GST Full Book WWW - Capiyush.online

WWW.CAPIYUSH.
ONLINE
GST
BASIC TO
ADVANCE CA
COMPLETE BOOK PIYUSH
GUPTA
FOR 25+ EARNING ORIENTED PRACTICAL

CERTIFICATE COURSES DOWNLOAD THE MOBILE
APP NAMED - CA PIYUSH GUPTA SMARTIOUS
Practical Earning Start Own Practice Or Simple Hindi

Oriented Become Job Ready Language Classes
INDIA
needs more than 20 Lacs
TAX CONSULTANTS
Huge GST Collection

even in COVID Period
INDIA has
9.48 Crores
INCOME TAX PAYERS
LARGE NUMBER OF CLIENTS

= HUGE EARNING OPPORTUNITY
SMARTIOUS STUDENTS
ARE EARNING
25 LAC+ PER YEAR
OFFICES OF STUDENTS
INDIA’s No. 1 Courses
Signed By CA
This book has been created, owned, and overseen by the Institute of Chartered
Accountants of India (ICAI). It is made available to students for educational purposes
without any form of compensation or payment by CA Piyush Gupta & Smartious,
with the intention of enhancing their learning experience. Please note that CA Piyush
Gupta & Smartious hold no ownership or liability pertaining to this publication.
25+ Practical Certificate Courses - Download Mobile App - CA Piyush Gupta Smartious
GST, ITR, Audit, Tally, Excel, Mutual Funds, Project Report, AI, MS Office & More
CHAPTER
1
GST IN INDIA –
AN INTRODUCTION
Examples/illustrations/Questions and Answers given in the Chapter are based on
the position of GST law existing as on 30.04.2023.
LEARNING OUTCOMES
After studying this Chapter, you will be able to:

❑ explain the concept of GST and the need for GST in India.
❑ discuss the framework of GST as introduced in India and
comprehend the various benefits to be accrued from
implementation of GST.
❑ explain the constitutional provisions pertaining to levy of
various taxes
❑ appreciate the need for constitutional amendment paving
way for GST.
❑ discuss the significant amendments made by the
Constitution (101st Amendment) Act, 2016.
© The Institute of Chartered Accountants of India

1.2 GOODS AND SERVICES TAX
CHAPTER OVERVIEW
Genesis of GST in india
Concept of GST
GST in India
Need for GST in India
Framework of GST as introduced in India
Benefits of GST
Constitutional provisions
1. OVERVIEW OF TAXATION SYSTEM IN INDIA

In any Welfare State, it is the
prime responsibility of the Collect taxes from the citizens as
Government to fulfill the honeybees collect nectar from the
increasing developmental needs of flowers, gently and without inflicting
the country and its people by way pain.
of public expenditure. India, being -Chanakya
a developing economy, has been
striving to fulfill the obligations of a Welfare State with its limited resources; the
primary source of revenue being the levy of taxes. Though the collection of tax is
to augment as much revenue as possible
Taxes, after all, are dues that to the Government to provide public
we pay for the privileges of services, over the years it has been used
membership in an organized as an instrument of fiscal policy to
society. stimulate economic growth. Thus, taxes
-Franklin D. Roosevelt are collected to fulfill the socio-economic
objectives of the Government.
Now, the question arises, what is tax? A tax is defined as a "pecuniary burden laid
upon individuals or property owners to support the Government, a payment
exacted by legislative authority. A tax "is not a voluntary payment or donation,
but an enforced contribution, exacted pursuant to legislative authority".

a
GST IN INDIA – AN INTRODUCTION 1.3
a
In simple words, tax is nothing but money that people pay to the Government,
which is used to provide public services.
A direct tax is a kind of charge, which is imposed directly on the taxpayer and
paid directly to the Government by the persons (juristic or natural) on whom it is
imposed. A direct tax cannot be shifted by the taxpayer to someone else. A
significant direct tax imposed in India is income tax.
If the taxpayer is just a conduit and at every stage the tax-incidence is passed on
till it finally reaches the consumer, who really bears the brunt of it, such tax is
indirect tax. An indirect tax can be shifted by the taxpayer to someone else.
Its incidence is borne by the consumers who ultimately consume the product or
the service, while the immediate liability to pay the tax may fall upon another
person such as a manufacturer or provider of service or seller of goods.
Also called consumption taxes, they are regressive in nature because they are not
based on the principle of ability to pay. All the consumers, including the
economically challenged bear the brunt of the indirect taxes equally.
Indirect taxes are levied on consumption, expenditure, privilege, or right but not
on income or property. Earlier, a number of indirect taxes were levied in India,
namely, excise duty, customs duty, service tax, central sales tax (CST), value added
tax (VAT), entry tax, purchase tax, entertainment tax, tax on lottery, betting and
gambling, luxury tax, tax on advertisements, etc.
However, indirect taxation in India witnessed a paradigm shift on July 01, 2017
with usherance into a unified indirect tax regime wherein a large number of
Central and State indirect taxes were amalgamated into a single tax – Goods and
Services Tax (GST). The introduction of GST has been a very significant step in the
field of indirect tax reforms in India. Customs duty continues in post-GST regime.
Economists world over agree that direct and indirect taxes are complementary
and therefore, a rational tax structure should incorporate in itself both types of
taxes.
According to the renowned physicist Albert Einstein, “The hardest thing in the world is
to understand income tax.” Nevertheless, we are committed to ensure that your
journey to India's historic indirect tax system is effortless, engaging, and enjoyable!

At Intermediate level, we will study the select provisions of

substantive and procedural law of GST - concept of supply,
charge of GST, exemptions, basic concepts of time, value and
place of supply, input tax credit, registration, tax invoice, credit and debit
notes, accounts and records, e-way bill, returns & payment. Remaining
provisions of the GST law and entire Customs law will be discussed at Final
level.
2. GENESIS OF GST IN INDIA

In the year 2000, the then Prime Minister mooted the concept
of GST and set up a committee to design a Goods and `
Services Tax (GST) model for the country. In 2003, the Central
Government formed a task force on Fiscal Responsibility and
Budget Management, which in 2004 strongly recommended fully integrated ‘GST’
on national basis.
Subsequently, the then Union Finance Minister, Shri P. Chidambaram, while

presenting the Union Budget (2006-2007), announced that GST would be
introduced from April 1, 2010. Since then, GST missed several deadlines and
continued to be shrouded by the clouds of uncertainty.
The talks of ushering in GST, however, gained
momentum in the year 2014 when the NDA Government
tabled the Constitution (122 nd Amendment) Bill, 2014 on
GST in the Parliament on 19 th December, 2014. The Lok
Sabha passed the Bill on 6 th May, 2015 and Rajya Sabha
on 3rd August, 2016. Subsequent to ratification of the Bill
by more than 50% of the States, Constitution
(122nd Amendment) Bill, 2014 received the assent of the President on 8 th
September, 2016 and became the Constitution (101 st Amendment) Act, 2016,
which paved the way for introduction of GST in India.
In the following year, on 27 th March, 2017, the Central GST
legislations - Central Goods and Services Tax Bill, 2017,
Integrated Goods and Services Tax Bill, 2017, Union

a
a
Territory Goods and Services Tax Bill, 2017 and Goods and Services Tax
(Compensation to States) Bill, 2017 were introduced in Lok Sabha. Lok Sabha
passed these bills on 29 th March, 2017 and with the receipt of the President’s
assent on 12th April, 2017, the Bills were enacted.
The enactment of the Central Acts was
It’s a win for democratic followed by the enactment of the State GST
ethos of India and a victory
laws by various State Legislatures. Telangana,
for everyone, GST will
Rajasthan, Chhattisgarh, Punjab, Goa and Bihar
improve the way of doing
were among the first ones to pass their
business.
-Narendra Modi respective State GST laws. By 30 th June, 2017,
all States and Union Territories had passed their It is not the end but start of
respective SGST and UTGST Acts except Jammu the Journey.
st
and Kashmir. With effect from 1 July, 2017, the
-Arun Jaitely
historic indirect tax reform - GST was introduced.
GST law was extended to Jammu and Kashmir on 8 th July, 2017.
In the year 2000, the then Prime The Constitution

Minister introduced the concept of (122nd Amendment)
GST and set up a committee to design Bill was introduced in
a GST model for the country. 2006 the Lok Sabha.
Aug 2016
Announcement by Union 2014 The

2000 Finance Minister, during Constitution
budget of 2006-07 that (101st
GST would introduced Amendment)
from 1 April 2010. GST Council Act was enacted
GST Council Recommends CGST,
recommends SGST, IGST, UTGST &
all the rules. Compensation Cess
Apr 2017 Bill. Sep 2016
May 2017 1st GST
CGST, IGST, UTGST Mar 2017
and Compensation Council
All States Meeting
Cess Acts passed.
except J & K 30th June 2017
passed their
SGST Act
1st July 2017 8th July 2017 Journey
continues
GST launched SGST Act passed by J&K;
CGST and IGST Ordinances
promulgated to extend
GST to J&K.

GST is a path breaking indirect tax reform which attempts to create a common
national market. GST has subsumed multiple indirect taxes like excise duty,
service tax, VAT, CST, luxury tax, entertainment tax, entry tax, etc.
VAT and GST are often used inter-changeably as the
latter denotes comprehensiveness of VAT by
coverage of goods and services. France was the first
country to implement VAT/GST in 1954. Presently,
more than 160 countries have implemented
VAT/GST in some form or the other because this tax
has the capacity to raise revenue in the most transparent and neutral manner.
Most of the countries follow unified GST i.e., a single tax applicable throughout
the country. However, in federal polities like Brazil and Canada, a dual GST system
is prevalent. Under dual system, GST is levied by both the federal and the State
Governments. India has adopted dual GST model because of its unique federal
nature.
3. CONCEPT OF GST
What is GST?
Before we proceed with the finer nuances of Indian GST, let us first understand
the basic concept of GST.
❑ GST is a value added tax levied on supply i.e.,
manufacture or sale of goods and provision of
services.
❑ GST offers comprehensive and continuous chain of tax credits from the
producer's point/service provider's point
upto the retailer's level/consumer’s level
thereby taxing only the value added at each stage of supply chain.

a
a
❑ The supplier at each stage is permitted to
avail credit of GST paid on the purchase of
goods and/or services and can set off this
credit against the GST payable on the supply of goods and services to be
made by him. Thus, only the final consumer bears the GST charged by the
last supplier in the supply chain, with set-off benefits at all the previous
stages.
❑ Since, only the value added at each stage is taxed
under GST, there is no tax on tax or cascading of
taxes under GST system. The same can be understood better with the help of
the following example:
Manufacturer Distributor Retailer Consumer

(`) (`) (`) (`)
Cost: 1,00,000 Cost: 1,00,000 Cost: 1,11,200 Cost: 1,60,291.2

GST @ 18%= Profit: 11,200 Profit: 24,640 (1,35,840+24,451
18,000 Sale Price: Sale Price: .20)
1,11,200 1,35,840
GST @ 18% GST@ 18%
20,016 24,451.20
Input Tax Input Tax Input Tax Input Tax

Credit= NIL Credit= 18,000 Credit= 20,016 Credit= NIL
Paid to Paid to Paid to Tax Borne by

Government Government Government the Consumer
GST = 18,000 GST = 2,016 GST= 4,435.20 18,000+2,016+4,
435.20=
(Output tax – (Output tax –
24,451.20
Input tax) Input tax)
Value Addition = Value Addition= Value Addition= Value Addition=

