computed only for the purpose of determining the eligibility limit
for composition levy since the aggregate turnover is required for determining
the eligibility for both registration and composition levy.
Last but not the least, Rajesh Dynamics is compulsorily required to register
under section 24 irrespective of the turnover limit as it is liable to pay tax on
inward supplies under reverse charge and it also makes inter-State taxable
supply.

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 TAX INVOICE, CREDIT AND DEBIT NOTES 9.79

TEST YOUR KNOWLEDGE

1. Jai, a registered supplier, runs a general store in Ludhiana, Punjab. Some of
the goods sold by him are exempt whereas some are taxable. You are required
to advise him on the following issues:
(i) Whether Jai is required to issue a tax invoices in all cases, even if he is
selling the goods to the end consumers?

(ii) Jai sells some exempted as well as taxable goods valuing ` 5,000 to a
school student. Is he mandatorily required to issue two separate GST
documents?

(iii) Jai wishes to know whether it’s necessary to show tax amount separately
in the tax invoices issued to the customers. You are required to advise
him.
2. Avtaar Enterprises, Kanpur started trading exclusively in ayurvedic medicines
from July 1. Its turnover exceeded ` 40 lakh on October 3. The firm applied for
registration on October 31 and was issued registration certificate on
November 5.
Examine whether any revised invoice can be issued in the given scenario. If the
answer to the first question is in affirmative, determine the period for which the
revised invoices can be issued as also the last date up to which the same can
be issued.
3. Discuss the provisions relating to issue of an invoice/document in the following
circumstances:
(i) Advance payment is received against a supply, but subsequently no
supplies are made.

(ii) Goods are sent on approval for sale or return and are removed before the
supply takes place.
(iii) Mr. Mohan provides continuous supply of services to his client, where the
due date of payment for such services is not ascertainable. No advance
has been received in this behalf.

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4. Pari & Sons is an unregistered dealer of taxable supplies in Kerala. On

10th August, aggregate turnover of Pari & Sons exceeded ` 20,00,000. The firm
applied for registration on 27th August and was granted the registration
certificate on 1st September.
Under CGST Rules, 2017, you are required to advise Pari & Sons as to what is
the effective date of registration in its case. It has also sought your advice
regarding period for issuance of revised tax invoices.

ANSWERS/HINTS

1. (i) No, he is not required to issue tax invoice in all cases. As per
section 31(1), every registered person supplying taxable goods is
required to issue a ‘tax invoice’. Section 31(3)(c) stipulates that every
registered person supplying exempted goods is required to issue a bill
of supply instead of tax invoice.
Further, rule 46A provides that a registered person supplying taxable as
well as exempted goods or services or both to an un-registered person
may issue a single ‘invoice-cum-bill of supply’ for all such supplies.

However, as per section 31(3)(b) read with rule 46 and 49, a registered
person may not issue a tax invoice/bill of supply if:
(i) value of the goods supplied <` 200,

(ii) the recipient is unregistered; and

(iii) the recipient does not require such invoice.
Instead, such registered person shall issue a Consolidated Tax
Invoice/bill of supply for such supplies at the close of each day in
respect of all such supplies.
(ii) As per rule 46A, where a registered person is supplying taxable as well
as exempted goods or services or both to an unregistered person, a
single “invoice-cum-bill of supply” may be issued for all such
supplies. Thus, there is no need to issue a tax invoice and a bill of supply

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 TAX INVOICE, CREDIT AND DEBIT NOTES 9.81

separately to the school student in respect of supply of the taxable and

exempted goods respectively.
(iii) As per section 33, where any supply is made for a consideration, every
person who is liable to pay tax for such supply shall prominently
indicate in all documents relating to assessment, tax invoice and other
like documents, the amount of tax which shall form part of the price at
which such supply is made.
As per rule 46(m), a tax invoice shall contain the various particulars, inter
alia, namely, amount of tax charged in respect of taxable goods or
services (central tax, State tax, integrated tax, Union territory tax or
cess);
Hence, Jai has to show the tax amount separately in the tax invoices
issued to customers.
2. As per section 31(3)(a), a registered person may, within one month from the
date of issuance of certificate of registration, issue a revised invoice against
the invoice already issued during the period beginning with the effective date
of registration till the date of issuance of certificate of registration to him.
Further, rule 10(2) lays down that the registration shall be effective from the
date on which the person becomes liable to registration where the application
for registration has been submitted within a period of 30 days from such date.

In the given case, Avtaar Enterprises has applied for registration within 30
days of becoming liable for registration. Thus, the effective date of
registration is the date on which Avtaar Enterprises became liable for
registration i.e., October 3. Therefore, since in the given case there is a time
lag between the effective date of registration (October 3) and the date of
grant of certificate of registration (November 5), revised invoices can be
issued. The same can be issued for supplies made during this intervening
period i.e., for the period beginning with October 3 till November 5. Further,
the revised invoices can be issued for the said period till December 5.

3. (i) As per section 31(3)(e), where advance payment is received against a

supply for which receipt voucher has been issued, but subsequently no
supplies are made and no tax invoice is issued in pursuance thereof, a
refund voucher may be issued to the person who had made the advance
payment.

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(ii) As per section 31(7), where the goods are sent on approval for sale or
return and are removed before the supply takes place, the invoice shall
be issued before or at the time of supply or 6 months from the date of
removal, whichever is earlier.
(iii) As per section 31(5)(b), in case of continuous supply of services, where
the due date of payment is not ascertainable from the contract, the
invoice shall be issued before or at the time when the supplier of service
receives the payment

4. Section 22(1) provides that every supplier is liable to be registered under this
Act in the State or Union territory, other than special category States, from
where he makes a taxable supply of goods or services or both, if his aggregate
turnover in a financial year exceeds the threshold limit (` 20 lakh).
Section 25(1) provides that a supplier whose aggregate turnover in a financial
year exceeds the threshold limit in a State/UT is liable to apply for registration
within 30 days from the date of becoming liable to registration (i.e., the date
of crossing the threshold limit).
Where the application is submitted within the said period, the effective date
of registration is the date on which the person becomes liable to registration
vide rule 10(2); otherwise it is the date of grant of registration in terms of rule
10(3).
In the given case, since Pari & Sons have applied for registration on
27th August which is within 30 days from the date of becoming liable to
registration (10th August), its effective date of registration is 10th August.
Further, every registered person who has been granted registration with effect
from a date earlier than the date of issuance of registration certificate to him,
may issue revised tax invoices in respect of taxable supplies effected during this
period within one month from the date of issuance of registration certificate
[Section 31(3)(a) read with rule 53(2)].
In view of the same, Pari & Sons may issue revised tax invoices against the
invoices already issued during the period between effective date of
registration (10th August) and the date of issuance of registration certificate
(1st September), on or before 1st October.

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 ACCOUNTS AND RECORDS; E-WAY BILL 10.49

(i) being a composition supplier has not furnished the

statement for payment of self-assessed tax for 2
consecutive quarters, or
(ii) being a person paying tax under regular scheme has
not furnished the returns for a consecutive period of 2
tax periods, or
(iii) being a person paying tax under regular scheme has
not furnished GSTR-1 for any 2 months or quarters, as
the case may be, or
(iv) being a person whose registration has been
suspended.
However, Commissioner (jurisdictional commissioner) may,
on sufficient cause being shown and for reasons to be
recorded in writing, allow furnishing of the said information
in Part A of Form GST EWB-01, subject to prescribed
conditions and restrictions.

TEST YOUR KNOWLEDGE

1. Mala Services Ltd. is a supplier of management consultancy services registered

in Haryana. It has approached you to ascertain the period for which the books
of accounts or other records need to be maintained?
2. Essel Groups has started making taxable supplies and gets registered under GST
law. You are required to advice it about the accounts and records required to
be maintained by it as required under section 35(1).
3. Swad Restaurant has opted for composition scheme in the current financial
year. Discuss the records which are not to be maintained by a supplier opting
for composition levy though required to be maintained by a normal tax-payer
as enumerated in rule 56.
4. ABC Manufacturers Ltd. engages Raghav & Sons as an agent to sell goods on
its behalf wherein the invoice for supply or procurement on behalf of ABC

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Manufacturers Ltd. is issued by Raghav & Sons in its own name. For the
purpose, ABC Manufacturers Ltd. has supplied the goods to Raghav & Sons
located in Haryana. Enumerate the accounts required to be maintained by
Raghav & Sons as per rule 56(11).
5. Sindhi Toys Manufacturers, registered in Punjab, sold electronic toys to a retail
seller in Gujarat, at a value of ` 48,000 (excluding GST leviable @ 18%). It
wants to send the consignment of such toys to the retail seller in Gujarat.
You are required to advise Sindhi Toys Manufacturers on the following issues:
(a) Whether e-way bill is mandatorily required to be generated in respect of
such movement of goods?
(b) If yes, who is required to generate the e-way bill?

(c) What will be the consequences for non-issuance of e-way bill?

6. Power Electricals Ltd., a registered supplier of air-conditioners, is required to
send from Mumbai (Maharashtra), a consignment of parts of air-conditioner to
be replaced under warranty at various client locations in Gujarat. The value of
consignment declared in delivery challan accompanying the goods is
` 70,000. Power Electricals Ltd. claims that since movement of goods to Gujarat
is caused due to reasons other than supply, e-way bill is not mandatorily
required to be generated in this case.
You are required to examine the technical veracity of the claim made by Power
Electricals Ltd.
7. Beauty Cosmetics Ltd. has multiple wholesale outlets of cosmetic products in
Mumbai, Maharashtra. It receives an order for cosmetics worth ` 1,20,000
(inclusive of GST leviable @ 18%) from Prasannaa, owner of a retail cosmetic
store in Delhi. While checking the stock, it is found that order worth ` 55,000
can be fulfilled from the company’s Dadar (Mumbai) store and remaining goods
worth ` 65,000 can be sent from its Malad (Mumbai) store. Both the stores are
instructed to issue separate invoices for the goods sent to Prasannaa. The goods
are transported to Prasannaa in Delhi, in a single conveyance owned by Radhey
Transporters.
You are required to advise Beauty Cosmetics Ltd. with regard to issuance of
e-way bill(s).

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 ACCOUNTS AND RECORDS; E-WAY BILL 10.51

ANSWERS/HINTS

1. Section 36 stipulates that every registered person required to keep and

maintain books of account or other records in accordance with the provisions
of sub-section (1) of section 35 shall retain them until the expiry of 72 months
from the due date of furnishing of annual return for the year pertaining to
such accounts and records.
However, a registered person, who is a party to an appeal or revision or any
other proceedings before any Appellate Authority or Revisional Authority or
Appellate Tribunal or court, whether filed by him or by the Commissioner, or
is under investigation for an offence under Chapter XIX, shall retain the books
of account and other records pertaining to the subject matter of such appeal
or revision or proceedings or investigation for a period of one year after final
disposal of such appeal or revision or proceedings or investigation, or for the
period specified above, whichever is later.

2. Section 35(1) stipulates that a true and correct account of following is to be

maintained:
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;

(e) output tax payable and paid

(f) such other particulars as may be prescribed.
3. Following records are not required to be maintained by a supplier who has
opted for composition scheme as per rule 56(2) and (4), but are required to
be maintained by a normal tax payer:
(I) Stock of goods: Accounts of stock in respect of goods received and
supplied by him, and such accounts shall contain particulars of the
opening balance, receipt, supply, goods lost, stolen, destroyed, written
off or disposed of by way of gift or free sample and the balance of stock
including raw materials, finished goods, scrap and wastage thereof.

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(II) Details of tax: Account, containing the details of tax payable (including
tax payable under reverse charge), tax collected and paid, input tax,
input tax credit claimed, together with a register of tax invoice, credit
notes, debit notes, delivery challan issued or received during any tax
period.

4. Rule 56(11) provides that every agent shall maintain accounts depicting the-
(a) particulars of authorisation received by him from each principal to
receive or supply goods or services on behalf of such principal
separately;
(b) particulars including description, value and quantity (wherever
applicable) of goods or services received on behalf of every principal;
(c) particulars including description, value and quantity (wherever
applicable) of goods or services supplied on behalf of every principal;
(d) details of accounts furnished to every principal; and
(e) tax paid on receipts or on supply of goods or services effected on behalf
of every principal.
5. (a) Rule 138(1) provides that e-way Bill is mandatorily required to be
generated if the goods are moved, inter alia, in relation to supply and
the consignment value exceeds ` 50,000. Further, explanation 2 to
rule 138(1) stipulates that the consignment value of goods shall be the
value, determined in accordance with the provisions of section 15,
declared in an invoice, a bill of supply or a delivery challan, as the case
may be, issued in respect of the said consignment and also includes
CGST, SGST/UTGST, IGST and cess charged, if any, in the document and
shall exclude the value of exempt supply of goods where the invoice is
issued in respect of both exempt and taxable supply of goods.

Accordingly, in the given case, the consignment value will be as follows:

= ` 48,000 × 118%
= ` 56,640.

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Since the movement of goods is in relation to supply of goods and the

consignment value exceeds ` 50,000, e-way bill is mandatorily required
to be issued in the given case.
(b) An e-way bill contains two parts namely, Part A to be furnished by the
registered person who is causing movement of goods of consignment
value exceeding ` 50,000/- and part B (transport details) is to be
furnished by the person who is transporting the goods.
Where the goods are transported by the registered person as a
consignor or the recipient of supply as the consignee, whether in his
own conveyance or a hired one or a public conveyance, by road, the
said person shall generate the e-way bill on the common portal after
furnishing information in Part B [Rule 138(2)].
Where the goods are transported by railways or by air or vessel, the
e-way bill shall be generated by the registered person, being the
supplier or the recipient, who shall, either before or after the
commencement of movement, furnish, on the common portal, the
information in Part B [Rule 138(2A)].
Where the goods are handed over to a transporter for transportation
by road, the registered person shall furnish the information relating to
the transporter on the common portal and the e-way bill shall be
generated by the transporter on the said portal on the basis of the
information furnished by the registered person in Part A [Rule 138(3)].
Where the consignor or the consignee has not generated the e-way bill
and the aggregate of the consignment value of goods carried in the
conveyance is more than ` 50,000/, the transporter, except in case of
transportation of goods by railways, air and vessel, shall, in respect of
inter-State supply, generate the e-way bill on the basis of invoice or bill
of supply or delivery challan, as the case may be, and may also generate
a consolidated e-way bill on the common portal prior to the movement
of goods [Rule 138(7)].
(c) It is mandatory to generate e-way bill in all cases where the value of
consignment of goods being transported is more than ` 50,000/- and
it is not otherwise exempted in terms of rule 138(14). If e-way bills,

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wherever required, are not issued in accordance with the provisions

contained in rule 138, the same will be considered as contravention of
rules.
As per section 122(1)(xiv), a taxable person who transports any taxable
goods without the cover of specified documents (e-way bill is one of
the specified documents) shall be liable to a penalty of ` 10,000/- or tax
sought to be evaded (wherever applicable) whichever is greater.
Moreover, as per section 129(1), where any person transports any goods
or stores any goods while they are in transit in contravention of the
provisions of this Act or the Rules made thereunder, all such goods and
conveyance used as a means of transport for carrying the said goods
and documents relating to such goods and conveyance shall be liable
to detention or seizure.
6. The goods to be moved to another State for replacement under warranty is
not a ‘supply’. However, rule 138(1), inter alia, stipulates that every registered
person who causes movement of goods of consignment value exceeding
` 50,000:

(i) in relation to a supply; or

(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,

shall, generate an electronic-way bill (E-way Bill) before commencement of

such movement.
CBIC vide FAQs on E-way Bill has also clarified that even if the movement of
goods is caused due to reasons others than supply [including replacement of
goods under warranty], e-way bill is required to be issued.
Thus, in the given case, since the consignment value exceeds ` 50,000,
e-way bill is required to be mandatorily generated. Therefore, the claim of
Power Electricals Ltd. that e-way bill is not mandatorily required to be
generated as the movement of goods is caused due to reasons other than
supply, is not correct.

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7. Beauty Cosmetics Ltd. would be required to prepare two separate e-way bills
since each invoice value exceeds ` 50,000 and each invoice is considered as
one consignment for the purpose of generating e-way bills.
The FAQs on E-way Bill issued by CBIC clarify that if multiple invoices are
issued by the supplier to one recipient, that is, for movement of goods of
more than one invoice of same consignor and consignee, multiple e-way bills
have to be generated. In other words, for each invoice, one e-way bill has to
be generated, irrespective of the fact whether same or different consignors
or consignees are involved. Multiple invoices cannot be clubbed to generate
one e-way bill. However, after generating all these e-way bills, one
consolidated e-way bill can be prepared for transportation purpose, if goods
are going in one vehicle.

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 PAYMENT OF TAX 1.61
61 11.61

TEST YOUR KNOWLEDGE

1. Miss Nitya has following balances in her Electronic Cash Ledger as on
28th February as per GST portal.

Major Heads Minor Heads Amount (`)

Tax 40,000

CGST Interest 1,000

Penalty 800

Tax 80,000

Interest 400
SGST
Penalty 1,200

Fee 2,000

Tax 45,000

IGST Interest 200

Penalty Nil

She furnishes return on monthly basis. Her tax liability for the month of
February for CGST and SGST was ` 75,000 each. She failed to pay the tax and
contacted you as legal advisor on 12th April to advise her as to how much
amount of tax or interest she is required to pay, if any. In order to optimize the
interest liability as per GST provisions, she is willing to make any transfer from
the cash ledger between any of the major or minor heads as the case may be.
She wants to pay the tax on 20th April.
Other information:
(i) Date of collection of GST was 18th February.

(ii) No other transaction after this up to 20th April.

(iii) Ignore penalty and late fee for this transaction.
(iv) No other balance is available.

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You are required to advise her with reference to legal provisions with brief notes
on the legal provisions applicable.

2. A makes intra-State supply of goods valued at ` 50,000(excluding taxes) to B

within State of Karnataka. There is no input tax credit balance available with
A. B makes inter-State supply to X Ltd. (located in Telangana) after adding 10%
as its margin on the value of goods excluding taxes. Thereafter, X Ltd. sells it to
Y in Telangana (Intra-State sale) after adding 10% as his margin on the value
of goods excluding taxes.
Assume that the rate of GST chargeable is 18% (CGST and SGST at 9% each
and IGST chargeable at 18%) and every person involved in the aforesaid
supplies are registered tax payers. 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.

3. Can one use input tax credit for payment of interest, penalty or payment of GST
under reverse charge?
4. M/s PPC & Co. have availed input tax credit of ` 42,500 during September
under IGST head, instead of availing ` 21,250 under CGST & SGST heads. Mr.
X, accountant of the above entity would like to use Form GST PMT-09 for
making a transfer from IGST head to respective CGST & SGST heads.

Examine the scenario and offer your comments.

5. ABC Ltd. has belatedly filed GST return (under section 39) for the month of
January after 60 days from the due date for filing such return. Total tax paid
in such return is as below:

Particulars IGST (`) CGST (`) SGST (`)

Output tax payable 4,50,000 2,85,000 2,85,000

Tax payable under reverse charge 18,000 32,000 32,000

Input tax available for utilisation 2,50,000 55,000 55,000

Tax paid through Electronic Cash Ledger 2,18,000 2,62,000 2,62,000

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63 11.63

Examine the interest payable as per the provisions of GST law with the help of
above information.
What would be your answer, if entire tax for the month of January has to be
paid through Electronic Credit Ledger except taxes to be paid on reverse charge
basis?
6. Examine the taxes to be paid for the month of July on the basis of below
information furnished by M/s Zinc & Co.:

Particulars IGST (`) CGST (`) SGST (`)

Output tax payable 14,75,000 28,34,000 28,34,000

Tax payable under reverse 36,000 1,44,000 1,44,000

charge

Balance in Electronic Credit 26,52,000 18,32,000 18,32,000

Ledger

Output tax reported under IGST column pertains to the month of February,
which was not paid for the said period. Also, note that input tax credit available
in Electronic Credit Ledger pertains to input tax on purchases made during the
month of July and no opening balance exists from previous tax period. It
furnishes return on monthly basis.
7. M/s Neptune & Co. is registered under GST in the state of Maharashtra. They
have made zero-rated supply of goods worth ` 84,50,000 on payment of IGST
for ` 10,14,000 during the month of May. The refund application under section
54 for the above supply has been rejected by the proper officer.
Mr. A, taxation manager of the firm, has sought for recrediting the Electronic
Credit Ledger as per the provisions of rule 86 for the above rejection. Examine
the scenario and offer your comments.
8. Manihar Enterprises, registered in Delhi, is engaged in supply of various goods
and services exclusively to Government departments, agencies etc. and persons
notified under section 51. It has provided the information relating to the
supplies made, their contract values and the payment due against each of them
in the month of October, respectively as under:

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S.No. Particulars Total contract Payment

value (inclusive due in
of GST) (` ) October (`)

(i) Supply of stationery to Fisheries 2,60,000 15,000

Department, Kolkata

(ii) Supply of car rental services to 2,95,000 20,000

Municipal Corporation of Delhi

(iii) Supply of a heavy machinery to 5,90,000 25,000

Public Sector Undertaking
located & registered in
Uttarakhand

(iv) Supply of taxable goods to Delhi 6,49,000 50,000

office of National Housing
Bank, a society established by
Government of India under the
Societies Registration Act, 1860

(v) Interior decoration of Andhra 12,39,000 12,39,000

Bhawan located in Delhi.
Service contract is entered into
with the Government of Andhra
Pradesh (registered only in
Andhra Pradesh)

(vi) Supply of printed books and 9,72,000 50,000

printed post cards to a West for books &
Delhi Post Office [Out of total 20,000 for
contract value of printed post
` 9,72,000, contract value for cards
supply of books (exempt from
GST) is ` 7,00,000 and for
supply of printed post cards
(taxable under GST) is
` 2,72,000.]

(vii) Maintenance of street lights in 3,50,000 3,50,000

Municipal area of East Delhi*

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[The maintenance contract

entered into with the Municipal
Corporation of Delhi also
involves replacement of defunct
lights and other spares.
However, the value of supply of
goods is not more than 25% of
the value of composite supply.]
*an activity in relation to any
function entrusted to a
Municipality under article 243W
of the Constitution

You are required to determine amount of tax, if any, to be deducted from each
of the receivable given above assuming the rate of CGST, SGST and IGST as 9%,
9% and 18% respectively.
Will your answer be different, if Manihar Enterprises is registered under
composition scheme?
9. Yash Shoppe, a registered supplier of Jaipur, is engaged in supply of various
goods and services exclusively to Government departments, agencies, local
authority and persons notified under section 51.
You are required to briefly explain the provisions relating to tax deduction at
source under section 51 and also determine the amount of tax, if any, to be
deducted from each of the receivables given below (independent cases)
assuming that the payments as per the contract values are made on 31st
October. The rates of CGST, SGST and IGST may be assumed to be 6%, 6% and
12% respectively.
(1) Supply of computer stationery to Public Sector Undertaking (PSU) located
& registered in Mumbai. Total contract value is ` 2,72,000 (inclusive of
GST)
(2) Supply of air conditioner to GST department located & registered in Delhi.
Total contract value is ` 2,55,000 (exclusive of GST)
(3) Supply of generator renting service to Municipal Corporation of Jaipur
(not exempt under GST law). Total contract value is ` 3,50,000 (inclusive
of GST)

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ANSWERS/HINTS

1. Due date for payment of tax collected on 18th February is 20th March. Interest
@ 18% p.a. is payable for the period for which the tax remains unpaid in terms
of section 50 of CGST Act, 2017. In the given case, since Miss Nitya wants to
pay the tax on 20th April, interest payable on the amount of CGST and SGST
each is as follows:
` 75,000 × 18% × 31/365 = ` 1,147 (rounded off)

As per Section 49(10) of the CGST Act, 2017, any amount of tax, interest,
penalty, fee or any other amount available in the electronic cash ledger under
the CGST Act, 2017 can be transferred to the electronic cash ledger for
integrated tax, central tax, State tax, Union territory tax or cess, in such form
and manner and subject to such conditions and restrictions as may be
prescribed. Thus, amount entered under any Minor head (Tax, Interest,
Penalty, etc.) and Major Head (CGST, IGST, SGST/UTGST) of the Electronic
Cash Ledger can be transferred to any other major or minor head.
Consequently, cross-utilization among Major and Minor heads is also
possible.
Thus, Miss Nitya is liable to pay the following amount of tax and interest as
under:

CGST SGST

Tax Interest Tax Interest

Tax Liability 75,000 1,147 75,000 1,147

Balances in Electronic cash 40,000 1,000 80,000 400

ledger in same
major/minor head

Balance transferred from 35,000 147 Nil 747

other major/minor head (Note 1) (Note 2) (Note 3)

Amount payable in cash Nil Nil Nil Nil

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Note 1 – ` 35,000 shortfall amount has been transferred from cash ledger
balance available in Major Head IGST.

Note 2 – ` 147 shortfall amount has been transferred from cash ledger
balance in minor head penalty of major head CGST.
Note 3 – ` 747 shortfall amount has been transferred from cash ledger
balance in minor head tax of major head SGST.
Since there is no restriction in intra-head or inter-head transfer of available
balance in cash ledger as per the relevant provisions, it is upon the taxpayer
to decide from which account the shortfall has to be made good.
2. I. Intra-State supply of goods by A to B

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 59,000

A does not have credit of CGST, SGST or IGST. Thus, the entire CGST
(` 4,500) & SGST (` 4,500) charged will be paid in cash by A, which shall
be allocated to Central Government and Karnataka Government in
specified manner.
II. Inter-State supply of goods by B to X Ltd. – Margin @ 10%

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. 64,900

Computation of IGST payable by B to Central Government in cash

IGST payable 9,900

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Less: Credit of CGST 4,500

Less: Credit of SGST 4,500

IGST payable to Central Government in cash 900

Credit of CGST and SGST can be used to pay IGST provided the SGST
credit shall be utilised towards payment of IGST only where the balance
of CGST credit is not available for payment of IGST. [Section 49(5) of the
CGST Act, 2017].
III. Intra-State supply of goods by X Ltd. to Y

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

Add: CGST @ 9% 5,445

Add: SGST @ 9% 5,445

Total price charged by X Ltd. from Y 71,390

Computation of CGST and SGST payable by X Ltd in cash

CGST payable 5,445

Less: Credit of IGST 5,445
CGST payable to Central Government in cash Nil
SGST payable 5,445
Less: Available Credit of IGST [` 9,900 – ` 5,445] 4,455
SGST payable to Telangana Government in cash 990
Credit of IGST shall first be utilised towards payment of IGST and the amount
remaining, if any, may be utilised towards the payment of CGST and
SGST/UTGST, as the case may be, in any order and in any proportion. Here,
there is no payment to be made with respect to IGST so its credit balance will
be directly utilised for making payment of CGST or SGST, in any order. Central

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Government will transfer IGST of R` 4,455 utilised in the payment of SGST to

Telangana Government.

3. No, as per section 49(4) the amount available in the electronic credit ledger
may be used for making any payment towards ‘output tax’.
As per section 2(82), output tax means, the CGST/SGST chargeable under this
Act on taxable supply of goods and/or services made by him or by his agent
and excludes tax payable by him on reverse charge basis. Therefore, input tax
credit cannot be used for payment of interest, penalty or GST payment under
reverse charge.
4. As per provisions of section 49(10) read with rule 87(13) of CGST Rules, 2017,
“A registered person may, on the common portal, transfer any amount of tax,
interest, penalty, fee or any other amount available in the electronic cash
ledger under the Act to the electronic cash ledger for integrated tax, central
tax, State tax or Union territory tax or cess in FORM GST PMT-09”.
It is important to note that only amounts available under Electronic Cash
Ledger can be transferred to the respective heads using Form GST PMT-09
and not otherwise.

Accordingly, contention of the Accountant Mr. X of M/s PPC & Co., is not
valid for transfer of ` 42,500 from head IGST to respective CGST & SGST in
Electronic Credit Ledger.

5. Proviso to section 50 lays down that the interest on tax payable in respect of
supplies made during a tax period and declared in the return for the said period
furnished after the due date in accordance with the provisions of section
39, except where such return is furnished after commencement of any
proceedings under section 73 or section 74 in respect of the said period, shall
be levied on that portion of the tax that is paid by debiting the electronic cash
ledger.
In the given scenario, ABC Ltd. has filed its return belatedly and as per the
above provisions, interest is payable on the tax component paid through
Electronic Cash Ledger only. A point relevant to note here is that tax payable
on reverse charge basis also carries interest for the period of delay in
remittance of tax and input tax credit cannot be used to pay the same (i.e. tax
payable under reverse charge has to be paid in cash).

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Accordingly, interest under section 50 payable for the tax paid through
Electronic Cash Ledger is computed as below:

IGST: 218,000 *18%*60/365 = 6,450

CGST: 262,000*18%*60/365 = 7,752
SGST: 262,000*18%*60/365 = 7,752

Further, if entire tax payable for January is paid through Electronic Credit
ledger, except for the taxes to be paid under reverse charge basis, then
interest under section 50 is applicable only on the remittance of tax under
reverse charge basis and not for tax payable on forward charge basis. Interest
payable is given as below:
IGST: 18,000 * 18% * 60/365 = 533 (rounded off)

CGST: 32,000 * 18% * 60/365 = 947 (rounded off)

SGST: 32,000 * 18% * 60/365 = 947 (rounded off)
6. Payment of taxes is governed as per the provisions laid in section 49 read
with section 49A and 49B of CGST Act, 2017 along with rule 88A of CGST
Rules, 2017
Also, section 49(8) of CGST Act, stipulates that every taxable person shall
discharge his tax and other dues under this Act or the rules made thereunder
in the following order, namely:
(a) self-assessed tax, and other dues related to returns of previous tax
periods;
(b) self-assessed tax, and other dues related to the return of the current tax
period;
(c) any other amount payable under this Act or the rules made thereunder
including the demand determined under section 73 or section 74;”
As per the above provisions, self-assessed tax of previous tax period i.e.
February shall be paid first and later self-assessed tax of current tax period
i.e. July shall be paid.

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Payment of taxes under forward charge

Particulars IGST CGST SGST

Balance in electronic credit ledger for 26,52,000 18,32,000 18,32,000

utilization

Output tax payable for July 14,75,000 28,34,000 28,34,000

Less: Utilization of input tax credit:

a. IGST [Refer Note1] 14,75,000 5,88,500 5,88,500

b. CGST 0 18,32,000 0

c. SGST 0 0 18,32,000

Amount payable through electronic Nil 4,13,500 4,13,500

cash ledger

Total amount payable through electronic cash ledger

Particulars IGST CGST SGST

Amount payable through Electronic cash Nil 4,13,500 4,13,500

ledger under forward charge

Amount payable through electronic cash 36,000 1,44,000 1,44,000

ledger under reverse charge [Refer Note-2]

Total amount payable through electronic 36,000 5,57,500 557,500

cash ledger

Notes:-
1 After utilization of IGST credit towards output IGST liability, balance has
been utilized equally amongst CGST & SGST
2 Input tax credit cannot be utilized for discharging tax liability under
reverse charge basis, thus payable vide electronic cash ledger.
Since, M/s Zinc & Co., have defaulted in payment of taxes for the month of
February and the same has been paid during July, interest is payable as per
the provisions of section 50 of the CGST Act, 2017

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7. Rule 86 of CGST Rules provides that where a registered person has claimed
refund of any unutilized amount (i.e. ITC) from the electronic credit ledger in
accordance with the provisions of section 54, the amount to the extent of the
claim shall be debited in the said ledger.
If the refund so filed is rejected, either fully or partly, the amount so debited
to the extent of rejection, shall be re-credited to the electronic credit ledger
by the proper officer.
In the present case, M/s Neptune & Co., have made zero-rated supply with
payment of IGST for ` 10,14,000 and the refund for the same has been
rejected by the proper officer. Therefore, contention of Mr. A is not
sustainable as debit entry in the Electronic Credit Ledger has not been made
as per sub-rule (3) of Rule 86 towards “refund of any unutilized amount”.
Supply made during May by M/s Neptune & Co. is on payment of IGST and
therefore provisions laid out in sub-rule (4) of Rule 86 shall not be applicable.
8. As per section 51 read with section 20 of the IGST Act, 2017 and Notification
No. 50/2018 CT 13.09.2018, following persons are required to deduct CGST
@ 1% [Effective tax 2% (1% CGST + 1% SGST/UTGST)] or IGST @ 2% from the
payment made/credited to the supplier (deductee) of taxable goods or
services or both, where the total value of such supply, under a contract,
exceeds ` 2,50,000:

(a) a department or establishment of the Central Government or State

Government; or
(b) local authority; or

(c) Governmental agencies; or

(d) an authority or a board or any other body, -
(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 51% or more participation by way of equity or control, to carry out
any function; or

(e) Society established by the Central Government or the State Government

or a Local Authority under the Societies Registration Act, 1860, or

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(f) Public sector undertakings.