1,00,000 11,200 24,640 NIL
GST @ 18% = GST @ 18%= GST @ 18%=
18,000 2,016 4,435.20

4. NEED FOR GST IN INDIA
Deficiencies A cure for

in the Goods and ills of
erstwhile have led to Services erstwhile
value added Tax indirect tax
taxation regime
Under the earlier indirect tax regime, despite the introduction of the principle of
taxation of value added in India – at the Central level in the form of CENVAT
(Central Excise) and at the State level in the form of State VAT - its application
always remained piecemeal and fragmented on account of the following reasons:
❑ Certain transactions were subject to double taxation and were taxed as both
goods and services, since under the earlier regime, distinction between
goods and services was often blurred.
(1) Under the earlier tax regime, software was subject to both
service tax and VAT. This was so because both sale of goods and
provision of service were involved and therefore taxable event
under both the Statutes i.e. respective VAT law and service tax law got
triggered. This aspect has been taken care of under GST law.
❑ CENVAT did not include chain of value addition in the distributive trade
after the stage of production. Similarly, in the State-level VAT, CENVAT load
on the goods was not removed. This led to the cascading of taxes. Below
mentioned example illustrates that under the earlier indirect tax regime,
when the goods were manufactured and sold, both central excise duty
(CENVAT) and State-Level VAT were levied.

a
a
(2) Under the earlier tax regime, if goods were manufactured for
` 1000/- and excise duty was payable @ 12.5% and VAT was payable
@ 14.30%, the billing was being done as under:
Assessable value of goods under excise law ` 1,000
Excise duty @ 12.5% ` 125
Taxable value for VAT ` 1,125
VAT @ 14.30% ` 160.88
Total invoice value ` 1,285.88
❑ Though CENVAT and State-Level VAT were essentially value added taxes, set
off of one against the credit of another was not possible as CENVAT was a
central levy and State-Level VAT was a State levy.
❑ There were several taxes in the States, such as, Luxury Tax, Entertainment
Tax, etc. which were not subsumed in the VAT. Hence for a single
transaction, multiple taxes in multiple forms were required to be paid.
❑ VAT on goods was not integrated with tax on services, at the State level, to
remove the cascading effect of service tax. With service sector being the
fastest growing sector in the economy, the exclusion of services from the
tax base of the States potentially eroded their tax- buoyancy.
❑ CST was another source of distortion in terms of its cascading nature since
it was non-VATABLE. Being an origin based tax, CST was also against one of
the basic principles of consumption taxes that tax should accrue to the
jurisdiction where consumption takes place.
(3) Under the earlier tax regime, if a dealer in Delhi purchases
goods from a manufacturer in Punjab for ` 1000 + ` 20 (2% CST)
=
` 1020/- and sells such goods within Delhi for ` 1200/-. The tax rate on
sales is 12.5% and hence output tax liability is ` 150/-. Credit of
` 20/- is not allowed while making payment of ` 150/- and hence the dealer
has to pay ` 150 as VAT.

Non-inclusion of several Cascading of taxes on account of (i) levy

local levies in State VAT of Non-VATable CST and (ii) inclusion of
such as luxury tax, CENVAT in the value for imposing VAT
entertainment tax, etc.
No CENVAT after Non-integration Double taxation of

manufacturing of VAT & service certain transactions as
stage tax both goods and services
A comprehensive tax structure covering both goods and services viz. Goods and
Services Tax (GST) addresses most of the above stated issues. Simultaneous
introduction of GST at both Centre and State levels has integrated taxes on goods
and services for the purpose of set-off relief and
ensures that both the cascading effects of CENVAT and
service tax are removed and a continuous chain of set-
off from the original producer’s point/ service
provider’s point upto the retailer’s level/ consumer’s level is established.
In the GST regime, the major indirect taxes have been subsumed in the ambit of
GST. The erstwhile concepts of manufacture or sale of goods or rendering of
services are no longer applicable since the tax is now levied on “Supply of Goods
and/or services”.

a
a
5. FRAMEWORK OF GST AS INTRODUCED IN

INDIA
I. Dual GST:
India has adopted a Dual GST model in view of the federal structure of the
country. Consequently, the Centre and States simultaneously levy GST on
taxable supply of goods or services or both which, takes place within a State
or Union Territory. Thus, tax is imposed concurrently by the Centre and
States, i.e. Centre and States simultaneously tax goods and services. Now,
the Centre also has the power to tax intra-State sales & States are also
empowered to tax services. GST extends to whole of India including the
State of Jammu and Kashmir.
II. CGST/SGST/UTGST/IGST
GST is a destination-based tax applicable
on all transactions involving supply of
goods or services or both for a consideration subject to exceptions thereof.
GST in India comprises of Central Goods and Services Tax (CGST) - levied
and collected by Central Government, State Goods and Services Tax (SGST) -
levied and collected by State Governments/Union Territories with
Legislatures and Union Territory Goods and Services Tax (UTGST) - levied

and collected by Union Territories without Legislatures, on intra-State

supplies of taxable goods and/or services. As a general rule, where the
location of the supplier and the place of supply of goods or services are in
the same State/Union territory, it is treated as intra-State supply of goods or
services respectively.
Further, where the location of the supplier and the place of supply of goods
or services are in (i) two different States or (ii) two different Union
Territories or (iii) a State and a Union territory, it is treated as inter-State
supply of goods or services respectively. Inter-State supplies of taxable
goods and/or services are subject to Integrated Goods and Services Tax
(IGST). IGST is the sum total of CGST and SGST/UTGST and is levied by the
Centre on all inter-State supplies.
III. Legislative Framework

There is single legislation – CGST Act, 2017 - for
levying CGST. Similarly, Union Territories without
Legislatures [i.e. Andaman and Nicobar Islands, Lakshadweep, Ladakh, Dadra
and Nagar Haveli & Daman and Diu and Chandigarh] are governed by UTGST
Act, 2017 for levying UTGST. States and Union territories with their own
legislatures [i.e. Delhi, Jammu and Kashmir and Puducherry] have their own GST
legislation for levying SGST.

a
a
(4) In Ladakh, CGST and UTGST is levied on supply of goods or
services or both. In Delhi, CGST and SGST is levied on supply of
goods or services or both.
Though there are multiple SGST legislations, the basic features of law, such
as chargeability, definition of taxable event and taxable person,
classification and valuation of goods and services, procedure for collection
and levy of tax and the like are uniform in all the SGST legislations, as far as
feasible. This is necessary to preserve the essence of dual GST.
IV. Classification of goods and services
HSN (Harmonised System of
Nomenclature) is used for classifying the
goods under the GST. Chapters referred to in the Rate Schedules for goods
are the Chapters of the First Schedule to the Customs Tariff Act, 1975.
A new Scheme of Classification of Services has been devised wherein the
services of various descriptions have been classified under various sections,
headings and groups. Each group consists of various Service Codes (Tariff).
SAC (Services Accounting Code) is used for classifying the services under
the GST like HSN for goods.
V. Composition Scheme
In GST regime, tax (i.e. CGST and SGST/UTGST for
intra-State supplies and IGST for inter-State
supplies) is payable by every taxable person and in this regard provisions
have been prescribed in the law.
However, for providing relief to small businesses, manufacturers, service
providers, suppliers of food articles, traders, etc., making intra-State
supplies, a simpler method of paying taxes is prescribed, known as
composition levy.
VI. Registration
Every supplier of goods and/ or services is required to
obtain registration in the State/UT from where he makes the
taxable supply if his aggregate turnover exceeds the
threshold limit during a FY. Different threshold limits have been prescribed
for various States and Union Territories depending upon the fact whether

the supplier is engaged exclusively in supply of goods, or exclusively in

supply of services or in supply of both goods and services. The threshold
limit of aggregate turnover prescribed for various States/UTs are as follows:
States with States with threshold States with threshold

threshold limit of ` limit of limit of
10 lakh for supplier ` 20 lakh for supplier of ` 20 lakh for exclusive
of goods and/or goods and/or services supplier of
services services/both goods
and services and
threshold limit of ` 40
lakh for exclusive
supplier of goods
making only intra-
State supplies
❑ Manipur ❑ Arunachal Pradesh ❑ All other States
❑ Mizoram ❑ Meghalaya
❑ Nagaland ❑ Sikkim
❑ Tripura ❑ Uttarakhand
❑ Puducherry
❑ Telangana
However, in certain specified cases mandatory registration is required under
GST irrespective of the quantum of aggregate turnover.
VII. Exemptions
Apart from providing relief to small-scale business, the
law also contains provisions for granting exemption from
payment of tax on essential goods and/or services.
VIII. Seamless flow of credit
Since GST is a destination-based consumption tax,
revenue of SGST ordinarily accrues to the
consuming States. The inter-State supplier in the
exporting State is allowed to set off the available credit against the IGST
payable on inter-State supply made by him (order of utilisation of credit is
explained in brief below).

a
a
The buyer in the importing State is allowed to avail the credit of IGST paid
on inter-State purchases made by him.
Thus, unlike the earlier scenario where the credit chain used to break in case
of inter-State sales on account of non-VATable CST, under GST regime there
is a seamless credit flow in case of inter-State supplies too.
The revenue of inter-State sale does not accrue to the exporting State and
the exporting State transfers to the Centre the credit of SGST/UTGST used in
payment of IGST.
The Centre transfers to the importing State the credit of IGST used in
payment of SGST/UTGST.
Order of utilization of credit - There is a specified order in which
ITC should be utilized. First, IGST credit should be utilized towards
IGST payment, and then towards payment of CGST and SGST/UTGST in any
order and in any proportion.
After entire ITC of IGST is utilized, ITC of CGST should be utilized for
payment of CGST and IGST in that order. Thereafter, ITC of SGST
/UTGST should be utilized for payment of SGST/UTGST and IGST in that
order.
It may be noted that ITC of CGST cannot be utilized for payment of

SGST/UTGST and vice versa. Also, ITC of SGST/UTGST should be utilized
for payment of IGST, only after ITC of CGST has been utilized fully.
The seamless flow of credit under GST, in case of intra-State and inter-State
supplies, can be better understood with the help of the following
illustrations:
Intra-State Supply
ILLUSTRATION 1
In case of local supply of goods/ services, the supplier would charge dual
GST i.e., CGST and SGST at specified rates on the supply.

(i) Supply of goods/ services by A to B
Amount
(in `)
Value charged for supply of goods/ services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by A from B for local supply of 11,800

goods/ services
The CGST & SGST charged on B for supply of goods/services will be

remitted by A to the appropriate account of the Central and State
Government respectively.
A is the first stage supplier of goods/services and hence, does not
have credit of CGST, SGST or IGST.
(ii) Supply of goods/services by B to C – Value addition @ 20%
B will avail credit of CGST and SGST paid by him on the purchase of
goods/ services and will utilise such credit for being set off against the
CGST and SGST payable on the supply of goods/services made by him
to C.
Amount
(in `)

(` 10,000 x 120%)
Add: CGST @ 9% 1080
Add: SGST @ 9% 1080
Total price charged by B from C for local supply of 14160

goods/ services

a
a
Computation of CGST, SGST payable by B to Government
Amount (in `)
CGST payable 1080
Less: Credit of CGST 900
CGST payable to Central Government 180
SGST payable 1080
Less: Credit of SGST 900
SGST payable to State Government 180
Note: Rates of CGST and SGST have been assumed to be 9% each for
the sake of simplicity.
Statement of revenue earned by Central and State Government
Transaction Revenue to Revenue to State

Central Government (`)
Government (`)
Supply of goods/services 900 900

by A to B
Supply of goods/services 180 180

by B to C
Total 1080 1080
Inter-State Supply
ILLUSTRATION 2
In case of inter-State supply of goods/ services, the supplier would charge
IGST at specified rates on the supply.

(i) Supply of goods/services by X of State 1 to A of State 1
Amount (in `)
Value charged for supply of goods/services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by X from A for intra-State 11,800

supply of goods/services
X is the first stage supplier of goods/services and hence, does not

have any credit of CGST, SGST or IGST.
(ii) Supply of goods/services by A of State 1 to B of State 2 – Value
addition @ 20%
Amount (in `)
Value charged for supply of goods/services 12,000

(` 10,000 x 120%)
Add: IGST @ 18% 2,160
Total price charged by A from B for inter-State 14,160

supply of goods/services
Computation of IGST payable to Government
Amount (in `)
IGST payable 2,160
Less: Credit of CGST 900
Less: Credit of SGST 900
IGST payable to Central Government 360
The IGST charged on B of State 2 for supply of goods/services will be

remitted by A of State 1 to the appropriate account of the Central

a
a
Government. State 1 (Exporting State) will transfer SGST credit of
` 900 utilised in the payment of IGST to the Central Government.
(iii) Supply of goods/services by B of State 2 to C of State 2 – Value
addition @ 20%
B will avail credit of IGST paid by him on the purchase of
goods/services and will utilise such credit for being set off against the
CGST and SGST payable on the local supply of goods/services made
by him to C.
Amount (in `)

(` 12,000 x 120%)
Add: CGST @ 9% 1,296
Add: SGST @ 9% 1,296
Total price charged by B from C for local supply of 16,992

goods/services
Computation of CGST, SGST payable to Government
Amount (in `)
CGST payable 1,296
Less: Credit of IGST 1,296
CGST payable to Central Government Nil
SGST payable 1,296
Less: Credit of IGST (` 2,160 - ` 1,296) 864
SGST payable to State Government 432
Central Government will transfer IGST credit of ` 864 utilised in the

payment of SGST to State 2 (Importing State).
Note: Rates of CGST, SGST and IGST have been assumed to be 9%, 9%
and 18% respectively for the sake of simplicity.

Statement of revenue earned by Central and State Governments
Transaction Revenue to Revenue to Revenue to

Central Government Government
Government of State 1 of State 2
(`) (`) (`)
Supply of 900 900

goods/services by X
to A
Supply of 360
goods/services by A
to B
Transfer by State 1 to 900 (900)

Centre
Supply of 432
goods/services by B to
C
Transfer by Centre to (864) 864

State 2
Total 1,296 Nil 1,296
IX. GST Common Portal

Before GST, since the Centre and State indirect tax administrations worked
under different laws, regulations, procedures and formats, their IT
infrastructure and systems were also independent of each other. Integrating
them for GST implementation was complex since it required integrating the
entire indirect tax ecosystem so as to bring all the tax administrations
(Centre, State and Union Territories) to the same level of IT maturity with
uniform formats and interfaces for taxpayers and other external
stakeholders.
Besides, GST being a destination based tax, the inter-State trade of goods
and services (IGST) needed a robust settlement mechanism amongst the
States and the Centre. A Common Portal was needed which could act as a
clearing house and verify the claims and inform the respective Governments

a
a
to transfer the funds. This was possible only with the help of a strong IT
infrastructure.
Resultantly, Common GST Electronic Portal – www.gst.gov.in – a website
managed by Goods and Services Network (GSTN) [a company incorporated
under the provisions of section 8 of the Companies Act, 2013] is set by the
Government to establish a uniform interface for the tax payer and a
common and shared IT infrastructure between the Centre and States.
The GST portal is accessible over Internet (by taxpayers and their CAs/Tax
Advocates etc.) and Intranet by Tax Officials etc. The portal is one single
common portal for all GST related services.
A common GST system provides linkage
to all State/ UT Commercial Tax
Departments, Central Tax authorities, Taxpayers, Banks and other
stakeholders. The eco-system consists of all stakeholders starting from
taxpayer to tax professional to tax officials to GST portal to Banks to
accounting authorities.
The functions of the GSTN include facilitating registration; forwarding the

returns to Central and State authorities; computation and settlement of
IGST; matching of tax payment details with banking network; providing
various MIS reports to the Central and the State Governments based on the
taxpayer return information; providing analysis of taxpayers' profile.
However, it is important to
note that the Common GST
Electronic Portal for furnishing
electronic way bill is
www.ewaybillgst.gov.in
[managed by the National
Informatics Centre, Ministry of
Electronics & Information

Technology, Government of India]. E-way bill is an electronic document

generated on the GST portal evidencing movement of goods.
Further, Invoice Registration
Portal (IRP) is the website for
uploading/reporting of e-invoices
by the notified persons*. It is
managed by the National
Informatics Centre, Ministry of
Electronics & Information
Technology, Government of India.
*All registered businesses with an aggregate turnover (based on PAN) in any
preceding financial year from 2017-18 onwards greater than ` 10 crore are
required to issue e-invoices.
X. GSPs/ASPs
GSTN has selected certain Information Technology,
Information Technology enabled Services and financial
technology companies, to be called GST Suvidha
Providers (GSPs). GSPs have access to GST System and have the capability
to develop applications to be used by taxpayers for interacting with the
GSTN.
GSP develops applications having features like return filing, reconciliation of
purchase register data with auto populated data for
acceptance/rejection/modification, dashboards for
taxpayers for quick monitoring of GST compliance
activities. They may also provide role-based access to
divide various GST related activities like uploading invoice, filing returns
etc., among different set of users inside a company (medium or large
companies will need it), applications for tax professional to manage their
client’s GST compliance activities, integration of existing accounting
packages/ERP with GST System, etc.
GSP is an additional channel being made available for facilitating the
taxpayers for performing some of the functions and use of their services is
optional. GSPs may take the help of Application Service Providers (ASPs)
who act as a link between taxpayers and GSPs.

a
a
XI. Compensation Cess
A GST Compensation Cess at specified rate
is imposed under the Goods and Services
Tax (Compensation to States) Cess Act, 2017 on the specified luxury items
or demerit goods, like pan masala, tobacco, aerated waters, motor cars etc.,
computed on value of taxable supply.
Compensation cess is leviable on intra-State
supplies and inter-State supplies with a view to
provide for compensation to the States for the
loss of revenue arising on account of
implementation of the GST. Initially, it was levied
for a period of 5 years upto 30th June, 2022.
However, its levy and collection has been extended till 31st March, 2026.
Compensation is to be provided to a State for a period of 5 years from the
date on which the State brings its SGST Act into force.
XII. GST – A tax on goods and services
GST is levied on all goods and services, except alcoholic liquor for human
consumption and petroleum crude, diesel, petrol, ATF and natural gas.
❑ Alcoholic liquor for human consumption: is outside the realm of

GST. The manufacture/production of
alcoholic liquor continues to be subjected
to State excise duty and inter-State/intra-
State sale of the same is subject to
CST/VAT respectively.
❑ Petroleum crude, diesel, petrol, ATF and natural gas: As regards
petroleum crude, diesel, petrol, ATF and natural gas are concerned,
they are not presently leviable to GST. GST will be levied on these
products from a date to be notified on the recommendations of the
GST Council.
Till such date, central excise duty continues to be levied on
manufacture/production of petroleum crude, diesel, petrol, ATF and
natural gas and inter-State/intra-State sale of the same is subject to
CST/ VAT respectively.

❑ Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on

tobacco. However, Union Government has also retained the power to
levy excise duties on tobacco and tobacco products manufactured in
India. Resultantly, tobacco is subject to GST as well as central
excise duty.
❑ Opium, Indian hemp and other narcotic drugs and narcotics:
Opium, Indian hemp and other narcotic drugs and narcotics are within
the purview of GST, i.e. GST is leviable on them. However, State
Governments have also retained the power to levy excise duties on
such products manufactured in India. Resultantly, Opium, Indian
hemp and other narcotic drugs and narcotics are subject to GST as
well as State excise duties.
❑ Further, real estate sector has been kept out of ambit of GST, i.e. GST
will not be levied on sale/purchase of immovable property.
The various central, State and local levies were examined to identify their
possibility of being subsumed under GST. While identifying, the following
principles were kept in mind:
(i) Taxes or levies to be subsumed should be primarily in the nature of indirect

taxes, either on the supply of goods or on the supply of services.
(ii) Taxes or levies to be subsumed should be part of the transaction chain
which commences with import/ manufacture/ production of goods or
provision of services at one end and the consumption of goods and services
at the other.
(iii) The subsuming of taxes should result in free flow of tax credit in intra and
inter-State levels. The taxes, levies and fees that were not specifically related
to supply of goods & services would not be subsumed under GST.
(iv) Revenue fairness for both the Union and the States individually would need
to be attempted.

a
a
Taking the above principles into account, following taxes were subsumed in the
GST:
Central Taxes State Taxes
❑ Central Excise Duty & Additional ❑ State surcharges and cesses in so far
Excise Duties as they relate to supply of goods &
❑ Service Tax services
❑ Excise Duty under Medicinal & Toilet

❑ Entertainment Tax (except those
levied by local bodies)
Preparation Act, 1955
❑ Tax on lottery, betting and gambling
❑ CVD & Special CVD
❑ Entry Tax (All Forms) & Purchase Tax
❑ Central Sales Tax ❑ VAT/ Sales tax
❑ Central surcharges & Cesses in so far ❑ Luxury Tax
as they relate to supply of goods & ❑ Taxes on advertisements
services
GST

Quiz
Time!
Which of the following statements is incorrect?

1
(a) Alcoholic (b) Manufacture/ (c) Inter-

(d) Alcoholic
liquor for human production of State/intra-State
liquor for human
consumption is alcoholic liquor is sale of the alcohol
consumption is
outside the realm subject to State is subject to CST/
subject to GST.
of GST excise duty. VAT respectively.

a
a
6. BENEFITS OF GST
GST is introduced with a vision to bring
benefits to all the stakeholders of
industry, Government and the citizens.
GST is a win-win situation for the entire
country. It is envisaged that GST will accrue following significant benefits to the
stake holders:
Benefits to economy
❑ Creation of unified national market: GST
aims to make India a common market with
common tax rates and procedures and remove
the economic barriers, thereby paving the way
for an integrated economy at the national level.
❑ Boost to ‘Make in India' initiative: GST has
given a major boost to the ‘Make in India' initiative
of the Government of India by making goods and
services produced in India competitive in the
national as well as international market. Further,
all imported goods are being charged integrated tax (IGST) which is more or
less equivalent to CGST + SGST. This brings parity in taxation on local and
imported goods or services.
❑ Boost to investments and employment: The subsuming of major Central
and State taxes in GST, complete and comprehensive
set-off of input tax on goods and services and
phasing out of Central Sales Tax (CST) would reduce
the cost of locally
manufactured goods and
services. Resultantly, the
competitiveness of Indian goods and services in
the international market may increase to give
boost to investments and Indian exports. With a
boost in exports and manufacturing activity, more employment would be
generated and GDP would increase.

Simplified tax structure

❑ Ease of doing business: Simpler tax regime with
fewer exemptions along with reduction in
multiplicity of taxes under GST has led to
simplification and uniformity in tax structure. The
uniformity in laws, procedures and tax rates across
the country makes doing business easier.
Common definitions, common forms/ formats, common interface through
GST portal result in efficiencies and synergies across the board.
❑ Certainty in tax administration: Common procedures for registration of
taxpayers, refund of taxes, uniform formats of tax return, common tax base,
common system of classification of goods or services along with timelines
for every activity ensures certainty in tax administration across India.
Easy tax compliance
❑ Automated procedures with greater
use of IT: GST is largely technology
driven. The interface of the taxpayer
with the tax authorities is through the
common portal (GSTN). There are
simplified and automated procedures
for various processes such as registration, returns, refunds, tax payments.
All processes, like applying for registration, filing of returns, payment of
taxes, filing of refund claims etc., are online through GSTN. The human
interface between the taxpayer and the tax administration has greatly
reduced thereby leading to speedy decisions. The measures like e-Invoice
and auto populated returns has eased the compliance for the registered
person.
❑ Easier tax compliance: Harmonization of laws, procedures and rates of tax
has made compliance easier and simple. There are common definitions,
common forms/ formats, common interface through common portal (GSTN)
resulting in efficiencies and synergies across the board. All this has also
helped in reduction in compliance costs, alleviate the need for multiple
record keeping for a variety of taxes leading to lesser investment of
resources and manpower in maintaining records to the registered person.

a
a
Advantages for trade and industry
❑ Benefits to industry: Average tax burden on
trade and industry has come down, which has
resulted in reduction in prices of goods and
services. This has resulted in more consumption,
which in turn means more production and
thereby boosting the growth of the industries.
❑ Mitigation of ill effects of cascading: GST is a destination-based
consumption tax. It has been designed in a manner so that tax is collected
at every stage and the credit of tax paid at the previous stage is available to
set off the tax to be paid at the next stage of transaction. This eradicates
“tax on tax” and allows cross utilization of input tax credits which benefit
the industry by making the entire supply chain tax neutral.
Thus, GST prevents cascading of taxes by providing a comprehensive input
tax credit mechanism across the
entire supply chain. Such a seamless
availability of input tax credit across goods or services at every stage of
supply helps in mitigating the ill effects of cascading, enables streamlining
of business operations, improving competitiveness in the markets in India
and across globe.
❑ Benefits to small traders and entrepreneurs: GST has increased the
threshold limit for GST registration for
small businesses. Small businesses have
also been provided the benefit of
composition scheme. With the creation of a
seamless national market across the
country, small enterprises will have an
opportunity to expand their national
footprint with minimal investment.


a
a
Quiz
Presently, _________________ is leviable on ______________ of
Time!
petroleum and diesel.
(i) GST; supply
(ii) Central excise duty; manufacture/production
2
(iii) Central sales tax; inter-State sale
(iv) Value Added Tax; intra-State sale
(v) State excise duty; manufacture
Choose the most appropriate option.
(a) (ii), (iii) and

(b) (i) (c) (i) and (ii) (d) (i) and (v)
(iv)
7. CONSTITUTIONAL PROVISIONS
India has a three-tier federal structure, comprising the Union Government, the
State Governments and the Local Government. The power to levy taxes and
duties is distributed among the three tiers of Governments, in accordance with
the provisions of the Indian Constitution.
The Constitution of India is the supreme law of India. It consists of a Preamble,

25 parts containing 448 Articles and 12 Schedules.