Further, for the purpose of deduction of tax, the value of supply shall be taken
as the amount excluding CGST, SGST/UTGST, IGST and GST Compensation
Cess indicated in the invoice.
Since in the given case, Manihaar Enterprises is supplying goods and services
exclusively to Government departments, agencies etc. and persons notified
under section 51, applicability of TDS provisions on its various receivables is
examined in accordance with the above-mentioned provisions as under:

S. Particulars Total Payment Tax to be deducted

No. contract due
value (`) (`) CGST SGST IGST
(`) (`) (`)

(i) Supply of stationery to 2,60,000 15,000 --

Fisheries Department,
Kolkata (Note-1)

(ii) Supply of car rental 2,95,000 20,000 --

services to Municipal
Corporation of Delhi
(Note-2)

(iii) Supply of a heavy 5,90,000 25,000 500

machinery to Public
Sector Undertaking
located in Uttarakhand
(Note-3)

(iv) Supply of taxable goods 6,49,000 50,000 500 500

to Delhi office of
National Housing Bank,
a society established by
Government of India
under the Societies
Registration Act, 1860
(Note-4)

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(v) Interior decoration of 12,39,000 12,39,000 --

Andhra Bhawan located
in Delhi (Note-5)

(vi) Supply of printed books 9,72,000 --

and printed post cards
to a West Delhi Post
Office (Note-6)

(vii) Maintenance of street 3,50,000 3,50,000 --

lights in Municipal area
of East Delhi (Note-7)

Notes:
1. Being an inter-State supply of goods, supply of stationery to Fisheries
Department, Kolkata is subject to IGST @ 18%. Therefore, total value
of taxable supply [excluding IGST] under the contract is as follows:
= ` 2,60,000 × 100 / 118
= ` 2,20,339 (rounded off)

Since the total value of supply under the contract does not exceed
` 2,50,000, tax is not required to be deducted.
2. Being an intra-State supply of services, supply of car rental services to
Municipal Corporation of Delhi is subject to CGST and SGST @ 9% each.
Therefore, total value of taxable supply [excluding CGST and SGST]
under the contract is as follows:

= ` 2,95,000 × 100 / 118

= ` 2,50,000
Since the total value of supply under the contract does not exceed
` 2,50,000, tax is not required to be deducted.
3. Being an inter-State supply of goods, supply of heavy machinery to PSU
in Uttarakhand is subject to IGST @ 18%. Therefore, total value of
taxable supply [excluding IGST] under the contract is as follows:
= ` 5,90,000× 100 / 118

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= ` 5,00,000
Since the total value of supply under the contract exceeds ` 2,50,000, PSU
in Uttarakhand is required to deduct tax @ 2% of ` 25,000, i.e. ` 500.
4. Being an intra-State supply of goods, supply of taxable goods to
National Housing Bank, Delhi is subject to CGST and SGST @ 9% each.
Therefore, total value of taxable supply [excluding CGST and SGST]
under the contract is as follows:
= ` 6,49,000× 100 / 118

= ` 5,50,000
Since the total value of supply under the contract exceeds ` 2,50,000,
National Housing Bank, Delhi is required to deduct tax @ 2% (1% CGST
+ 1% SGST) of ` 50,000, i.e. ` 1,000.
5. Proviso to section 51(1) of the CGST Act, 2017 stipulates that no tax
shall be deducted if the location of the supplier and the place of supply
is in a State or Union territory which is different from the State or as the
case may be, Union territory of registration of the recipient.
Section 12(3) of the IGST Act, 2017, inter alia, stipulates that the place
of supply of services, directly in relation to an immovable property,
including services provided by interior decorators, shall be the location
at which the immovable property is located or intended to be located.
Accordingly, the place of supply of the interior decoration of Andhra
Bhawan shall be Delhi.
Since the location of the supplier (Manihar Enterprises) and the place
of supply is Delhi and the State of registration of the recipient i.e.
Government of Andhra Pradesh is Andhra Pradesh, no tax is liable to be
deducted in the given case.
6. If the contract is made for both taxable supply and exempted supply,
tax shall be deducted if the total value of taxable supply in the contract
exceeds ` 2,50,000. Being an intra-State supply of goods, supply of
printed post cards to a West Delhi Post Office is subject to CGST and
SGST @ 9% each. Therefore, total value of taxable supply [excluding
CGST and SGST] under the contract is as follows:

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= ` 2,72,000× 100 / 118

= ` 2,30,509 (rounded off)

Since the total value of taxable supply under the contract does not
exceed ` 2,50,000, tax is not required to be deducted.
7. Composite supply of goods and services in which the value of supply of
goods constitutes not more than 25% of the value of the said composite
supply provided to, inter alia, local authority by way of any activity in
relation to any function entrusted to a Municipality under article 243W
of the Constitution is exempt from GST. Thus, maintenance of street
lights (an activity in relation to a function entrusted to a Municipality)
in Municipal area of East Delhi involving replacement of defunct lights
and other spares where the value of supply of goods is not more than
25% of the value of composite supply is a service exempt from GST.
Since tax is liable to be deducted from the payment made or credited
to the supplier of taxable goods or services or both, no tax is required
to be deducted in the given case as the supply is exempt.
The answer will remain unchanged even if Manihar Enterprises is registered
under composition scheme. Tax will be deducted in all cases where it is
required to be deducted under section 51 of the CGST Act, 2017 including
the scenarios when the supplier is registered under composition scheme.

9. As per section 51 of the CGST Act, 2017, Government departments, agencies,

local authority and notified persons are required to deduct tax @ 2% (1%
CGST + 1% SGST/UTGST) or IGST @ 2% from payment made to the supplier
of taxable goods and/ or services where the total value of such supply
[excluding tax and compensation cess indicated in the invoice], under a
contract, exceeds ` 2,50,000.

Since in the given case, Yash Shoppe is supplying goods and services
exclusively to Government departments, agencies, local authority and
persons notified under section 51 of the CGST Act, 2017, applicability of TDS
provisions on its various receivables is examined in accordance with the
above-mentioned provisions as under:

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S. Particulars Total Tax to be deducted

No. contract
CGST SGST IGST
value due
@ 1% @ 1% @
to be
(`) (`) 2%
received
(`)
[excluding
GST] (`)

(1) Supply of computer 2,42,857 -- --

stationery to PSU in [2,72,000 ×
Mumbai 100 / 112]
[Since the total value of
supply under the contract
[excluding IGST (being
inter-State supply)] does
not exceed ` 2,50,000, tax is
not required to be
deducted.]

(2) Supply of air conditioner to 2,55,000 -- 5,100

GST Department in Delhi
[Since the total value of
supply under the contract
[excluding IGST (being
inter-State supply)] exceeds
` 2,50,000, tax is required to
be deducted.]

(3) Supply of a generator 3,12,500 3,125 3,125

renting service to Municipal [3,50,000×
Corporation of Jaipur 100 / 112]
[Since the total value of
supply under the contract
[excluding CGST and SGST
(being intra-State supply)]
exceeds ` 2,50,000, tax is
required to be deducted.]

Total 3,125 3,125 5,100

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TEST YOUR KNOWLEDGE

1. Starkart Limited owns and operates a web portal in the name of “Starkart” and
is registered with the jurisdictional GST authorities in Delhi as an electronic
commerce operator and is liable to collect tax at source under section 52.
Starkart provides listing service to various sellers for selling the goods to
ultimate customers. Besides this, Starkart also sells its own products through
the same web portal.
For the listing services provided to sellers, Starkart charges a listing fee at the
rate of 10% of turnover of goods sold by the seller in a particular month. Such
listing fee is recovered from the seller irrespective of any return of goods sold
through Starkart. The customers can choose from wide range of goods listed
on the web portal and place an online order for goods.

The payment is made by the customers through the payment gateway in online
mode only. At the time of monthly settlement, Starkart makes the payment to
the sellers after adjusting the tax collection at source at the applicable rates.

The invoice for goods sold on Starkart is issued by the seller in the name of
customers and tax is charged on the basis of location of seller and customer.
The goods are shipped directly by the seller to the customer and there is no
responsibility of shipping the goods on Starkart for such third-party sellers.
In case of return of goods by the customer, the shipping is arranged by Starkart.
It charges a fee equivalent to 20% of the value of goods returned as cancellation
charges and refunds the balance amount to the customer.
Further, 10% of the value of goods returned is collected from the seller by
Starkart as handling charges for return of goods.

In the month of January, Pulkit, a resident of Rajasthan, purchased following

goods from Starkart:
a. Laptop having a value of ` 50,000 and a printer having a value of
` 10,000. Both the products are sold by Infocom Limited, a seller listed
on Starkart and registered under GST in the State of Uttar Pradesh.

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b. Mobile phone having a value of ` 30,000 sold by Starkart in its own

capacity.
c. CCTV camera system having a value of ` 1,00,000 sold by Secure World,
listed on Starkart and registered under GST in the State of Gujarat.
All the amounts given above are exclusive of GST, wherever applicable.
The opening balance of input tax credit for the relevant tax period for Starkart,
Infocom Limited and Secure World is nil. Further, there is no other inward or
outward supply transaction for Starkart, Infocom Limited and Secure World in
January apart from the aforementioned transactions. Subject to the
information given above, assume that all the other conditions necessary for
availing ITC have been fulfilled.
GST is applicable on all inward and outward supplies at the following rates
unless otherwise specified:

CGST - 9%, SGST - 9%, IGST - 18%

Compute the net tax liability (including amount collected as TCS) of Starkart
Limited and net GST payable in cash (after set-off of credits, if any) of Infocom
Limited and Secure World, for the month of January.
2. Whether the rate of tax of 1% notified under section 52 is CGST or SGST or a
combination of both CGST and SGST?

3. Is every e-commerce operator required to collect tax on behalf of actual

supplier?
4. State whether the provisions pertaining to tax collected at source under section
52, will be applicable in below mentioned scenarios -
(a) Fitan sells watch on its own through its own website
(b) ABC limited who is dealer of Fitan brand sells watches through Slipkart,
an electronic commerce operator
5. A is an e-commerce operator supplying goods through its electronic portal in
capacity of an agent. The goods belong to B and the consideration for such
supplies is received by A and remitted to B as per the contractual arrangement.
A requires your help in arriving at the rate at which tax shall be collected from
the amount which is received by it against the supplies?

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6. X booked a Hotel in Udaipur, Rajasthan through an e-commerce portal for an

amount of ` 25,000. As per the terms and conditions, the amount was payable
at the hotel at the time of check in. Whether TCS provisions shall apply in the
present case?
7. Sumitra Nandan books a Hotel – Hillpoint Residency - via Zitcom Technologies
Ltd. – an ECO - who in turn is integrated with another ECO-Techsuper Ltd. who
has agreement with Hillpoint Residency. You are required to determine who is
required to collected TCS in the given case.

8. AB Pvt. Ltd., Pune, Maharashtra, provides house-keeping services. The company

supplies its services exclusively through an e-commerce website owned and
managed by Hi-Tech Indya Pvt. Ltd., Pune. The turnover of AB Pvt. Ltd. in the
current financial year is ` 18 lakh.
Advise AB Pvt. Ltd. as to whether it is required to obtain GST registration. Will
your advice be any different if AB Pvt. Ltd. sells readymade garments exclusively
through the e-commerce website owned and managed by Hi-Tech Indya Pvt.
Ltd.?

ANSWERS/HINTS

1. Computation of net tax liability (including amount collected as TCS) of

Starkart Limited for January:

Particulars `

TCS to be collected from Infocom Limited on supply of Laptop 600

and a printer to Pulkit
[Starkart is an ECO since it owns and operates a web portal
through which Infocom Limited supplies goods. Further, IGST
is applicable on said inter-State transaction since supplier -
Infocom Limited is located in the State of Uttar Pradesh and
place of supply is Rajasthan [i.e. where movement of goods
terminates in terms of section 10(1)(a) of the IGST Act, 2017].
Thus, Starkart will collect TCS @ 1% of [` 50,000 + ` 10,000]

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GST to be paid by Starkart on supply of mobile phone made 5,400

on its own account @ 18% (IGST) of ` 30,000. IGST is applicable
on said inter-State transaction since supplier - Starkart is
located in Delhi and place of supply is Rajasthan [i.e. where
movement of goods terminates in terms of section 10(1)(a) of
the IGST Act, 2017]. Since supply has been made by Starkart
on its own account, no TCS needs to be collected.

TCS to be collected from Secure World on supply of CCTV 1,000

camera system to Pulkit
[ECO - Starkart is liable to collect TCS on this transaction.
Further, IGST is applicable on said inter-State transaction since
supplier - Secure World is located in the State of Gujarat and
place of supply is Rajasthan [i.e. where movement of goods
terminates in terms of section 10(1)(a) of the IGST Act, 2017].
Thus, Starkart will collect TCS @ 1% of ` 1,00,000]

Listing services provided by Starkart to Infocom Limited and 2,880

Secure Limited @ 10% of turnover for the month of January.
Turnover of Infocom Limited and Secure Limited is ` 60,000
and ` 1,00,000 respectively.
IGST @ 18% on (` 1,60,000 × 10%) is applicable on said inter-
State transaction since supplier – Starkart is located in Delhi
and place of supply is Uttar Pradesh and Gujarat respectively
[i.e. location of recipient in terms of section 12(2) of the IGST
Act, 2017]

Total GST liability (including TCS) of Starkart for January 9,880

Computation of net GST payable in cash by Infocom Limited for the

month of January

Particulars `

Gross GST liability 10,800

[18% of turnover for January (` 50,000 + ` 10,000)]

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Less: ITC of GST payable on listing services received from [(10% (1,080)
of ` 60,000) ×18%]
Net GST payable from Electronic Cash Ledger 9,720

Less: TCS credited to Electronic Cash Credit Ledger (600)

Net GST payable in cash 9,120

Computation of net GST payable in cash by Secure World for the month
of January

Gross GST Liability 18,000

[18% of turnover for January (` 1,00,000)]

Less: ITC of GST payable on listing services received from [(10% (1,800)
of ` 1,00,000) ×18%]
Net GST payable from Electronic Cash Ledger 9,720

Less: TCS credited to Electronic Cash Credit Ledger (1,000)

Net GST payable in cash 15,200

2. The rate of TCS as notified under CGST Act is payable under CGST and the
equal rate of TCS is expected under the SGST Act also, in effect aggregating
to 1%.
3. Yes, every e-commerce operator is required to collect tax where consideration
with respect to the supply made through it is being collected by the e-
commerce operator.
However, no TCS is required to be collected in the following cases:-
(i) on supply of services notified under section 9(5) of the CGST Act, 2017.

(ii) on exempt supplies

(iii) on supplies on which the recipient is required to pay tax on reverse
charge basis.

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4. Answers for both the scenarios is as follows:

As per section 52, every electronic commerce operator not being an agent,
shall collect an amount calculated at such rate not exceeding one per cent.,
as may be notified by the Government on the recommendations of
(a) the Council, of the net value of taxable supplies made through it by
other suppliers where the consideration with respect to such supplies is
to be collected by the operator.
Hence, if the person sells on his own, provisions pertaining to tax
collected at source (TCS) won’t be applicable.
(b) If ABC limited who is dealer of Fitan brand sells watches through
Slipkart, then the provision of TCS will be applicable to Slipkart.
5. As per section 52(1), the TCS provisions are not applicable in cases where the
ECO is an agent of the supplier. In the present case, A being an ECO is
supplying goods through the electronic portal in capacity of an agent and
hence the liability to collect tax as per Section 52 shall not arise in this case.
6. No, as per the provisions under section 52, the TCS provisions shall trigger
only when the ECO is receiving the consideration for supply from the recipient
of supply. In the present case, the supplier i.e. the hotel is directly receiving
the consideration from the recipient of the services i.e. X. Hence, the present
transactions shall not trigger the TCS provisions under section 52.

7. The given case is a case of multiple e-commerce model wherein a customer

orders supplies via ECO-1 who in turn is integrated with ECO-2 who has
agreement with the supplier. In this case, ECO-1 will not have any GST
information of the supplier. TCS is to be collected by that e-Commerce
operator who is making payment to the supplier for the particular supply
happening through it, which is in this case will be ECO-2.

Thus, in the given case, TCS is to be collected by ECO-Techsuper Ltd. who is

making payment to Hillpoint Residency for the supply happening through it,
8. As per section 22, every supplier of goods or services or both is required to
obtain registration in the State/ Union territory from where he makes the
taxable supply if his aggregate turnover exceeds threshold limit in a financial
year.

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However, section 24 enlists certain categories of persons who are mandatorily

required to obtain registration, irrespective of their turnover. Persons who
supply goods or services or both through such electronic commerce operator
(ECO), who is required to collect tax at source under section 52, is one such
person specified under clause (ix) of section 24. However, where the ECO is
liable to pay tax on behalf of the suppliers of services under a notification
issued under section 9(5), the suppliers of such services are entitled for
threshold exemption.

Section 2(45) defines ECO as any person who owns, operates or manages
digital or electronic facility or platform for electronic commerce. Electronic
commerce is defined under section 2(44) to mean the supply of goods or
services or both, including digital products over digital or electronic network.
Since Hi-Tech Indya Pvt. Ltd. owns and manages a website for e-commerce
where both goods and services are supplied, it will be classified as an ECO
under section 2(45).
Notification No. 17/2017 CT (R) dated 28.06.2017 issued under section 9(5)
specifies services by way of house-keeping, except where the person
supplying such service through ECO is liable for registration under section
22(1), as one such service where the ECO is liable to pay tax on behalf of the
suppliers.
In the given case, AB Pvt. Ltd. provides house-keeping services through an
ECO. It is presumed that Hi-Tech Indya is an ECO which is required to collect
tax at source under section 52. However, house-keeping services provided by
AB Pvt. Ltd., which is not liable for registration under section 22(1) as its
turnover is less than `20 lakh, is a service notified under section 9(5). Thus,
AB Pvt. Ltd. will be entitled for threshold exemption for registration and will
not be required to obtain registration even though it supplies services
through ECO.
In the second case, AB Pvt. Ltd. sells readymade garments through ECO. Such
supply cannot be notified under section 9(5) as only supplies of services are
notified under that section. Therefore, in the second case, AB Pvt. Ltd. will not
be entitled for threshold exemption and will have to compulsorily obtain
registration in terms of section 24(ix).

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 1.84 13.84 GOODS AND SERVICES TAX

(ii) Defective Information Return

Commissioner/
any authorised He may intimate Defect to be
defect to the Otherwise,
officer, considers rectified within information
information person who has 30 days from the
furnished such return shall
furnished in the date of such be treated as
information information intimation or
return to be not furnished
return extended time
defective

(iii) Issuance of notice for failure to furnish the information return within
stipulated time
within a
period not
Commissioner/ exceeding
Where a person requiring him to
any authorised 90 days
required to furnish furnish such
officer, may from the
information return
serve a notice information return
has not furnished it date of
on such person
service of
the notice

TEST YOUR KNOWLEDGE

1. Which type of taxpayers need to file annual return under section 44?
Enumerate.

2. Is an annual return under section 44 and a final return one and the same?
Explain.

3. Do input service distributors (ISDs) need to file separate statement of outward

supplies (GSTR-1) with their return? Discuss.

4. Is it compulsory for a taxpayer to file return by himself? Explain.

5. Mr. Anand Kumar, a regular taxpayer, filed GSTR-1 for the month of August
before the due date. Later, in the month of February next year, he discovers
error in the GSTR-1 of the month of August already filed and wants to revise it.

You are required to advise him on the future course of action in this scenario.

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6. B Ltd. has filed the return for the month of October belatedly. At the time of
computing the late fee to be paid for delay in filing return, B Ltd. has taken a
view that if the late fee has been paid as per the provisions under the CGST Act,
there is no requirement of paying the late fee under the SGST Act for the same
default.

Whether B Ltd. has taken a correct view? Examine.

7. Tax authorities have been scrutinizing the returns furnished by A Ltd. During
the scrutiny process, A Ltd. has been made aware by the authorities about an
incorrect disclosure in a return under section 39 filed by it for a particular tax
period.

A Ltd. seeks your opinion to rectify the incorrect disclosure made in the return.

8. ABC Ltd. applied for cancellation of GST registration in the month of March. In
the month of September, the consultant of ABC Ltd. suggested to furnish the
final return in said month. He advised the company that a final return needs
to be furnished before the due date of furnishing the return for the month of
September of subsequent financial year or before furnishing of annual return
(for the financial year in which cancellation has been sought for), whichever is
earlier. However, the jurisdictional authorities have yet not passed the order of
cancellation due to reasons not known to ABC Ltd.

Whether the advice given by the consultant of ABC Ltd. is correct? Examine.

9. XYZ Ltd. has deducted TDS from the consideration payable to A Ltd. for supplies
made by it. The deductee, i.e. A Ltd., seeks your advice on taking credit for the
TDS deducted by XYZ Ltd. Also, whether the tax deducted by XYZ Ltd. will be
shown in the electronic credit ledger or electronic cash ledger of A Ltd.?

10. Whether GSTPs are required to furnish any return for disclosure of activities
carried out by them for any of the registered person during a tax period?
Elucidate.

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ANSWERS/HINTS

1. Every registered person, other than ISD’s, casual/non-resident taxpayers, tax

deductors at source, tax collector at source are required to file an annual
return in Form GSTR-9. Taxpayer under composition scheme are required to
file annual return in Form GSTR-9A. The department of the Central/State
Government or a local authority, whose books of account are subject to audit
by the Comptroller and Auditor-General of India or an auditor appointed for
auditing the accounts of local authorities under any law for the time being in
force, are exempt from the requirement of furnishing the annual return.
2. No. Annual return has to be filed by every registered person paying tax as a
normal taxpayer, with certain exceptions. Final return has to be filed only by
those registered persons whose registration under GST has been cancelled.
The final return has to be filed within three months of the date of cancellation
or the date of cancellation order, whichever is later.
3. No, the ISDs need to file only a return in Form GSTR-6 and the return has the
details of credit received by them from the service provider and the credit
distributed by them to the recipient units. Since their return itself covers these
aspects, there is no requirement to file separate statement of outward supplies.
4. No. A registered taxpayer can also get his return filed through a Goods and
Services Tax Practitioner(GSTP) as authorised by him subject to confirmation
of registered person over mail or SMS each time when return filed by GSTP .
5. The mechanism of filing revised return for any correction of errors/omission
is not available under GST. The rectification of errors/omission is allowed in
the subsequent returns.
Therefore, Mr. Anand Kumar who discovered an error in GSTR-1 for the month
of August cannot revise it. However, he should rectify said error in the GSTR-
1 filed for the month of February and should pay the tax and interest, if any,
in case there is short payment, in the return to be furnished for February. The
error can be rectified by furnishing appropriate particulars in the
“Amendment Tables” contained in GSTR-1.

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However, as per section 37(3), no rectification of details furnished in GSTR-1

shall be allowed after 30th day of November following the end of the financial
year to which such details pertain, or furnishing of the relevant annual return,
whichever is earlier.
6. The understanding of B Ltd. is incorrect. For arriving at the late fee payable
on account of delayed filing of GST return, the computation of late fee is
made separately for CGST and SGST/UTGST. This is because the provisions
of late fee on delayed filing of return are prescribed in both CGST Act and
SGST/UTGST Act although a common return is filed for both the laws.
7. In terms of section 39(9), any rectification in the return (under section 39)
furnished by the registered person is allowed only when the error or omission
is discovered on account of reasons other than scrutiny, audit, inspection, or
enforcement activity by the tax authorities.
In the present case, since the incorrect disclosure has been highlighted to A
Ltd. by the tax authorities during the process of scrutiny, the rectification of
the incorrect disclosure cannot be made by A Ltd. on its own.
8. No, the advice of the consultant is not correct.

In terms of section 45 read with rule 81, every registered person who is
required to furnish GSTR-3B and whose registration has been cancelled is
required to file a final return within three months of the date of cancellation
or date of order of cancellation, whichever is later.
In the given case, the registration of the company has not been cancelled.
Therefore, requirement of filing final return will arise only when the registration
of the company gets cancelled.
9. In terms of section 51(5) read with rule 66, the deductee shall claim credit, in
his electronic cash ledger, of the tax deducted and reflected in GSTR-7 of the
deductor, after validation. Similarly, rule 87(9), inter alia, provides that any
amount deducted under section 51 shall be credited to the electronic cash
ledger of the deductee.
Therefore, in the present case, A Ltd., can take credit of TDS amount deducted
by XYZ Ltd. in its electronic cash ledger and use the same for payment of tax,
interest, penalty, late fee or any other amount.

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10. In terms of section 48(2), a registered person may authorise an approved

GSTP to furnish the details of outward supplies under section 37, the details
of inward supplies under section 38 and the return under section 39 or annual
return under section 44 or final return under section 45 and to perform other
prescribed functions. Thus, the GSTP can furnish the specified documents or
information on behalf of the registered person with prior authority of the
registered person.
However, there is no specific return furnishing mechanism for GSTP itself to
disclose the activities carried out by it for any of the registered person during
a tax period.

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India to a place outside India. India has rupee trade with Nepal and Bhutan.
The RBI regulations allow receipt of payment in Indian rupees in case of
exports to Nepal and Bhutan. In case of export of goods under GST law,
receipt of export proceeds in convertible foreign exchange is not a pre-
requisite. [However, non-realization of export proceeds within the time
prescribed under FEMA may result in recovery of any refund paid to the
taxpayer.] Hence, export of goods to Nepal and Bhutan will be treated as
zero rated and consequently will also qualify for all the benefits available to
zero rated supplies under the GST regime.
Export of services: In case of export of services, wherever permitted by the
Reserve Bank of India, receipt of payment in Indian rupees is allowed in terms
of section 2(6). As stated earlier, the RBI regulations allow receipt of payment
in Indian rupees in case of exports to Nepal and Bhutan. Consequently,
supply of services having place of supply in Nepal or Bhutan, against payment
in Indian Rupees is considered as export of services subject to fulfillment of
other conditions.
Therefore, exports of both goods and services to Nepal and Bhutan are
treated as ‘normal exports’, i.e. goods and services can be exported to Nepal
and Bhutan under LUT.

TEST YOUR KNOWLEDGE

1. Explain how imports are taxed under GST.

2. Describe how exports are taxed under GST.

3. Is it necessary to execute a bond for effecting zero rated supplies? Elucidate.
4. A Ltd. enters into an agreement for sale of goods with B Ltd., a company based
in UAE. B Ltd. requires the goods to be delivered by A Ltd. to C Ltd., a company
based in Karnataka.
Whether the transaction will qualify as export of goods under GST? Analyze the
scenario and offer your comments.

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1.58 GOODS AND SERVICES TAX

5. A Ltd. is making zero rated supplies which are also specifically exempt from
GST. The company has paid input tax of ` 2,00,000 on inputs and input services
which have been used exclusively in effecting such zero rated supplies.

Examine if A Ltd. can avail ITC of input tax of ` 2,00,000 paid on inputs and
input services used exclusively in effecting such zero rated supplies.

6. Whether services of short-term accommodation, conferencing, banqueting etc.

provided to a SEZ unit/developer by a supplier located in the same State as that
of the SEZ unit/developer should be treated as an inter-State supply under
section 7(5)(b) or an intra-State supply in terms of section 8(2) read with section
12(3)(c)? Examine.

7. Mr. Amar Kant, a Chartered Accountant, being a partner in GST registered firm
orders a gaming software for his son from a company located in USA. He makes
the payment for the same from his personal bank account.

Examine whether the transaction will be liable to GST. If yes, in whose hands
the tax liability will arise?

8. ‘Separate LUT is to be furnished for every export supply.’

With reference to the provisions of the GST law, examine the veracity or
otherwise of the statement.

9. AXT Ltd. entered into a high sea sale transaction with BYU Ltd. for certain
goods. AXT Ltd. is of the view that GST on such sale transaction is payable at
the time of such sale and basic customs duty is payable at the time of filing the
bill of entry for import of goods.

Examine whether the view taken by AXT Ltd. is correct.

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ANSWERS/HINTS

1. All imports are deemed as inter-State supplies for the purposes of levy of GST
(IGST). The incidence of tax follows the destination principle and the tax
revenue accrues to the State where the imported goods and services are
consumed. IGST paid on import of goods and services is available as ITC for
set off against the output tax liability. IGST on import of goods is levied under
the IGST Act but the machinery of the customs law is used to levy and collect
the same.
2. Exports of goods and services are zero rated. The exporter can export under
bond/LUT without payment of IGST and claim refund of ITC. In case of
notified class of persons or notified goods or services, he may pay IGST at the
time of export and claim refund thereof.
3. No. The facility to export under LUT has been extended to all zero rated
suppliers (barring a few exceptions such as those who have been prosecuted
for an offence involving tax of ` 2.5 crore) vide Notification No. 37/2017 CT
dated 4.10.2017. The other conditions for executing LUT have been specified
in Circular No. 8/8/2017 GST dated 4.10.2017 as amended.
4. As per the definition of export of goods provided under section 2(5), export
of goods means taking goods out of India to a place outside India.

Since in the given case, the goods remain in India, i.e. with C Ltd. located in
Karnataka, the transaction between A Ltd. and B Ltd. cannot be treated as
export of goods under GST.

5. As per section 16(2), ITC may be availed for making zero rated supplies,
notwithstanding that such supplies are exempt supplies. However, the same
is subject to provisions u/s 17(5) of the CGST Act, i.e. blocked credit.

Hence, A Ltd. can take credit of ` 2,00,000 even if the outward zero rated
supply is exempt from GST. However, the credit would not be available in
respect of the inputs and input services, the credit on which is blocked under
section 17(5) of the CGST Act.

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1.60 GOODS AND SERVICES TAX

6. Circular No. 48/22/2018 GST has clarified on this issue as under:

As per section 7(5)(b), the supply of goods and/or services to a SEZ
unit/developer is treated as a supply of goods and/or services in the course
of inter-State trade or commerce. Whereas, as per section 12(3)(c), the place
of supply of services by way of accommodation in any immovable property
for organising any functions shall be the location at which the immovable
property is located. Thus, in such cases, if the location of the supplier and
the place of supply are in the same State/ Union territory, it would be treated
as an intra-State supply.
It is an established principle of interpretation of statutes that in case of an
apparent conflict between two provisions, the specific provision shall prevail
over the general provision. In the instant case, section 7(5)(b) is a specific
provision relating to supplies of goods and/or services made to a SEZ
unit/developer, which states that such supplies shall be treated as inter-State
supplies.
Further, proviso to section 8(2) also lays down that intra-State supply of
services do not include supply of services to a SEZ unit/developer. It is,
therefore, clarified that services of short-term accommodation, conferencing,
banqueting etc., provided to a SEZ unit/developer shall be treated as an inter-
State supply.
7. The supply of gaming software is in the nature of OIDAR service in terms of
section 2(17).
The transaction is for personal consumption of Mr. Amar Kant and the
payment has also been made from the personal bank account of Mr. Amar
Kant and not from the bank account of his GST registered firm. Therefore,
being an unregistered person receiving OIDAR service in taxable territory, Mr.
Amar Kant is a non-taxable online recipient in terms of section 2(16).
Services received from a provider of service located in a non- taxable territory
by an individual in relation to any purpose other than commerce, industry or
any other business or profession is exempt from IGST. However, such
exemption is not available in case of OIDAR services [Notification No. 9/2017
IT (R) dated 28.06.2017].

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Therefore, being an OIDAR service provided by a supplier located outside

India and received by a non-taxable online recipient, the same is liable to GST.