25 Parts
(containing
Preamble 448
articles)
12
Schedules
Constitution of India
Power to levy and collect taxes whether, direct or indirect emerges from the
Constitution of India. In case any tax law, be it an act, rule, notification or order is
not in conformity with the Constitution, it is called ultra vires the Constitution and
is illegal and void.
Thus, a study of the basic provisions of the Constitution is essential for

understanding the genesis of the various taxes being imposed in India. The
significant provisions of the Constitution relating to taxation are:
I. Article 265: Article 265 of

the Constitution of India Those of us who understand human
history know the role taxation has
prohibits arbitrary collection of
played in shaping the destiny of
tax. It states that “no tax
mankind. The matter of taxes – more
shall be levied or collected
specifically, the right to tax – is clearly
except by authority of law”. no stranger to controversy and has
The term “authority of law” frequently served as the catalyst for
means that tax proposed to be revolutionary change.
levied must be within the
-Owen Arthur
legislative competence of the
Legislature imposing the tax.
II. Article 245: Part XI of the Constitution deals with relationship between the
Union and States. The power for enacting the laws is conferred on the
Parliament and on the Legislature of a State by Article 245 of the
Constitution. The said Article provides as under:

a
a
❑ Subject to the provisions of this Constitution, Parliament may make
laws for the whole or any part of the territory of India, and the
legislature of a State may make laws for the whole or any part of the
State.
❑ No law made by Parliament shall be deemed to be invalid on the
ground that it would have extra-territorial operation.
III. Article 246: It gives the respective authority to Union and State
Governments for levying tax.
IV. Seventh Schedule to Article 246: It contains three lists which enumerate
the matters under which the Union and the State Governments have the
authority to make laws.
LIST – I LIST – II LIST – III CONCURRE

UNION LIST STATE LIST
NT LIST
It contains It contains
the matters It contains
the matters
in respect of the matters
in respect of
which the in respect of
which the
Parliament which both
State
(Central the Central
Government
Government) & State
has the
has the Government
exclusive
exclusive s have power
right to make
right to make to make laws.
laws .
laws.
Entries 82 to 91 of List I enumerate the subjects where the Central

Government has power to levy taxes. Entries 45 to 63 of List II enumerate
the subjects where the State Governments have the power to levy taxes.
Parliament has a further power to make any law for any part of India not
comprised in a State even if such matter is included in the State List.
Income tax is levied by virtue of Entry 82 - Taxes on income other than
agricultural income and customs duty vide Entry 83 - Duties of customs
including export duties of the Union List.
Power to levy Goods and Services Tax (GST) has been conferred by Article
246A of the Constitution which was introduced by the Constitution (101 st

Amendment) Act, 2016. Before discussing the significant provisions of the

Constitution (101 st Amendment) Act, 2016, let us first understand why there
arose a need for such constitutional amendment.
Need for constitutional amendment
The Constitutional provisions hitherto had delineated separate powers for
the Centre and the States to impose various taxes. Whereas the Centre
levied excise duty on all goods produced or manufactured in India, the
States levied Value Added Tax once the goods entered the stream of trade
upon completion of manufacture.
In the case of inter-State sales, the Centre had the power to levy a tax (the
Central Sales Tax), but the tax was collected and retained entirely by the
States (from where the movement of goods start). Services were exclusively
taxed by the Centre together with applicable cesses, if any. Besides, there
were State specific levies like entry tax, Octroi, luxury tax, entertainment tax,
lottery and betting tax, local taxes levied by Panchayats etc.
With respect to goods imported from outside the country into India, Centre
levied basic customs duty and additional duties of customs together with
applicable cesses, if any.
Introduction of the GST required amendment in
the Constitution to enable integration of the
central excise duty, additional duties of customs,
State VAT and certain State specific taxes and
service tax into a comprehensive Goods and
Services Tax and to empower both Centre and the
States to levy and collect it.
Consequently, Constitution (101 st Amendment Act), 2016 (hereinafter
referred to as CAA) was passed. It has 20 sections. Newly inserted Article
279A empowering President to constitute GST Council was notified on
12.09.2016. Remaining provisions were notified with effect from 16.09.2016.
CAA also provides for compensation to States for loss of revenue on
account of introduction of goods and services tax. Parliament shall, by law,
on the recommendation of the Goods and Services Tax Council, provide for
compensation to the States for loss of revenue arising on account of
implementation of the goods and services tax for a period of five years.

a
a
st
Significant provisions of Constitution (101 Amendment) Act, 2016
Key changes in brief

❑ Concurrent powers on Parliament and State Legislatures to make laws
governing taxes on goods and services.
❑ Levy of integrated goods and services tax on inter-State transactions
of goods and services to be levied and collected by the Central
Government and apportioned between the Union and the States in the
manner provided by Parliament by Law as per the recommendation of
the GST Council.
❑ Principles for determining the place of supply and when a supply takes
place in the course of inter-State trade or commerce shall be formulated
by the Parliament, by law.
❑ GST will be levied on all supply of goods and services except alcoholic
liquor for human consumption.
❑ On the following products GST shall not be levied, till a date to be
notified on the recommendations of the GST Council:
 Petroleum Crude
 High Speed Diesel
 Motor Spirit (commonly known as Petrol)
 Natural Gas
 Aviation Turbine Fuel
❑ The Union Government shall retain the power to levy duties of excise on
the aforesaid products besides tobacco and tobacco products
manufactured or produced in India.
❑ Article 279A of the Constitution empowers the President to constitute a
joint forum of the Centre and States namely, Goods & Services Tax
Council (GST Council).
❑ The provisions relating to GST Council came into force on 12th
September, 2016. President constituted the GST Council on 15th
September, 2016.

❑ The Union Finance Minister is the Chairman of this Council and Ministers
in charge of Finance/Taxation or any other Minister nominated by each
of the States & UTs with Legislatures are its members. Besides, the Union
Minister of State in charge of Revenue or Finance is also its member. The
function of the Council is to make recommendations to the Union and
the States on important issues like tax rates, exemptions, threshold limits,
dispute resolution etc.
❑ The concept of ‘declared goods of special importance’ under the
Constitution is done away with. Earlier, certain restrictions were placed on
the powers of States in regard to tax on such goods.
❑ Transitional provisions to take care of any inconsistency with respect to
any law relating to tax on goods or services or both, in force in any State.
Such tax to continue to be in force until amended or repealed or until
expiration of one year from commencement of GST, whichever is earlier.
Quiz _________________ is leviable on ______________ of

Time! Tobacco
(i) GST; supply

3 (ii) Central excise duty; manufacture
(iii) Central sales tax; inter-State sale
(a) (ii), (iii) and

(b) (i) (c) (i) and (ii) (d) (i) and (v)
(iv)

a
a
Quiz _________________ is leviable on ______________ of
Time! opium and Indian hemp.
(i) GST; supply

(ii) Central excise duty; manufacture
4 (iii) Central sales tax; inter-State sale
(a) (ii), (iii) and (b) (i) (c) (i) and (v) (d) (i) and (ii)
(iv)
Key changes in detail

Significant amendments made by Constitution Amendment Act are
discussed below in detail:
V. Article 246A: Power to make laws with respect to Goods and
Services Tax:
Newly inserted Article 246A

(1) Notwithstanding anything contained in Articles 246 and 254,
Parliament, and, subject to clause (2), the Legislature of every
State, have power to make laws with respect to goods and
services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to
goods and services tax where the supply of goods, or of services,
or both takes place in the course of inter-State trade or
commerce.

Explanation—The provisions of this article, shall, in respect of goods

and services tax referred to in clause (5) of article 279A, take effect
from the date recommended by the Goods and Services Tax Council.
❑ This article grants power to Centre and State

Governments to make laws with respect to GST
imposed by Centre or such State.
❑ Centre has the exclusive power to make laws with respect to GST in
case of inter-State supply of goods and/or services.
❑ However, in respect to the following goods, the aforesaid provisions
shall apply from the date recommended by the GST Council:
motor
high spirit aviation
petroleum natural
speed (commonly turbine
crude gas
diesel known as fuel
petrol)
❑ The provisions of Article 246A are notwithstanding anything contained

in Articles 246 and 254. Article 254 deals with the supremacy of the
laws made by Parliament.
VI. Article 248 amended: Residuary powers of legislation amended
❑ Article 248 grants the residuary powers to
Parliament to make laws with respect to any
matter not enumerated in the Concurrent List
or State List. Such power shall include the power of making any law
imposing a tax not mentioned in either of those Lists.
❑ This article has been amended. Now, this power has been subjected
to Article 246A, namely the power to make laws with respect to goods
and service tax to be imposed by the Centre and States.

a
a
VII. Power of Parliament to legislate with respect to a matter in the
State List, in the national interest/in case of emergency, extended to
GST provided under Article 246A
❑ Article 249 grants the Parliament the power to
make laws with respect to a matter in the State
list in national interest in a case where the
Council of States has declared by resolution supported by not less
than two-thirds of the members present and voting on any matter
enumerated in the State List.
❑ Similarly, Article 250 grants the Parliament the
power to make laws with respect to any of the
matters enumerated in the State List if a proclamation of Emergency is
in operation.
❑ Articles 249 and 250 have been amended to grant power to
Parliament to make laws with respect to the Goods and Services Tax
provided under Article 246A also alongwith the matters in the State
list, in the national interest/in case of emergency.
VIII. Article 268: Duties levied by the Centre but collected and
appropriated by the States
❑ Article 268 pertains to the duties levied by the
Centre but collected and appropriated by the
States. It stipulates that such stamp duties and such duties of excise
on medicinal and toilet preparations as are mentioned in the Union
List shall be levied by the Government of India but shall be collected
in the case where such duties are leviable within any Union territory,
by the Government of India, and in other cases, by the States within
which such duties are respectively leviable.
❑ The CAA omits “and such duties of excise on medicinal and toilet
preparations” from Article 268.
❑ Duties of excise on medicinal and toilet preparations have been
subsumed into the goods and service tax to be levied by the Centre
and States.

IX. Article 268A: Article 268A empowering Union to levy service tax
omitted
Service tax was levied in 1994 under the
residual Entry 97 of the Union list. Article 268A
was inserted by the Constitution (88 th)
Amendment Act, 2003 to usher in service tax
under a separate entry 92C in the Union List. However, it was not notified
ever since. This article has been omitted by the CAA.
X. Article 269A: Levy and collection of GST on inter-State supply
Newly inserted article 269A.