Tax on service supplied by any person located in a non-taxable territory to

any person other than non-taxable online recipient is payable by the recipient
of such service under reverse charge. Therefore, tax on OIDAR services
provided by the company located in USA to Mr. Amar Kant, a non-taxable
online recipient, will be payable by such company under forward charge.
8. No, the statement is not correct.
The LUT remains valid for the whole financial year and there is no need to
furnish separate LUT for each export supply.
However, in case goods are not exported within the time limit specified in
rule 96A(1) of the CGST Rules and the registered person fails to pay the
amount mentioned in the said sub rule, the facility of export under LUT will
be deemed to have been withdrawn. However, if the amount mentioned in
the said sub-rule is paid subsequently, the facility of export under LUT shall
be restored. As a result, exports, during the period from when the facility to
export under LUT is withdrawn till the time the same is restored, shall be
either on payment of the applicable IGST or under bond with bank guarantee.
Rule 96A(1) provides inter alia that an exporter of goods has to execute the
bond or LUT prior to export, binding himself to pay the tax due along with
interest @ 18% within 15 days after the expiry of 3 months, or such further
period as may be allowed by the Commissioner, from the date of issue of the
invoice for export, if the goods are not exported out of India.

9. AXT Ltd.’s view is partially correct.

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 (high sea sale) is neither treated as supply of goods nor supply
of services in terms of paragraph 8(b) of Schedule III to the CGST Act.

Thus, GST is not leviable on high sea sales. Therefore, AXT Ltd.’s view that
GST is payable on a high-sea sale transaction at the time of sale, is not correct.

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As per section 14 of the Customs Act, 1962, the value for the purpose of
charging customs duty on imported goods is the value at the time of
importation, i.e. at the time of filing of the bill of entry. Further, IGST on
imported goods is also levied at the time of filing of bill of entry. Therefore,
in case of high sea sales, the assessable value of imported goods for levying
customs duty and IGST is determined on the basis of the price paid by the
last high sea sales buyer who files the bill of entry for home consumption.
Therefore, AXT Ltd.’s view that basic customs duty is payable at the time of
filing the bill of entry for import of goods is correct.

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 REFUNDS 15.63

TEST YOUR KNOWLEDGE

1. Is there any time limit for sanctioning of refund under section 54?
2. Discuss the provisions relating to refund of the amount of advance tax
deposited by a casual taxable person under section 27(2).
3. In case of refund under exports of goods, whether BRC/FIRC is necessary for
granting refund?
4. When is a deficiency memo issued in respect of a refund claim made under
section 54?
5. State the exceptions to the principle of unjust enrichment as applicable to
refund claims.
6. Kailash Global (P) Ltd. supplies various goods in domestic and international
markets. It is engaged in both manufacturing and trading of goods. The
company is registered under GST in the State of Karnataka. The company
exports goods without payment of tax under letter of undertaking in accordance
with the provisions of section 16(3) of the IGST Act, 2017.

The company has made the following supplies during a tax period:

S. Particulars (` )
No.

(i) Export of product ‘A’ to UK for $ 10,000. Assessable 7,00,000

value under customs in Indian rupees.
[Export duty is payable on product ‘A’ at the time of
exports. Further, value of like goods domestically
supplied by the similarly placed supplier is
` 6,00,000]

(ii) Domestic supplies of taxable product ‘B’* during the 10,00,000

period [excluding tax @ 5%]
[Inputs used in manufacturing of such goods are taxable
@18%]
*not notified as a product, in respect of which refund of
unutilised ITC shall not be allowed under section 54(3)(ii)

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(iii) Supply of goods to Export Oriented Unit [excluding tax 5,00,000

@ 18%]
[ITC has been claimed by the recipient]

(iv) Export of exempt supplies of goods (Value of like 6,00,000

goods domestically supplied by the similarly placed
supplier is ` 5,00,000)
The ITC available for the above tax period is as follows:

S.No. Particulars (` )

(i) On inputs 3,50,000

(ii) On input service 1,50,000

(iii) On capital goods 1,20,000

Determine the maximum amount of refund admissible to Kailash Global (P)

Ltd. for the given tax period.
7. Super Engineering Works, a registered supplier in Haryana, is engaged in
supply of taxable goods within the State. Given below are the details of the
turnover and applicable GST rates of the final products manufactured by Super
Engineering Works as also the input tax credit (ITC) availed on inputs used in
manufacture of each of the final products and GST rates applicable on the
same, during a tax period:

Products Turnover* Output GST ITC availed (`) Input GST

(` ) Rates Rates

A 500,000 5% 54,000 (Goods) 18%

B 350,000 5% 54,000 (Goods) 18%

C 100,000 18% 10,000 (Service) 18%

*excluding GST
Determine the maximum amount of refund of the unutilized input tax credit
that Super Engineering Works is eligible to claim under section 54(3)(ii)

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provided that Product B is notified as a product, in respect of which no refund

of unutilised input tax credit shall be allowed under said section.

8. With reference to section 54(3), mention the cases where refund of unutilised
input tax credit is allowed.
9. State few cases where refundable amount shall be paid to the applicant, instead
of being credited to Consumer Welfare Fund under CGST Act, 2017.

ANSWERS/HINTS

1. Yes, refund has to be sanctioned within 60 days from the date of receipt of
application complete in all respects. If refund is not sanctioned within the said
period of 60 days, interest @ 6% p.a. will have to be paid in accordance with
section 56.
However, in case where provisional refund to the extent of 90% of the amount
claimed is refundable in respect of zero-rated supplies made by certain
categories of registered persons in terms of sub-section (6) of section 54, the
provisional refund has to be given within 7 days from the date of
acknowledgement of the claim of refund.

2. The amount of advance tax deposited by a casual taxable under section 27(2),
shall be refunded only when such person has, in respect of the entire period
for which the certificate of registration granted to him had remained in force,
furnished all the returns required under section 39 [Section 54(13)]. Further,
refund of any amount, after adjusting the tax payable by the applicant out of
the advance tax deposited by him under section 27 at the time of registration,
shall be claimed in the last return required to be furnished by him [Fourth
proviso to rule 89(1)].
3. In case of refund on account of export of goods, the refund rules do not
prescribe BRC/FIRC as a necessary document for filing of refund claim.
However, for export of services details of BRC/FIRC is required to be
submitted along with the application for refund.

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However, in case of non-realization of consideration in terms of FEMA, the

exporter shall deposit the amount so refunded to the extent of non realization
of sale proceed along with interest within 30 days [Rule 96B].
4. Rule 90(3) provides for communication in prescribed form (deficiency memo)
where deficiencies are noticed. The said sub-rule also provides that once the
deficiency memo has been issued, the claimant is required to file a fresh
refund application after the rectification of the deficiencies.
Further the time period, from the date of filing of the refund claim in FORM
GST RFD-01 till the date of communication of the deficiencies by the proper
officer, shall be excluded from the period of two years as specified under
Section 54(1), in respect of any such fresh refund claim filed by the applicant
after rectification of the deficiencies.
5. The principle of unjust enrichment is applicable in all cases of refund except
in the following cases:-
(a) Refund of tax paid on export of goods or services or both or on inputs
or input services used in making such exports.
(b) Unutilized input tax credit in respect of (i) zero rated supplies made
without payment of tax or, (ii) where the credit has accumulated on
account of rate of tax on inputs being higher than the rate of tax on
output supplies.

(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued.
(d) refund of tax in pursuance of section 77 of CGST/SGST Act i.e. tax
wrongfully collected and paid to Central Government or State
Government.
(e) if the incidence of tax or interest paid has not been passed on to any
other person.
(f) such other class of persons who has borne the incidence of tax as the
Government may notify.

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6. Computation of maximum amount of refund admissible to Kailash

Global (P) Ltd.

Particulars (`)

Exports of product ‘A’ to UK [Note (i)] Nil

Domestic supplies of taxable product ‘B’ during the period 90,000

[Note (ii)]

Supply of goods to Export Oriented Unit [Note (iii)] Nil

Export of exempt supplies [Note (iv)]

1,07,143

Total refund claim admissible 1,97,143

Notes:
(i) Export of goods is a zero-rated supply in terms of section 16(1)(a) of
the IGST Act, 2017. Fu] rther, Kailash Global (P) Ltd. exports goods
without payment of tax under letter of undertaking in accordance with
the provisions of section 16(3) of the IGST Act, 2017.

Therefore, as per clause (i) of first proviso to section 54(3), a registered

person may claim refund, of any unutilised ITC in the case of zero rated
supply made without payment of tax at the end of any tax period.
However, second proviso to section 54(3) lays down that refund of
unutilized ITC is not allowed if the goods exported out of India are
subjected to export duty.

(ii) Refund of unutilised ITC is allowed in case of inverted duty structure,

i.e. where the credit has accumulated on account of rate of tax on inputs
being higher than the rate of tax on output supplies (other than nil rated
or fully exempt supplies) except supplies of goods or services or both
as may be notified by the Government on the recommendations of the
GST Council [Clause (ii) of the first proviso to section 54(3)].

Rule 89(5) stipulates that in the case of refund on account of inverted

duty structure, refund of ITC is granted as per the following formula –

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 1.68 15.68 GOODS AND SERVICES TAX

Turnover of
inverted rated
supply of Tax payable
goods & on such Net ITC
Maximum
services × Net inverted rated
Refund
Amount
= ITC - supply of x
goods & ITC availed
Adjusted Total services on inputs
Turnover and input
services
where-
“Net ITC” means ITC availed on inputs during the relevant period other
than the ITC availed for which refund is claimed under sub-rules (4A) or
(4B) or both.
“Adjusted total turnover” means the sum total of the value of:

(a) the turnover in a State/ Union territory, as defined under section

2(112), excluding turnover of services; &
(b) the turnover of zero-rated supply of services determined in terms
of specified manner and non-zero-rated supply of services,
excluding:
(i) the value of exempt supplies other than zero-rated supplies; and

(ii) the turnover of supplies in respect of which refund is claimed

under sub-rule (4A) or sub-rule (4B) or both, if any,
during the relevant period.

“Relevant period” means the period for which the claim has been filed.
Tax payable on inverted rated supply of goods = ` 10,00,000 × 5% =
` 50,000

Here, Net ITC = ` 3,50,000,

Adjusted Total Turnover = ` 28,00,000 [` 7,00,000 + ` 10,00,000 + `
5,00,000 + ` 6,00,000] and Turnover of inverted rated supply of goods
= ` 10,00,000

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Thus, maximum refund amount under rule 89(5) = ` 3,50,000 x

10,00,000/ ` 28,00,000 – (` 50,000×{` 3,50,000/(` 3,50,000+` 1,50,000)}
= ` 90,000
(iii) As per section 2(39), deemed exports means such supplies of goods as
may be notified under section 147. Supplies to EOU is notified as
deemed export under section 147 vide Notification No. 48/2017 CT
dated 18.10.2017. In respect of supplies regarded as deemed exports,
the application of refund can be filed by the supplier of deemed export
supplies only in cases where the recipient does not avail of ITC on such
supplies and furnishes an undertaking to the effect that the supplier
may claim the refund [Third proviso to rule 89(1)]. Therefore, since in
the given case, the recipient is claiming ITC, Kailash Global (P) Ltd.
(supplier of deemed exports) cannot claim refund of ITC.

(iv) Section 16(2) of the IGST Act, 2017 stipulates that subject to the
provisions of section 17(5) of the CGST Act, ITC may be availed for
making zero-rated supplies, notwithstanding that such supply may be
an exempt supply. Section 54(3) of the CGST Act, 2017 allows refund
of ITC in the case of zero rated supply made without payment of tax.
Rule 89(4) stipulates that in the case of zero-rated supply of goods or
services or both without payment of tax under bond/LUT in accordance
with the provisions of section 16(3) of the IGST Act, 2017, refund of ITC
shall be granted as per the following formula:

(Turnover of zero-rated supply of goods +

Refund
= Turnover of zero-rated supply of services) × Net ITC
Amount
Adjusted Total Turnover
where-

“Net ITC” means ITC availed on inputs and input services during the
relevant period other than the ITC availed for which refund is claimed
under sub-rules (4A) or (4B) or both.

“Turnover of zero-rated supply of goods” means the value of zero-rated

supply of goods made during the relevant period without payment of
tax under bond/LUT, or the value which is 1.5 times the value of like

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goods domestically supplied by the same or, similarly placed, supplier,

as declared by the supplier, whichever is less, other than the turnover
of supplies in respect of which refund is claimed under sub-rules (4A)
or (4B) or both.
“Adjusted total turnover” means the same as explained in point ii above.

Here, Turnover of zero rated supply of goods = ` 6,00,000 (Lower of

` 6,00,000 or 1.5 times of ` 5,00,000 i.e. 7,50,000 whichever is lower),
Net ITC = ` 5,00,000 and Adjusted Total Turnover = ` 28,00,000 (as
computed in point ii above)
Thus, maximum refund amount under rule 89(4) = ` 5,00,000 x
` 6,00,000/ ` 28,00,000 = ` 1,07,143.
7. Section 54(3)(ii) allows refund of unutilized input tax credit (ITC) at the end of
any tax period to a registered person where the credit has accumulated on
account of inverted duty structure i.e. rate of tax on inputs being higher than
the rate of tax on output supplies (other than nil rated or fully exempt
supplies), except supplies of goods or services or both as may be notified by
the Government on the recommendations of the Council.

In the given case, the rates of tax on inputs used in Products A and B (18%
each) are higher than rates of tax on output supplies of Products A and B (5%
each). However, Product B is notified as a product, in respect of which no
refund of unutilised ITC shall be allowed under section 54(3)(ii). Further rate
of tax on input used in the product C is carrying same rate of tax on output
supplies hence it is not the case of inverted duty structure. Therefore, no
refund on the Product C.
Therefore, only Product A is eligible for refund under section 54(3)(ii).
Further, rule 89(5) stipulates that in the case of refund on account of inverted
duty structure, refund of ITC shall be granted as per the following formula -

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Turnover of
inverted rated
supply of goods tax payable on
Maximum and services × such inverted Net ITC
Refund
Amount
= Net ITC - rated supply of
goods and
x ITC availed
Adjusted Total services on inputs
Turnover and input
services
where,-

A. "Net ITC" means input tax credit availed on inputs during the relevant
period;

B. Adjusted Total Turnover means the sum total of the value of-

(a) the turnover in a State or a Union territory, as defined under

section 2(112), excluding the turnover of services; and

(b) the turnover of zero-rated supply of services determined in

specified manner and non-zero-rated supply of services,
excluding-

(i) the value of exempt supplies other than zero-rated supplies;

and

(ii) the turnover of supplies in respect of which refund is

claimed under rule 89(4A) or rule 89(4B) or both, if any,

during the relevant period.

C. Relevant period means the period for which the claim has been filed.

In accordance with the aforesaid provisions, the maximum refund amount

which Super Engineering Works is eligible to claim shall be computed as
follows:

Tax payable on inverted rated supply of Product A = ` 5,00,000 × 5%

= ` 25,000

Net ITC = ` 108000 (` 54,000 + ` 54,000) [Net ITC availed during the relevant
period needs to be considered irrespective of whether the ITC pertains to

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inputs eligible for refund of inverted rated supply of goods or not - Circular
No. 79/53/2018-GST dated 31.12.2018]

Adjusted Total Turnover = ` 9,50,000 (` 5,00,000 + ` 3,50,000 + ` 1,00,000)

Turnover of inverted rated supply of Product A = ` 5,00,000

Maximum refund amount for Super Engineering Works is as follows:

= [(` 5,00,000 × ` 108000)/ ` 9,50,000] – (` 25,000 x 108,000/118,000)

= ` 33,961 (rounded off)

8. As per section 54(3), a registered person may claim refund of unutilised input
tax credit at the end of any tax period in the following cases:

(i) Zero rated supplies made without payment of tax: Supply of goods
or services or both for authorised operations to an SEZ developer/unit
or export of goods or services or both qualifies as zero rated supplies.

(ii) Accumulated ITC on account of inverted duty structure: Where the

credit has accumulated on account of rate of tax on inputs being higher
than the rate of tax on output supplies (other than nil rated or fully
exempt supplies), except supplies of goods or services or both as may
be notified by the Government on the recommendations of the Council.

However, refund of unutilized input tax credit shall not be allowed if:

♦ the goods exported out of India are subjected to export duty;

♦ the supplier of goods or services or both avails of drawback in respect

of CGST or claims refund of the IGST paid on such supplies.

9. Section 54(8) provides that the refundable amount shall be paid to the
applicant, instead of being credited to the Consumer Welfare Fund, if such
amount is relatable to —

(a) refund of tax paid on export of goods and/or services or on inputs or

input services used in making such exports;

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(b) refund of unutilized ITC in case of zero-rated supplies made without

payment of tax or accumulated ITC on account of inverted duty
structure;

(c) refund of tax paid on a supply which is not provided, either wholly or
partially, and for which invoice has not been issued, or where a refund
voucher has been issued;

(d) refund of tax paid on a transaction treating it to be an intra-State

supply, but which is subsequently held to be an inter-State supply or
vice-versa;

(e) the tax and interest, if any, or any other amount paid by the applicant,
if he had not passed on the incidence of such tax and interest to any
other person; or

(f) the tax or interest borne by notified class of applicants.

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1.20 GOODS AND SERVICES TAX

Time limits for the return of inputs/capital goods sent for job-work
or supply from job worker’s place of business after required
processing or treatment

 Principal can take credit on goods (inputs and capital goods) sent for job
work.
 Credit can be taken even if the said goods are sent directly to job worker
without being first brought to the principal's place of business.

Time limit for return of

On failing to comply with the Time-
goods sent for job
timelines, the goods will be lines do
work/supply from job
deemed to have been not apply
worker's place of business
supplied to the job worker on to
♦ Inputs - 1 year (extendable
the day they were sent out. moulds
by another 1 year)
Principal is liable to pay tax and dies,
♦ Capital goods - 3 years
along with applicable interest jigs and
(extendable by another 2
on such supply. fixtures
years)
Subsequent return of the or tools
from the date of sending the
goods by the job worker will sent out
same for job work or from the
be treated as a separate for job
date of receipt of the same by
supply. work.
the job worker.

TEST YOUR KNOWLEDGE

1. Under what circumstances, can the principal directly supply goods from the
premises of job worker without declaring the premises of job worker as his
additional place of business?
2. What happens when the inputs or capital goods are not received back or
supplied from the place of business of job worker within prescribed time period?

3. Who is responsible for the maintenance of proper accounts related to job work?
4. Genie Engineers had a mould delivered directly to a job worker from the
supplier for making certain precision parts for use in the factory of Genie
Engineers. As per agreement, the mould was to remain with the job worker as

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long as work was being sent to him.

After four years a departmental audit team that visited the job worker noticed
the mould and traced it to Genie Engineers. GST was demanded from Genie
Engineers for taking ITC without receiving the mould and furthermore for not
bringing the mould back after three years of delivery to the job worker.

How should they respond to this?

5. Sudama Industries Ltd., registered in the State of Jammu & Kashmir,
manufactures plastic pipes for other suppliers on job-work basis.

On 10th January, Plasto Manufacturers (registered in the State of Himachal

Pradesh) sent plastic worth ` 4 lakh and moulds worth ` 50,000, free of cost, to
Sudama Industries Ltd. to make plastic pipes. Sudama Industries Ltd. also used
its own material - a special type of lamination material for coating the pipes -
worth ` 1 lakh in the manufacture of pipes. It raised an invoice of ` 2 lakh as job
charges for making pipes and returned the manufactured pipes through delivery
challan to Plasto Manufacturers on 20th October in the same financial year.
The same quality and quantity of plastic pipes, as was made for Plasto
Manufacturers, were made by Sudama Industries Ltd. from its own raw material and
sold to Solid Pipes (registered in Jammu and Kashmir) for ` 7.5 lakh on 20th October.
Examine the scenario and offer your views on the following issues with
reference to the provisions relating to job work under the GST laws:
(i) Is there any difference between the manufacture of plastic pipes by
Sudama Industries Ltd. for Plasto Manufacturers and for Solid Pipes?
(ii) Whether Sudama Industries can use its own material even when it is
manufacturing the plastic pipes on job-work basis?
(iii) Whether sending the plastic and moulds to Sudama Industries Ltd. by
Plasto Manufacturers is a supply and a taxable invoice needs to be issued
for the same?
(iv) Whether Sudama Industries should include the value of free of cost plastic
and moulds supplied by Plasto Manufacturers in its job charges?

6. Alok Pvt. Ltd., a registered manufacturer, sent steel cabinets worth ` 50 lakh
under a delivery challan to M/s Prem Tools, a registered job worker, for job

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1.22 GOODS AND SERVICES TAX

work on 28th January. The scope of job work included mounting the steel
cabinets on a metal frame and sending the mounted panels back to Alok Pvt.
Ltd. The metal frame is to be supplied by M/s Prem Tools. M/s Prem Tools has
agreed to a consideration of ` 5 lakh for the entire mounting activity including
the supply of metal frame. During the course of mounting activity, metal waste
is generated which is sold by M/s. Prem Tools for ` 45,000. M/s Prem Tools sent
the steel cabinets mounted on the metal frame to Alok Pvt. Ltd. on 3rd December
in the same financial year.

Assuming GST rate for metal frame as 28%, for metal waste as 12% and standard
rate for services as 18%, you are required to compute the GST liability of M/s Prem
Tools. Also, give reason(s) for inclusion or exclusion of the value of cabinets in the
job charges for the purpose of payment of GST by M/s Prem Tools.
7. Bedi Manufacturers, a registered person, instructs its supplier to send the capital
goods directly to Rajesh Enterprises, who is a job worker, outside its factory
premises for carrying out certain operations on the goods. The goods were sent
by the supplier on 10th April and were received by the job worker on 15th April.
Rajesh Enterprises carried out the job work, but did not return the capital goods
to their principal - Bedi Manufacturers. Discuss whether Bedi Manufacturers are
eligible to retain the input tax credit availed by them on the capital goods. What
action under the GST Act is required to be taken by Bedi Manufacturers.
What would be your answer if in place of capital goods, jigs and fixtures are
supplied to the job worker and the same has not been returned to the principal?
8. Nandeeshwar Manufacturers, a registered person, sends certain category of yarn
for processing to the job worker in January. The job worker undertakes the
processing work on the yarn as per the requirement of Nandeeshwar
Manufacturers. During the process, the job worker uses his own material also. The
processed yarn is sold by Nandeeshwar Manufacturers directly from the job
worker’s premises in the month of March. The balance quantity of yarn and waste
material is sent back by the job worker to Nandeeshwar Manufacturers in April.

The accountant of job worker is of the opinion that since the job worker is using
his own material also in the processing, the supply being made by it to
Nandeeshwar Manufacturers is in the nature of supply of goods as well as services.
Do you agree with the opinion of accountant of the job worker?

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ANSWERS/HINTS
1. The goods can be supplied directly from the place of business of job worker
without declaring it as additional place of business in two circumstances
namely (i) where the job worker is a registered taxable person or (ii) where
the principal is engaged in supply of such goods as may be notified by the
Commissioner.
2. If the inputs or capital goods are not received back by the principal or are not
supplied from the place of business of job worker within the prescribed time
limit, it would be deemed that such inputs or capital goods had been supplied
by the principal to the job worker on the day when the said inputs or capital
goods were sent out by the principal (or on the date of receipt by the job
worker where the inputs or capital goods were sent directly to the place of
business of job worker). Thus, the principal would be liable to pay tax
accordingly along with interest. Further, if the job worker is registered, when
the processed goods are sent back by it to the principal, the same shall also
be considered as a supply over and above the charges for job work.
3. It is completely the responsibility of the principal to maintain proper accounts
of job work related inputs and capital goods.
4. Genie Engineers should reply on the following lines:
Under section 19(6), the principal may take ITC on capital goods sent to a job
worker for job work without being first brought to his place of business.
The capital goods sent for job work should either be returned to the principal
or must be supplied from the job worker’s premises within 3 years [extendible
by another 2 years] from sending them to the job worker or direct receipt by
the job worker from the supplier. If the above time-lines are not met, it is
deemed that the capital goods were supplied by the principal to the job
worker (in other words, tax will be payable on them) on the day they were
sent out to the job worker [Section 19(6)].
However, sub-section (7) of section 19 provides that the time-limit of three
years in sub-section (6) for bringing back the capital goods from the job
worker does not apply to moulds.

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1.24 GOODS AND SERVICES TAX

Accordingly, Genie Engineers have correctly availed the ITC in respect of the
moulds delivered to their job worker and not brought back even after
completion of four years.
5. (i) As per section 2(68), job work means any treatment or process
undertaken by a person on goods belonging to another registered
person and the expression “job worker” shall be construed accordingly.
The registered person on whose goods (inputs or capital goods) job
work is performed is called the principal. Thus, the job worker is
expected to work on the goods sent by the principal.
Therefore, when the goods are manufactured by Sudama Industries Ltd.
for Plasto Manufacturers, it is job work as the process is undertaken on
inputs (plastic and moulds) supplied by the principal (Plasto
Manufacturers). However, when goods are manufactured for Solid
Pipes, it is manufacture by Sudama Industries Ltd on own account as
the pipes are manufactured from their own raw material. Further,
processing or treatment on job work basis is a supply of service in terms
of para 3 of Schedule II to the CGST Act, 2017 and manufacture and
selling of pipes on own account is a supply of goods.
(ii) It has been clarified vide Circular No. 38/12/2018 GST dated 26.03.2018
that the job worker, in addition to the goods received from the
principal, can use his own goods for providing the services of job work.
(iii) Section 143 provides that the registered principal may, without
payment of tax, send inputs or capital goods to a job worker for job
work. Subsequently, on completion of the job work, the principal shall
either bring back the goods to his place of business or supply (including
export) the same directly from the place of business/ premises of the
job worker within one year in case of inputs or within three years in case
of capital goods (except moulds and dies, jigs and fixtures or tools).
Thus, the provision relating to return of goods is not applicable in case
of moulds, dies, jigs, fixtures and tools.
If the time frame of one year/ three years for bringing back or further
supplying the inputs/ capital goods is not adhered to, the activity of
sending the goods for job work shall be deemed to be a supply by the
principal on the day when the said inputs/ capital goods were sent out

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by him. Thus, essentially, sending goods for job work is not a supply as
such, but it acquires the character of supply only when the inputs/
capital goods sent for job work are neither received back by the
principal nor supplied further by the principal from the place of
business/ premises of the job worker within one/ three years of being
sent out.
Therefore, the activity of sending of plastic and moulds by Plasto
Manufacturers to Sudama Industries Ltd. (job worker) is not supply as
the manufactured pipes are received back within the stipulated time
and the provisions relating to return of goods are not applicable in case
of moulds.
Rule 45 provides that the inputs, semi-finished goods or capital goods
being sent for job work shall be sent under the cover of a delivery
challan issued by the principal.

Therefore, Plasto Manufacturers need not issue a taxable invoice for

sending the inputs to Sudama Industries Ltd. but should send the inputs
under the cover of a challan.

(iv) As per section 15(2)(b), 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, is includible in the value of supply. However,
Sudama Industries Ltd. should not include the value of free of cost
plastic and moulds supplied by Plasto Manufacturers in its job charges
as Sudama Industries Ltd. is manufacturing the plastic pipes on job work
basis. The scope of supply of Sudama Industries Ltd. is to manufacture
plastic pipes from the raw material supplied by the Plasto
Manufacturers. Thus, at no point of time was Sudama Industries Ltd.
(supplier of job work service) is liable to pay for the raw material and
therefore, the value thereof should not be included in its job charges
even though the same has been incurred by Plasto Manufacturers
(recipient of job work service).
6. As per para 3 of Schedule II to the CGST Act, any treatment or process which
is applied to another person’s goods is a supply of services and accordingly
is subject to GST rate applicable for services.

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1.26 GOODS AND SERVICES TAX

In the given case, M/s Prem Tools (job worker) undertakes the process of
mounting the steel cabinets of Alok Pvt. Ltd. (principal) on metal frames. In
view of para 3 of Schedule II to the CGST Act cited above, the mounting
activity classifies as a service even though the metal frames are also supplied
as a part of the mounting activity. Accordingly, the job charges will be
chargeable to GST at a rate of 18%, which is the applicable rate for services.
Further, the value of steel cabinets will not be included in the value of taxable
supply made by M/s Prem Tools as the supply of cabinets does not fall within
the scope of supply to be made by M/s Prem Tools. M/s Prem Tools is only
required to mount the steel cabinets, which are to be supplied by Alok Pvt.
Ltd., on metal frames, which are to be supplied by it.
As regards sale of waste generated during the job work, since M/s Prem Tools
is registered, the tax leviable on the supply will have to be paid by it in terms
of section 143(5). Such supply will be treated as supply of goods and subject
to GST rate applicable for metal waste.
Accordingly, the GST liability of M/s Prem Tools will be computed as under:

Particulars Amount (`)

Job charges 5,00,000

GST @ 18% (A) 90,000

Sale of metal waste 45,000

GST @ 12% (B) 5,400

Total GST payable (A) + (B) 95,400

7. As per section 19(5), the principal is entitled to take input tax credit of
capital goods sent for job work even if the said goods are directly sent to
job worker.
Further, section 19(6) stipulates that where the capital goods sent directly
to a job worker are not received back by the principal within a period of 3
years of the date of receipt of capital goods by the job worker, it shall be
deemed that such capital goods had been supplied by the principal to the

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job worker on the day when the said capital goods were received by the
job worker.

In view of aforementioned provisions, Bedi Manufacturers are eligible to

retain the input tax credit availed by them on the capital goods.
However, if the capital goods are not returned by Rajesh Enterprises within
3 years from 15 th April (date of receipt of capital goods by job worker), it
shall be deemed that such capital goods had been supplied by Bedi
Manufacturers to Rajesh Enterprises on 15 th April and Bedi Manufacturers
shall be liable to pay the tax along with applicable interest.
However, there is no time limit for return of moulds and dies, jigs and
fixtures or tools sent out to a job worker for job work [Section 19(7)].

However, if Rajesh Enterprises does not return the jigs and fixtures to Bedi
Manufacturers, it shall not be considered as a supply of jigs and fixtures
to Rajesh Enterprises by Bedi Manufacturers. In this case also, Bedi
Manufacturers will be eligible to retain the input tax credit availed by them.
8. No, the opinion of the accountant of the job worker is not correct. Section
7(1A) 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. Any
processing activity carried on any other person’s goods is treated as supply
of service in terms of Schedule II. Circular No. 38/12/2018 GST dated
26.03.2018 has also clarified that 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 are 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 Nandeeshwar Manufacturers.

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 ASSESSMENT & AUDIT 17.21

TEST YOUR KNOWLEDGE

1. Is summary assessment order to be necessarily passed against the registered
person?
2. Whether principal of natural justice is must to be followed before passing
assessment order against the unregistered person?
3. Explain in what cases, assessment order passed by proper officer may be
withdrawn under CGST Act, 2017?
4. Explain the difference between Audit by Tax Authorities under section 65 and
Special Audit under section 66 of the CGST Act, 2017.
5. Explain the recourse that may be taken by the officer in case proper explanation
is not furnished for the discrepancy detected in the return filed, while
conducting scrutiny of returns under section 61 of the CGST Act, 2017.
6. Write a brief note on Summary Assessment in certain special cases as per
section 64 of the CGST Act, 2017.
7. Kulbhushan & Sons has entered into a contract to supply a consignment of
certain taxable goods. However, since it is unable to determine the value of the
goods to be supplied by it, it applies for payment of tax on such goods on a
provisional basis along with the required documents in support of its request.
On 12thJanuary, the Assistant Commissioner of Central Tax issues an order
allowing payment of tax on provisional basis indicating the value on the basis
of which the assessment is allowed on provisional basis and the amount for
which the bond is to be executed and security is to be furnished.

Kulbhushan & Sons complies with the same and supplies the goods on
25thJanuary thereafter paying the tax on provisional basis in respect of said
consignment on 19thFebruary.
Consequent to the final assessment order passed by the Assistant
Commissioner of Central Tax on 21stMarch, a tax of ` 1,80,000 becomes due on
the consignment.
Kulbhushan & Sons pays the tax due on 9thApril. Determine the interest
payable, if any, by Kulbhushan & Sons in the above case.

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1.22 GOODS AND SERVICES TAX

Assuming all the other facts remaining the same, if consequent to the final
assessment order passed on 21stMarch, a tax of ` 4,20,000 becomes refundable
on the consignment, refund of which is applied by Kulbhushan & Sons on
9thApril and tax was refunded to it on 5thJune, determine the interest receivable,
if any, by Kulbhushan & Sons in the given case.