Levy and collection of goods and services tax in course of inter -State
trade or commerce
(1) Goods and services tax on supplies in the course of inter -State
trade or commerce shall be levied and collected by the
Government of India and such tax shall be apportioned between
the Union and the States in the manner as may be provided by
Parliament by law on the recommendations of the Goods and
Services Tax Council.
Explanation — For the purposes of this clause, supply of goods, or
of services, or both in the course of import into the territory of
India shall be deemed to be supply of goods, or of services, or
both in the course of inter-State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not
form part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has
been used for payment of the tax levied by a State under article
246A, such amount shall not form part of the Consolidated Fund
of India.
(4) Where an amount collected as tax levied by a State under article
246A has been used for payment of the tax levied under clause
(1), such amount shall not form part of the Consolidated Fund of
the State.

a
a
(5) Parliament may, by law, formulate the principles for determining
the place of supply, and when a supply of goods, or of services, or
both takes place in the course of inter-State trade or commerce.
❑ Article 269A stipulates that GST on

supplies in the course of inter-State trade
or commerce shall be levied and collected
by the Government of India and such tax
shall be apportioned between the Union and the States in the manner
as may be provided by Parliament by law on the recommendations of
the Goods and Services Tax Council.
❑ Further, import of goods or services or both into India will also be
deemed to be supply of goods and/ or services in the course of Inter-
State trade or Commerce. This will give power to Central Government
to levy IGST on the import transactions which were earlier subject to
Countervailing duties under the Customs Tariff Act, 1975.
❑ Where an amount collected as IGST has been used for payment of

SGST or vice versa, such amount shall not form part of the
Consolidated Fund of India/State1 respectively. This is to facilitate
transfer of funds between the Centre and the States.
❑ Parliament is empowered to formulate the principles regarding place

of supply and when supply of goods, or of services, or both occurs in
inter-State trade or commerce.
XI. Article 270: Distribution of the goods and services tax (GST)
between the Centre and the States
❑ Article 270 is amended to provide for
distribution of the goods and services tax
between the Centre and the States, by
1
All revenues received and loans raised by the Government of India are credited to the
Consolidated Fund of India and all expenditure of the Government are incurred from this Fund.
All revenues received and loans raised by the Government of a State are credited to the
Consolidated Fund of the State and all expenditure of that Government are incurred from
this Fund.

order of the President after considering recommendations of the

Finance Commission.
❑ This applies for those tax amounts apportioned or payable to the
Central Government for taxes levied by it under articles 246A(1) and
(2) and Clause (1) of 269A.
XII. Article 271 amended
Article 271 empowers Parliament to increase any
of the duties, or taxes referred to in articles 269
or 270. It further provides that such surcharge is
not shareable and remains with the Centre. Now this article is amended to
exclude GST from its purview.
XIII. Definitions of ‘Goods and Services Tax’, ‘Services’ and ‘State’
incorporated under Article 366
❑ The terms Goods and Services Tax, services and State have been
defined under respective clauses of Article 366 as follows:
✓ Goods and services tax means any
tax on supply of goods, or services
or both except taxes on the supply
of the alcoholic liquor for human consumption. Consequently,
GST can be levied on supply of all goods and services except
alcoholic liquor for human consumption.
✓ Services means anything other than
goods.
✓ State, with reference to articles 246A,
268, 269, 269A and article 279A,
includes a Union territory with
Legislature.
❑ Definition of “goods”: The term goods has already been defined
under clause (12) of Article 366 in an inclusive manner to provide that
“goods includes all materials, commodities, and articles”.

a
a
XIV. Article 286: Article 286 imposing restrictions as to imposition of tax
on the sale or purchase of goods amended
❑ Article 286 which restrains the States from
framing laws for imposition of any tax on
the sale or purchase of goods where such
sale or purchase takes place outside the
State or in course of the import of the goods into, or export of the
goods out of, the territory of India.
❑ This article has been amended to incorporate the changes arising out
of GST by substituting the words “sale or purchase” with “supply” and
words “goods” with “goods or services or both”.
❑ Consequently, States have no right to impose GST on inter-State
supply of goods or services or both. It will be levied by Union
Government under Article 269A as mentioned earlier.
❑ Further, clause (3) of Article 286 which stipulates that any law of a
State shall, in so far as it imposes, or authorises the imposition, of a
tax on the sale or purchase of goods declared by Parliament by law to
be of special importance in inter-State trade or commerce, be
subjected to such restrictions and conditions in regard to the system
of levy, rates and other incidents of the tax, as Parliament may, by law,
specify, has been omitted.
XV. GST Council: Article 279A
❑ Article 279A of the Constitution empowers
the President to constitute a joint forum of GST COUNCIL
the Centre and States namely, Goods &
Services Tax Council (GST Council).
❑ The provisions relating to GST Council came into force on 12th
September, 2016. President constituted the GST Council on 15th
September, 2016.
❑ The GST Council shall consist of the following members, namely:—
(a) the Union Finance Minister is the Chairperson;

(b) the Union Minister of State in charge of Revenue or Finance is the

Member;
(c) the Minister in charge of Finance or Taxation or any other
Minister nominated by each State Government are the Members.
❑ The Members of the GST Council referred to clause (c) above shall, as
soon as may be, choose one amongst themselves to be the Vice-
Chairperson of the Council for such period as they may decide.
❑ The GST Council shall make recommendations to the Union and the
States on—
(a) the taxes, cesses and surcharges levied by the Union, the States
and the local bodies which may be subsumed in the goods and
services tax;
(b) the goods and services that may be subjected to, or exempted
from the goods and services tax;
(c) model Goods and Services Tax Laws, principles of levy,

apportionment of Goods and Services Tax levied on supplies in
the course of inter-State trade or commerce under article 269A
and the principles that govern the place of supply;
(d) the threshold limit of turnover below which goods and services
may be exempted from goods and services tax;
(e) the rates including floor rates with bands of goods and services tax;
(f) any special rate or rates for a specified period, to raise additional
resources during any natural calamity or disaster;
(g) special provision with respect to the States of Arunachal Pradesh,

Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand
[Such States are referred as Special Category States]; and
(h) any other matter relating to the goods and services tax, as the
Council may decide.

a
a
❑ GST Council shall recommend the date on which the goods and services
tax be levied on petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel.
❑ While discharging the functions conferred by this article, the GST
Council shall be guided by the need for a harmonised structure of
goods and services tax and for the
development of a harmonised national market
GST COUNCIL
for goods and services.
❑ One-half of the total number of Members of
the GST Council shall constitute the quorum at
its meetings.
❑ The GST Council shall determine the procedure in the performance of
its functions.
❑ Every decision of the GST Council shall be taken at a meeting, by a
majority of not less than three-fourths of the weighted votes of the
members present and voting, in accordance with the following
principles, namely:
(a) the vote of the Central Government shall have a weightage of
one-third of the total votes cast, and
(b) the votes of all the State Governments taken together shall have a
weightage of two-thirds of the total votes cast, in that meeting.
❑ No act or proceedings of the Goods and Services Tax Council shall be
invalid merely by reason of—
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a Member of the
Council; or
(c) any procedural irregularity of the Council not affecting the
merits of the case.
❑ The Goods and Services Tax Council shall establish a mechanism to
adjudicate any dispute —
(a) between the Government of India and one or more States; or

(b) between the Government of India and any State or States on

one side and one or more other States on the other side; or
(c) between two or more States, arising out of the

recommendations of the Council or implementation thereof.
XVI. Article 368 amended
Article 368 has been amended to include Article
279A also within its purview. Consequently, at
least two-thirds of the majority in each House of
the Parliament and ratification by at least half of the States is specifically
required to make any amendment in Article 279A relating to GST Council.
Quiz
Which of the following taxes is/are not subsumed in
Time!
GST?
(i) Service tax
(ii) Customs duty
(iii) Luxury tax
5 (iv) Tax on lottery, betting and gambling
(v) Entertainment tax levied by local bodies
(c) (i), (iii), (iv)
(a) (ii) (b) (ii) and (v) (d) (v)
and (v)

a
a
TEST YOUR KNOWLEDGE
1. List some of the benefits that GST may accrue to the economy.
2. Explain with the help of examples how a particular transaction of goods and
services is taxed simultaneously under Central GST (CGST) and State GST
(SGST)?
3. Why was the need to amend the Constitution of India before introducing the
GST?
4. GST is a destination-based tax on consumption of goods or services or both.
Discuss the validity of the statement.
5. Discuss the leviability of GST or otherwise on the following:
(a) Alcoholic liquor for human consumption
(b) Petroleum crude, diesel, petrol, Aviation Turbine Fuel (ATF) and natural
gas
(c) Tobacco
(d) Opium, Indian hemp and other narcotic drugs and narcotics
6. Under Goods and Services Tax (GST), only value addition is taxed and burden
of tax is to be borne by the final consumer. Examine the validity of the
statement.
7. Which are the commodities which have been kept outside the purview of GST?
Examine the status of taxation of such commodities after introduction of GST.
8. A dual GST has been implemented in India. Elaborate.
9. Discuss Article 269A pertaining to levy and collection of GST on inter-State
supply.
10. Discuss Article 246A which grants the power to make laws with respect to
Goods and Services Tax.

ANSWERS/HINTS
1. GST may accrue following benefits to the economy:

(a) Creation of unified national market: GST aims to make India a
common market with common tax rates and procedures and remove
the economic barriers, thereby paving the way for an integrated
economy at the national level.
(b) Boost to ‘Make in India' initiative: GST may give a major boost to
the ‘Make in India' initiative of the Government of India by making
goods and services produced in India competitive in the national as
well as international market. This would make India a manufacturing
hub.
(c) Boost to investments, exports and employment: Under the GST
regime, the principle of exporting only the cost of goods or services
and not taxes is being followed. This may boost Indian exports thereby
improving the balance of payments position. Exporters are being
facilitated by grant of provisional refund of 90% of their claims within
7 days of issue of acknowledgement of their application, thereby
resulting in the easing of position with respect to cash flows.
Further, the subsuming of major Central and State taxes in GST,
complete and comprehensive set-off of input tax on goods and
services and phasing out of Central Sales Tax (CST) may reduce the
cost of locally manufactured goods and services. Resultantly, the
competitiveness of Indian goods and services in the international
market may increase to give boost to investments and Indian exports.
With a boost in exports and manufacturing activity, more employment
would be generated and GDP would increase.
2. The Central GST and the State GST is levied simultaneously on every
intra-State supply of goods or services or both made by registered persons
except the exempted goods and services as well as goods and services
which are outside the purview of GST. Further, both are levied on the same

a
a
price or transaction value. The same can be better understood with the help
of following examples:
Example I: Suppose that the rate of CGST is 10% and that of SGST is 10%.
When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and
rods to a construction company which is also located within the same State
for, say ` 100, the dealer would charge CGST of ` 10 and SGST of ` 10 in
addition to the basic price of the goods. The CGST component will go into
a Central Government account while the SGST portion into the account of
the concerned State Government (viz. U.P.).
It is important to note that he might not actually pay ` 20 (` 10 + ` 10) in

cash as he would be entitled to set-off this liability against the CGST or
SGST paid on his eligible purchases (inputs, input services and capital
goods) assuming that all his purchases are intra-State. However, for paying
CGST, he would be allowed to use only the credit of CGST paid on his
purchases while for SGST he can utilize the credit of SGST alone. CGST
credit cannot be used for payment of SGST and vice versa.
Example II: Suppose, again the rate of CGST is 10% and that of SGST is
10%. When an advertising company located in Mumbai supplies advertising
services to a company manufacturing soap also located within the State of
Maharashtra for, let us say ` 100, the ad company would charge CGST of
` 10 as well as SGST of ` 10 at the basic value of the service. The CGST
component will go into a Central Government account while the SGST
portion into the account of the Maharashtra Government.
He might not actually pay ` 20 (` 10+` 10) in cash as it would be entitled to
set-off this liability against the CGST or SGST paid on his eligible purchases
(say, of inputs such as stationery, office equipment, services of an artist etc.)
assuming that all his purchases are intra-State. However, for paying CGST,
he would be allowed to use only the credit of CGST paid on its purchase
while for SGST, he can utilise the credit of SGST alone. CGST credit cannot
be used for payment of SGST and vice versa.
3. Earlier, the fiscal powers between the Centre and the States were clearly
demarcated in the Constitution with almost no overlap between the
respective domains. The Centre had the powers to levy tax on the
manufacture of goods (except alcoholic liquor for human consumption,

opium, narcotics etc.) while the States had the powers to levy tax on the sale
of goods. In the case of inter-State sales, the Centre had the power to levy
the Central Sales Tax but the tax was collected and retained entirely by the
States. As for services, it was the Centre alone that was empowered to levy
service tax.
Introduction of the GST necessitated the amendments in the Constitution so
as to simultaneously empower the Centre and the States to levy and collect
this tax. The Constitution of India was amended by the Constitution (101st
Amendment) Act, 2016 for this purpose. Article 246A of the Constitution
introduced thereby empowered the Centre and the States to simultaneously
levy and collect the GST.
4. The given statement is valid. GST is a destination-based tax on

consumption of goods or services or both. GST is known as destination-
based tax since the tax would accrue to the taxing authority which has
jurisdiction over the place of consumption which is also termed as place of
supply.
For example, if A in Delhi produces the goods and sells the goods to B in
Haryana. In this case, the tax would accrue to the State of Haryana and not
to the State of Delhi. On the other hand, under pre-GST regime, origin-
based taxation was prevailing in such cases.
Under origin-based taxation, the tax used to accrue to the State from where
the transaction originated. In the given case, under origin-based taxation,
the central sales tax would have been levied by Centre and collected by the
State of Delhi and not by the State of Haryana.
5. (a) Alcoholic liquor for human consumption: is outside the realm of
GST. The manufacture/production of alcoholic liquor continues to be
subjected to State excise duty and inter-State/intra-State sale of the
same is subject to CST/VAT respectively.
(b) Petroleum crude, diesel, petrol, ATF and natural gas: As regards
petroleum crude, diesel, petrol, ATF and natural gas are concerned,
they are not presently leviable to GST. GST will be levied on these
products from a date to be notified on the recommendations of the
GST Council.