ANSWERS/HINTS
1. No. In certain cases, like when goods are under transportation or are stored
in a warehouse, and the registered person in respect of such goods cannot
be ascertained, the person in charge of such goods shall be deemed to be
the registered person and will be assessed to tax.
2. Yes, principal of natural justice is must to be followed before passing
assessment order against an unregistered person seeking to impose any
financial burden on him.
3. Assessment order passed by the proper officer may be withdrawn in following
cases:-
(i) Assessment of non-filers of returns-The best judgement order passed
by the proper officer under section 62 of the CGST Act shall
automatically stand withdrawn where a registered person files a valid
return within 60 days of the service of the best judgment assessment
order. However, the liability for payment of interest under section 50(1)
of the CGST Act, 2017or for payment of late fee under section 47 of the
CGST Act, 2017 shall continue.
However, where the registered person fails to furnish a valid return
within 60 days of the service of the assessment order, he may
furnish the same within a further period of 60 days on payment of
an additional late fee of ` 100 for each day of delay beyond 60 days
of the service of the said assessment order and in case he furnishes
valid return within such extended period, the said assessment order
shall be deemed to have been withdrawn, but the liability to pay
interest under section 50(1) or to pay late fee under section 47 shall
continue.

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(ii) Summary assessment-As per section 64(2) of the CGST Act, 2017,a
taxable person against whom a summary assessment order has been
passed can apply for its withdrawal to the jurisdictional Additional/ Joint
Commissioner within 30 days of the date of receipt of the order.
If the said officer finds the order erroneous, he can withdraw it and
direct the proper officer to carry out determination of tax liability in
terms of section 73 or 74 of the CGST Act. The Additional/ Joint
Commissioner can follow a similar course of action on his own motion
if he finds the summary assessment order to be erroneous.
4. Audit by Tax authorities under section 65 of the CGST Act, 2017:-
1 The Commissioner or any officer authorized by him can undertake audit
of any registered person for such period, at such frequency and in such
manner as may be prescribed.
2 The audit shall be completed within a period of 3 months from the date
of commencement of audit. However, the Commissioner can extend this
period by a further period upto maximum 6 months.
Special Audit under section 66 of the CGST Act, 2017:-

1 The registered person can be directed to get his records including

books of account examined and audited by a chartered accountant or
a cost accountant during any stage of scrutiny, inquiry, investigation or
any other proceedings; depending upon the complexity of the case. Any
officer not below the rank of Assistant Commissioner may order special
audit, with the prior approval of the Commissioner, if he is of the
opinion that the value has not been correctly declared or the credit
availed is not within the normal limits.
2 Audit is to be completed within 90 days. However, the Assistant
Commissioner can extend this period by a further period of 90 days.
5. If proper explanation is not furnished for the discrepancy detected in return
filed, while conducting scrutiny of returns under section 61 of the CGST Act,
2017 of a registered person, the proper officer may:
(i) conduct audit of the registered person; or

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1.24 GOODS AND SERVICES TAX

(ii) direct the registered person to get his records including books of
account examined and audited by a Chartered Accountant or a Cost
Accountant nominated for this purpose by the Commissioner; or.
(iii) exercise the powers of inspection, search and seizure with respect to
the registered person, or

(iv) proceed to determine the tax and other dues of the registered person
under Sections 73 or 74 of the Act.
6. As per section 64 of the CGST Act, 2017, summary assessments can be
initiated to protect the interest of revenue with the previous permission of
Additional/Joint Commissioner when the proper officer has evidence that a
taxable person has incurred a liability to pay tax under the Act, and any delay
by him in passing an assessment order may adversely affect the interest of
revenue.
Additional/Joint Commissioner may withdraw summary assessment order on
an application filed by taxable person within 30 days from the date of receipt
of order or on his own motion, if he finds such order to be erroneous and
may instead follow the procedures laid down in section 73 or section 74 to
determine the tax liability of such taxable person.
Where the taxable person to whom the liability pertains is not ascertainable
and such liability pertains to supply of goods, the person in charge of such
goods shall be deemed to be the taxable person liable to be assessed and
liable to pay tax and any other amount due under this section.
7. Section 60(4) of the CGST Act, 2017 stipulates that where the tax liability as
per the final assessment is higher than under provisional assessment i.e. tax
becomes due consequent to order of final assessment, the registered person
shall be liable to pay interest on tax payable on supply of goods but not paid
on the due date, at the rate specified under section 50(1) [18% p.a.], from the
first day after the due date of payment of tax in respect of the goods supplied
under provisional assessment till the date of actual payment, whether such
amount is paid before or after the issuance of order for final assessment.
In the given case, due date for payment of tax on goods cleared on
25th January under provisional assessment is 20th February.

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In view of the provisions of section 60(4), in the given case, Kulbhushan &
Sons is liable to pay following interest in respect of the consignment of goods
supplied:
= ` 1,80,000 × 18% × 48/365
= ` 4,261 (rounded off)
If, in the given case, it is assumed that consequent to the final assessment
order passed on 21 st March, a tax of ` 4,20,000 becomes refundable to
Kulbhushan & Sons, answer would be as follows:

Section 60(5) of the CGST Act, 2017 stipulates that where the tax liability as
per the final assessment is less than in provisional assessment i.e. tax becomes
refundable consequent to the order of final assessment, the registered person
shall be paid interest at the rate specified under section 56 [6% p.a.] from the
date immediately after the expiry of 60 days from the date of receipt of
application under section 54(1) till the date of refund of such tax.

However, since in the given case, refund has been made (05thJune) within 60
days from the date of receipt of application of refund (09thApril), interest is
not payable to Kulbhushan& Sons on tax refunded.

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 1.18 18.18 GOODS AND SERVICES TAX

TEST YOUR KNOWLEDGE

1. Explain the situation in which access to business premises is allowed under

section 71. Also, list the records which are to be produced during access to
business premises.
2. Explain the safeguards provided under section 69 to a person who is placed
under arrest.

3. Who can order for carrying out ‘inspection’ and under what circumstances?
4. Who can order for search and seizure under the provisions of the CGST Act?
5. Describe the powers that can be exercised by an officer during a valid search.
6. Discuss the responsibilities of the person to whom summons has been issued.
7. Explain the meaning of ‘arrest’.
8. State the circumstances when the proper officer can authorize ‘arrest’ of any
person under the CGST Act.

ANSWERS/HINTS

1. The access to any place of business of a registered person is allowed to a

proper officer who authorized by an officer of the rank of Joint Commissioner
or higher for the purposes of carrying out any audit, scrutiny, verification and
checks as may be necessary to safeguard the interest of revenue. During such
access, the officers can inspect the books of accounts, documents, computers,
computer programs, computer software and such other things as may be
required.
It is the duty of the persons in charge of such premises to furnish the required
documents within fifteen working days from the day when such demand is
made. Similarly, the persons in charge of business premises are also duty
bound to furnish such documents to the audit party deputed by the proper
officer or the Chartered Accountant or Cost Accountant, who has been
deputed by the Commissioner to carry out special audit. The following
records are covered by this provision and are to be produced, if called for.

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(i) the records prepared and maintained by the registered person and
declared to the proper officer in the prescribed manner.

(ii) trial balance or its equivalent.

(iii) statements of annual financial accounts, duly audited.

(iv) cost audit report, if any.

(v) the income-tax audit report, if any.

(vi) any other relevant record.

2. Section 69 provides following safeguards to a person who is placed under arrest:

(a) If a person is arrested for a cognizable offence, he must be informed of the

grounds of arrest and be produced before a magistrate within 24 hours.

(b) If a person is arrested for a non-cognizable offence, he shall be admitted

to bail or in default of bail, forwarded to the custody of the Magistrate.

(c) All arrest must be in accordance with the provisions of the Code of Criminal
Procedure relating to arrest in terms of section 69(3).

3. As per section 67, an inspection can be carried out by an officer of CGST/SGST

only upon a written authorization given by an officer of the rank of Joint
Commissioner or above. A Joint Commissioner or an officer higher in rank can
give such authorization only if he has reasons to believe that the person
concerned has done one of the following to evade tax:

i. suppressed any transaction of supply;

ii. suppressed stock of goods in hand;

iii. claimed excess input tax credit;

iv. contravened any provision of the CGST Act to evade tax;

v. a transporter or an owner/operator of a warehouse/godown/any other

place has kept goods which have escaped payment of tax or has kept his
accounts or goods in a manner that is likely to cause evasion of tax.

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4. An officer of the rank of Joint Commissioner or above can authorize an officer in

writing to carry out search and seize goods, documents, books or things. Such
authorization can be given only where the Joint Commissioner/an officer above
his rank has reasons to believe that any goods liable to confiscation or any
documents or books or things relevant for any proceedings are hidden in any
place. The Joint Commissioner/an officer above his rank empowered to
authorize any officer to carry out search and seizure can himself also carry out
search and seize such goods, documents or books or things.

5. An officer carrying out a search has the power to search for and seize goods
(which are liable to confiscation) and documents, books or things (relevant
for any proceedings under the CGST Act) from the premises searched. During
search, the officer has the power to break open the door of the premises
authorized to be searched if access to the same is denied. Similarly, while
carrying out search within the premises, he can break open any almirah or
box if access to such almirah or box is denied and in which any goods,
account, registers or documents are suspected to be concealed. He can also
seal the premises if access to it denied. In case where it is not practicable to
seize any such goods, the officer can issue an order restricting the owner of
the goods to not remove / part / deal with the goods except with his prior
permission. The officer can also dispose of goods seized which are specified
by the Government in a notification having regard to the nature of such
goods.

6. A person who is issued summons is legally bound to attend either in person

or by an authorized representative and he is bound to state the truth before
the officer who has issued the summons upon any matter which is the subject
matter of examination and to produce such documents and other things as
may be required.

7. The term ‘arrest’ has not been defined in the CGST Act. However, as per
judicial pronouncements, it denotes ‘the taking into custody of a person
under some lawful command or authority’. In other words, a person is said to
be arrested when he is taken and restrained of his liberty by power or colour
of a lawful warrant.

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8. The Commissioner can authorize an officer to arrest a person if he has reasons

to believe that the person has committed an offence attracting a punishment
prescribed under section 132(1) (a), (b), (c), (d) or section 132(2) and the tax
evaded / input tax credit wrongly availed or utilized or refund wrongly taken
exceeds ` 2 crore. This essentially means that a person can be arrested only
where the tax evasion is more than ` 2 crore and the offences are specified
offences namely, making supply without any invoice; issue of invoice without
any supply; amount collected as tax but not paid to the Government beyond
a period of 3 months and taking input tax credit without receiving goods and
services. However, the monetary limit shall not be applicable if the offences
are committed again (even after being convicted earlier), i.e. repeat offender
of the specified offences can be arrested irrespective of the tax amount
involved in the case.

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 1.4819.48 GOODS AND SERVICES TAX

adjudicating authority for insolvency proceedings which are initiated on

application from any stakeholder of the entity like the firm, creditors,
debtors, employees etc. and passes an order approving the resolution plan.
As the proceedings conducted under IBC also adjudicate the government
dues pending under the CGST Act or under existing laws against the
corporate debtor, the same appear to be covered under the term ‘other
proceedings’ in section 84.
[Circular No. 187/19/2022 GST dated 27.12.2022]

TEST YOUR KNOWLEDGE

1. Mohan Enterprises is entitled for exemption from tax under GST law. However,
it collected tax from its buyers worth ` 50,000 in the month of August. It has
not deposited the said amount collected as GST with the Government. You are
required to brief to Mohan Enterprises the consequences of collecting tax, but
not depositing the same with Government as provided under section 76.
2. Discuss briefly the time limit for issue of show cause notice as contained under
sections 73 and 74.

3. Is there any time limit prescribed for adjudication of the cases under CGST Act,
2017? If yes, discuss the same.
4. A person is chargeable with tax in case of fraud. He decides to pay the amount
of demand alongwith interest before issue of notice. Is there any immunity
available to such person?
5. Briefly discuss the modes of recovery of tax available to the proper officer.

6. Enlist the circumstances for which a show cause notice can be issued by the
proper officer under section 73. Specify the time limit for issuance of such show
cause notice as also the time period for issuance of order by the proper officer
under section 73.
7. Subharti Enterprises collected GST on the goods supplied by it from its
customers on the belief that said supply is taxable. However, later it discovered
that goods supplied by it are exempt from GST.

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 DEMANDS AND RECOVERY 19.49

The accountant of Subharti Enterprises advised it that the amount mistakenly

collected by Subharti Enterprises representing as tax was not required to be
deposited with Government. Subharti Enterprises has approached you for
seeking the advice on the same. You are required to advise it elaborating the
relevant provisions.
8. Anant & Co. self-assessed its CGST liability as ` 90,000 for the month of April,
but failed to make the payment.
Subsequently the Department initiated penal proceedings against Anant & Co.
for recovery of penalty under section 73 for failure to pay GST and issued show
cause notice on 10th August which was received by Anant & Co. on 14th August.
Anant & Co. deposited the tax along with interest on 25th August and informed
the department on the same day.

Department is contending that he is liable to pay a penalty of ` 45,000 (i.e.

50% of ` 90,000) under the CGST Act.
Examine the correctness of the stand taken by the Department with reference
to the provisions of the CGST Act. Explain the relevant provisions in brief.

ANSWERS/HINTS

1. It is mandatory to pay amount, collected from other person representing tax

under GST law, to the Government. Every person who has collected from any
other person any amount as representing the tax under GST law, and has not
paid the said amount to the Government, shall forthwith pay the said amount
to the Government, irrespective of whether the supplies in respect of which
such amount was collected are taxable or not.
For any such amount not so paid, proper officer may issue SCN for recovery
of such amount and penalty equivalent to amount specified in notice.
The proper officer shall, after considering the representation, if any, made by
the person on whom SCN is served, determine the amount due from such
person and thereupon such person shall pay the amount so determined
alongwith interest at the rate specified under section 50 from the date such
amount was collected by him to the date such amount is paid by him to the
Government.

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 1.5019.50 GOODS AND SERVICES TAX

2. The provisions relating to ‘relevant date’ as contained in CGST Act, 2017 are
as under:
(i) In case of section 73 (cases other than fraud/suppression of facts/willful
misstatement), the time-limit for issuance of SCN is 2 years and
9 months from the due date of filing Annual Return for the Financial
Year to which the demand pertains or within 2 years and 9 months from
the date of erroneous refund.
(ii) In case of section 74 (cases involving fraud/suppression of facts/willful
misstatement), the time-limit for issuance of SCN is 4 years and
6 months from the due date of filing of Annual Return for the Financial
Year to which the demand pertains or within 4 years and 6 months from
the date of erroneous refund.

3. The provisions relating to time-limit for adjudication of cases as contained in

section 73 and 74 are as under:
(i) In case of section 73 (cases other than fraud/suppression of facts/willful
misstatement), the time limit for adjudication of cases is
3 years from the due date for filing of annual return for the financial
year to which demand relates to or within 3 years from the date of
erroneous refund. [Section 73(10)].
(ii) In case of section 74 (cases of fraud/suppression of facts/willful
misstatement), the time limit for adjudication is 5 years from the due
date for filing of annual return for the financial year to which demand
relates to or within 5 years from the date of erroneous refund. [Section
74(10)].

4. Yes. Person chargeable with tax, shall have an option to pay the amount of
tax along with interest and penalty equal to 15% per cent of the tax involved,
as ascertained either on his own or ascertained by the proper officer, and on
such payment, no notice shall be issued with respect to the tax so paid
[Section 74(6)].
5. The proper officer may recover the dues in following manner:

(a) Deduction of dues from the amount owned by the tax authorities
payable to such person.

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 DEMANDS AND RECOVERY 19.51

(b) Recovery by way of detaining and selling any goods belonging to such
person;
(c) Recovery from other person, from whom money is due or may become
due to such person or who holds or may subsequently hold money for
or on account of such person, to pay to the credit of the Central or a
State Government;

(d) Distrain any movable or immovable property belonging to such person,

until the amount payable is paid. If the dues not paid within 30 days,
the said property is to be sold and with the proceeds of such sale the
amount payable and cost of sale shall be recovered.
(e) Through the Collector of the district in which such person owns any
property or resides or carries on his business, as if it was an arrear of
land revenue.
(f) By way of an application to the appropriate Magistrate who in turn shall
proceed to recover the amount as if it were a fine imposed by him.

(g) By enforcing the bond/instrument executed under this Act or any rules
or regulations made thereunder.
(h) CGST arrears can be recovered as an arrear of SGST and vice versa
[Section 79].
6. As per section 73, a show cause notice can be issued by the proper officer if
it appears to him that:
 tax has not been paid; or
 tax has been short paid; or
 tax has been erroneously refunded; or

 input tax credit has been wrongly availed or utilized,

for any reason other than the reason of fraud or any wilful misstatement or
suppression of facts to evade tax.

The notice should be issued at least 3 months prior to the time limit specified
for passing the order determining the amount of tax, interest and any penalty
payable by defaulter [Sub-section (2) of section 73].

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The order referred herein has to be passed within three years from the due
date for furnishing the annual return for the financial year to which the tax
not paid or short paid or input tax credit wrongly availed or utilised relates to
or within three years from the date of erroneous refund [Sub-section (10) of
section 73].
Thus, the time-limit for issuance of show cause notice is 2 years and 9 months
from the due date of filing annual return for the financial year to which the
demand pertains or within 2 years and 9 months from the date of erroneous
refund. As per section 44(1), the due date of filing annual return for a financial
year is 31st day of December following the end of such financial year.
7. The provisions of section 76 make it mandatory on Subharti Enterprises to
pay amount collected from other person representing tax under this Act, to
the Government.
Section 76 stipulates that notwithstanding anything to the contrary contained
in any order or direction of any Appellate Authority or Appellate Tribunal or
Court or in any other provisions of the CGST Act or the rules made thereunder
or any other law for the time being in force, every person who has collected
from any other person any amount as representing the tax under this Act,
and has not paid the said amount to the Government, shall forthwith pay the
said amount to the Government, irrespective of whether the supplies in
respect of which such amount was collected are taxable or not.

Where any amount is required to be paid to the Government as mentioned

above, and which has not been so paid, the proper officer may serve on the
person liable to pay such amount a notice requiring him to show cause as to
why the said amount as specified in the notice, should not be paid by him to
the Government and why a penalty equivalent to the amount specified in the
notice should not be imposed on him under the provisions of this Act.
The proper officer shall, after considering the representation, if any, made by
the person on whom show cause notice (SCN) is served, determine the
amount due from such person and thereupon such person shall pay the
amount so determined.
The person who has collected any amount as representing the tax, but not
deposited the same with the Government shall in addition to paying the said

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 DEMANDS AND RECOVERY 19.53

amount determined by the proper officer shall also be liable to pay interest
thereon. Interest is payable at the rate specified under section 50. Interest is
payable from the date such amount was collected by him to the date such
amount is paid by him to the Government.
The proper officer shall issue an order within 1 year [excluding the period of
stay order] from the date of issue of the notice. The proper officer, in his
order, shall set out the relevant facts and the basis of his decision.
8. Due date for payment of tax for the month of April is 20th May.
As per section 73, where self-assessed tax is not paid within 30 days from due
date of payment of such tax, penalty equivalent to 10% of tax or
` 10,000, whichever is higher, is payable. Thus, option to pay tax within 30
days of issuance of SCN to avoid penalty, is not available in case of self-
assessed tax.
Since in the given case, Anant & Co. has not paid the self-assessed tax within
30 days of due date [i.e. 20th May], penalty equivalent to:
(i) 10% of tax, viz., ` 9,000 (10% of ` 90,000) or
(ii) ` 10,000,
whichever is higher, is payable by him under CGST Act. Equivalent amount of
penalty is payable under SGST/UTGST Act.
Hence, the stand taken by the Department that penalty will be levied on
Anant & Co. is correct, but the amount of penalty of ` 45,000 under CGST Act
is not correct.

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 1.5419.54 GOODS AND SERVICES TAX

AMENDMENTS MADE VIDE THE FINANCE (NO. 2)

ACT, 2019
The Finance (No. 2) Act, 2019 came into force from 01.08.2019. However, the
amendments made in section 2(4) of the CGST Act vide the Finance (No. 2) Act,
2019 would become effective only from a date to be notified by the Central
Government in the Official Gazette. Such a notification has not been issued till the
date of printing of this material. Therefore, the applicability or otherwise of such
amendment for May 2024 and/or November 2024 examinations shall be
announced by the ICAI only after such notification is issued by the Central
Government.
In the table given below, the existing provisions of section 2(4) are compared with
the provisions as amended by the Finance (No. 2) Act, 2019.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the Chapter.

Existing provisions Provisions as amended by the Remarks

Finance (No. 2) Act, 2019
Section 2(4) Section 2(4) The definition of
“adjudicating authority” “adjudicating authority” means adjudicating
means any authority, any authority, appointed or authority
appointed or authorised to authorised to pass any order or proposed to be
pass any order or decision decision under this Act, but amended to
under this Act, but does not does not include the Central exclude the
include the Central Board of Board of Indirect Taxes and proposed
Indirect Taxes and Customs, Customs, the Revisional National
the Revisional Authority, the Authority, the Authority for Appellate
Authority for Advance Advance Ruling, the Appellate Authority for
Ruling, the Appellate Authority for Advance Ruling, Advance Ruling
Authority for Advance National Appellate Authority from the purview
Ruling, the Appellate for Advance Ruling, the of adjudicating
Authority, the Appellate Appellate Authority, the authority.
Tribunal and the Authority Appellate Tribunal and the
referred to in sub-section Authority referred to in sub-
(2) of section 171; section (2) of section 171;

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Act shall, so far as may be, apply as if every such person or partner or
member were himself a taxable person.

B. Change in the constitution of the firm or AOP [Section 94(2)]:

 Where a change has occurred in the constitution of a firm or an
association of persons, the partners of the firm or members of
association, as it existed before and as it exists after the reconstitution,
shall, without prejudice to the provisions of section 90, jointly and
severally, be liable to pay tax, interest or penalty due from such firm or
association for any period before its reconstitution.
C. Dissolution of firm/AOP or partition of HUF [Section 94(3)]:
 The provisions of section 94(1) shall, so far as may be, apply where the
taxable person, being a firm/AOP is dissolved or where the taxable
person, being an HUF, has effected partition with respect to the
business carried on by it and accordingly references in that sub-
section to discontinuance shall be construed as reference to
dissolution or to partition.

Explanation — For the purposes of this Chapter, —

(i) A Limited Liability Partnership formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 shall also be
considered as a firm.
(ii) Court: means the District Court, High Court or Supreme Court.

TEST YOUR KNOWLEDGE

1. Avataar Industries, a registered person under GST, has sold whole of its
business to Rolex Manufacturers. Determine the person liable to pay GST,
interest or any penalty under GST law [determined before sale, but still
unpaid] due from Avataar Industries upto the time of such transfer.
2. ABC Manufacturers Ltd. engages Raghav & Sons as an agent to sell goods on
its behalf. Raghav & Sons sells goods to Swami Associates on behalf of ABC
Manufacturers Ltd. Determine the liability to pay GST payable on such goods
as per the provisions of section 86.

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3. A person, liable to pay GST, interest and penalty under GST law, dies.
Determine the person liable to pay the GST, interest and penalty due from
such person under GST law determined after his death if the business carried
on by such person is continued after his death by his legal representative.
4. In the question 3. above, would your answer be different if the business
carried on by the person who has died, is discontinued after his death.
5. What happens to the GST liability when the estate of a taxable person is
under the control of Court of Wards?

6. Discuss the liability to pay tax in case of an amalgamation/merger, under

section 87.
7. Discuss the liability to pay tax, interest or penalty on death of a person liable
to pay tax, interest or penalty as per the provisions of section 93(1).
8. With reference to the provisions of CGST Act, 2017, explain the liability of
partners of firm to pay tax?

9. Explain the provisions relating to liability for GST in case of company in

liquidation (section 88).
10. Discuss the liability of the retiring partner of a firm to pay any tax, interest or
penalty, if any, leviable on the firm under CGST/ lGST/ SGST Act.

ANSWERS/HINTS

1. Where a taxable person, liable to pay tax under this Act, transfers his
business in whole or in part, by sale, gift, lease, leave and license, hire or in
any other manner whatsoever, the taxable person and the person to whom
the business is so transferred shall, jointly and severally, be liable wholly or
to the extent of such transfer, to pay the tax, interest or any penalty due
from the taxable person upto the time of such transfer, whether such tax,
interest or penalty has been determined before such transfer, but has
remained unpaid or is determined thereafter.
Thus, in the given case, Avataar Industries and Rolex Manufacturers shall,
jointly and severally, be liable wholly or to the extent of such transfer, to pay

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GST, interest or any penalty [determined before sale, but still unpaid] due
from Avataar Industries upto the time of such transfer.

2. As per provisions of Section 86, where an agent supplies or receives any

taxable goods on behalf of his principal, such agent and his principal shall,
jointly and severally, be liable to pay the tax payable on such goods under
this Act.
Thus, in the given case, ABC Manufacturers Ltd. and Raghav & Sons shall,
jointly and severally, be liable to pay GST payable on such goods.
3. Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
where a person, liable to pay tax, interest or penalty under this Act, dies,
then if a business carried on by the person is continued after his death by
his legal representative or any other person, such legal representative or
other person, shall be liable to pay tax, interest or penalty due from such
person under this Act, whether such tax, interest or penalty has been
determined before his death but has remained unpaid or is determined
after his death.
4. Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016,
where a person, liable to pay tax, interest or penalty under this Act, dies,
then if a business carried on by the person is discontinued, whether before
or after his death, his legal representative shall be liable to pay, out of the
estate of the deceased, to the extent to which the estate is capable of
meeting the charge, the tax, interest or penalty due from such person under
this Act, whether such tax, interest or penalty has been determined before
his death but has remained unpaid or is determined after his death.
5. Where the estate of a taxable person owning a business in respect of which
any tax, interest or penalty is payable is under the control of the Court of
Wards/Administrator General/Official Trustee/Receiver or Manager
appointed under any order of a Court, the tax, interest or penalty shall be
levied and recoverable from such Court of Wards/Administrator
General/Official Trustee/Receiver or Manager to the same extent as it would
be determined and recoverable from a taxable person.
6. Section 87 stipulates that when two or more companies are amalgamated/
merged in pursuance of an order of court or Tribunal or otherwise and the

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order is to take effect from a date earlier to the date of the order and any
two or more of such companies have supplied/ received any goods and/or
services to or from each other during the period commencing on the date
from which the order takes effect till the date of the order, then such
transactions of supply and receipt shall be included in the turnover of
supply or receipt of the respective companies and they shall be liable to pay
tax accordingly.
For the purposes of the CGST Act, 2017, the said two or more companies
shall be treated as distinct companies for the period up to the date of the
said order. The registration certificates of the said companies shall be
cancelled with effect from the date of the said order.

7. As per provision of Section 93(1), save as otherwise provided in the

Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax,
interest or penalty under CGST Act, dies, then:
 Business is continued after his death: if a business carried on by the
person is continued after his death by his legal representative or any
other person, such legal representative or other person, shall be liable
to pay tax, interest or penalty due from such person under this Act.
 Business is discontinued after his death: if the business carried on
by the person is discontinued, whether before or after his death, his
legal representative shall be liable to pay, out of the estate of the
deceased, to the extent to which the estate is capable of meeting the
charge, the tax, interest or penalty due from such person under this
Act,
whether such tax, interest or penalty has been determined before his death
but has remained unpaid or is determined after his death.

8. Section 90 explains the liability of partners of firm to pay tax as under:-

Partners of the firm jointly and severally liable to pay any tax, interest
or penalty of the firm: Notwithstanding any contract to the contrary and
any other law for the time being in force, where any firm is liable to pay any
tax, interest or penalty under this Act, the firm and each of the partners of
the firm shall, jointly and severally, be liable for such payment.

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Retiring partner liable to pay any tax, interest or penalty of the firm
due up to the date of his retirement: Where any partner retires from the
firm, he or the firm, shall intimate the date of retirement of the said partner
to the Commissioner by a notice in that behalf in writing and such partner
shall be liable to pay tax, interest or penalty due up to the date of his
retirement whether determined or not, on that date.
However, if no such intimation is given within 1 month from the date of
retirement, the liability of such partner shall continue until the date on
which such intimation is received by the Commissioner.
9. The provisions relating to liability for GST in case of company in liquidation
provided under section 88 are:-
 Where any company is being wound up whether under the orders
of a court or Tribunal or otherwise, every person appointed as a
liquidator/receiver of assets of a company shall give the intimation
of his appointment to the Commissioner within 30 days of his
appointment.
 The Commissioner shall ascertain the amount which in the opinion
of the Commissioner would be sufficient to provide for any tax,
interest or penalty which is then, or is likely thereafter to become,
payable by the company.
 He shall communicate the details of amount to the liquidator within
3 months of the receipt of intimation of appointment of liquidator.
 When any private company is wound up and any tax, interest or
penalty determined under the CGST Act on the company for any
period, whether before or in the course of or after its liquidation,
cannot be recovered, then every person who was a director of such
company at any time during the period for which the tax was due
shall, jointly and severally, be liable for the payment of such tax,
interest or penalty.

However, director shall not be liable if he proves to the satisfaction of the

Commissioner that the non-recovery cannot be attributed to any gross
neglect, misfeasance or breach of duty on his part in relation to the affairs
of the company.

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10. Where any partner retires from the firm, he or the firm, shall intimate the
date of retirement of the said partner to the Commissioner by a notice in
that behalf in writing. Such partner shall be liable to pay tax, interest or
penalty due up to the date of his retirement whether determined or not, on
that date.

However, if no such intimation is given within 1 month from the date of

retirement, the liability of such partner shall continue until the date on
which such intimation is received by the Commissioner [Section 90].

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falsifying financial records is an offence under section 122(1)(x). This offence

may also be punishable with imprisonment and fine under section 132(1)
depending on the amount of default involved and subject to specified
conditions.
5. GST implications on Mr. X

Mr. X, being a consultant of A Ltd., had adequate knowledge of the fraud and
wilful misrepresentation of the facts in terms of maintaining the financial
records and submission of information in GST returns. In fact, Mr. X himself
was filing the GST returns and was aware of the fake invoices and ineligible
input tax credit availment by the companies. Mr. X shall be liable to a penalty
in terms of the provisions of 122(3) since in the given case, he has aided or
abetted the offences specified above. This offence may also be punishable
with imprisonment and fine under section 132(1) depending on the amount
of default involved and subject to specified conditions.

If a Chartered Accountant undertakes the assignment of issuing relevant certificates

to the bank thereby certifying the turnover of A Ltd. and B Ltd., he may be held
guilty of professional misconduct. Further, he shall also be liable to a penalty in
terms of the provisions of 122(3). This offence may also be punishable with
imprisonment and fine under section 132(1) depending on the amount of default
involved and subject to specified conditions.

TEST YOUR KNOWLEDGE

1. What is the quantum of penalty for an offence mentioned under section 122(1),
122(1A) and section 122(2)?
2. Mr. X, an unregistered person under GST, purchases the goods supplied by
Mr. Y who is a registered person without receiving a tax invoice from Mr. Y and
thus helps in tax evasion by Mr. Y. A disciplinary action is taken against Mr. X
and an adhoc penalty of ` 20,000/- is imposed by passing an order without
describing contravention for which penalty is going to be imposed and without
mentioning the provisions under which penalty is going to be imposed. Should
Mr. X proceed to pay for penalty or challenge the order passed by Department?
4. Examine the implications as regards the bailability and quantum of punishment

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on prosecution, in respect of the following cases pertaining to the month of

December under CGST Act, 2017-
(i) 'X' collects ` 245 lakh as tax from its clients and deposits ` 241 lakh with
the Central Government. It is found that he has falsified financial records
and has not maintained proper records.
(ii) 'Y' collects ` 550 lakh as tax from its clients but deposits only
` 30 lakh with the Central Government.
What will be the implications with regard to punishment on prosecution of 'X'
and 'Y' for the offences? What would be the position, if 'X' and 'Y' repeat the
offences?
It may be assumed that offences are proved in the Court.
5. Discuss the cognizable and non-cognizable offences under section 132?
6. Bindusar CEO of Ashoka Solution Ltd is issued a summon to appear before the
central tax officer to produce the books of accounts of Ashoka Solution Ltd in
an enquiry conducted on said company. Determine the amount of penalty if
any that may be imposed on Bindusar under the CGST Act, 2017 if he fails to
appear before the central tax officer.

ANSWERS/HINTS

1. Section 122(1) provides that any taxable person who has committed any of
the specified offences mentioned thereunder, shall be liable to a penalty
which shall be higher of the following amounts:

(a) ` 10,000/-; or

(b) An amount equivalent to, any of the following (Applicable as the case
may be) –

(i) Tax evaded; or

(ii) Tax not deducted under section 51 or short deducted or deducted

but not paid to the Government; or

(iii) Tax not collected under section 52 or short collected or collected

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but not paid to the Government; or

(iv) Input tax credit availed of or passed on or distributed irregularly;

or

(v) Refund claimed fraudulently

Further, section 122(1A) provides that any person who retains the benefit of
a transaction covered under clauses (i), (ii), (vii) or clause (ix) of section 122(1)
and at whose instance such transaction is conducted, shall be liable to a
penalty of an amount equivalent to the tax evaded or input tax credit availed
of or passed on.

Moreover, section 122(2) provides that if any registered person who supplies
any goods and/or services on which any tax has not been paid or short paid
or erroneously refunded or where the ITC has been wrongly availed or
utilized:-

(i) for any reason other than the reason of fraud or any willful
misstatement or suppression of facts to evade tax, he shall be liable to
a penalty of ` 10,000 or 10% of the tax due from such person, whichever
is higher.

(ii) for reason of fraud, or any willful misstatement or suppression of facts

to evade tax, penalty shall be equal to ` 10,000 or the tax due from such
person, whichever is higher.

2. The levy of penalty is subject to a certain disciplinary regime which is based

on jurisprudence, principles of natural justice and principles governing
international trade and agreements. Such general discipline is enshrined in
section 126. Accordingly—

• no penalty is to be imposed without affording an opportunity of being

heard to the person proceeded against to rebut the allegations levelled
against him,

• the penalty is to depend on the totality of the facts and circumstances

of the case, the penalty imposed is to be commensurate with the degree
and severity of breach of the provisions of the law or the rules alleged,

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• the nature of the breach is to be specified clearly in the order imposing

the penalty,

• the provisions of the law under which the penalty has been imposed is
to be specified.

Since the order suffers from lack of clarity about nature of breach which has
taken place and about applicable law under which penalty has been imposed,
such order passed by the department should be challenged.

4. (i) Failure to pay any amount collected as tax beyond 3 months from due
date of payment is a specified offence as per clause (d) of Section
132(1).

In the present case, failure to deposit the tax ` 4 lakh (` 245 lakh –
` 241 lakh). As the amount of failure does not exceed ` 200 lakh
therefore, failure to deposit ` 4 lakh collected as tax by ‘X’ will not be
punishable with imprisonment as per section 132(1).

Further, falsification of financial records by ‘X’ is a specified offence as

per section 132(1)(d) and punishable with imprisonment upto 6 months
or with fine or both as per clause (iv) of section 132(1) assuming that
falsification of records is with an intention to evade payment of tax due
under the CGST Act, 2017 and the said offence is bailable in terms of
section 132(4).

(ii) Failure to pay any amount collected as tax beyond 3 months from due
date is punishable with imprisonment upto 5 years and with fine, if the
amount of tax evaded exceeds ` 500 lakh in terms of section 132(1)(d)
read with clause (i) of section 132(1).

Since the amount of tax evaded by ‘Y’ exceeds ` 500 lakh (` 550 lakh -
` 30 lakh), ‘Y’ is punishable with an imprisonment for a term which may
extend to 5 years and with fine. It has been assumed that amount of `
520 lakh collected as tax is not paid to the Government beyond 3
months from the due date of payment of tax.

Such offence is non-bailable in terms of section 132(5).

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If ‘X ’and ‘Y’ repeat the offence, they shall be punishable for second and for
every subsequent offence with imprisonment upto 5 years and with fine in
terms of section 132(2) of the CGST Act, 2017.

Such imprisonment shall also be of at least 6 months in the absence of special

and adequate reasons to the contrary to be recorded in the judgment of the
Court.

5. As per section 132(5), following offences are cognizable offences, provided

amount of tax evaded or input tax credit wrongly availed/ utilised or refund
wrongly taken exceeds ` 5 crores, namely:

(a) Supply without issuance of invoice with the intention to evade tax

(b) Issuance of any invoice/ bill without supply leading to wrongful

availment/ utilisation of ITC or refund of tax

(c) Availment of ITC using invoice/ bill against which no supplies have been
made or fraudulent availment of ITC without any invoice or bill.

(d) Failure to pay the amount collected as tax to the Government beyond
a period of 3 months from the due date of payment.

Further, section 132(4) provides that all offences specified under section 132
are non-cognizable offences except the cognizable offences specified as
aforesaid.

6. Sec 122(3)(d) of the CGST Act stipulates that any person who fails to appear
before the officer of central tax, when issued with a summon for appearance to
give evidence or produce a document in an enquiry is liable to a penalty which
may extend to ` 25,000. Therefore, penalty upto ` 25,000 can be imposed on
Bindusar under the CGST Act, 2017 in the given case.

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(b) an order pertaining to the seizure or retention of books of account, register

and other documents; or

(c) an order sanctioning prosecution under the Act; or

(d) an order passed under section 80 (payment of tax in instalments).

TEST YOUR KNOWLEDGE

1. Does CGST law provide for any appeal to a person aggrieved by any order or
decision passed against him by an adjudicating authority under the CGST Act?
Explain the related provisions under the CGST Act.
2. Describe the provisions relating to Departmental appeal to Appellate Authority
under section 107.
3. With reference to sections 107(6) and 112(8), specify the amount of mandatory
pre-deposit which should be made along with every appeal made before the
Appellate Authority and the Appellate Tribunal. Does making the pre-deposit
have any impact on recovery proceedings?
4. With reference to section 108, elaborate whether a CGST/SGST authority can
revise an order passed by his subordinates.
5. The Appellate Tribunal has the discretion to refuse to admit any appeal.
Examine the correctness of the above statement.
6. In an order dated 20th August issued to GH (P) Ltd., the Joint Commissioner of
CGST has confirmed IGST demand of ` 280 crore. The company is disputing
the entire demand of IGST and wants to know the amount of pre-deposit it has
to make under the IGST Act for filing an appeal before the Appellate Authority
against the order of the Joint Commissioner.
Assuming that the Appellate Authority also confirms the order of the Joint
Commissioner and the company wants to file an appeal before the Appellate
Tribunal against the order of the Appellate Authority, determine the amount of
pre-deposit to be made by the company for filing the said appeal.

7. With reference to the provisions of section 121, specify the orders against which
no appeals can be filed.

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8. Mr. A had filed an appeal before the Appellate Tribunal against an order of the
Appellate Authority where the issue involved relates to place of supply. The
order of Appellate Tribunal is also in favour of the Department. Mr. A now
wants to file an appeal against the decision of the Appellate Authority as he
feels the stand taken by him is correct.

You are required to advise him suitably with regard to filing of an appeal before
the appellate forum higher than the Appellate Tribunal.
9. Pursuant to audit conducted by the tax authorities under section 65, a show
cause notice was issued u/s 74 of the CGST Act to Home Furnishers, Surat, a
registered supplier, alleging that it had wrongly availed the input tax credit
without actual receipt of goods for the month of July. In the absence of a
satisfactory reply from Home Furnishers, Joint Commissioner of Central Tax
passed an adjudication order dated 20th August (received by Home Furnishers
on 22nd August) confirming a tax demand of ` 50,00,000 (i.e., CGST 25,00,000
and SGST 25,00,000) and imposing a penalty of equal amount under relevant
provisions of CGST Law.
Home Furnishers does not agree with the order passed by the Joint
Commissioner. It decides to file an appeal with the Appellate Authority against
the said adjudication order. It has approached you for seeking advice on the
following issues in this regard:

(1) Can Home Furnishers file an appeal to Appellate Authority against the
adjudication order passed by the Joint Commissioner of Central Tax? If
yes, till what date can the appeal be filed?

(2) Does Home Furnishers need to approach both the Central and State
Appellate Authorities for exercising its right of appeal?
(3) Home Furnishers is of the view that there is no requirement of paying
pre-deposit of any kind before filing an appeal with the Appellate
Authority. Give your opinion on the issue.
10. With reference to the provisions of section 120, list the cases in which appeal is
not to be filed and also specify other relevant provisions in this respect.
11. XY Company received an adjudication order passed by the Assistant
Commissioner of Central Tax on 1st November under section 73 wherein it was
decided as follows:

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1.36 GOODS AND SERVICES TAX

CGST+SGST due ` 6,00,000

Interest @ 18% p.a. for number of delayed days

Penalty ` 60,000

The taxpayer filed an appeal before the Appellate Authority on 26th November.
Determine the amount of pre-deposit to be made by the company for filing the
appeal if it disagrees with the entire tax demanded.

Whether your answer would be different, if the taxpayer appeals only against
part of the demanded amount say ` 4,00,000 and admits the balance liability
of tax amounting to ` 2,00,000 and proportionate penalty arising from the said
order?

ANSWERS/HINTS

1. Yes, any person aggrieved by any order or decision passed by an adjudicating

authority under the CGST Act has the right to appeal to the Appellate
Authority under section 107. The appeal should be filed within 3 months from
the date of communication of such order or decision. However, the Appellate
Authority has the power to condone the delay of up to 1 month in filing the
appeal if there is sufficient cause for the delay. The appeal can be filed only
when the admitted liability and 10% of the disputed tax amount, subject to a
maximum of ` 25 crore. (` 50 crore in case of IGST) is paid as pre-deposit by
the appellant.
However, no appeal shall be filed before (AA) against an order under
section 129(3), unless a sum equal to 25% of the penalty has been paid
by the appellant.
Further, no appeal can be filed against the following orders in terms of section
121:-
(a) an order of the Commissioner or other authority empowered to direct
transfer of proceedings from one officer to another officer;

(b) an order pertaining to the seizure or retention of books of account,

register and other documents; or

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(c) an order sanctioning prosecution under the Act; or

(d) an order passed under section 80 (payment of tax in installments).

2. Section 107(2) provides that Department can file a “review

application/appeal” with the Appellate Authority.
The Commissioner may, on his own motion, or upon request from the
SGST/UTGST Commissioner, examine the record of any proceedings in which
an adjudicating authority has passed any decision/order to satisfy himself as
to the legality or propriety of the said decision /order. The Commissioner
may, by order, direct any officer subordinate to him to apply to the Appellate
Authority within 6 months from the date of communication of the said
decision/order for the determination of such points arising out of the said
decision/order as may be specified him.
The AA can condone the delay in filing of appeal by 1 month if it is satisfied
that there was sufficient cause for such delay [Section 107(4)].

Such application shall be dealt with by the AA as if it were an appeal made

against the decision/order of the adjudicating authority [Section 107(3)].
There is no requirement of making a pre-deposit in case of departmental
appeal.
3. Section 107(6) provides that no appeal shall be filed before the Appellate
Authority, unless the appellant has paid—

(a) full amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him; and
(b) a sum equal to 10% of the remaining amount of tax in dispute arising
from the impugned order, subject to a maximum of ` 25 crore. (` 50
crore in case of IGST)
However, no appeal shall be filed before (AA) against an order under
section 129(3), unless a sum equal to 25% of the penalty has been paid
by the appellant.
Section 112(8) lays down that no appeal can be filed before the Appellate
Tribunal, unless the appellant deposits

(a) full amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him; and

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(b) 20% of the remaining amount of tax in dispute, in addition to the

amount deposited before the AA, arising from the said order, subject
to a maximum of ` 50 crore (` 100 crore in case of IGST), in relation to
which appeal has been filed.
The above limits are applicable for the pre-deposits to be made under the
CGST Act. Equal amount of pre-deposit is payable under the respective SGST
Act as well.
Where the appellant has made the pre-deposit, the recovery proceedings for
the balance amount shall be deemed to be stayed till the disposal of the
appeal.
4. Section 2(99) defines “Revisional Authority” as an authority appointed or
authorised under the CGST Act for revision of decision or orders referred to
in section 108.
Section 108 of the Act authorizes such “revisional authority” to call for and
examine any order passed by his subordinates and in case he considers the
order of the lower authority to be erroneous in so far as it is prejudicial to
revenue and is illegal or improper or has not taken into account certain
material facts, whether available at the time of issuance of the said order or
not or in consequence of an observation by the Comptroller and Auditor
General of India, he may, if necessary, can revise the order after giving
opportunity of being heard to the person concerned. The “revisional
authority” can also stay the operation of any order passed by his subordinates
pending such revision.

The “revisional authority” shall not revise any order if-

(a) the order has been subject to an appeal under section 107 or under
section 112 or under section 117 or under section 118; or
(b) the period specified under section 107(2) has not yet expired or more
than 3 years have expired after the passing of the decision or order
sought to be revised.

(c) the order has already been taken up for revision under this section at
any earlier stage.
(d) the order is a revisional order

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5. The statement is incorrect.

Though the Appellate Tribunal does have the power to refuse to admit an
appeal, it cannot refuse to admit ANY appeal. It can refuse to admit an appeal
where –
o the tax or input tax credit involved or
o the difference in tax or the difference in input tax credit involved or
o the amount of fine, fees or penalty determined by such order,
does not exceed ` 50,000.

6. Section 107(6) read with section 20 of the IGST Act provides that no appeal
shall be filed with the Appellate Authority unless the applicant has paid in full,
such part of the amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him and a sum equal to 10% of the
remaining amount of tax in dispute arising from the said order subject to a
maximum of ` 50 crore. Thus, the amount of pre-deposit for filing an appeal
with Appellate Authority cannot exceed ` 50 crore (for tax in dispute) where
IGST demand is involved.
In the given case, the amount of pre-deposit for filing an appeal with the
Appellate Authority against the order of Joint Commissioner, where entire
amount of tax is in dispute, is:
(i) ` 28 crore [10% of the amount of tax in dispute, viz. ` 280 crore]
or
(ii) ` 50 crore,
whichever is less.

= ` 28 crore.
Further, section 112(8) provides that no appeal shall be filed with the
Appellate Tribunal unless the applicant has paid in full, such part of the
amount of tax, interest, fine, fee and penalty arising from the impugned order,
as is admitted by him and a sum equal to 20% of the remaining amount of
tax in dispute, in addition to the amount paid as pre-deposit while filing
appeal to the Appellate Authority, arising from the said order subject to a
maximum of ` 100 crores.

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Thus, in the given case, the amount of pre-deposit for filing an appeal with
the Appellate Tribunal against the order of the Appellate Authority, where
entire amount of tax is in dispute, is:
(i) ` 56 crores [20% of the amount of tax in dispute, viz. 280 crores]
or
(ii) ` 100 crores,
whichever is less.
= ` 56 crores.
7. As per section 121, no appeal shall lie against any decision taken or order
passed by a CGST officer if such decision taken or order passed relates to any
one or more of the following matters, namely:—
(a) an order of the Commissioner or other authority empowered to direct
transfer of proceedings from one officer to another officer; or
(b) an order pertaining to the seizure or retention of books of account,
register and other documents; or

(c) an order sanctioning prosecution under the CGST Act; or

(d) an order passed under section 80 (payment of tax in instalments).
8. As per section 117(1), an appeal against orders passed by the State Benches
of the Tribunal would lie to the High Court if the High Court is satisfied that
such an appeal involves a substantial question of law.
However, appeal against orders passed by the Principal Bench of the
Tribunal would lie to the Supreme Court and not High Court. As per section
109(5) of the Act, only the Principal Bench of the Tribunal can decide appeals
where one of the issues involved relates to the place of supply.

Since the issue involved in Mr. A’s case relates to place of supply, the appeal
in his case would have been decided by the Principal Bench of the Tribunal.
Thus, Mr. A will have to file an appeal with the Supreme Court and not with
the High Court.
9. (1) An appeal against a decision/order passed by any adjudicating
authority under the CGST Act or SGST Act/ UTGST Act is appealable
before the Appellate Authority [Section 107(1)]. Thus, Home Furnishers

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can file an appeal to Appellate Authority against the adjudication order

passed by the Joint Commissioner of Central Tax.
Further, such appeal can be filed within 3 months from the date of
communication of such decision/order [Section 107(1)]. Thus, Home
Furnishers can file the appeal to Appellate Authority on or before
22nd November. Further, the Appellate Authority can also condone the
delay in filing of appeal by 1 month if it is satisfied that there was
sufficient cause for such delay [Section 107(4)].
(2) GST law makes provisions for cross empowerment between CGST and
SGST/UTGST officers to ensure that a proper officer under the CGST Act
is also treated as the proper officer under the SGST/UTGST Act and vice
versa. Thus, a proper officer can issue orders with respect to both, the
CGST as well as the SGST/UTGST laws.
GST law also provides that where a proper officer under one Act (say
CGST) has passed an order, any appeal/review/ revision/rectification
against the said order will lie only with the proper officers of that Act
(CGST Act). Accordingly, if any order is passed by the proper officer
under a SGST Act, any appeal/ review/ revision/ rectification against the
said order will lie only with the proper officer under that SGST Act. Thus,
Home Furnishers is required to file an appeal only with the Central Tax
Appellate Authority [Section 6 of CGST Act].
(3) Home Furnishers’ view is not correct in law. Section 107(6) provides
that no appeal shall be filed before the Appellate Authority, unless the
appellant has paid—
(a) full amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him; and
(b) a sum equal to 10% of the remaining amount of tax in dispute arising
from the impugned order subject to a maximum of ` 25 crore*.
*Equivalent amount is required to be deposited with respect to SGST
liability.
Since in the given case, Home Furnishers disagrees with the entire tax
demanded, it has to make a pre-deposit of 10% of the amount of tax in
dispute arising from the impugned order, i.e., 10% of ` 50,00,000 which
is ` 5,00,000 (i.e. ` CGST 2,50,000 and SGST ` 2,50,000).

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10. (1) The Board may, on the recommendations of the GST Council, issue
orders or instructions or directions fixing monetary limits for regulating
filing of appeal or application by the CGST officer.
(2) Non-filing of appeal/application by a CGST officer on account of such
monetary limits fixed by the Board shall not preclude such officer from
filing appeal or application in any other case involving the same or
similar issues or questions of law.
(3) No person, who is a party in application or appeal can contend that the
CGST Officer has acquiesced in the decision on the disputed issue by
not filing an appeal or application (on account of monetary limits).
(4) The Appellate Tribunal or Court hearing such appeal or application shall
have regard to circumstances for non-filing of appeal or application by
the CGST officer on account of monetary limits fixed by the Board.
11. Section 107(6) provides that no appeal shall be filed before Appellate
Authority, unless the appellant pays*:-
(a) in full, tax, interest, fine, fee and penalty arising from impugned order,
as is admitted by him; and
(b) 10% of remaining tax in dispute arising from the impugned order
subject to a maximum of ` 25 crore, in relation to which the appeal has
been filed.
*Equivalent amount is required to be deposited with respect to SGST liability.
Thus, in Case-I, XY Company has to make a pre-deposit of 10% of ` 6,00,000,
which is ` 60,000 (i.e. CGST ` 30,000 and SGST ` 30,000).
However, when XY Company admits the liability of only ` 2,00,000 (CGST +
SGST) and disputes the balance tax demanded of ` 4,00,000, it has to make a
pre-deposit of:
(i) ` 2,00,000 + ` 20,000 [proportionate penalty on tax admitted] + interest
@ 18% p.a. payable on the tax admitted for the period of delay, and
(ii) 10% of ` 4,00,000 which is ` 40,000.

It may be noted that the Appellate Tribunal was not constituted till 30.04.2023.
This aspect needs to be borne in mind while reading the examples and questions
and answers relating to Appellate Tribunal given in the Chapter.

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however not treated as civil court for the purpose of Chapter XXVI of the
Code of Criminal Procedure, 1973.

 Any proceeding before the authority shall be deemed to be judicial

proceeding under section 193 and 228 and for the purpose of section 196, of
the Indian Penal Code, 1860. The AAR and AAAR also have the power to
regulate their own procedure.

TEST YOUR KNOWLEDGE

1. Which are the questions for which advance ruling can be sought?
2. What is the objective of having a mechanism of Advance Ruling?

3. To whom will the Advance Ruling be applicable?

4. What is the time period for applicability of Advance Ruling?
5. Can an advance ruling given be nullified?

6. Ranjan intends to start selling certain goods in Delhi. However, he is not able
to determine (i) the classification of the goods proposed to be supplied by him
[as the classification of said goods has been contentious] and (ii) the place of
supply if he supplies said goods from Delhi to buyers in U.S.
Ranjan’s tax advisor has advised him to apply for the advance ruling in respect
of these issues. He told Ranjan that the advance ruling would bring him
certainty and transparency in respect of the said issues and would avoid
litigation later. Ranjan agreed with his view, but has some apprehensions.
In view of the information given above, you are required to advise Ranjan with
respect to following:
(i) The tax advisor asks Ranjan to get registered under GST law before
applying for the advance ruling as only a registered person can apply for
the same. Whether Ranjan needs to get registered?
(ii) Ranjan is apprehensive that if at all advance ruling is permitted to be
sought, he has to seek it every year. Whether Ranjan’s apprehension is
correct?

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(iii) The tax advisor is of the view that the order of Authority for Advance
Ruling (AAR) is final and is not appealable. Whether the tax advisor’s view
is correct?
(iv) Sambhav - Ranjan’s friend - is a supplier registered in Delhi. He is
engaged in supply of the goods, which Ranjan proposes to supply at the
same commercial level that Ranjan proposes to adopt.
He intends to apply the classification of the goods as decided in the advance
ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi.
Whether Sambhav can do so?
7. Briefly explain the procedure to be followed by the Authority for Advance Ruling
on receipt of the application for Advance Ruling under section 98.

8. Briefly explain whether an appeal could be filed before the Appellate Authority
against order of Authority for Advance Ruling (AAR), with reference to
sections 100 and 101.

9. Discuss briefly provisions of CGST Act, 2017 regarding questions for which
advance ruling can be sought.

ANSWERS/HINTS

1. Advance Ruling can be sought for the following questions:

(a) classification of any goods or services or both;
(b) applicability of a notification issued under provisions of the GST Act(s);
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been
paid;
(e) determination of the liability to pay tax on any goods or services under
the Act;

(f) whether applicant is required to be registered under the Act;

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(g) whether any particular thing done by the applicant with respect to any
goods or services amounts to or results in a supply of goods or services,
within the meaning of that term.
2. The broad objective for setting up such an authority is to:
(i) provide certainty in tax liability in advance in relation to an activity
being undertaken or proposed to be undertaken by the applicant;
(ii) helps taxpayer in financial planning and making new investments
(iii) attract Foreign Direct Investment (FDI);
(iv) reduce litigation;
(v) pronounce ruling expeditiously in transparent and inexpensive manner
3. The advance rulings are given in personem and not in rem, that is, not to the
whole world and therefore, rulings cannot apply to other similar cases.
Section 103 provides that an advance ruling pronounced by AAR or AAAR
shall be binding only on the applicant who sought it in respect of any matter
referred to in section 97(2) and on the jurisdictional tax authority of the
applicant. This clearly means that an advance ruling is not applicable to
similarly placed taxable persons in the State. It is only limited to the person
who has applied for an advance ruling.
4. The law does not provide for a fixed time period for which the ruling shall
apply. Instead, in section 103(2), it is provided that advance ruling shall be
binding till the period when the law, facts or circumstances supporting the
original advance ruling have changed. Thus, a ruling shall continue to be in
force so long as the transaction continues and so long as there is no change
in law, facts or circumstances.
5. Section 104(1) provides that an advance ruling shall be held to be ab initio
void if the AAR or AAAR finds that the advance ruling was obtained by the
applicant by fraud or suppression of material facts or misrepresentation of
facts. In such a situation, all the provisions of the GST Act(s) shall apply to the
applicant as if such advance ruling had never been made (but excluding the
period when advance ruling was given and up to the period when the order
declaring it to be void is issued). An order declaring advance ruling to be void
can be passed only after hearing the applicant.

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6. (i) Advance ruling under GST can be sought by a registered person or a

person desirous of obtaining registration under GST law [Section 95(c)].
Therefore, it is not mandatory for a person seeking advance ruling to
be registered.
(ii) Section 103(2) stipulates that the advance ruling shall be binding unless
the law, facts or circumstances supporting the original advance ruling
have changed. Therefore, once Ranjan has sought the advance ruling
with respect to an eligible matter/question, it will be binding till the
time the law, facts and circumstances supporting the original advance
ruling remain same.
(iii) No, the tax advisor’s view is not correct. As per section 100, if the
applicant is aggrieved with the finding of the AAR, he can file an appeal
with Appellate Authority for Advance Ruling (AAAR). Similarly, if the
concerned/ jurisdictional officer of CGST/SGST does not agree with the
findings of AAR, he can also file an appeal with AAAR.
Such appeal must be filed within 30 days from the date on which the
ruling sought to be appealed against is communicated. The Appellate
Authority may allow additional 30 days for filing the appeal, if it is
satisfied that there was a sufficient cause for delay in presenting the
appeal.

(iv) Section 103 provides that an advance ruling pronounced by AAR is

binding only on the applicant who had sought it and on the concerned
officer or the jurisdictional officer in respect of the applicant. This
implies that an advance ruling is not applicable to similarly placed other
taxable persons in the State. It is only limited to the person who has
applied for an advance ruling.

Thus, Sambhav will not be able to apply the classification of the goods
that will be decided in the advance ruling order to be obtained by
Ranjan, to the goods supplied by him in Delhi.

7. The procedure to be followed by the Authority for Advance Ruling (AAR) on

receipt of the application for advance ruling under section 98 is as under:-

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1. Upon receipt of an application, the AAR shall send a copy of application

to the officer in whose jurisdiction the applicant falls and call for all
relevant records.
2. The AAR may then examine the application along with the records and
may also hear the applicant. Thereafter he will pass an order either
admitting or rejecting the application.
3. Application for advance ruling will not be admitted in cases where the
question raised in the application is already pending or decided in any
proceedings in the case of an applicant under any of the provisions of
this Act.
4. If the application is rejected, it should be by way of a speaking order
giving the reasons for rejection and only after giving an opportunity of
being heard to the applicant.
5. If the application is admitted, the AAR shall pronounce its ruling on the
question specified in the application. Before giving its ruling, it shall
examine the application and any further material furnished by the
applicant or by the concerned departmental officer.

6. Before giving the ruling, AAR must hear the applicant or his authorized
representative as well as the jurisdictional officers of CGST/ SGST.
7. If there is a difference of opinion between the two members of AAR,
they shall refer the point or points on which they differ to the Appellate
Authority for hearing the issue
8. The Authority shall pronounce its advance ruling in writing within 90
days from the date of receipt of application.
9. A copy of the advance ruling duly signed by members and certified in
prescribed manner shall be sent to the applicant, the concerned officer
and the jurisdictional officer.
8. Yes, the concerned officer, jurisdictional officer or applicant aggrieved by any
advance ruling may appeal to the Appellate Authority for Advance Ruling
(AAAR) within 30 days [extendible by another 30 days] from the date on which
such ruling is communicated to him in the prescribed form and manner.

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The AAAR must pass an order confirming or modifying the ruling appealed
against within a period of 90 days of the filing of an appeal, after hearing the
parties to the appeal.
If members of AAAR differ on any point referred to in appeal, it shall be
deemed that no advance ruling can be issued in respect of the question under
appeal. A copy of the advance ruling pronounced by the AAAR is sent to
applicant, concerned officer, jurisdictional officer and to the Authority.
9. As per section 97(2), advance ruling can be sought for the following
questions:-
(a) classification of any goods or services or both
(b) applicability of a notification issued under the CGST Act

(c) determination of time and value of supply of goods or services or both

(d) admissibility of input tax credit of tax paid or deemed to have been paid
(e) determination of the liability to pay tax on any goods or services or
both
(f) whether applicant is required to be registered
(g) whether any particular activity with respect to any goods and/or
services, amounts to/results in a supply of goods and/or services, within
the meaning of that term.

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CEx. v. Ashok Kumar Tiwari 2015 (37) STR 727 (All.) has held that where the
legislature has stipulated the period of limitation in terms of months, such a
stipulation can only mean a calendar month and not 30 days.

TEST YOUR KNOWLEDGE

1. Briefly explain how the GST compliance rating score is determined.
2. When shall the particulars relating to any proceedings or prosecution be
published under GST laws? Discuss the relevant provisions.
3. Explain the provisions relating to rectification of errors apparent on the face of
record under section 161.

4. Write a short note on Anti-profiteering measure.

5. Elaborate the functions of Anti-profiteering Authority.
6. State the various modes of service of a notice, decision, order, summons, or any
other communication under the CGST Act, on the taxable person or any other
person to whom it is intended.
7. Section 158(1) lays down that the information obtained by a public servant
from the record of any proceeding under the CGST Act is confidential and
cannot be disclosed.
Is there any exception to this rule? Discuss in brief.

8. Explain the scope of circulars and instructions issued by the Board.

9. ‘The time limits provided under the CGST Act cannot be extended.’
Do you agree with the statement? Give your views with reference to
section 168A.

ANSWERS/HINTS

1. As per section 149(2), the GST compliance rating is determined on a scale of

ten on the basis of prescribed parameters.

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2. When the Commissioner/authorised officer is of opinion that it is necessary

or expedient in the public interest to publish the name of any person and any
other particulars relating to any proceedings or prosecution under the CGST
Act in respect of such person, it may cause to be published such name and
particulars [Section 159(1)].

No publication under this section shall be made in relation to any penalty imposed
under the CGST Act until the time for presenting an appeal to the Appellate
Authority under section 107 has expired without an appeal having been presented
or the appeal, if presented, has been disposed of [Section 159(2)].
3. Section 161 lays down that any authority, who has passed or issued any
decision or order or notice or certificate or any other document, may rectify
any error which is apparent on the face of record in such decision or order or
notice or certificate or any other document, either on its own motion or where
such error is brought to its notice by any GST officer or by the affected person
within a period of three months from the date of issue of such decision or
order or notice or certificate or any other document, as the case may be.
However, no such rectification shall be made after a period of six months
from the date of issue of such decision or order or notice or certificate or any
other document. Further, the said period of six months shall not apply in
such cases where the rectification is purely in the nature of correction of a
clerical or arithmetical error, arising from any accidental slip or omission.
Principles of natural justice should be followed by the authority carrying out
such rectification, if it adversely affects any person.

4. As per section 171, any reduction in rate of tax on any supply of goods or
services or the benefit of input tax credit shall be passed on to the recipient
by way of commensurate reduction in prices. Competition Commission of
India (CCI) may examine whether input tax credits availed by any registered
person or the reduction in the tax rate have actually resulted in a
commensurate reduction in the price of the goods or services or both
supplied by him. Henceforth, all investigations, based on complaints filed
by consumers, will be done by the Directorate General of Anti-
profiteering (DGAP) which will then submit a report to CCI.

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5. The authority shall discharge the following functions, namely:-

(i) to determine whether the reduction in tax rate or the benefit of input
tax credit has been passed on by the seller to the buyer (hereinafter
collectively referred to as ‘benefit’) by reducing the prices
(ii) to identify the taxpayer who has not passed on the benefit
(iii) to order
(a) reduction in prices
(b) return to the recipient, an amount equivalent to the amount not
passed on by way of commensurate reduction in prices along with
interest at the rate of 18% from the date of collection of the higher
amount till the date of the return of such amount or recovery of
the amount not returned, as the case may be.
If the eligible person does not claim return of the amount or is
not identifiable, the amount must be deposited in the Consumer
Welfare Fund;
(c) imposition of penalty
(d) cancellation of registration

(iv) to furnish a performance report to the GST Council by the 10 th of the

month succeeding each quarter [Rule 127 of the CGST Rules, 2017]
6. Section 169(1) provides that any decision, order, summons, notice or other
communication under the CGST Act and the rules made thereunder can be
served by any one of the following methods:
(a) Giving/tendering directly including by a courier to the addressee or
authorised representative or to any adult member of family residing
with the taxable person; or
(b) By Registered post/speed post/courier with acknowledgement due at
the last known place of business or residence; or
(c) By Email to the e-mail address provided at the time of registration or
as amended from time to time; or
(d) By making the same available at common portal; or

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(e) Publication in newspaper circulating in the locality in which the addressee is

last known to have resided, carried on business or personally worked for gain;
or
(f) If none of the above modes is practicable then by Affixing at last known
place of business or residence and if such mode is not practicable for
any reason, then by affixing a copy thereof on the notice board of the
office of the concerned officer or authority concerned.
7. Yes, the confidential information can be disclosed by the public servant for
certain specific purposes in terms of section 158(3). Such specific purposes
are given in brief hereunder:
(i) For prosecution
(ii) For carrying out the objects of the CGST Act
(iii) For service of notice or recovery of demand
(iv) For furnishing information to Court in a proceeding where Government
is a party
(v) For audit of tax receipts or refunds
(vi) For inquiry into the conduct of a GST officer
(vii) For enabling levy, realisation of any tax or duty
(viii) In lawful exercise of powers
(ix) For enquiry into a charge of misconduct by any professional
(x) For data entry on automated system
(xi) For fulfilling the requirement under any other law and in public interest.
8. Section 168 empowers the Board (CBIC) to issue orders, instructions or
directions to the CGST officers for the purpose of uniformity in the
implementation of the CGST Act. All officers and all other persons employed
in the implementation of the Act observe and follow such orders, instructions
or directions.
The binding nature of such orders, instructions and directions has been a
matter of debate and scrutiny. The general understanding that prevails now
is that a circular is binding on the officers, but not on the assessee. However,

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in case such circular states something contrary to the law, the law shall prevail
over the circular.
9. The statement is not correct.
The Government has power to extend the time limits provided under the
CGST Act. However, such powers are not unbridled powers. Section 168A
empowers the Government to extend the time limits only when the actions
cannot be completed or complied with due to force majeure. Here, force
majeure means war, epidemic, flood, drought, fire, cyclone, earthquake or any
other calamity caused by nature affecting the implementations of provisions
of the CGST Act. This power can also be exercised retrospectively.