a
a
Till such date, central excise duty continues to be levied on
manufacture/production of petroleum crude, diesel, petrol, ATF and
natural gas and inter-State/intra-State sale of the same is subject to
CST/ VAT respectively.
(c) Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on
tobacco. However, Union Government has also retained the power to
levy excise duties on tobacco and tobacco products manufactured in
India. Resultantly, tobacco is subject to GST as well as central excise
duty.
(d) Opium, Indian hemp and other narcotic drugs and narcotics:
Opium, Indian hemp and other narcotic drugs and narcotics are within
the purview of GST, i.e. GST is leviable on them. However, State
Governments have also retained the power to levy excise duties on
such products manufactured in India. Resultantly, Opium, Indian
hemp and other narcotic drugs and narcotics are subject to GST as
well as State excise duties.
6. The statement is correct. Goods and Services Tax is a destination-based tax
on consumption of goods and services. It is levied at all stages right from
manufacture up to final consumption with credit of taxes paid at previous
stages available as setoff. Resultantly, only value addition is taxed and
burden of tax is to be borne by the final consumer.
7. Article 366(12A) of the Constitution as amended by 101 st Constitutional
Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on
supply of goods or services or both, except supply of alcoholic liquor for
human consumption. Therefore, alcohol for human consumption is kept out
of GST by way of definition of GST in the Constitution. Five petroleum
products viz. petroleum crude, motor spirit (petrol), high speed diesel,
natural gas and aviation turbine fuel have temporarily been kept out of the
purview of GST; GST Council shall decide the date from which they shall be
included in GST. The erstwhile taxation system (CST/VAT & central excise)
still continues in respect of the said commodities.
8. A dual GST has been implemented in India with the Centre and States
simultaneously levying it on a common tax base. The GST levied by the
Centre on intra-State supply of goods and / or services is called the Central
GST (CGST) and that levied by the States/ Union territory is called the State
GST (SGST)/ Union GST (UTGST). Similarly, Integrated GST (IGST) is levied

and administered by Centre on every inter-State supply of goods and/or

services.
India is a federal country where both the Centre and the States have been
assigned the powers to levy and collect taxes through appropriate
legislation. Both the levels of Government have distinct responsibilities to
perform according to the division of powers prescribed in the Constitution
for which they need to raise resources. A dual GST, therefore, keeps with the
Constitutional requirement of fiscal federalism.
9. Article 269A of the Constitution stipulates that Goods and Services Tax on
supplies in the course of inter-State trade or commerce shall be levied and
collected by the Government of India and such tax shall be apportioned between
the Union and the States in the manner as may be provided by Parliament by law
on the recommendations of the Goods and Services Tax Council.
Here, supply of goods, or of services, or both in the course of import into
the territory of India shall be deemed to be supply of goods, or of services,
or both in the course of inter-State trade or commerce.
The amount so apportioned to a State shall not form part of the
Consolidated Fund of India. Where an amount collected as IGST has been
used for payment of SGST or vice versa, such amount shall not form part of
the Consolidated Fund of India/State respectively. This is to facilitate
transfer of funds between the Centre and the States.
Parliament is empowered to formulate the principles for determining the
place of supply, and when a supply of goods, or of services, or both takes
place in the course of inter-State trade or commerce.
10. Article 246A stipulates that Parliament, and, the Legislature of every State,
have power to make laws with respect to goods and services tax imposed by
the Union or by such State.
Parliament has exclusive power to make laws with respect to goods and
services tax where the supply of goods, or of services, or both takes place in
the course of inter-State trade or commerce.
However, in respect to petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel, the
aforesaid provisions shall apply from the date to be notified by the
Government on the recommendations by the GST Council.

a
a
CROSSWORD PUZZLE
1
3 4
7 8
10 11
ACROSS
2. India has adopted __________ GST model because of its unique federal
nature.
5. Common GST Electronic Portal for furnishing ___________way bill is

www.ewaybillgst.gov.in

7. __________ is subject to GST as well as central excise duty.

8. __________ duty is not subsumed in GST.
9. ________is used for classifying the goods under the GST. (acronym)
10. ____________ is subject to GST as well as State excise duties.
DOWNWARDS
1. ____________ was the first country to implement VAT/GST in 1954.
3. Article 265 of the Constitution of India states that “no tax shall be levied or
collected except by ___________ of law”.
4. GST is a _____________a based tax.
6. Common GST Electronic Portal – www.gst.gov.in is a website managed by

___________. (acronym)
11. ____________ is the website for uploading/reporting of e-invoices by the
notified persons. (acronym)
Scan the following QR code for accessing the answers to MCQs in Quiz
Time and Cross word puzzle of this chapter.
Scan the code



1.1
a
CHAPTER a
2
SUPPLY UNDER GST

The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless
otherwise specified. Examples/illustrations/Questions and Answers given in the
Chapter are based on the position of GST law existing as on 30.04.2023.
LEARNING OUTCOMES
After studying this Chapter, you will be able to –
❑ comprehend the taxable event under GST

❑ analyse the taxable event – Supply – its meaning and scope.
❑ identify the transactions that will amount to supply even
without any consideration.
❑ identify the transactions which will be neither the supply of
goods nor the supply of services.
❑ classify the specified transactions either as supply of goods
or as supply of services.
❑ explain the composite and mixed supplies and their taxability
under GST.

a 2.2 a GOODS AND SERVICE TAX
CHAPTER OVERVIEW
Meaning of supply - Supply for a consideration in course/

furtherance of business
Activities/transactions between a person, other than an
individual, and its members/ constituents for
Taxable Event (Supply)
consideration
Import of services for a consideration whether or not in
course/ furtherance of business treated as supply
Activities treated as supply even made without
consideration
Activities classified as either Supply of goods or Supply of
services
Activities treated as neither supply of goods nor supply of

services
Concept of Composite and Mixed Supplies
1. INTRODUCTION
A taxable event is any transaction or occurrence
that results in a tax consequence. Before levying
any tax, taxable event needs to be ascertained.
It is the foundation stone of any taxation system;
it determines the point at which tax would be
levied.
Under the earlier indirect tax regime, the
framework of taxable event in various statutes
was prone to catena of interpretations resulting in litigation since
decades. The controversies largely related to issues like whether
a particular process amounted to manufacture or not, whether the
sale was pre-determined sale, whether a particular transaction was
a sale of goods or rendering of services etc.

SUPPLY UNDER GST a 2.3 a
The GST laws resolve these issues by laying down one comprehensive taxable event
i.e. “Supply” - Supply of goods or services or both.
Various taxable events namely manufacture, sale, rendering of service, purchase,
entry into a territory of State etc. that existed prior to introduction of GST have
been done away with in favour of just one event i.e. Supply.
The GST Law, by levying tax on the ‘supply’ of goods and/or services, departs from
the historically understood concepts of ‘taxable event’ under the State VAT Laws,
Excise Laws and Service Tax Law i.e. sale, manufacture and provision of services
respectively.
In the GST regime, the entire value of supply of goods and/or services is taxed
in an integrated manner, unlike the earlier indirect taxes, which were charged
independently either on the manufacture or sale of goods, or on the provision
of services.
2. RELEVANT DEFINITIONS
❑ Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Section 2(52)].
❑ Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged.
Explanation: It is clarified that the expression “services” includes

facilitating or arranging transactions in securities [Section 2(102)].
❑ Principal: means a person on whose behalf an agent carries on the

business of supply or receipt of goods or services or both [Section 2 (88)].
❑ Competent authority: means such authority as may be notified by the
Government [Section 2(29)].

❑ Family: means, —
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they
are wholly or mainly dependent on the said person [Section 2(49)].
❑ Government: means the Central Government [Section 2(53)].
❑ Local authority: means —
(a) a “Panchayat” as defined in clause (d) of article 243 of the
Constitution.
(b) a “Municipality” as defined in clause (e) of article 243P of the
Constitution.
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any

other authority legally entitled to, or entrusted by the C entral
Government or any State Government with the control or
management of a municipal or local fund.
(d) a Cantonment Board as defined in section 3 of the Cantonments Act,
2006.
(e) a Regional Council or a District Council constituted under the Sixth

Schedule to the Constitution.
(f) a Development Board constituted under article 371 and article 371J
of the Constitution.
(g) a Regional Council constituted under article 371A of the
Constitution [Section 2(69)].
❑ Consideration: in relation to the supply of goods or services or both
includes:
 any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central
Government or a State Government,

• the monetary value of any act or forbearance, in respect of, in

response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government.
However, a deposit given in respect of the supply of goods or services or
both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply. [Section
2(31)].
❑ Actionable claim: means a claim to any debt, other than a debt secured
by mortgage of immovable property or by hypothecation or pledge of
movable property, or to any beneficial interest in movable property not in
the possession, either actual or constructive, of the claimant, which the
civil courts recognise as affording grounds for relief, whether such debt
or beneficial interest be existent, accruing, conditional or contingent
[Section 2(1) of CGST Act read with section 3 of the Transfer of Property
Act, 1882].
❑ Manufacture: means processing of raw material or inputs in any manner
that results in emergence of a new product having a distinct name,
character and use and the term “manufacturer” shall be construed
accordingly [Section 2(72)].
❑ Money: means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance or any other
instrument recognised by the Reserve Bank of India when used as a
consideration to settle an obligation or exchange with Indian legal tender
of another denomination but shall not include any currency that is held
for its numismatic value [Section 2(75)].
❑ Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108)].
❑ Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109)].

❑ Non-taxable territory: means the territory which is outside the taxable

territory [Section 2(79)].
❑ India: means the territory of India as referred to in article 1 of the

Constitution, its territorial waters, seabed and sub-soil underlying such
waters, continental shelf, exclusive economic zone or any other maritime
zone as referred to in the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act, 1976, and the air space
above its territory and territorial waters. [Section 2(56)].
❑ Supplier: in relation to any goods or services or both, shall mean the

person supplying the said goods or services or both and shall include an
agent acting as such on behalf of such supplier in relation to the goods
or services or both supplied [Section 2(105)].
❑ Recipient: of supply of goods and/or services means-
(a) where a consideration is payable for the supply of goods or services

or both, the person who is liable to pay that consideration,
(b) where no consideration is payable for the supply of goods, the

person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available,
and
(c) where no consideration is payable for the supply of a service, the

person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be

construed as a reference to the recipient of the supply
and shall include an agent acting as such on behalf of the recipient in

relation to the goods or services or both supplied [Section 2(93)] .