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Exemption from customs duty on imported goods used for inward

processing of goods [Section 25A]/ re-imported goods used for
outward processing [Section 25B]

For repair/further processing/manufacture

1 year time limit

identifiable goods

other specified condition

TEST YOUR KNOWLEDGE

1. What are the provisions relating to effective date of notifications issued under
section 25 of the Customs Act, 1962?
2. M/s Pure Energy Ltd. is engaged in oil exploration and has imported software
containing seismic data. The importer is entitled to exemption from customs
duty subject to the condition that an “essentiality certificate” granted by the
Director General of Hydrocarbons is produced at the time of importation of the
goods. Though the importer applied for the certificate within the statutory time
limit prescribed for the same, the certificate was not made available to the
importer within a reasonable time by the Director General of Hydrocarbons.
The customs department rejected the importer’s claim for exemption.
Examine briefly whether the department’s action is sustainable in law.
3. M/s. XYZ, a 100% export oriented undertaking (100% E.O.U. in short) imported
DG sets and furnace oil duty free for setting up captive power plant for its power
requirements for export production. This benefit was available vide an
exemptions notification. They used the power so generated for export
production but sold surplus power in domestic tariff area.

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Customs Department has demanded duty on DG sets and furnace oil as surplus
power has been sold in domestic tariff area. The notification does not
specifically restrict the use of imported goods for manufacture of export goods.
Do you think the demand of the Customs Department is valid in law.
4. Referring to section 25 of the Customs Act, 1962, discuss the following:

(i) Special exemption

(ii) General exemption
5. Write a brief note on the following with reference to the Customs Act, 1962:

(i) Remission of duty on imported goods lost

(ii) Pilfered goods
6. Distinguish between Pilfered goods and Lost/destroyed goods
7. Goods manufactured or produced in India, which were earlier exported and
thereafter imported into India will be treated at par with other goods imported
into India. Is the proposition correct or any concession is provided on such
import? Discuss briefly.
8. Write a brief note on stages of imposition of taxes and duties.
9. Discuss the provisions relating to denaturing or mutilation of goods.

10. Briefly explain the provisions relating to abatement of duty on damaged or

deteriorated goods under section 22 of the Customs Act, 1962.
11. Briefly explain the following with reference to the provisions of the Customs
Act, 1962:
(i) Indian customs waters
(ii) India

12. Distinguish between Indian territorial waters and Indian custom waters.
13. Write a brief note on the constitutional provisions governing the levy of customs
duties.

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14. Examine the validity of the following statements:

(a) A beneficial owner of imported goods is a person on whose behalf the
goods are being imported.

(b) Customs area does not include a warehouse.

(c) Customs station includes international courier terminal.
15. Rock & Rock India Ltd. imported a consignment from U.S.A (by sea). The value
of consignment was ` 7,50,000 and total duty payable was ` 1,50,000.
Company filed bill of entry for home consumption but before inspection and
clearance for home consumption it found that the goods were damaged.
On filing a representation to the Customs Department, proper officer refused
the claim for abatement because goods were already unloaded. The proper
officer is in agreement with the claim that the value of goods has come down
to only ` 1,50,000.
Examine the issue with reference to the relevant statutory provisions and
calculate the amount of total duty payable:
Would your answer be different in the above case if the goods get deteriorated
after unloading and examination but before clearance for home consumption,
and value comes down to ` 7,00,000 ?

ANSWERS/HINTS
1. Date of effect of every notification issued will be the date of its issue by the
Central Government for publication in the Official Gazette, unless provided
otherwise in the notification. Issue means signed by competent authority and
sent for publication to Government press.
The provision is made as there may be delay of one or two days in publishing
in Gazette e.g. if the notification is issued on 2nd November and published in
Official Gazette on 4th November, the notification will be effective from
2nd November.
However, where any exemption is granted subject to any condition, such
exemption shall, unless otherwise specified or varied or rescinded, be valid
up to 31st day of March falling immediately after two years from the date of
such grant or variation.

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Further, However limited period of validity shall not apply to any such
exemption granted to, or in relation to,—
(a) any multilateral or bilateral trade agreement;
(b) obligations under international agreements, treaties, conventions or
such other obligations including with respect to United Nations
agencies, diplomats and international organisations;
(c) privileges of constitutional authorities;
(d) schemes under the Foreign Trade Policy;

(e) the Central Government schemes having validity of more than two
years;
(f) re-imports, temporary imports, goods imported as gifts or personal
baggage;
(g) any duty of customs under any law for the time being in force,
including integrated tax leviable under sub-section (7) of section 3 of
the Customs Tariff Act, 1975, other than duty of customs leviable
under section 12.
The above rules do not apply to exemptions granted through special orders.
Special orders are issued separately for each case and communicated to the
beneficiary directly by the Government.
2. This issue has been addressed by the Supreme Court in the case of
Commissioner of Customs v. Tullow India Operations Ltd. (2005) 189 ELT 401
(SC). The Apex Court has observed that if a condition is not within the power
and control of the importer and depends upon the acts of public
functionaries, non-compliance of such a condition, subject to just exceptions
cannot be held to be a condition precedent which would disable it from
obtaining the benefit for all times to come.

In the given case also the certificate has not been granted within a reasonable
time. Therefore, in view of the above-mentioned judgement, the importer
M/s Pure Energy Ltd. cannot be blamed for the lapse by the authorities. The
Directorate General of Hydrocarbons is under the Ministry of Petroleum and
Natural Gas and such a public functionary is supposed to grant the

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essentiality certificate within a reasonable time so as to enable the importer

to avail of the benefits under the notification.

3. The facts of the case are similar to the case of Commissioner v. Hanil Era
Textile Ltd. 2005 (180) ELT A44 (SC) wherein the Supreme Court agreed to the
view taken by the Tribunal that in the absence of a restrictive clause in the
notifications that imported goods are to be solely or exclusively used for
manufacture of goods for export, there is no violation of any condition of
notification, if surplus power generated due to unforeseen exigencies is sold
in domestic tariff area.
Therefore, no duty can be demanded from M/s XYZ for selling the surplus
power in domestic tariff area for the following reasons:

(i) They have used the DG sets and furnace oil imported duty free for
generation of power, and
(ii) such power generated has been used for manufacturing goods for
export, and
(iii) only the surplus power has been sold, as power cannot be stored.
4. (i) Special Exemption: As per section 25(2) of the Customs Act, 1962, if
the Central Government is satisfied that it is necessary in the public
interest so to do, it may, by special order in each case, exempt from
payment of duty, any goods on which duty is leviable only under
circumstances of an exceptional nature to be stated in such order.
Further, no duty shall be collected if the amount of duty leviable is equal
to, or less than, ` 100. This type of exemption is called as ad hoc
exemption. Order under section 25(2) is not required to be published
in the Official Gazette.
(ii) General Exemption: As per section 25(1) of the Customs Act, 1962, if
the Central Government is satisfied that it is necessary in the public
interest so to do, it may, by notification in the Official Gazette, exempt
generally either absolutely or subject to such conditions (to be fulfilled
before or after clearance) as may be specified in the notification, goods
of any specified description from the whole or any part of duty of
customs leviable thereon.

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However, where any exemption is granted subject to any condition, such

exemption shall, unless otherwise specified or varied or rescinded, be
valid up to 31st day of March falling immediately after two years from
the date of such grant or variation.
Further, limited period of validity shall not apply to any such
exemption granted to, or in relation to,—
(a) any multilateral or bilateral trade agreement;
(b) obligations under international agreements, treaties,
conventions or such other obligations including with respect to
United Nations agencies, diplomats and international
organisations;

(c) privileges of constitutional authorities;

(d) schemes under the Foreign Trade Policy;
(e) the Central Government schemes having validity of more than
two years;
(f) re-imports, temporary imports, goods imported as gifts or
personal baggage;

(g) any duty of customs under any law for the time being in force,
including integrated tax leviable under sub-section (7) of section
3 of the Customs Tariff Act, 1975, other than duty of customs
leviable under section 12.
Further, this exemption applies to all importers while exemption under
section 25(2) is for specific importer and specific goods under import.

5. (i) Remission of duty on imported goods lost: Section 23(1) of the

Customs Act, 1962 provides for remission of duty on imported goods
lost (otherwise than as a result of pilferage) or destroyed, if such loss or
destruction is at any time before clearance for home consumption.
Such loss or destruction covers loss by leakage. Duty is payable under
this section but it is remitted by Assistant/Deputy Commissioner of
Customs if the importer is able to prove the loss or destruction. Thus,
unless remitted, duty has to be paid and burden of proof is on the
importer. The provisions of this section are applicable for warehoused
goods also.

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(ii) Pilfered goods: Section 13 provides that if imported goods are pilfered
after unloading thereof but before the proper officer has made an order
for clearance for home consumption or deposit in a warehouse, ,the
importer is not liable to pay the duty on the said pilfered goods unless
the pilfered goods are restored to importer. In such a case, duty on
pilfered goods is payable by the Port authorities. Also, the importer
does not have to prove pilferage. However, the loss must be only due
to pilferage. Section 13 is not applicable for warehoused goods.

6.

Pilfered goods Lost/Destroyed goods

1. Covered by section 13 Covered by section 23(1)

2. Importer is not liable to pay duty on Duty paid on such goods

these goods to be remitted

3. Department gets compensation from No such compensation

the custodian [Section 45(3)]

4. Petty theft by human being Loss/Destruction by fire,

flood etc (Act of God)

5. Restoration possible Restoration is not

possible

6. Occurrence is after unloading and Occurrence may be at

before Customs clearance order for any time before
home consumption or warehousing clearance for home
consumption

7. Occurrence in warehouse not Occurrence in

recognized warehouse is recognized

8. Duty need not be calculated Duty should be

calculated for
determining the
remission amount

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9. No need to prove pilferage. It is quite Should be proved and

obvious remission sought for

7. The given proposition is correct i.e., goods produced in India, which were
earlier exported and thereafter imported into India will be treated at par with
other goods imported into India [Section 20 of the Customs Act, 1962].
However, the following concessions are being provided in this regard:
(i) Maximum import duty will be restricted to duty drawback or refund
availed or integrated tax not paid at the time of export.
(ii) Where the goods were originally exported for repairs, the duty on re-
importation is restricted to the fair cost of repairs including cost of
materials used in repairs whether such costs are actually incurred or not,
insurance and freight charges, both ways done abroad.
The above two concessions are given subject to the condition that:

(a) the re-importation is done within 3 years or 5 years if time is

extended.
(b) the exported goods and re-imported goods must be the same.

In case of point (ii) above, the ownership of the goods should also
not have changed.
However, these concessions would not be applicable if-

• re-imported goods had been exported by EOU or a unit in

FTP
• re-imported goods had been exported from a public/private
warehouse
• re-imported goods which fall under Fourth schedule to the
Central Excise Act, 1944.

[Notification No. 45/2017 Cus dated 30.06.2017]

(iii) When exported goods come back for repairs and re-export, the re-
imported goods other than the specified goods can avail exemption
from paying of import duty subject to the following conditions:

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(i) the re-importation is for repairs only

(ii) the time limit is 3 years. In case of Nepal, such time-limit is 10 years.

(iii) the goods must be re-exported after repairs

(iv) the time limit for export is 6 months (extendable to one year).
(v) certain goods, listed in the notification, are not covered by this
exemption.
[Notification No. 158/95 Cus. dated 14.11.1995 as amended vide
Notification No. 60/2018 Cus dated 11.09.2018]

8. [Refer para 1-Unit II]

9. [Refer para 4 -Unit II]
10. [Refer para 4 -Unit II]

11. [Refer para 3 -Unit I]

12. [Refer para 3 -Unit I]
13. [Refer para 2 -Unit I]
14. (a) The statement is valid. Section 2(3A) defines beneficial owner to mean
any person on whose behalf the goods are being imported or exported
or who exercises effective control over the goods being imported or
exported.
(b) The statement is not valid. The definition of customs area includes
within its ambit a warehouse too.
The customs area is defined to mean the area of a customs station or a
warehouse and includes any area in which imported goods or export
goods are ordinarily kept before clearance by customs authorities.
(c) The statement is valid. International courier terminal and foreign post
office are included within the scope of customs station as defined under
section 2(13) of the Customs Act, 1962.
As per section 2(13), a customs station means any customs port,
customs airport, international courier terminal, foreign post office or
land customs station.

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15. The two different situations here are (i) damage after unloading and (ii)
deterioration after unloading.

The abatement of duty is allowed under section 22(b) where it is shown to

the satisfaction of the Assistant/Deputy Commissioner of Customs that, inter
alia, any imported goods, other than warehoused goods, had been damaged
at any time after the unloading thereof in India but before their examination,
on account of any accident not due to any wilful act, negligence or default of
the importer.

Thus, in view of the above-mentioned provisions, the stand taken by the

proper officer of refusing the claim for abatement is not valid in law.
The duty to be charged on the damaged goods shall be reduced in proportion
to the reduction in the value of goods on account of damage.
Thus, in the given case, the amount of total duty payable
= [` 1,50,000/` 7,50,000] x ` 1,50,000 = ` 30,000
The abatement of duty is allowed in case of deterioration only if such
deterioration occurs before or during the unloading of goods. Since in this
case, imported goods have deteriorated before clearance for home
consumption but after unloading, abatement of duty will not be allowed and
full duty will have to be paid.

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TEST YOUR KNOWLEDGE

1. With reference to section 9AA of Customs Tariff Act, 1975, state briefly the
provisions of refund of anti-dumping duty.

2. With reference to section 9A(1A) of the Customs Tariff Act, 1975, mention the
ways that constitute circumvention of antidumping duty imposed on an article
which may warrant action by the Central Government.

3. When shall the safeguard measures under section 8B of the Customs Tariff
Act, 1975 be not imposed? Discuss briefly.
4. What are the conditions required to be fulfilled by the importer to make the
imported goods eligible for preferential rate of duty prescribed by the Central
Government by notification under section 25 of the Customs Act, 1962?
5. Write a note on "Emergency power to impose or enhance import duties under
section 8A of the Customs Tariff Act, 1975".
6. Determine the customs duty payable under the Customs Tariff Act, 1975
including the safeguard duty of 30% under section 8B of the said Act with the
following details available on hand:

Assessable value of Sodium Nitrite imported from a developing ` 30,00,000

country from 26thAugust, 2022 to 25th August, 2023 (both days
inclusive)

Share of imports of Sodium Nitrite from the developing country 4%

against total imports of Sodium Nitrite to India

Basic custom duty 10%

Integrated tax 12%

Social welfare surcharge 10%

Note: Ignore GST compensation cess and Agriculture infrastructure and

development cess.

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7. Differentiate between protective duty and safeguard measures.

8. Briefly examine the nature and significance of the levy of anti-dumping duty
under the Customs Tariff Act, 1975.
9. Chaintop Industries has challenged the imposition of anti-dumping duty
retrospectively on the grounds that it is unconstitutional. Explain whether it
would succeed in its contention.
10. Determine the total duties payable under Customs Act if Mr. Rao imported
rubber from Malaysia at landed price (exclusive of duties) of ` 25 lakh. It has
been notified by the Central Government that share of imports of rubber from
the developing country against total imports to India exceeds 5%. Safeguard
duty notified on this product is 30%, IGST u/s 3(7) is 12% and BCD is 10%.
Ignore agriculture infrastructure and development cess.
11. During the year 2023, the customs authorities have noticed that there is an
increased quantity of Product XYZ being imported into the country. Determine
whether the Central Government should consider levying safeguard duty or
anti-dumping duty with appropriate reasons. Also enumerate any
exemptions/reliefs available from such duty.

ANSWERS/HINTS

1. According to the provisions of section 9AA of the Customs Tariff Act, 1975,
where an importer proves to the satisfaction of the Central Government that
he has paid any anti-dumping duty imposed on any article, in excess of the
actual margin of dumping in relation to such article, he shall be entitled to
refund of such excess duty. However, the importer will not be entitled for
refund of provisional anti-dumping duty under section 9AA as the same is
refundable under section 9A(2) of the said Act.
2. As per section 9A(1A) of the Customs Tariff Act, 1975, following are the ways
that would constitute circumvention (avoiding levy of duty by unscrupulous
means) of antidumping duty imposed on an article that may warrant action
by the Central Government:
(i) altering the description or name or composition of the article subject
to such anti-dumping duty,

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(ii) import of such article in an unassembled or disassembled form,

(iii) changing the country of its origin or export, or

(iv) any other manner, whereby the anti-dumping duty so imposed is

rendered ineffective.
In such cases, investigation can be carried out by Central Government and
then anti dumping can be imposed on such articles.
3. The safeguard measures under section 8B of the Customs Tariff Act, 1975 is
not imposed on the import of the following types of articles:
(i) Articles originating from a developing country, so long as the share of
imports of that article from that country does not exceed 3% of the
total imports of that article into India;

(ii) Articles originating from more than one developing country, so long
as the aggregate of imports from developing countries each with less
than 3% import share taken together does not exceed 9% of the total
imports of that article into India;
(iii) Articles imported by a 100% EOU or units in a Special Economic Zone
unless it is specifically made applicable on them or the article imported
is either cleared as such into DTA or used in the manufacture of any
goods that are cleared into DTA. In such cases, safeguard measures
shall be applied on that portion of the article so cleared or so used as
was leviable when it was imported into India.
4. The Government may by notification under section 25 of the Customs Act,
1962 prescribe preferential rate of duty in respect of imports from certain
preferential areas. The importer will have to fulfill the following conditions
to make the imported goods eligible for preferential rate of duty:
(i) At the time of importation, he should make a specific claim for the
preferential rate.
(ii) He should also claim that the goods are produced or manufactured in
such preferential area.
(iii) The area should be notified under section 4(3) of the Customs Tariff
Act, 1975 to be a preferential area.

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(iv) The origin of the goods shall be determined in accordance with the
rules made under section 4(2) of the Customs Tariff Act, 1975.

5. Section 8A of Customs Tariff Act, 1975 provides that the where the Central
Government is satisfied that the basic customs duty leviable on any article
should be increased and that circumstances exist which render it necessary
to take immediate action, it may, by notification amend the First Schedule of
the Customs Tariff to increase the import duty leviable on such article to
such extent as it thinks necessary.
6. Computation of customs duty and integrated tax payable thereon

Particular Amount(`)

Assessable value of sodium nitrite imported 30,00,000

Add: Basic custom duty @ 10% (` 30,00,000 × 10%) 3,00,000

Safeguard duty @ 30% on `30,00,000 [Safeguard duty is

imposable in the given case since share of imports of 9,00,000
sodium nitrite from the developing country is more than
3% of the total imports of sodium nitrite into India (Proviso
to section 8B(2) of the Customs Tariff Act, 1975)]

Social welfare surcharge @ 10% x `3,00,000 30,000

Total 42,30,000

Integrated tax (`42,30,000 × 12%) [Note] 5,07,600

Total customs duty payable 17,37,600

(`3,00,000 +`9,00,000+ `30,000+ `5,07,600)

Note: It has been clarified by DGFT vide Guidance note that value for
calculation of integrated tax shall also include safeguard duty amount.
7. [Refer para 7 and 10]
8. [Refer para 12]

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9. Section 9A(3) of the Customs Tariff Act, 1975 provides that the anti-dumping
duty can be imposed with retrospective effect provided the Government is
of the opinion that:-
(a) there is a history of dumping which caused injury or that the importer
was, or should have been, aware that the exporter practices dumping
and that such dumping would cause injury, and
(b) the injury is caused by massive dumping of an article imported in a
relatively short time, which in the light of timing and volume of the
imported article dumped and other circumstances is likely to seriously
undermine the remedial effect of the anti-dumping duty liable to be levied.
The duty can be levied retrospectively by issuing a notification but not
beyond 90 days from the date of notification.
Thus, Chaintop Industries would succeed in its contention only if all of the
above conditions are not satisfied.
10. Computation of total duties payable under the Customs Act

S. No. Particulars (`)

1 Landed price 25,00,000

2 Add: Basic customs duty @ 10% 2,50,000

3 Add: Safeguard duty @ 30% on ` 25,00,000 7,50,000

4 Add: Social welfare surcharge (SWS) @ 10 % on 25,000

` 2,50,000
[While calculating SWS, safeguard duty is
excluded]

5 Add: Integrated tax 4,23,000

12% of ` 35,25,000 (` 25,00,000 +
` 2,50,000 + ` 7,50,000 + ` 25,000)
[Integrated tax is levied on the sum total of
the assessable value of the imported goods,
customs duties and applicable SWS]

6 Total customs duties and tax payable 14,48,000

[` 2,50,000 + ` 7,50,000 + ` 25,000 + ` 4,23,000]

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11. In the given case, since Product XYZ is being imported into the country in
increased quantity, Central Government should consider levying safeguard
Duty and not anti-dumping duty.
Anti-dumping duty is imposed when any article is exported from any country
to India at less than its normal value, which is not the case here.

However, safeguard duty can be imposed only when Central Government is

satisfied that such increased importation is causing/threatening to cause
serious injury to the domestic industry.

Exemptions/reliefs:
(a) Safeguard duty shall not be imposed on articles originating from
developing country if the share of imports of that article from that
country ≤ 3% of the total imports of that article into India.
(b) Safeguard duty shall not be imposed on articles originating from more
than one developing country if the aggregate of imports from
developing countries each with less than 3% import share taken
together ≤ 9% of the total imports of that article into India.
(c) Safeguard duty shall not be applicable on articles imported by a 100%
EOU/ SEZ unit unless specifically made applicable;
(d) Safeguard duty shall not be applicable on articles imported by a 100%
EOU/ SEZ unit unless the article imported is either cleared as such/
used in the manufacture of any goods that are cleared, into DTA.
(e) Central Government may exempt notified quantity of any article, when
imported from any country into India, from whole/part of the
safeguard duty.

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AMENDMENTS MADE VIDE THE FINANCE ACT, 2023 TO BE

NOTIFIED

Few amendments made in the Customs Act, 1962 and Customs Tariff Act, 1975
vide the Finance Act, 2023 would become effective only from a date to be notified
by the Central Government in the Official Gazette. Such a notification has not
been issued till the date of printing of this material. Therefore, the applicability or
otherwise of such amendment for May 2024 and/or November 2024 examinations
shall be informed by the ICAI by way of an announcement.
In the table given below, the existing provisions of sections 9, 9A and 9C of the
Customs Tariff Act are compared with the provisions as amended by the Finance
Act, 2023.
Once the announcement for applicability of such amendments for examination(s)
is made by the ICAI, students should read the amended provisions given
hereunder in place of the related provisions discussed in the Chapter.

Section Existing provisions Provisions as amended by Remarks

No. the Finance Act, 2023 2

9 Sub-Section (6) Sub-Section (6) Sections 9, 9A

Provided that if the Provided that if the Central and 9C of the
Central Government, Government, on Customs Tariff
in a review, is of the consideration of a review, Act to be
opinion……………..from is of the amended so as
the date of order of opinion………………from the to omit certain
such extension:. date of order of such words therein
extension:. and to clarify
that the
determination
Sub-Section (7) Sub-Section (7) or review of
The amount of any The amount of any such safeguard duty
such subsidy as subsidy as referred to in or of
referred to in sub- sub-section (1) or sub- countervailing
section (1) or sub- section (2) shall, from time

2
All amendments given in the table would be effective retrospectively, w.e.f. 01.01.1995.

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section (2) shall, from to time, be ascertained by duty or of anti-

time to time, be the Central dumping duty
ascertained and Government,……….under are to be done
determined by the this section. by an
Central Government,… authority in
…under this section. such manner as
may be
9A Sub-Section (5) Sub-Section (5) specified in the
Provided that if the Provided that if the Central rules made
Central Government, Government, on under sections
in a review, is of the consideration of a review, 8B, 9, 9A
opinion that the is of the opinion that the and 9B of the
cessation of such cessation of such duty said Act.
duty……………………date ………………date of order of
of order of such such extension :
extension :

Sub-Section (6) Sub-Section (6)

The margin of The margin of dumping as
dumping as referred to referred to in sub-section
in sub-section (1) or (1) or sub-section (2) shall,
sub-section (2) shall, from time to time, be
from time to time, be ascertained by the Central
ascertained and Government, after such
determined by the inquiry
Central Government, …………………………………………
after such such anti-dumping duty.
inquiry……………………
such anti-dumping
duty.

9C Sub-Section (1) Sub-Section (1)

An appeal against the An appeal against the
order of determination or review
determination or ……………that article.
review
………………………that
article.

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Sub-Section (2) Sub-Section (2)

Every appeal under Every appeal under this
this section shall be section shall be filed within
filed within ninety days ninety days of the date of
of the date of order determination or review
under appeal: under appeal:

Sub-Section (3) Sub-Section (3)

The Appellate Tribunal The Appellate Tribunal may,
may, after giving the after giving the parties to
parties to the appeal, the appeal, an opportunity
an opportunity of of being heard, pass such
being heard, pass such orders thereon as it thinks
orders thereon as it fit, confirming, modifying or
thinks fit, confirming, annulling the
modifying or annulling determination or review
the order appealed appealed against.
against.

Sub-Section (5) Sub-Section (5)

Every appeal under Every appeal under sub-
sub-section (1) shall be section (1) shall be heard by
heard by a Special a Special
Bench Bench……………….technical
……………….technical member.
member. Explanation
For the purposes of this
section, “determination”
or “review” means the
determination or review
done in such manner as
may be specified in the
rules made under sections
8B,9,9A and 9B.

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TEST YOUR KNOWLEDGE

1. Briefly explain the provisions of rule 2(a) of Rules of Interpretation of the First
Schedule to the Customs Tariff Act, 1975 on classification of
incomplete/unfinished articles.
2. What is the purpose of including General Rules of Interpretation of First
Schedule in Customs Tariff? Do they form part of the Tariff Schedule? Explain
the Akin Rule of interpretation.

3. Write a note on “Project Imports” under the Customs Tariff Act, 1975.
4. Explain rule 3 of the rules for Interpretation of the Customs Tariff.
5. Briefly explain the meaning of abbreviation “%” in relation to the rate of duty

ANSWERS/HINTS
1. The provisions of rule 2(a) of Rules of Interpretation of the First Schedule to
the Customs Tariff Act, 1975 on classification of incomplete/unfinished
articles are as under:-
If any particular heading refers to a finished/complete article, the
incomplete/unfinished form of that article shall also be classified under the
same heading provided the incomplete/unfinished goods have the essential
characteristics of the finished goods.
Reference to an article will also include the article complete or finished (or
failing to be classified as complete or finished) presented un-assembled or
dis-assembled.
2. The Customs Tariff has a set of six General Rules for Interpretation of the First
Schedule and three General Explanatory Notes. The six General Rules of
Interpretation and three General Explanatory Notes are integral part of the
Tariff Schedule. The purpose of their inclusion in Customs Tariff is to
standardize the manner in which the nomenclature in the schedule is to be
interpreted so as to reduce classification disputes.
Rule 4 of the Rules of Interpretation is called as akin rule. This rule lays down
that goods which cannot be classified in accordance with rules 1, 2 and 3 of

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the Rules of Interpretation shall be classified under the heading appropriate

to the goods to which they are most akin. In other words, akin rule’ is a
residual rule which is to be applied when classification is not possible by
applying any of the earlier rules. It is a rule of last resort.
3. Project Imports are the imports of machinery, instruments, and apparatus etc.,
falling under different classifications, required for initial set up of a unit or for
substantial expansion of an existing unit.
Heavy customs duty on imported machinery for projects make the initial
project cost very high and project may become unviable. Hence, concept of
‘project import’ is introduced to bring machinery etc. required for initial setup
or substantial exemption at concessional customs duty.

In a project several different items are required, each of which is importable

at different rates of customs duties. Thus, this simple method is adopted, as
otherwise, classifying each machinery and its parts in different heads and
valuing them would have been cumbersome and would have delayed
clearances, which would cause demurrages. Further, individual exemption
notification will apply even for items grouped under the said heading of the
customs tariff liable to duty at the project rate as per recent Supreme Court
judgement.
The items eligible for project import are specified in Heading 9801 of the
Customs Tariff Act, 1975.
The spare parts, raw material and consumables stores upto 10% of the value
of goods can be imported.

Few of the eligible projects are:

(i) Industrial plant
(ii) Irrigation project
(iii) Power project
(iv) Mining project
(v) Oil & mineral exploration project

(vi) Other projects as notified by the Central Government

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4. The application of this rule arises when the goods consists of more than one
material or substance.

When by application of rule 2(b) or for any other reason, goods are, prima
facie, classifiable under two or more headings, classification shall be effected
as follows:

Rule 3(a) – Specific over general

(i) The heading which provides the most specific description shall be
preferred to headings providing a more general description.

(ii) However, when two or more headings each refer to part only of the
materials or substances contained in mixed or composite goods or to
part only of the items in a set up for retail sale, those headings are to
be regarded as equally specific in relation to those goods, even if one
of them gives a more complete or precise description of the goods.
Rule 3(b) – Essential character principle: Mixtures, composite goods
consisting of different materials or made up of different components, and
goods put up in sets for retail sale, which cannot be classified with reference
to (a), shall be classified as if they consisted of material which gives them their
essential character, in so far as this criterion is applicable.
Rule 3(c) – Latter the better: When goods cannot be classified by reference
to (a) or (b), they shall be classified under the heading which occurs last in
numerical order among those which equally merit consideration.
5. The abbreviation “%” in any column of the Schedule in relation to the rate of
duty means that the duty shall be computed at the percentage specified on
the value of the goods as defined in section 14 of the Customs Act.

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SIGNIFICANT SELECT CASES

1. Where a classification (under a Customs Tariff head) is recognized by the

Government in a notification at any point of time, can the same be made
applicable in a previous classification in the absence of any conscious
modification in the Tariff?
Keihin Penalfa Ltd. v. Commissioner of Customs 2012 (278) ELT 578 (SC)
Facts of the Case: Department contended that ‘Electronic Automatic
Regulators’ were classifiable under Chapter sub-heading 8543.89 whereas the
assessee was of the view that the aforesaid goods were classifiable under
Chapter sub-heading 9032.89. An exemption notification dated 1-3-2002
exempted the disputed goods by classifying them under chapter sub-heading
9032.89. The period of dispute, however, was prior to 01.03.2002.
Point of Dispute: The dispute was on classification of Electronic Automatic
Regulators.

Supreme Court’s Decision: The Apex Court observed that the Central
Government had issued an exemption notification dated 1-3-2002 and in the
said notification it had classified the Electronic Automatic Regulators under
Chapter sub-heading 9032.89. Since the Revenue itself had classified the
goods in dispute under Chapter sub-heading 9032.89 from 1-3-2002, the said
classification needs to be accepted for the period prior to it.

The Headings cited in some of the case laws in this chapter may not co-
relate with the Headings of the present Customs Tariff as these cases
relate to an earlier point of time.

Note -Case laws given in this Chapter are solely for the
understanding of provisions relating to classification.