❑ Person: includes [Section 2(84)]-
An individual A HUF A company
An association of persons or a
A Limited Liability body of individuals, whether
A firm
Partnership incorporated or not, in India or
outside India
Any corporation established

by/under any Central, State Any body corporate A co-operative society
or Provincial Act or incorporated by or registered under any law
Government company as under the laws of a relating to cooperative
defined in section 2(45) of country outside India societies
Companies Act, 2013
Society as defined
Central Government/
A local authority under the Societies
State Government
Registration Act, 1860
Every artificial juridical

Trust person, not falling
above
Our discussion in this Study Material will principally be confined to the provisions
of CGST and IGST laws as the specific State GST laws 1 are outside the scope of
P0F P
syllabus.
1
It may be noted that GST laws of all the States and Union Territories are largely based on
the CGST Act, 2017.

3. CONCEPT OF SUPPLY [SECTION 7 OF THE

CGST ACT]
The concept of ‘supply’ is the key stone of the GST architecture. The provisions
relating to the meaning and scope of supply are contained in Chapter III of the
CGST Act read with various Schedules given under the said Act. Following sections
and schedules shall be discussed in this chapter to understand the concept of
supply:
Section 7 Meaning and scope of supply
Section 8 Taxability of composite and mixed supplies
Schedule I Activities to be treated as supply even if made without

consideration
Schedule II Activities or transactions to be treated as supply of goods or as

supply of services
Schedule III Activities or transactions which shall be treated neither as supply

of goods nor as supply of services.
Provisions of section 7 containing the meaning and scope of supply are as follows:
STATUTORY PROVISIONS
Section 7 Meaning and Scope of Supply
Sub-section Clause Particulars
(1) Supply includes -
(a) all forms of supply of goods or services or both such

as sale, transfer, barter, exchange, licence, rental,
lease or disposal made or agreed to be made for a
consideration by a person in the course or

(aa) the activities or transactions, by a person, other

than an individual, to its members or
constituents or vice-versa, for cash, deferred
payment/other valuable consideration.
Explanation.––For the purposes of this clause, it
is hereby clarified that, notwithstanding
anything contained in any other law for the time
being in force or any judgment, decree or order
of any Court, tribunal or authority, the person
and its members or constituents shall be deemed
to be two separate persons and the supply of
activities or transactions inter se shall be deemed
to take place from one such person to another.
(b) importation of services, for a consideration

whether or not in the course or furtherance of
business, and
(c) the activities specified in Schedule I, made or

agreed to be made without a consideration,
(1A) where certain activities or transactions, constitute a supply in

accordance with the provisions of sub-section (1), they shall
be treated either as supply of goods or supply of services as
referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),
(a) activities or transactions specified in Schedule III;

or
(b) such activities or transactions undertaken by the

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

services.

(3) Subject to the provisions of sub-sections (1), (1A) & (2),

Government may, on the recommendations of the Council,
specify, by notification, the transactions that are to be treated
as —
(a) a supply of goods and not as a supply of services;

or
(b) a supply of services and not as a supply of goods.
ANALYSIS
The definition of ‘supply’ as contained in section 7 is an inclusive definition and
does not define the term exhaustively. It defines the scope of supply in an inclusive
manner. Clause (a) of sub-section (1) illustrates the forms of supply, but the list is
not exhaustive. This is further substantiated by the use of words ‘such as’ in the
definition.
Provisions of scope of supply under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
The meaning and scope of supply in terms of section 7 can be understood in terms
of following parameters:
1. Supply should be of goods or services.
2. Supply should be made for a consideration.
3. Supply should be made in the course or furtherance of business.

in the of goods
course or and
furtherance services
of business
Parameters for
consideration
of supply
Supply should be
Aforesaid parameters describe the concept of supply. However, there are a few
exceptions to 2nd and 3rd parameters [the requirement of supply being made for a
P P P P
consideration and in the course or furtherance of business] in the GST law. Few
exceptions have been carved out where a transaction is deemed to be a supply
even without consideration [contained in Schedule I – discussed later in this
Chapter]. Similarly, the condition of supply to be made in the course or
furtherance of business has been relaxed in case of import of services [Import of
services for a consideration, whether or not in the course or furtherance of business,
is treated as supply].
Further, there are also cases where a transaction is kept out of scope of supply
despite the existence of the above parameters, i.e. there is a list of activities
which are treated neither as a supply of goods nor a supply of services. In other
words, they are outside the scope of GST.
GST law has classified certain activities/transactions either as supply of goods or

as supply of services. Government is also empowered to notify transactions that
are to be treated as a supply of goods and not as a supply of services, or as a
supply of services and not as a supply of goods.
In the subsequent paras, the above aspects of supply have been extensively
discussed. The discussion has been broadly categorised into following:

Supply
includes excludes
Supply of Activities or Importation of Supply Activities to

goods or transaction services for without be treated
services for between a consideration consideration as supply of
consideration person, other whether or [Section goods or
in course or than an 7(1)(c) supply of
not in course
furtherance individual, and or furtherance + Schedule I] services
of business its members or of business [Section
constituents
[Section 7(1A) +
[Section for cash,
7(1)(b)] Schedule
7(1)(a)] deferred
II]
payment or
other valuable
consideration Non supplies under GST
[Section [Section 7(2) +
7(1)(aa)] Schedule III]
Supply should be Supply includes specified

of goods or forms of supply, should be for
services or both consideration and should be
in course or furtherance of
business
Forms of supply In course or furtherance of

Consideration
business

SUPPLY OF GOODS OR SERVICES FOR CONSIDERATION IN

COURSE OR FURTHERANCE OF BUSINESS
SUPPLY SHOULD BE OF GOODS OR SERVICES OR BOTH

The definition of supply begins with the term
‘Supply includes’, thus making it clear that CGST Act
intends to give an extensive meaning to the term
‘supply’. Section
7(1)(a)
Supply includes all forms of supply of goods or
services or both. Supply of anything other than
goods or services like money, securities etc. does
not attract GST.
Money
💸
Anything Securities
which is
neither
Goods
Supply
goods nor
NOT Supply
services
Services
The terms “goods” and “services” as defined under the Act have been analysed by
way of a diagram on next page. Anything supplied other than goods or services
is outside the scope of supply.

Goods Services
means
means
Anything other than goods

Every kind of movable property
excludes
Money and securities
includes includes
**
**
**Please refer the definitions of ‘actionable claims’ and ‘money’ as provided in

heading 2. – Relevant Definitions.

SUPPLY INCLUDES SPECIFIED FORMS OF SUPPLY, SHOULD BE FOR

CONSIDERATION AND SHOULD BE IN COURSE OR FURTHERANCE OF
BUSINESS
The first part of section 7 [Clause (a) of sub-section (1)] includes all forms of supply
of goods or services or both such as sale, transfer, barter, exchange, license, rental,
lease or disposal made or agreed to be made for consideration in the course or
furtherance of business.
B
Sale
A for consideration
Transfer
Forms of Supply
Barter
Exchange
Licence
Rental in the course or
Lease
C
Disposal
It is important to note that supply includes ALL forms of supply within its purview,
though eight illustrative forms of supply have been enlisted in the definition.
Further, supply as contemplated in this first part has two pre-requisites:
✓ the supply should be for a consideration; and
✓ the supply should be in the course or furtherance of business.

We shall first discuss the various forms of supply as illustrated in section 7(1)(a) in
detail:
A. FORMS OF SUPPLY
Various forms of supply contemplated in section 7(1)(a) are sale, transfer, barter,
exchange, licence, rental, lease or disposal. These forms of supply are only
illustrative and not exhaustive. However, none of these terms have been defined
under the Act. In order to understand their meaning, we have taken recourse to
their dictionary meaning or otherwise and have explained them as follows:

I. Sale and Transfer: The dictionary meaning of term ‘sale’ is the act of selling;
specifically: the transfer of ownership of and title to property from one person
to another for a price 2. As per the Sale of Goods Act, 1930, a contract of sale
P1F P
of goods is a contract whereby the seller transfers or agrees to transfer the

property in goods to the buyer for a price.
Further, the term ‘transfer’ has been defined in the Black’s Law dictionary as
to convey or remove from one place, person, etc., to another; pass or hand
over from one to another; specifically, to make over the possession or control
of.
(1) A shopkeeper sells a pen for ` 100 to the buyer. After the sale,
the pen belongs to the buyer and shopkeeper does not have any
right on the pen. This is a transaction of sale.
(2) A company transfers goods from its factory to the depot for
sale purposes. This is ‘transfer’ of goods where the sale has not yet
taken place.
II. Barter and Exchange: The dictionary meaning of term ‘barter’ is to exchange
goods or services for other goods or services instead of using money 3. Black’s
P2F P
Law dictionary defines the term ‘exchange’ as an act of giving or taking one
thing for another.
While barter deals with a transaction which only includes an exchange of
goods/services, exchange may cover a situation where the goods are paid for
partly in goods and partly in money. When there is a barter of goods or
services, same activity constitutes supply as well as consideration.
(3) When a new car worth ` 5,00,000 is purchased in exchange of
an old car alongwith the monetary consideration of ` 4,00,000 paid
for the said purchase. – Exchange transaction
(4) A doctor got his hair cut from a barber and provides him
medical consultancy in return. In this transaction, the doctor
provided the medical consultancy services to the barber for which
consideration was in the form of hair cutting services provided by the barber.
2
www.merriam-webster.com
3
www.macmillandictionary.com

Similarly, the barber provided hair cutting services to the doctor for which
consideration was in the form of medical consultancy services provided by
the doctor. – Barter transaction
III. Licence, lease, rental and disposal: The dictionary meaning of the term
‘licence’ is a permission granted by competent authority to engage in a
business or occupation or in an activity otherwise unlawful 4. P3F P
The dictionary meaning of ‘rental’ is an arrangement to rent something, or

the amount of money that you pay to rent something 5 and that of ‘lease’ is
P4F P
to make a legal agreement by which money is paid in order to use land, a

building, a vehicle, or a piece of equipment for an agreed period of time 6. P5F P
Black’s law dictionary defines disposal as the sale, pledge, giving away, use,
consumption or any other disposition of a thing.
Under GST, such licenses, leases and rentals of goods with or without transfer
of right to use are covered under the supply of service because there is no
transfer of title in such supplies. Such transactions are specifically treated as
supply of service in Schedule II of CGST Act [Schedule-II has been discussed in
detail in the subsequent paras].
As discussed earlier, one of the parameters to qualify as a supply of goods and/or
services is that a supply is made for a consideration. This parameter has been
explicated in the following paras:
B. CONSIDERATION
The dictionary meaning of word ‘consideration’ is payment. Consideration need
not always be in the form of money. It can be in money or in kind. It covers
anything which might be possibly done, given or made in exchange for something
else.
Further, a consideration need not always flow from the recipient of the supply. It
can also be made by a third person. However, any subsidy given by the Central
Government or a State Government is not considered as consideration.
4
www.merriam-webster.com
5
www.dictionary.cambridge.org
6
www.dictionary.cambridge.org

A deposit given in respect of the supply of goods or services or both shall not be
considered as payment made for such supply unless the supplier applies such
deposit as consideration for the said supply.
The term consideration is defined under section 2(31) [Refer heading ‘Relevant
Definitions’].
The said definition has been depicted in the form of a diagram as follows:
CONSIDERATION
Payment in Monetary value of

money or any act or
otherwise for forbearance for the
the supply supply
By recipient or
any other
Deposit to be
person
considered as
payment
ONLY
Excluding subsidy
given by Central/
when the supplier State Governments
applies such
deposit as
consideration for
the said supply

Let us examine the existence of consideration in the following three scenarios:

1. Donations received by charitable institutions from individual donors, without
quid pro quo
2. Art works sent by artists to galleries for exhibition

3. ‘No Claim Bonus’ offered by an insurance company to the insured
1. Donations received by charitable institutions from individual donors,
without quid pro quo
An important feature of consideration is quid pro quo [something for
something]. 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).
Generally, institutions such as religious institutions, charitable organisations,
schools, hospitals, orphanages, old age homes etc. receive financial help or
any other support in the form of donation or gift from the individual donors.
In order to express the gratitude towards such help/support, the recipient
institutions place a name plate or similar such acknowledgement in their
premises.
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 the payment in the form of donation. In other words, there is no
obligation (quid pro quo) on part of recipient of the donation or gift to do
anything (i.e. supply a service). Therefore, there is no GST liability on such
payment made.
Some examples of cases where there would be no taxable supply are as
follows:-
(5) Bhushan donated a blackboard to Yoganisht Sansthan - a
charitable yoga institution. Yoganisht Sansthan printed
underneath the blackboard so donated - “Good wishes from
Mr. Bhushan”.