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TEST YOUR KNOWLEDGE

1 Briefly explain the following with reference to the Customs (Determination of

Value of Imported Goods) Rules, 2007:
(i) Goods of the same class or kind
(ii) Computed value

2. Whether the assessable value of the warehoused goods which are sold before
being cleared for home consumption, should be taken as the price at which the
original importer has sold the goods?

3. Explain when are the costs and services as given in rule 10 of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007 be added to
the value of the identical goods under rule 4.
4. Examine the validity of the following statements with reference to the Customs
Act, 1962 giving brief reasons:
(i) Service charges paid to canalizing agent are not includible in the
assessable value of imports. Such agent imports the goods from foreign
sellers and enters into an agreement to sell such goods with buyers in
India in high seas.

(ii) Charges for “vendor inspection” on the second hand goods carried out by
foreign supplier on his own and not required for making the goods ready
for shipment, are not includible in the assessable value of the imported
goods.
5. An importer entered into a contract for supply of crude sunflower seed oil @
U.S. $ 435 C.I.F./Metric ton. Under the contract, the consignment was to be
shipped in the month of July. The period was extended by mutual agreement
and goods were shipped on 5th August at old prices.
In the meanwhile, the international prices had gone up due to volatility in
market and other imports during the month of August were at higher prices.
Department sought to increase the assessable value on the basis of the higher
prices of contemporaneous imports.

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Decide whether the contention of the Department is correct, with reference to

a decided case law, if any.

6. BSA & Company Ltd. has imported a machine from U.K. From the following
particulars furnished by it, arrive at the assessable value for the purpose of
customs duty payable.

Particulars Amount

(i) Price of the machine 10,000 U.K. Pounds

(ii) Freight (air) 3,000 U.K. Pounds

(iii) Engineering and design charges 500 U.K. Pounds

paid to a firm in U.K.

(iv) License fee relating to imported 20% of Price of machine

goods payable by the buyer as a
condition of sale

(v) Materials and components

supplied in UK by the buyer free
of cost valued at
` 20,000

(vi) Insurance paid to the insurer in ` 6,000

India

(vii) Buying commission paid by the 100 U.K. Pounds

buyer to his agent in U.K.

Other particulars:
(i) Inter-bank exchange rate: ` 98 per U.K. Pound.

(ii) CBIC had notified for purpose of section 14 of the Customs Act, 1962,
exchange rate of ` 100 per U.K. Pound.
(iii) Importer paid ` 5,000 towards demurrage charges for delay in clearing
the machine from the Airport.
(Make suitable assumptions wherever required and show workings with
explanations)

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7. Briefly explain with reference to the provisions of the Customs Act, the relevant
date for determination of rate of duty and tariff valuation for imports through
a vehicle where bill of entry is filed prior to the arrival of the vehicle.
8. With reference to the provisions of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007, explain briefly the chief reasons on the
basis of which the proper officer can raise doubts on the truth or accuracy of
the declared value.
9. Jagat Corporation Limited imported some goods from US. The details of the
transaction are as follows:-

Authority Rate of exchange

CBIC 1 US $=` 70

RBI 1 US $=` 71

CIF value of the goods is $ 1,50,000

Rate of basic custom duty is 10%
Rate of social welfare surcharge is 10%

Integrated tax is 18%. Ignore GST Compensation Cess.

Calculate total customs duty and integrated tax payable thereon.
10. ABC Industries Ltd. imports an equipment by air. CIF price of the equipment is
6,000 US$, freight paid is 1,200 US$ and insurance cost is 1,800 US$. The
banker realizes the payment from importer at the exchange rate of ` 61 per
US$. Central Board of Indirect taxes and Customs notifies the exchange rate
as ` 70 per US$ while rate of exchange notified by RBI is ` 72 per US$. ABC
Industries Ltd. expends ` 56,000 in India for certain development activities with
respect to the imported equipment.

Basic customs duty is 10%, Integrated tax is leviable @ 12% and social welfare
surcharge is 10% on duty. Ignore GST Compensation Cess.
You are required to compute the amount of total duty and integrated tax
payable by ABC Industries Ltd. under Customs law.

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11. Compute the total customs duty and integrated tax payable under Customs law
on an imported machine, based on the following information:

US $

(i) Cost of the machine at the factory of the exporter 20,000

(ii) Transport charges from the factory of exporter to the port 800
for shipment

(iii) Handling charges paid for loading the machine in the ship 50

(iv) Freight charges from exporting country to India 5,000

(v) Buying commission paid by the importer 100

(` )

(vi) Lighterage charges paid by the importer at port of 12,000

importation

(vii) Freight incurred from port of entry to Inland Container 60,000

depot

(viii) Ship demurrage charges paid at port of importation 24,000

Date of bill of entry 20th January (Rate BCD 20%; Exchange rate
as notified by CBIC ` 70 per US $)

Date of entry inward 25th March (Rate of BCD 10%; Exchange rate
as notified by CBIC ` 75 per US $)

Integrated tax 12%

Note: Ignore GST Compensation Cess.

12. Kaveri Enterprises imported some goods from Italy. On the basis of certain
information obtained through computer printouts from the Customs House,
Department alleged that during the period in question, large number of
consignments of such goods were imported at a much higher price than the
price declared by Kaveri Enterprises. Therefore, Department valued such goods
on the basis of transaction value of identical goods as per rule 4 of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007 and

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demanded the differential duty along with penalty and interest from the Kaveri
Enterprises. However, Department did not provide these printouts to Kaveri
Enterprises.
Kaveri Enterprises contended that Department’s demand was without any basis
in law, without any legally admissible evidence and opposed to the principles
of natural justice as the computer printouts which formed the basis of such
demand had not been supplied to them. Resultantly, they had no means of
knowing as to whether any imports of comparable nature were made at the
relevant point of time.
You are required to examine the contention of Kaveri Enterprises, with the help
of a decided case law, if any.

13. M/s Impex imported some consignment of goods on 1st June. A bill of entry for
warehousing of goods was presented on 5th June and the materials were duly
warehoused. The goods were subject to duty @ 50% ad valorem. In the
meanwhile, on 1st July, an exemption notification was issued reducing the
effecting customs duty @ 30%, ad valorem. M/s Impex filed their bill of entry
for home consumption on 1st August claiming duty @ 30% ad valorem.
However, Customs Department charged duty @ 50% ad valorem being the rate
on the date of clearance into the warehouse.
Explain with reference to the provisions of the Customs Act, 1962:

(i) the rate of duty applicable for clearance for home consumption in this
case.
(ii) whether the rate of exchange on 1st August could be adopted for purpose
of conversion of foreign currency into local currency?
14. Differentiate between deductive value and computed value.
15. What is residual method of valuation? Discuss with reference to the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007.
16. Enumerate the various costs and services that are to be added under rule 10 of
the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
to arrive at the “transaction value”.

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17. In the context of Customs Valuation (Determination of Price of Imported Goods)

Rules, 2007, explain the meaning of:

(i) Similar goods

(ii) Identical goods
18. Briefly discuss the provisions relating to date for determining the rate of duty
and tariff valuation of imported goods.
19. Product ‘Z’ was imported by Mr. X by air. The details of the import transaction
are as follows:

Particulars US $

Price of ‘Z’ at exporter’s factory 8,500

Freight from factory of the exporter to load airport (airport in 250

the country of exporter)

Loading and handling charges at the load airport 250

Freight from load airport to the airport of importation in India 4,500

Insurance charges 2,000

Though the aircraft arrived on 22nd August, the bill of entry for home
consumption was presented by Mr. X on 20th August.

The other details furnished by Mr. X are:

20th August 22nd August

Rate of basic customs duty 20% 10%

Exchange rate notified by CBIC ` 70 per US$ ` 72 per US$

Exchange rate prescribed by RBI ` 71 per US$ ` 72 per US$

Integrated tax leviable under section 18% 12%

3(7) of the Customs Tariff Act, 1975

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Compute-
(i) value of product ‘Z’ for the purpose of levying customs duty
(ii) customs duty and tax payable
20. An importer from Cochin imports goods from an exporter in US. The vessel
carrying the goods reaches Mumbai port first and from there goods are
transshipped to Cochin port.
Determine the assessable value of the imported goods under the Customs Act,
1962 from the following particulars:

S.No. Particulars Amount

(i) Cost of the machine at the factory of the exporter US $ 20,000

(ii) Transport charges from the factory of exporter to US $ 1,000

the port for shipment

(iii) Handling charges paid for loading the machine in US $ 100

the ship

(iv) Buying commission paid by the importer US $ 100

(v) Freight charges from exporting country to India US $ 2,000

(vi) Actual insurance charges paid are not ascertainable ---

(vii) Charges for design and engineering work US $ 5,000

undertaken for the machine in US

(viii) Unloading and handling charges paid at the place ` 1,500

of importation

(ix) Transport charges from Mumbai to Cochin port ` 25,000

(x) Exchange rate to be considered: 1$ = ` 70

21. ABC Industries Ltd. of Mumbai imported one machine through vessel from
Japan, in the month of November.

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The following particulars are made available:

S. Particulars Amount in
No. Japanese Yen
(¥)

(i) Cost upto port of exportation incurred by exporter 6,00,000

(ii) Loading charges at port of exportation 25,000

(iii) Freight charges from port of export to port of import 1,00,000

in India.

Following additional amounts paid by ABC Industries Ltd:-

S. Particulars Amount
No. in Indian
rupees (`)

(i) Designing charges, necessary for such machine, paid to 8,00,000

consultancy firm in New Delhi

(ii) Commission paid (not the buying commission) to local 1,25,000

agent of exporter.

(iii) Actual landing charges paid at the place of importation. 15,000

(iv) Actual insurance charges paid to the place of importation -

are not ascertainable.

(v) Lighterage charges paid at the port of importation 20,000

Other Information :

(i) Rate of basic customs duty is 10%

(ii) Rate of social welfare surcharge is 10%

(iii) Integrated tax leviable under section 3(7) of Customs Tariff Act, 1975 is 12%.
(iv) Ignore GST compensation cess.
(v) Rate of exchange to be taken is 1 Japanese Yen (¥) = ` 0.71

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Arrive at the total customs duty, including integrated tax payable under section
3(7) of the Customs Tariff Act, 1975 with appropriate working notes.

22. Mr. X imported certain goods from a related person Mr. Q of US and transaction
value has been rejected. Rules 4 and 5 of the Import Valuation Rules are found
inapplicable as no similar/ identical goods are imported in India. Mr. X
furnishes cost related data of imports and requests customs authorities to
determine value accordingly as per rule 8. The relevant data are
1. Cost of materials incurred by Mr. Q $ 2000
2. Fabrication charges incurred by Mr. Q $ 1000
3. Other chargeable expenses incurred by Mr. Q $ 400
4. Other indirect costs incurred by Mr. Q $ 250

5. Freight from Mr. Q 's factory to US port $ 250

6. Loading charges at US port $ 100
7. Normal net profit margin of Mr. Q is 20% of FOB

8. Air freight from US port to Indian port $ 1,500

9. Insurance from US port to Indian port $ 50
10. Exchange rate ` 70 per $
The customs authorities are of the opinion that since value as per rule 7 can be
determined at ` 4,00,000, there is no need to apply rule 8.
Can the request of Mr. X be legally acceptable? If so, compute the assessable
value under the Customs Act, 1962.

ANSWERS/HINTS
1. (i) As per rule 2(1)(c) of Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007, goods of the same class or kind, means
imported goods that are within a group or range of imported goods
produced by a particular industry or industrial sector and includes
identical goods or similar goods.

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(ii) As per rule 2(1)(a) of the said rules, computed value means the value of
imported goods determined in accordance with rule 8. The value of
imported goods is taken as computed value when valuation is not
possible as per any of rules earlier than rule 8 and cost is ascertainable.
As per rule 8, subject to the provisions of rule 3, the value of imported
goods shall be based on a computed value, which shall consist of the
sum of –
(a) the cost or value of materials and fabrication or other processing
employed in producing the imported goods;
(b) an amount for profit and general expenses equal to that usually
reflected in sales of goods of the same class or kind as the goods
being valued which are made by producers in the country of
exportation for export to India;
(c) the cost or value of all other expenses under sub-rule (2) of
rule 10.
2. Section 14 of the Customs Act provides that the value of the imported goods
shall be the transaction value of goods which is the price actually paid or
payable for the goods when sold for export to India for delivery at the time
and place of importation. The sale of goods after warehousing them in India
cannot be considered a sale for export to India. It cannot be stated that the
export of goods is not complete even after the imported goods were cleared
for warehousing in the country of import. Hence, the price at which the
imported goods are sold after warehousing them in India does not qualify to
be the transaction value as per section 14. This has been clarified vide Circular
No. 11/2010 Cus. dated 03.06.2010.
Note: The above is only applicable for levy of BCD and Social welfare
surcharge. IGST is leviable as per Section 3(8A) of the Customs Tariff
Act, 1975.
3. As per rule 4(1)(c) of the Customs Valuation (Determination of Value of
Imported Goods Rules, 2007) where imported goods are being valued as per
rule 4, the value of the identical goods is adjusted to take into account the
difference attributable to the commercial level or to the quantity or both.
According to rule 4(2) where costs and charges referred to in rule 10 are

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included in the value of identical goods, adjustment has to be made of the

difference in such costs and charges between the imported goods and the
identical goods.
Therefore, if the value of the identical goods does not include certain specific
costs and charges relating to the imported goods, these are to be included
as per rule 10.
4. (i) The statement is not valid. Since the canalizing agent is not the agent
of the importer nor does he represent the importer abroad, purchases
in bulk by canalizing agency from foreign seller and subsequent sale by
it to Indian importer on high seas sale basis are independent of each
other. Hence, the commission or service charges paid to the canalizing
agent are includible in the assessable value as these cannot be termed
as buying commission [Hyderabad Industries Ltd. v. UOI 2000 (115) ELT
593 (SC)].

(ii) The statement is valid. As per rule 10(1)(e) of the Customs

(Determination of Value of Imported Goods) Rules, 2007, only the
payments actually made as a condition of sale of the imported goods
by the buyer to the seller are includible in the assessable value.
Thus, charges of vendor inspection on the goods carried out by foreign
supplier on his own and not required for making the goods ready for
shipment, are not includible in the assessable value of the imported
goods [Bombay Dyeing & Mfg. v. CC 1997 (90) ELT 276 (SC)].
5. No, the contention of the Department is not correct.
The facts of the given case are similar to the case of CCus., Vishakhapatnam
v. Aggarwal Industries Ltd. 2011 (272) E.L.T. 641 (SC). The Supreme Court, in
the instant case, observed that since the contract entered into for supply of
crude sunflower seed oil @ US $ 435 CIF/metric ton could not be performed
on time, the extension of time for shipment was agreed upon by the
contracting parties.
The Supreme Court pointed out that the commodity involved had volatile
fluctuations in its price in the international market, but having delayed the
shipment; the supplier did not increase the price of the commodity even after
the increase in its price in the international market.

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Further, there was no allegation regarding the supplier and importer being in
collusion. Thus, the appeal was allowed in the favour of the assessee and the
contract price was accepted as the ‘transaction value’.
6. Computation of assessable value of machine imported by BSA & Co.

Particulars Amount (£)

Price of the machine 10,000

Add: Engineering and design charges paid in UK [Note 1] 500

Licence fee relating to imported goods payable by

the buyer as a condition of sale (20% of Price of 2,000
machine) [Note 1]

Total 12,500

Amount (`)
Value in Indian currency [£12,500 x `100] [Note 2] 12,50,000
Add: Materials and components supplied by the buyer 20,000
free of cost [Note 1]
FOB 12,70,000
Add: Freight [Note 3] 2,54,000
Insurance paid to the insurer in India [Note 1] 6,000
CIF value 15,30,000
Assessable value 15,30,000

Notes:
1. Engineering and design charges paid in UK, licence fee relating to
imported goods payable by the buyer as a condition of sale, materials
and components supplied by the buyer free of cost and actual insurance
charges paid are all includible in the assessable value [Rule 10 of the
Customs (Determination of Value of Imported Goods) Rules, 2007].

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2. As per Explanation to section 14(1) of the Customs Act, 1962, assessable

value should be calculated with reference to the rate of exchange
notified by the CBIC.
3. If the goods are imported by air, the freight cannot exceed 20% of FOB
price [Fifth proviso to rule 10(2) of the Customs (Determination of Value
of Imported Goods) Rules, 2007].
4. Buying commission is not included in the assessable value [Rule 10(1)(a)
of the Customs (Determination of Value of Imported Goods) Rules,
2007].
5. Only ship demurrage charges on chartered vessels are included in the
cost of transport of the imported goods. Thus, demurrage charges for
delay in clearing the machine from the Airport will not be includible in
the assessable value [Explanation to Rule 10(2) of the Customs
(Determination of Value of Imported Goods) Rules, 2007].

7. As per section 15(1) of the Customs Act, 1962, the relevant date for
determination of rate of duty and tariff valuation of goods entered for
imports through a vehicle is the date of presentation of bill of entry OR date
of arrival of the vehicle, whichever is later.
Therefore, the relevant date for determination of rate of duty and tariff
valuation for imports through a vehicle where bill of entry is filed prior to the
arrival of the vehicle will be the date of the arrival of the vehicle.
8. As per explanation to rule 12 of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007, the chief reasons on the basis of which
the proper officer can raise doubts on the truth or accuracy of the declared
value may include:-
(a) the significantly higher value at which identical or similar goods
imported at or about the same time in comparable quantities in a
comparable commercial transaction were assessed;
(b) the sale involves an abnormal discount or abnormal reduction from the
ordinary competitive price;
(c) the sale involves special discounts limited to exclusive agents;

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(d) the misdeclaration of goods in parameters such as description, quality,

quantity, country of origin, year of manufacture or production;

(e) the non declaration of parameters such as brand, grade, specifications

that have relevance to value;
(f) the fraudulent or manipulated documents.

9. Computation of total custom duty and integrated tax payable

Particulars Amount

CIF Value $ 1,50,000.00

Assessable value (in `) =$1,50,000 × ` 70 (Note -1) ` 1,05,00,000.00

Add: Basic custom duty @ 10% (` 1,05,00,000 × 10%) ` 10,50,000.00

Add: Social Welfare surcharge [`10,50,000 × 10%] ` 1,05,000

Sub-total 1,16,55,000.00

Add: Integrated tax (` 1,16,55,000 × 18%) (Note-2) ` 20,97,900.00

Total custom duty and integrated tax payable ` 32,52,900

(rounded off)

Notes:-
(1) The applicable exchange rate is the rate notified by CBIC [Explanation
to section 14(1) of the customs Act, 1962].

(2) Integrated tax is levied on the sum total of the assessable value of the
imported goods, customs duties and applicable social welfare
surcharge.
10. Computation of customs duty and integrated tax payable by ABC
Industries Ltd.

Particulars Amount
CIF value 6,000 US $
Less: Freight 1,200 US $

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Less: Insurance 1,800 US $

FOB value 3,000 US $
Add: Freight (20% of FOB value) [Note 1] 600 US $
Add: Insurance (actual) 1,800 US $
CIF 5,400 US $
Exchange rate as per CBIC [Note 3] ` 70 per US $
Assessable value = ` 70 x 5,400 US $ ` 3,78,000
Add: Basic customs duty @ 10% ` 37,800
Add: Social Welfare Surcharge @ 10% ` 3,780
Sub-total ` 4,19,580
Integrated tax @ 12% of ` 4,19,580[Note 5] ` 50,349.60
Total customs duty and integrated tax payable ` 91,929.60
[`37,800 + ` 3,780 + ` 50,349.60]
Total customs duty and integrated tax payable ` 91,930
(rounded off)

Notes:
1. If the goods are imported by air, the freight cannot exceed 20% of FOB
price [Fifth proviso to rule 10(2) of the Customs (Determination of Value
of Imported Goods) Rules, 2007].
2. Rate of exchange determined by CBIC is considered [Clause (a) of the
explanation to section 14 of the Customs Act, 1962].
3. Rule 10(1)(b)(iv) of the Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007 inter alia provides that value of
development work undertaken elsewhere than in India is includible in
the value of the imported goods. Thus, development charges of
` 56,000 paid for work done in India have not been included for the
purposes of arriving at the assessable value.
4. Integrated tax is levied on the sum total of the assessable value of the
imported goods, customs duties and applicable social welfare surcharge.

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11. Computation of customs duty and integrated tax payable on the

imported goods

Particulars US $

Cost of the machine at the factory 20,000

Transport charges up to port 800

Handling charges at the port 50

FOB 20,850

FOB value in Indian rupees @ ` 70/- per $ [Note 1] 14,59,500

Freight charges up to India [US $ 5,000 x ` 70] 3,50,000

Lighterage charges paid by the importer [Note 2] 12,000

Ship demurrage charges on chartered vessels [Note 2] 24,000

Insurance charges @ 1.125% of FOB [Note 3] 16,419.38

CIF 18,61,919.38

Add: Basic customs duty @ 10% [Note 4] [a] 1,86,192

Add: Social Welfare surcharge @ 10% [b] 18,619.20

Total 20,66,730.58

Add: Integrated tax @ 12% of ` 20,66,730.58 [c] [Note 5] 2,48,007.67

Total custom duty and integrated tax payable [(a) +(b) 4,52,819
+ (c)] rounded off

Notes:

(1) Rate of exchange notified by CBIC on the date of presentation of bill of

entry is considered [Explanation to section 14 of the Customs Act, 1962].
(2) Cost of transport of the imported goods includes ship demurrage
charges and lighterage charges [Explanation to Rule 10(2) of Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007].

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(3) Insurance charges is included @ 1.125% of FOB value of goods [Third

proviso to rule 10(2) of Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007].
(4) Rate of duty is the rate prevalent on the date of presentation of bill of
entry or the rate prevalent on the date of entry inwards, whichever is
later [Section 15 of the Customs Act, 1962].
(5) Integrated tax is levied on the sum total of the assessable value of the
imported goods, customs duties and applicable Social welfare
surcharge.
(6) Buying commission is not included in the assessable value [Rule
10(1)(a)(i) of Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007].
(7) Freight incurred from port of entry to Inland Container depot is not
includible in assessable value [Rule 10(2)(a) of Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007].
12. The facts of the given case are similar to the case of Gira Enterprises v. CCus.
2014 (307) ELT 209 (SC) decided by the Supreme Court. In the instant case,
the Supreme Court observed that since Revenue did not supply the copy of
the computer printout, which formed the basis of the conclusion that the
appellants under-valued the imported goods, the appellants obviously could
not and did not have any opportunity to demonstrate that the transactions
relied upon by the Revenue were not comparable transactions.
The Supreme Court held that mere existence of alleged computer printout
was not proof of existence of comparable imports. Even if assumed that such
printout did exist and content thereof were true, such printout must have
been supplied to the appellant and they should have been given reasonable
opportunity to establish that the import transactions were not comparable.
In view of the above-mentioned judgment, contention of Kaveri Enterprises
is correct.
13. (i) Section 15(1)(b) of the Customs Act, 1962 provides that in the case of
goods cleared from a warehouse, rate of duty applicable is the rate of
duty in force on the date on which a bill of entry for home consumption
in respect of such goods is presented.

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In the given case, since M/s Impex has filed the bill of entry for home
consumption on 1st August, rate of duty is the rate prevalent on the said
date viz. 30%.
(ii) Third proviso to section 14 of the Customs Act, 1962 provides that the
rate of exchange notified by the CBIC as prevalent on the date of
presentation of bill of entry for warehousing is the applicable rate of
exchange for conversion of foreign currency into local currency.
Therefore, in the given case, rate of exchange that would be prevalent
on date of presentation of bill of entry for warehousing i.e. 5th June and
not the one prevalent on date of presentation of bill of entry for home
consumption i.e., 1st August, would be adopted.
14. [Refer Para 7]
15. [Refer Para 7]
16. [Refer Para 7]
17. [Refer Para 7]

18. [Refer Para 9]

19. Computation of assessable value of product ‘Z’

Particulars Amount

Ex-factory price of the goods 8,500 US $

Freight from factory of the exporter to load 250 US $

airport (airport in the country of exporter)

Loading and handling charges at the load 250 US $

airport

Freight from load airport to the airport of 4,500 US $

importation in India

Total cost of transport, loading and 5,000 US $

handling charges associated with the
delivery of the imported goods to the place
of importation

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Add: Cost of transport, loading, unloading and handling 1,800 US $

charges associated with the delivery of the imported
goods to the place of importation (restricted to 20%
of FOB value) [Note 1]

Insurance (actual) 2,000 US $

CIF for customs purpose 12,300 US $

Value for customs purpose 12,300 US $

Exchange rate as per CBIC [Note 2] ` 70 per US $

Amount (`)

Assessable value (` 70 x 12,300 US $) 8,61,000

Add: Basic customs duty @ 10% [Note 3] 86,100

Add: SWS @ 10% 8,610

Value for the purpose of levying integrated tax [Note 4] 9,55,710

Add: Integrated tax @ 12% 1,14,685.2

Total duty & tax payable (rounded off) 2,09,395

Notes:

(1) In the case of goods imported by air, the cost of transport, loading,
unloading and handling charges associated with the delivery of the
imported goods to the place of importation shall not exceed 20% of the
FOB value of the goods. [Fifth proviso to rule 10(2) of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007
(CVR)].
FOB value in this case is the ex-factory price of the goods (8,500 US $)
plus the cost of transport from factory to load airport (250 US $) plus
loading and handling charges at the load airport (250 US $) which is
9,000 US $.
(2) Rate of exchange determined by CBIC is to be considered [Clause (a) of
the explanation to section 14 of the Customs Act, 1962].

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(3) Section 15 of the Customs Act, 1962 provides that rate of duty shall be
the rate in force on the date of presentation of bill of entry or the rate
in force on the date of arrival of aircraft, whichever is later.
(4) Integrated tax is levied on the sum total of the assessable value of the
imported goods and customs duties [Section 3(8) of the Customs Tariff
Act, 1962]. SWS leviable on integrated tax have been exempted.
20. Computation of assessable value of imported goods

Particulars Amount
(US $)

Price of the machine at the factory of the exporter 20,000

Add: Transport charges up to the port in the country of 1,000

the exporter [Note 1]

Handling charges at the port in the country of the 100

exporter [Note 1]

Charges for design and engineering work 5,000

undertaken for the machine in US [Note 2]

Buying commission [Note 3] Nil

FOB value 26,100.00

Add: Freight charges up to India 2,000.00

Insurance charges @ 1.125% of FOB [Note 4] 293.63

Transport charges from Mumbai to Cochin port Nil

[Note 5]

CIF value 28,393.63

Add: Unloading and handling charges paid at the place Nil

of importation [Note 6]

Assessable value 28,393.63

Assessable value in Indian rupees @ ` 70/ per $ `19,87,554.10

Assessable value (rounded off) ` 19,87,554

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Notes:
(1) The cost of transport, loading, unloading and handling charges
associated with the delivery of the imported goods to the place of
importation are includible in the assessable value [Rule 10(2)(a) of the
Customs Valuation (Determination of Value of Imported Goods) Rules,
2007 (CVR)].
(2) Design and engineering work undertaken elsewhere than in India and
necessary for the production of the imported goods is includible in the
assessable value [Rule 10(1)(b)(iv) of the CVR].
(3) Buying commission is not included in the assessable value [Rule
10(1)(a)(i) of the CVR].

(4) If insurance cost is not ascertainable, the same shall be added @ 1.125%
of FOB value of the goods [Third proviso to rule 10(2) of the CVR].
(5) Cost of insurance, transport, loading, unloading, handling charges
associated with transshipment of imported goods to another customs
station in India is not included in the assessable value [Sixth proviso to
rule 10(2) of the CVR].

(6) As per rule 10(2) of the CVR, only charges incurred for delivery of goods
“to” the place of importation are includible in the transaction value.
The loading, unloading and handling charges associated with the delivery of
the imported goods at the place of importation are not to be added to the
CIF value of the goods.
21. Computation of assessable value of the imported goods

Japanese
Yen
Cost upto port of exportation 6,00,000
Add: Loading charges at the port of exportation [Note-1] 25,000
Total in Japanese Yen 6,25,000
`

Total in Indian rupees @ ` 0.71 per Japanese Yen 4,43,750.00

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Add: Commission paid to local agent of exporter [Note-3] 1,25,000.00

FOB value as per customs 5,68,750.00
Add: Freight charges from port of export to port of import 71,000.00
in India [Note-1]
[1,00,000 Japanese Yen × 0.71 = ` 71,000]
Add: Lighterage charges paid by the importer at port of 20,000
importation [Note-1]
Add: Insurance charges @ 1.125% of FOB 6,398.43
[` 5,68,750 × 1.125%] [Note-4]
CIF value 6,66,148.43
Assessable Value (rounded off) 6,66,148
Add: Basic customs duty @ 10% of ` 6,66,148 66,615
(rounded off) (A)
Add: Social welfare surcharge @ 10% of ` 66,615 6,662
(rounded off) (B)
Total 7,39,425
Add: Integrated tax @ 12% of ` 7,39,425 (rounded off) (C) 88,731
Total custom duty and integrated tax payable [(A) 1,62,008
+(B) + (C)] (rounded off)

Notes:

(1) The cost of transport, loading, unloading and handling charges

associated with the delivery of the imported goods to the place of
importation are includible in the assessable value [Rule 10(2) of the
Customs Valuation (Determination of Value of Imported Goods) Rules,
2007 (CVR)]. Further, explanation to rule 10(2), inter alia, clarifies that
cost of transport of the imported goods includes lighterage charges.

(2) Design and engineering work is includible in the assessable value only
when the same is undertaken elsewhere than in India and necessary for
the production of the imported goods [Rule 10(1) of the CVR].

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(3) Buying commission is not included in the assessable value [Rule 10(1)
of the CVR]. Commission paid to local agent of exporter is includible in
the assessable value since it is not buying commission.
(4) If insurance cost is not ascertainable, the same shall be added @ 1.125%
of FOB value of the goods [Rule 10(2) of the CVR].

(5) Cost of insurance, transport, loading, unloading, handling charges

associated with transshipment of imported goods to another customs
station in India is not included in the assessable value [Rule 10(2) of the
CVR].
22. The value of the imported goods is determined under rule 8 of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007
(hereinafter referred to as Import Valuation Rules) if the same cannot be
determined under the earlier rules. However, the order of application of rules
7 and 8 can be reversed at the request of the importer and with the approval
of the proper officer.
Thus, request of Mr. X for determination of value under rule 8 is legally
acceptable, if the same is also approved by the proper officer.

Assuming that the request of Mr. X has been approved by the proper officer,
the assessable value of the imported goods under rule 8 will be the sum of-
(a) the cost of materials and fabrication or other processing;

(b) an amount for profit and general expenses

(c) the cost or value of all other expenses under rule 10(2) of the said rules.

Computation of assessable value

Particulars Amount
($)

Cost of materials 2,000

Add: Fabrication charges 1,000

Other chargeable expenses 400

Other indirect costs 250

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Cost of the goods at Mr. Q’s factory 3,650

Add: Net profit margin @ 20% of FOB, i.e. 25% of total cost 1,000
Total cost till US port = Cost of the goods at factory +
Freight from factory to US port and loading charges at US
port = $ 4,000 [$ 3,650 + $ 250 + $ 100]
FOB value = Total cost till port + profit = $ 5,000
($ 4,000 +$ 1,000)

Add: Freight & loading/unloading charges 1,000

[In case of import by air, the cost of transport, loading,
unloading and handling charges associated with the
delivery of the imported goods to the place of
importation are restricted to 20% of FOB value]

Insurance charges 50

Assessable value 5,700

Assessable value in Indian Rupees (Exchange rate - ` 70 per $) 3,99,000

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TEST YOUR KNOWLEDGE

Note: The rates of duties, wherever mentioned in the

illustrations/questions/examples may not always be the actual rate prevalent during
the period in question. They may be hypothetical rates assumed to explain the
provisions of law with more clarity.
1. ‘Queen Marry’, is a vessel containing the goods imported by XML Ltd. The events
relating to its entry into India and the discharge and onward movement and
storage of the goods are as follows.
24th May Vessel entered the Indian territorial waters.
25th May Import manifest was delivered to the customs authorities
27th May XML Ltd filed bill of entry for the goods
29th May Entry inwards granted to the vessel
The rate of customs duty on the goods was increased from 8% to 10% on
28th May.
At what rate should XML Ltd. pay the customs duty on the goods imported by
it?
2. Write a brief note on self-assessment in customs under the Customs Act, 1962.
3. State briefly the provisions of the Customs Act, 1962 relating to payment of
interest in case of provisional assessment.
4 What is meant by ‘boat notes’?
5. Discuss the provisions regarding transit of goods and transhipment of goods
without payment of duty under the Customs Act.
6. Explain in brief the duty exemption to baggage under section 79(1) of the
Customs Act, 1962.

7. What is the relevant date for determining the rate of duty and tariff valuation
in respect of goods imported/exported by post?
8. Explain the obligation cast on person-in-charge on arrival of vessels or aircrafts
in India under section 29 of the Customs Act, 1962.

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9. Explain briefly the meaning of entry inwards and entry outwards with reference
to the customs law.

10. Which class of importers is required to pay customs duty electronically? Name
the dedicated payment gateway set up by the Board (CBIC) to use e-payment
facility easily by an importer.

11. Mr. Anil and his wife (non-tourist Indian passengers) are returning from Dubai
to India after staying there for a period of two years. They wish to bring gold
jewellery purchased from Dubai. Please enumerate provisions of customs laws
for jewellery allowance in their case.
12. Can the customs audit cover a person who is not an exporter or importer?
13. A fishing trawler is operating 10 nautical miles from the baseline. Is it entitled
to duty-free stores?
14. What are the circumstances under which assessment is done provisionally
under section 18?

15. State the provisions of transhipment of goods without payment of duty under
section 54 of the Customs Act, 1962.
16. Explain the procedure prescribed in Customs Act, 1962 in case of goods not
cleared, warehoused or transhipped within 30 days after unloading.
17. Write short notes on:
(a) Export general manifest

(b) Boat note (or restriction on goods being water borne)

18. Discuss briefly:
(a) Temporary detention of baggage
(b) Relevant date for rate of duty and tariff valuation in respect of goods
imported and exported by post
19. What is the permissible time limit with respect to the following- :

(i) for filing a bill of entry

(ii) for paying the assessed duty

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(iii) for delivery of arrival manifest or import manifest/report and departure

manifest or export manifest/report

20. State in brief the provisions of the Customs Act, 1962 relating to filing of
“Arrival manifest or import manifest/ Report”.
21. Write a brief note on the declaration made by the owner of baggage.

22. State and summarise the provisions and procedure in the Customs Act, 1962
governing preparation and filing of a bill of entry.
23. Under what situations the amount of duty and interest refundable under section
18 of the Customs Act, 1962 shall be paid to the importer/exporter instead of
being credited to the Consumer Welfare Fund?
24. State the procedure for clearance of goods imported by post.
25. Briefly explain the following with reference to the provisions of the Customs
Act, 1962:
(i) Bill of export
(ii) Import report
(iii) Imported goods
(iv) Entry

(v) Prohibited goods

(vi) Customs port
(vii) Goods

(viii) Stores
(ix) Conveyance
(x) Dutiable goods

(xi) Customs area

(xii) Adjudicating Authority
(xiii) Foreign going vessel or aircraft

(xiv) Assessment

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26. With reference to the facility, ‘Clear first-Pay later’ extended to importers under
the customs law, answer the following questions:

(i) What is the objective of the facility?

(ii) Who is eligible to avail this scheme?
(iii) What are the due dates for payment of duty under this facility?

(iv) What are the circumstances when the deferred payment facility will not
be available?
27. Gregory Peg of foreign origin has come on travel visa, to tour in India. He
carries with him, as part of baggage, the following:

Particulars Value in `

Travel Souvenir 85,000

Other articles carried on in person 1,50,000

120 sticks of cigarettes of `100 each 12,000

Fire arm with 100 cartridges (value includes the value of 1,00,000
cartridges at @ ` 500 per cartridge).

Determine customs duty payable, if the effective rate of customs duty is 38.50%
inclusive of social welfare surcharge, with short explanations where required.
Ignore Agriculture infrastructure and development cess.
28 An importer filed a bill of entry after 60 days of filing Import General Manifest.
The Deputy Commissioner of Customs imposed a penalty of ` 10,000 for late
filing of the bill of entry. Since, importer wanted to clear the goods urgently, he
paid the penalty. Can penalty be imposed for late filing of the bill of entry? Can
bill of entry be filed in advance? Examine the issue regarding period available
for filing bill of entry in the light of relevant statutory provisions?
29. Laxmi Company imported goods valued at ` 10,00,000 vide a Bill of Entry
presented before the proper officer on 15thDecember, 2022, on which date the
rate of customs duty was 20%. The proper officer decided that the goods should
be subject to chemical or other test and therefore, the same were provisionally
assessed at a value of ` 10,00,000 and Laxmi company paid provisional duty of

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` 2,00,000 on the same date. Laxmi Company wants to voluntarily pay duty of
` 1,50,000 on 20th January, 2023.
(1) Can Laxmi Company provisionally pay the duty and what are the
conditions which are to be complied before such payment is made?
(2) Determine the amount of interest payable, if any, under section 18 of the
Customs Act, 1962 assuming that the payment of ` 1,50,000 as stated
above is made on 20th January, 2023 and that the final duty is assessed
on 31st January, 2023 at ` 4,00,000 and the balance duty is paid on the
same day.
30. After visiting USA for a month, Mrs. and Mr. Iyer (Indian residents aged 35 and
40 years respectively) brought to India a laptop computer valued at
` 70,000, used personal effects valued ` 1,40,000 and a personal computer for
` 58,000.
Calculate the custom duty payable by Mrs. & Mr. Iyer, if any. Ignore Agriculture
infrastructure and development cess.
31. Mrs. X, an Indian resident (36 years old) who was on a visit to China, returned
after 6 months. She was carrying with her the following items:

(i) Personal effects ` 75,000

(ii) Laptop computer ` 60,000

(iii) Jewellery - 25 grams (purchased in China) ` 75,000

(iv) Music system ` 50,000

Compute the customs duty payable by Mrs. X with reference to the Baggage
Rules, 2016. Ignore Agriculture infrastructure and development cess.

ANSWERS/HINTS

1. Rate of duty will be 10%, because the bill of entry is deemed to have been
filed on the date of entry inward though it was actually filed before the rate
of duty increased.
2. Refer section 17.

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3. Interest is payable from the first day of the month in which the provisional
assessment began. Refer section 18.
4. Boat notes are issued to cover transport of cargo to or from vessels that
cannot come into the port. Refer ‘Restrictions on goods being water-borne’.
(section 35)
5. Refer sections 53 and 54.
6. Refer section 79 and Baggage Rules.
7. Refer Section 83.
8. Vessel / aircraft must call or land only at a notified customs port or airport,
unless otherwise permitted, and except in an emergency. Refer section 29 of
the Customs Act.
9. Entry inwards is permission to begin unloading of the imported goods, and
entry outwards is permission to begin loading of export goods. Refer section
31 and section 39.
10. Authorised economic operators and those importers who are paying
` 10,000 or more per bill of entry. They will pay through ICEGATE. Refer para
“Mandatory E-payment of duty”.
11. As per rule 5 of the Baggage Rules, 2016, a passenger who has been residing
abroad for more than one year and returns to India shall be allowed duty free
clearance of jewellery in bona fide baggage as under:
• Jewellery upto a weight of 20 grams with a value cap of ` 50,000 for a
gentlemen passenger
• Jewellery upto a weight of 40 grams with a value cap of ` 1,00,000 for
a lady passenger
Thus, in the given case, Mr. Anil would be allowed duty free jewellery
upto a weight of 20 grams with a value cap of ` 50,000 and his wife
would be allowed duty free jewellery upto a weight of 40 grams with a
value cap of `1,00,000.
Further, in addition to the jewellery allowance, Mr. Anil and his wife
would also be allowed duty free clearance of jewellery worth
` 1,00,000 (` 50,000 per person) as part of free baggage allowance.
12. Yes, persons dealing with the goods can also be audited. Refer section 99A
and related regulations.

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13. No. Refer definitions of Foreign going vessel and ‘India’.

14. Refer provisional assessment of duty under para 5.
15. Refer transit and transhipment of goods under para 11.
16. Refer section 48: The goods can be auctioned.
17. (a) EGM: Refer section 41;(b) boat note: Refer section 35
18. (a) Refer section 80 (b) Refer section 83
19. (i) Refer section 46: 30 days prior to arrival, & not later than the end of the
day of arrival.
(ii) Refer section 47: day of filing bill of entry (self-assessment) or within a
day of receiving re-assessed bill of entry.
(iii) Refer section 30: import manifest: before arrival; import report: within
12 hours of arrival of conveyance at customs station; section 41:
departure or export manifest / report: before departure of conveyance.
20. Refer section 30
21. Refer section 77 read with Baggage Declaration Regulations 2013

22. Refer section 46

23. Refer section 18
24. Refer section 84

25. Refer para 3

26 (i) ‘Clear first-Pay later’ i.e., deferred duty payment is a mechanism for
delinking duty payment and customs clearance. The aim is to have a
seamless wharf to warehouse transit in order to facilitate just-in-time
manufacturing.

(ii) Central Government has permitted importers certified under

Authorized Economic Operator programme as AEO (Tier-Two) and AEO
(Tier-Three) to make deferred payment of import duty (eligible
importers).

As a part of the ease of doing business focus of the Government of

India, the CBIC has rolled out the AEO (Authorized Economic Operator)
programme.

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It is a trade facilitation move wherein benefits are extended to the

entities who have demonstrated strong internal control systems and
willingness to comply with the laws administered by the CBIC.

(iii) The due dates for payment of deferred duty are -

S. No. Goods corresponding to Due date of payment of

bill of entry returned for duty, inclusive of the
payment from period (excluding holidays)
as mentioned in section
47(2)

1. 1st day to 15th day of any 16th day of that month

month

2. 16th day till the last day of 1st day of the following
any month other than month
March

3. 16th day till the 31st day of 31st March

March

(iv) If there is default in payment of duty by due date more than once in
three consecutive months, the facility of deferred payment will not be
allowed unless the duty with interest has been paid in full.
The benefit of deferred payment of duty will not be available in respect
of the goods which have not been assessed or not declared by the
importer in the bill of entry.
27. As per rule 3 of Baggage Rules, 2016, tourist of foreign origin, excluding
infant, is allowed duty free clearance of

(i) travel souvenirs; and

(ii) Articles up to the value of ` 15,000 (excluding inter alia fire arms,
cartridges of fire arms exceeding 50 and cigarettes exceeding 100
sticks), if carried on in person.

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Computation of customs duty payable `

Travel souvenir Nil

Articles carried on in person 1,50,000

Cigarettes [100 sticks can be accommodated in General Free 10,000

Allowance (GFA)]

Fire arms cartridge (50 cartridges can be accommodated in 25,000

GFA)

Baggage than can be accommodated in GFA 1,85,000

Less: GFA 15,000

Baggage on which duty is payable 1,70,000

Duty payable @ 38.50% (including 10% Social welfare 65,450

surcharge)

Note: Fire arms, cartridges of firearms exceeding 50 and cigarettes exceeding

100 sticks are not chargeable to rate applicable to baggage [Notification No.
26/2016 Cus. dated 31.03.2016]. These items are charged @ 100% applicable
to baggage under Heading 9803 of the Customs Tariff.
28. Yes, charges are payable for late filing of bill of entry if an importer fails to
present the bill of entry before the end of the day (including holidays)
preceding the day on which the aircraft/vessel/vehicle carrying the goods
arrives at a customs station at which such goods are to be cleared for home
consumption or warehousing, and the proper officer is satisfied that there
was no sufficient cause for such delay [Section 46(3) of the Customs Act,
1962]. However, the Board may, in such cases as it may deem fit, prescribe
different time limits for presentation of the bill of entry, which shall not be
later than the end of the day of such arrival.
Yes, a bill of entry can be filed in advance. It can be presented within 30 days
of the expected arrival of the aircraft/vessel/vehicle by which the goods have
been shipped for importation into India vide proviso to section 46(3) of the
Customs Act, 1962.

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In the given case also, the time period as described above will be available -
with reference to the date of arrival of vessel/aircraft - for filing the bill of
entry.
29. (1) Provisional assessment of duty is permitted in case where the proper
officer deems it necessary to subject any imported goods or export
goods to any chemical or other test [Section 18 of the Customs Act,
1962]. Thus, Laxmi Company can pay the duty on provisional basis.
Before, the provisional assessment of duty, the importer must furnish
such security as the proper officer deems fit for the payment of the
deficiency, if any, between the duty finally assessed/re-assessed and the
duty provisionally assessed.

(2) Section 18 of the Customs Act, 1962 further stipulates that the importer
is liable to pay interest, on any amount payable consequent to the final
assessment order @ 15% p.a. from the first day of the month in which
the duty is provisionally assessed till the date of payment thereof.
Accordingly, amount of interest payable will be
= [` 1,50,000 x 15% x 51/365] + [` 50,000 x 15% x 62/365]
= ` 3,144 + ` 1,274 = ` 4,418
30. (1) As per the Baggage Rules, 2016, an Indian resident arriving from a
country other than Nepal, Bhutan, or Myanmar,is allowed duty free
clearance of-
(i) Used personal effects and travel souvenirs without any value limit.
(ii) Articles [other than certain specified articles] up to a value of
` 50,000 carried as accompanied baggage [General duty free
baggage allowance].
(iii) Further, such general duty free baggage allowance of a passenger
cannot be pooled with the general duty free baggage allowance
of any other passenger.
(2) One laptop computer when imported into India by a passenger of the
age of 18 years or above (other than member of crew) is exempt from

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whole of the customs duty [Notification No. 11/2004 Cus. dated

08.01.2004].

(3) (i) Accordingly, there will be no customs duty on used personal

effects(worth ` 1,40,000) of Mrs. and Mr. Iyer and laptop computer
brought by them will be exempt from duty.

(ii) Duty payable on personal computer after exhausting the duty free
baggage allowance will be `58,000 – ` 50,000 = ` 8,000.
(iii) Effective rate of duty for baggage =38.50% [including Social
Welfare Surcharge]
(iv) Therefore, total customs duty = ` 3,080.
31. Computation of customs duty payable by Mrs. X

Particulars `

Personal effects Nil

[Duty free clearance is allowed]

Laptop computer Nil

[One laptop computer is exempt when imported into India by a
passenger ≥ 18 years of age]

Jewellery 75,000
[Duty free jewellery allowance is not available to Mrs. X since
she did not reside abroad for more than 1 year]

Music system 50,000

Total value 1,25,000

Less: General duty free baggage allowance of ` 50,000 50,000

Value of baggage liable to customs duty 75,000

Rate of Duty 38.50%

Customs duty @ 38.50% (including social welfare surcharge) 28,875

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8.26

TEST YOUR KNOWLEDGE

1. Interest free period of ninety (90) days under section 61(2) in respect of
warehoused goods commences from the date on which an into-bond bill of
entry in respect of such goods is presented. Comment on the validity of the
statement.
2. “If manufacturing operations are carried out on warehoused goods and finished
products are cleared for home consumption, then appropriate duty of customs
should be levied on the quantity of the warehoused goods contained in the
waste or refuse arising out of such manufacturing process.”
Examine the validity of the said statement in the context of section 65 of the
Customs Act, 1962 dealing with manufacture and other operations in relation
to warehoused goods.
3. Enumerate the circumstances under which goods are considered to have been
removed improperly from a warehouse under the Customs Act.
4. Vipul imported certain goods in May. An ‘into bond’ bill of entry was presented
on 14 th May and goods were cleared from the port for warehousing. Assessable
value on that date was US $ 1,00,000. The order permitting the deposit of
goods in warehouse for 4 months was issued on 21st May. Vipul deposited the
goods in warehouse on the same day but did not clear the imported goods even
after the warehousing period got over on 21 st September.
A notice was issued under section 72 of the Customs Act, 1962, demanding duty
and interest. Vipul cleared the goods on 14th October. Compute the amount
of duty and interest payable by Vipul while removing the goods on the basis of
the following information:

Particulars 14th 21st 14th

May September October

Rate of exchange per US $ (as ` 65.20 ` 65.40 ` 65.50

notified by Central Board of
Indirect taxes & Customs)

Basic customs duty 15% 10% 12%

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Integrated Tax leviable under section 3(7) of the Customs Tariff Act is exempt.
Ignore agriculture and infrastructure development cess.

5. BL Ltd. imported Super Kerosene Oil (SKO) and stored it in a warehouse. An

ex-bond bill of entry for home consumption was filed and duty was paid as per
the rate prevalent on the date of presentation of such bill of entry; and the order
for clearance for home consumption was passed.
On account of highly combustible nature of SKO, the importer made an application
to permit the storage of such kerosene oil in the same warehouse until actual
clearance for sale/use. The application was allowed. However, the rate of duty
increased when the goods were actually removed from the warehouse.
The Department demanded the differential duty. The company challenged the
demand. Whether it will succeed? Discuss briefly taking support of decided
case(s), if any.

ANSWERS/HINTS

1. Invalid. As per section 61, if goods remain in a warehouse beyond a period

of 90 days from the date on which the order permitting deposit of goods in
a warehouse under section 60(1) is made, interest is payable @ 15% on the
amount of duty payable at the time of clearance of the goods, for the period
from the expiry of the said 90 days till the date of payment of duty on the
warehoused goods.

In other words, the relevant date for determining the commencement of the
period of 90 days is the date of order made under section 60 permitting
removal of goods from the customs station for deposit in a warehouse, and
not the date on which into-bond bill of entry in respect of such goods is
presented.
2. The said statement is valid.
Section 65 lays down that if the finished products arising as a result of
operations carried out in the warehouse are cleared for home consumption,
import duty would be charged on the quantity of the warehoused goods
contained in the waste or refuse arising from such operations.

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8.28
3. Section 72 provides that in any of the following circumstances the goods shall
be considered to have been removed improperly from a warehouse–
(a) where any warehoused goods are removed from a warehouse in
contravention of section 71 of the Customs Act;
(b) where any warehoused goods have not been removed from a
warehouse at the expiration of the period during which such goods are
permitted under section 61 to remain in a warehouse;
(c) where any goods in respect of which a bond has been executed under
section 59 and which have not been cleared for home consumption or
export are not duly accounted for to the satisfaction of the proper
officer.
4. Computation of import duty payable by Vipul

Particulars Amount
(US $)

Assessable value 1,00,000

Amount (`)

Value in Indian currency (US $ 1,00,000 x ` 65.20) [Note 1] 65,20,000

Customs duty @ 10% [Note 2] 6,52,000

Add: Social welfare surcharge @ 10% on ` 6,52,000 65,200

Total customs duty payable 7,17,200

Notes:
1. As per third proviso to section 14(1) of the Customs Act, 1962,
assessable value has to be calculated with reference to the rate of
exchange prevalent on the date on which the into bond bill of entry is
presented for warehousing under section 46 of the Customs Act, 1962.
2. Goods which are not removed within the permissible period are
deemed to be improperly removed in terms of section 72 of the
Customs Act, 1962 on the day they should have been removed [Kesoram
Rayon v. CC 1996 (86) ELT 464 (SC)]. The applicable rate of duty in such
a case is the rate of duty prevalent on the last date on which the goods
should have been removed.

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As per section 61 of the Customs Act, 1962, if goods remain in a

warehouse beyond a period of 90 days from the date on which the order
permitting deposit of goods in warehouse under section 60 is made,
interest is payable @ 15% p.a., on the amount of duty payable at the
time of clearance of the goods, for the period from the expiry of the
said 90 days till the date of payment of duty on the warehoused goods.
Therefore, interest payable will be computed as under:

Period of 90 days commencing from the date of order made 19th

under 60 expires on August

No. of days for which interest shall be payable [12 days of 56 days
August + 30 days of September + 14 days of October]

15 56 ` 16,505
Interest payable = ` 7,17,200× × (rounded off)
100 365
5. Yes, the company will succeed. The facts of the given situation are similar to
the case of CCus vs. Biecco Lawrie Ltd. 2008 (223) ELT 3 (SC) wherein the
Supreme Court has held that where duty on the warehoused goods is paid
and out of charge order for home consumption is made by the proper officer
in compliance of the provisions of section 68, the goods allowed to be
retained for storage in the warehouse as permitted under section 49 of the
Customs Act are not treated as warehoused goods and importer would not
be required to pay anything more.
Section 49 of the Customs Act, 1962 inter alia also provides that imported
goods entered for home consumption if stored in a public warehouse, or in a
private warehouse on the application of the importer and if the same cannot
be cleared within a reasonable time, shall not be deemed to be warehoused
goods for the purposes of this Act, and accordingly the provisions of
Chapter IX shall not apply to such goods.

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Meaning of relevant date

S.No. Case Relevant date

1. Goods exported out of Date on which proper officer makes

India an order for exportation under
section 51

2. Relinquishment of title to Date of such relinquishment

goods

3. Goods being destroyed or Date of such destruction/rendering

rendered commercially of goods commercially valueless
valueless

TEST YOUR KNOWLEDGE

1. Explain the provisions of Customs Act, 1962 relating to computation of
limitation for submission of refund application.
2. M/s. HIL imports copper concentrate from different suppliers. At the time of
import, the seller issues a provisional invoice and the goods are provisionally
assessed under section 18 of the Customs Act, 1962 based on the invoice. When
the final invoice is raised, based on the price prevalent in the London Metal
Exchange on a predetermined date as agreed in the contract between the buyer
and seller, the assessments are finalized on the basis of the price in such
invoices.

M/s HIL has filed a refund claim arising out of the finalization of the bill of
entry by the authorities. The Department, however, has rejected the refund
claim on the grounds of unjust enrichment. Discuss whether the action of the
department is correct in law?
3. XYZ Ltd imported capital goods and used them in its factory to produce goods
for sale. Upon discovery of an error by which excess import duty had been paid
on the said capital goods, it filed a claim for refund. As regards unjust
enrichment, it contended -

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• that the capital goods were not sold and hence the principle of unjust
enrichment will not apply to the refund of import duty paid on capital
goods; and
• that in any case the price of the finished goods manufactured in the
factory remained the same before and after the import and installation
of the capital goods, which is sufficient proof to establish that duty burden
has not been passed on.
Examine the merits of these contentions, with the support of case law, if any.

4. Section 26A of Customs Act, 1962 provides for refund of import duty paid if
goods are found defective or not as per specifications. Discuss the conditions
governing such refund in brief.

5. What is the minimum monetary limit prescribed in the Customs law below
which no refund shall be granted?
6. Explain the doctrine of unjust enrichment with respect to refund of duty.
7. Acme Sales’ imports were being provisionally assessed pending a verification
that the department was carrying out. Upon completion of the verification, the
assessments were finalized, and Acme Sales was asked to pay ` 12 lakh, which
it paid. After six months, upon detailed scrutiny of the verification report and
taking legal opinion on it, Acme Sales filed a claim for refund of
` 8 lakh on the ground that the differential amount should be ` 4 lakh only and
that there were factual errors in the verification report. Was this the correct
mode of redressal for Acme Sales? What will be likely outcome of the claim?
Discuss on the basis of case law on the subject.

8. Mr. N has, over three consignments of 200, 400 and 400 units, imported a total
of 1000 units of an article "ZEP", which has been valued at ` 1,150 per unit.
The customs duty on this article has been assessed ` 250 per unit. He adds his
profit margin ` 350 per unit and sells the article for ` 1,750 per unit.
After one month of selling the entire consignment of article "ZEP", Mr. N found
that there had been an error in payment of amount of duty, in which duty for
the consignment of 200 units was paid as if it was 400 units, resulting in excess
payment of duty. Mr. N files an application for refund for
` 50,000 (200 X 250). Is the bar of unjust enrichment attracted?

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9. Explain the relevant dates as provided in section 26A(2) of the Customs Act,
1962 for purpose of refund of duty under specified circumstances, namely:

(i) goods exported out of India

(ii) relinquishment of title to goods
(iii) goods destroyed or rendered valueless.

10. Explain whether refund of import duty is allowed in case of perishable goods?
11. Briefly explain whether interest is paid to the applicant in case of delayed
refund by Customs Authorities? If yes, also explain the period for computation
of interest?

ANSWERS/HINTS
1. According to section 27(1) of the Customs Act, 1962, a refund claim should
be lodged before the expiry of one year from the date of payment of such
duty or interest. The period of limitation of one year should be computed in
the following manner:
(a) If the refund claim is lodged by the importer, the time limit should be
calculated from the date of payment of duty.
(b) If the refund claim is lodged by the buyer of imported goods, the time
limit should be calculated from the date of purchase of goods.
(c) In case of goods which are exempt from payment of duty by an ad-hoc
exemption, the limitation of one year should be computed from the
date of issue of such exemption order.
(d) Where any duty is paid provisionally, the time limit should be computed
from the date of adjustment of duty after the final assessment thereof
or in case of re-assessment, from the date of such re-assessment.
(e) Where the refund arises as a result of any judgement/ decree/ order/
direction of the Appellate Authority/ Appellate Tribunal/Court, the time
limit should be calculated from the date of such
judgement/decree/order/direction.

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The time limit of one year is not applicable if duty is paid under protest.
Finally, it is worth mentioning that above provisions regarding time limit are
mandatory and customs authorities cannot grant a refund which is filed
beyond the maximum permissible period.
2. Section 18 (dealing with provisional assessment) incorporates the principle of
unjust enrichment in case of refund arising out of finalization of provisional
assessment. Sub-section (5) of section 18 of Customs Act, 1962 provides that
if any amount is found to be refundable after finalisation of provisional
assessment, such refund will be subject to doctrine of unjust enrichment.
Further, section 28D places the onus on the person who has paid duty to
prove that he has not passed on the incidence of such duty. In the absence
of any proof from such person, section 28D deems that the burden of duty
has been passed on to the buyer.
Therefore, in the given case, the Department’s action will be correct if M/s
HIL does not produce any evidence of bearing the burden of duty.
3. The incidence of duty can be passed directly or indirectly. Where the capital
goods are used for manufacture, the duty paid on their import will go into
the costing of the goods manufactured and sold, and can thus be passed on
to the buyers. The Large Bench of the Tribunal in the case of SRF Ltd. v. CCus.
Chennai 2006 (193) ELT 186 (Tri. - LB) has held that the doctrine of unjust
enrichment would be applicable in case of imported capital goods used
captively for manufacture of excisable goods. As regards the relevance of the
fact that price remained the same before and after the capital goods were
imported, the Larger Bench also clarified that uniformity in price before and
after assessment does not lead to inevitable conclusion that duty burden has
not been passed, as such uniformity may be due to various reasons. In view
of this, the contentions of XYZ Ltd are liable to be rejected.
4. Often, goods imported are found to be defective or not according to
specifications. In such cases, earlier, the refund of customs duty paid at the
time of import could be obtained only if the imported goods were physically
returned to foreign supplier. Generally, cost of return of the rejected goods
is heavy and it is economical to dispose of the goods in India itself. Realising
this practical difficulty, section 26A of Customs Act makes provision for refund
of import duty paid if goods are found defective or not as per specifications.

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The refund is admissible if goods are re-exported or relinquished and

abandoned to the customs authorities or destroyed. Thus, refund is possible
even if goods are destroyed or relinquished in India without re-exporting the
same.
The section stipulates the following conditions for the refund:

(i) the goods are found to be defective or otherwise not in conformity with
the specification agreed upon between the importer and the supplier
of goods;

(ii) the goods have not been worked, repaired or used after importation
except where such use was indispensable to discover the defects or
non-conformity with the specifications;
(iii) the goods are identified to the satisfaction of Assistant/Deputy
Commissioner of Customs as the goods which were imported;
(iv) the importer does not claim drawback under any other provision of this
Act; and
(v) the goods are exported or the importer relinquishes his title to the
goods and abandons them to customs or such goods are
destroyed/rendered commercially valueless in the presence of proper
officer in prescribed manner within 30 days from the date on which the
order of clearance of imported goods for home consumption is made
by the proper officer. This period of 30 days can be extended up to 3
months.
(vi) An application for refund of duty shall be made before the expiry of 6
months from the relevant date in prescribed form and manner.
(vii) Imported goods should not be such regarding which an offence
appears to have been committed under this Act or any other law.
(viii) Imported goods should not be perishable goods and goods which have
exceeded their shelf life or their recommended storage before use
period.

5. As per third proviso to section 27(1) of the Customs Act, 1962, the minimum
monetary limit below which refund cannot be granted is ` 100.

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6. Customs duty is a levy under Indirect taxation, which implies that the
incidence of the customs duty paid is generally passed on to the buyer of the
goods.
When an importer imports goods, he has to pay the customs duty on such
goods. Similarly, an exporter in case of export goods, if the same are subject
to export duty, the exporter pays the export duty. This duty is recovered from
the buyer when the goods are sold by the importer or exporter, as the case
may be. In other words, the incidence or burden of duty is passed on to the
buyer, from whom the importer or exporter collects the customs duty paid.
Subsequently, if the importer or exporter makes a claim for refund of duty
paid (due to excess payment) and receives the refund from the Government,
he would be called to have enriched himself as he collected the duty from his
customer also and also as refund from the Government. Such enrichment is
referred to as ‘unjust enrichment’.
Accordingly, the doctrine of ‘unjust enrichment’ implies that no person
should enrich himself at the cost of others.
Therefore, wherever there is excess payment of duty, the refund is to be given
only to the person who has borne the burden of such duty along with interest,
if any. When the person who applies for refund is not the person who has
borne the burden of duty, the refund is paid into a fund called 'Consumer
Welfare Fund'.
Section 28D provides that every person who has paid duty under the Customs
Act, unless the contrary is proved by him, shall be deemed to have passed the
full incidence of such duty to the buyer; hence the applicant for refund has
to refute the presumption of passing on the incidence of duty.
7. Acme Sales received an order finalizing provisional assessment on the basis
of a verification report, and requiring payment of ` 12 lakh. They did not
contest this order, but made the payment, and allowed the appeal period of
sixty days to lapse. After appeal became time-barred they filed a claim for
refund in which they challenged the order. This was a backdoor method of
seeking relief against the order; it also asked an officer of the same rank to
review the order passed; and it sought to bypass the time limitation for appeal
by presenting the appeal as a claim for refund. The Supreme Court has held,
in the case of Priya Blue Industries Limited, 2004 (172) ELT 145 (SC), that such

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a refund claim is not permissible for all these reasons. A person who is
aggrieved with an assessment order cannot seek refund without filing an
appeal against the assessment order.
8. Mr. N’s invoices show that he collected duty of ` 250 per unit on 1,000 items.
However, he paid duty on 200 items more. This payment, in the normal
course, was made before the order permitting the clearance of the goods. It
would be evident from the bill of entry that the amount paid was more than
the amount of duty assessed. Thus Mr. N’s case falls within the exception to
unjust enrichment listed at clause (g) of the first proviso to section 27(2). He
will be able to refute the charge of unjust enrichment. Furthermore, clause (a)
of the same sub-section provides that the doctrine of unjust enrichment will
not apply to the refund of duty and interest, if any, paid on such duty if such
amount is relatable to the duty and interest paid by the importer/exporter, if
he had not passed on the incidence of such duty and interest to any other
person. Mr. N’s invoices will show how much duty he collected from his
customers, hence he may be covered by this clause also to escape the bar of
unjust enrichment.
9. The relevant dates provided under Explanation to section 26A(2) of the
Customs Act, 1962 for purpose of refund of duty under specified
circumstances are as follows:-

Case Relevant date

(i) Goods exported out of Date on which the proper officer

India makes an order permitting clearance
and loading of goods for exportation

(ii) Relinquishment of title to Date of such relinquishment

the goods

(iii) Goods being destroyed or Date of such destruction or

rendered valueless rendering of goods commercially
valueless

10. Refund is not allowed in case of perishable goods and goods which have
exceeded their shelf life or their recommended storage-before-use period in
terms of section 26A(3) of the Customs Act, 1962.

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However, the Board may, by notification in the Official Gazette, specify any
other condition subject to which the refund may be allowed under section
26A(4) of the Customs Act, 1962
11. Yes, interest is to be paid to the applicant in case any duty ordered to be
refunded to an applicant is not refunded within 3 months from the date of
receipt of application for refund. The government is permitted to fix such
interest between 5% and 30%.
Currently, the rate of interest is 6% vide Notification No. 75/2003-Cus (NT)
dated 12.09.2003.
The interest is to be paid for the period beginning from the date immediately
after the expiry of 3 months from the date of receipt of such application, till
the date of refund of such duty. For the purpose of payment of interest, the
application is deemed to have been received on the date on which a complete
application, as acknowledged by the proper officer of Customs, has been
made.

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