(6) Smt. Durga Devi donated some money to a temple in the

memory of her late father. The Temple Trust constructed a room
in the temple complex from such donation and wrote “Donated by
Smt. Durga Devi in the memory of her father” on the door of the room.
In above examples, it may be noticed that there is no reference or mention
of any business activity of the donor which otherwise would have got
advertised.
Thus, GST is not leviable where all the following three conditions are satisfied
namely:
Purpose is
Gift or donation
Payment has the philanthropic (i.e., it
is made to a
character of gift leads to no
charitable
or donation commercial gain) and
organization
not advertisement
[Circular No. 116/35/2019 GST dated 11.10.2019] U
2. Art works sent by artists to galleries for exhibition is not a supply as no

consideration flows from the gallery to the artists
Artists give their work of art to galleries where
it is exhibited for supply.
However, no consideration flows from the
gallery to the artist when the art works are sent
to the gallery for exhibition and therefore, the
same is not a supply.
It is only when a buyer selects a particular art work displayed at the gallery,
that the actual supply takes place and applicable GST would be payable at
the time of such supply [Circular No. 22/22/2017 GST dated 21.12.2017].
3. No supply of service by the insured to the insurance company in lieu of

‘No Claim Bonus’ offered by said insurance company to him
The issue which arose for consideration was whether the deduction on
account of ‘No Claim Bonus’ (NCB) allowed by the insurance company
from the insurance premium payable by the insured, can be considered

as consideration for the supply provided by the insured to the insurance

company, for agreeing to the obligation to refrain from the act of lodging
insurance claim during the previous year(s).
As per practice prevailing in the insurance sector, the insurance

companies deduct ‘No Claim Bonus’ from the gross insurance premium
amount, when no claim is made by the insured person during the
previous insurance period(s). The customer/ insured procures insurance
policy to indemnify himself from any loss/ injury as per the terms of the
policy and is not under any contractual obligation not to claim
insurance claim during any period covered under the policy, in lieu of
NCB.
It is, therefore, clarified that there is no supply provided by the insured

to the insurance company in form of agreeing to the obligation to
refrain from the act of lodging insurance claim during the previous
year(s) and NCB cannot be considered as a consideration for any supply
provided by the insured to the insurance company.
[Circular No. 186/18/2022 GST dated 27.12.2022]
Any transaction involving supply

of goods and/or services without
consideration is not a supply
unless it is deemed to be a supply
under Schedule I**.
**Provisions of Schedule I have been discussed in detail later in this chapter .
Another parameter to qualify as supply of goods and/or services is that a supply is

made in course or furtherance of business. This parameter has been expounded in
the following paras:
C. IN COURSE OR FURTHERANCE OF BUSINESS
GST is essentially a tax only on commercial transactions. Hence, only those supplies
that are in the course or furtherance of business qualify as supply under GST.

Resultantly, any supplies made by an individual in his personal capacity do not

come under the ambit of GST unless they fall within the definition of ‘business’.
Meaning of supply made in the course or furtherance of business: Any activity
undertaken in course/ for
furtherance of business would
constitute a supply. In order to
understand the term ‘in the
course or furtherance of
business’, we need to first understand the term
‘business’. Business as defined under section 2(17), inter alia, includes any trade,
commerce, manufacture, profession, vocation etc. whether or not undertaken for a
monetary benefit.
The definition of business has been summarised in the diagram below:
Any trade/commerce, manufacture, Any activity incidental/ ancillary to it

profession etc. even if there is no
pecuniary benefit
Any activity of same nature even if
no volume/continuity
Supply/acquisition of goods including in connection with commencement /

capital goods & services closure of business
Provision of facilities by club/ association etc. to its members for consideration

Business
includes
Admission for consideration to any premises
Services as holder of office accepted in course/ furtherance of trade, profession
Activities of a race by way of totalisator or a license to book maker or activities

club including of a licensed book maker in such club
Any activity by Government /local authority as public authorities
Thus, business includes any activity/transaction which is incidental or ancillary to

any trade, commerce, manufacture, profession, vocation, adventure, wager [bet] or

any other similar activity. In addition, any activity undertaken by the Central
Government or a State Government or any local authority in which they are
engaged as public authority shall also be construed as business. For any trade,
commerce, or any other similar activity to qualify as business, f requency, volume,
F
continuity or regularity of such transaction or obtaining pecuniary benefit

from it is not a pre-requisite.
Some of the examples of supply made/not made ‘in the course or furtherance of
business’ are as follows:
(7) Rishabh buys a car for his personal use and after a year sells it to a
car dealer. Sale of car by Rishabh to car dealer is not a supply under CGST
Act because said supply is not made by Rishabh in the course or furtherance of
business 7.
P6F P
(8) Manikarnika sold her old gold bangles and earrings to ‘Aabhushan
Jewellers’. Sale of old gold jewellery by an individual to a jeweller will not
constitute supply as the same cannot be said to be in the course or furtherance of
business of the individual 8 9. P7F P P
Since ‘business’ includes vocation, therefore, supply of goods or service as a

vocation is also a supply under GST.
(9) Sundaram Acharya, a famous actor, paints some paintings and sells
them. The consideration from such sale is to be donated to a Charitable
7
Clarified vide GST FAQs issued by CBIC
8
Clarified by CBIC vide press release dated 13.07.2017
9
The view taken in Examples 7 & 8 above is based on the view taken in the Departmental
FAQs/ press release. There is another school of thought according to which since the definition
of business includes trade, commerce, or any other similar activity, whether or not there is
frequency, volume, continuity or regularity of such transaction, on literal interpretation,
the transactions in the above examples can be considered to be made in the course or
furtherance of business and thus, will constitute supply. The taxability of such transactions,
however, will have to be examined under the provisions of section 9 [Discussed in detail in
Chapter 3 – Charge of GST in this Module of the Study Material]. However, since this view
may not always lead to logical conclusions, it is more prudent to take a purposive approach
as followed in Departmental FAQs/press release given above.

Trust – ‘Kind Human’. The sale of paintings by the actor qualifies as supply as it is
made in course or furtherance of business.
Facilities provided by the club/association to its members for consideration are

provided in course or furtherance of business.
(10) A Resident Welfare Association provides the service of depositing
the electricity bills of the residents in lieu of some nominal charges.
Provision of service by a club or association or society to its members is included
in the definition of ‘business’.
Admission of persons to any premises for a consideration is also included in business.

(11) Services by way of admission to circus, cinema halls, amusement
parks including theme parks, water parks, etc. are considered as supply
as these are services by way of admission of persons to any premises for a
consideration.
Business includes activities of a race club including by way of totalisator or a license
to book maker10 or activities of a licensed book maker in such club.
(12) Royal Turf Race Club is engaged in facilitating the wagering (betting)
transactions on horses placed through totalisator 11. For providing the
service of facilitating wagering transactions, Royal Turf Race Club gets commission
which is deducted and retained by the club from the total bet value. Said services
amount to supply as the activities of a race club are included in business.
There is one exception to this

‘course or furtherance of
business’ rule i.e., import of
services for a consideration.
10
Book maker is a person that accepts and pays off bets on sporting and other events at
agreed-upon odds.
11
Totalisator is a device showing the number and amount of bets staked on a race, to
facilitate the division of the total among those backing the winner.

From the above discussion, it can be inferred that if an activity

or transaction satisfies all the above parameters, as discussed in
points A, B and C above, said activity or transaction qualifies as
‘Supply under GST’.
In the subsequent paras, we have discussed the exceptions to the two parameters
of supply, namely,
(i) supply made for consideration, but not in course or furtherance of business
and
(ii) supply made without consideration.
IMPORTATION OF SERVICES FOR CONSIDERATION

WHETHER OR NOT IN COURSE OR FURTHERANCE OF
BUSINESS
The connotation of ‘supply’ gets expanded significantly

through the second part of section 7 i.e. 7(1)(b) which brings
within the ambit of ‘supply’, the importation of services for a Section
consideration whether or not in the course or furtherance
U
7(1)(b)
of business. This is the only exception to the condition of
supply being made in course or furtherance of business.
(13) Ramaiyaa, a proprietor, has received the architect services for his
personal residence from an architect located in New York at an agreed
consideration of $ 5,000. The import of services by Ramaiyaa is supply under
section 7(1)(b) though it is not in course or furtherance of business.
ACTIVITIES WITHOUT CONSIDERATION - DEEMED SUPPLY

Schedule-I Activities to be treated as supply even if made without

consideration

Para No. Particulars

(1) Permanent transfer or disposal of business assets where input tax
credit has been availed on such assets.
(2) Supply of goods or services or both between related persons or
between distinct persons as specified in section 25, when made in the
course or furtherance of business.
Provided that gifts not exceeding fifty thousand rupees in value in a
financial year by an employer to an employee shall not be treated as
supply of goods or services or both.
(3) Supply of goods —
(a) by a principal to his agent where the agent undertakes to supply
such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.
(4) Import of services by a person from a related person or from any of
his other establishments outside India, in the course or furtherance of
business
ANALYSIS
As seen earlier, section 7(1)(c) provides that supply

includes the activities specified in Schedule I, made
or agreed to be made without a consideration.
Section 7(1)(c)
Thus, there are activities or transactions which are read with
treated as supply, even if they are made without Schedule I
consideration. These are specifically mentioned in
Schedule I appended to the CGST Act. The same
has been discussed in the subsequent paras:
In the past indirect tax regime, in every tax statute, “consideration” played the most
important role for levying taxes. For instance, if any service was provided for free
to a person, such service was not subject to service tax. However, under GST, the
condition of consideration has been dispensed with in certain cases – this is an
important departure from the earlier indirect tax regime.

As per Schedule I, in the following four cases, activities made without consideration
will be treated as supply under section 7:
U I. Permanent Transfer/Disposal of Business Assets [Para 1 of
Schedule I]: Any kind of disposal or transfer of business assets made by an
U
entity on permanent basis even though without consideration qualifies as

supply. However, it is important to note that this provision would apply only
if input tax credit has been availed on such assets.
Therefore, in order to qualify as supply under this para, following conditions
need to be satisfied:
❑ There must be a disposal or transfer of business assets**.
❑ Transfer/disposal must be permanent.
❑ ITC must have been availed on such business assets.
In view of the last condition stipulated above, permanent transfer/disposal of
following business assets, without consideration, will not be covered within
this para and thus will not be deemed as supply:
(i) Business assets on which ITC is blocked/not available under GST 12. P10F P
(ii) Business assets though eligible for ITC, ITC has not been availed by the
registered person.
**It is important to note that the term business asset has not been defined under
the GST law.
(14) Dhruv gives old laptops being used in his business to his friend
free of cost. This will qualify as supply provided input tax credit has
been availed by Dhruv on such laptops.
(15) A dealer of air-conditioners permanently transfers the motor

vehicle free of cost. ITC on said motor vehicle is blocked. The
transaction will not constitute a supply as the condition of availment of ITC
on the business asset transferred is not fulfilled.
12
List of the goods and services in respect of which ITC is blocked has been elaborated in
Chapter 8 – Input Tax Credit in Module 2 of this Study Material.

This clause is wide enough to cover transfer of business assets from holding
to subsidiary company for nil consideration.
II.
U Supply between related person or distinct persons [Para 2 of
Schedule I]: Supply of goods or services or both between ‘related persons’
U
or between ‘distinct persons’ as specified in section 25, will qualify as supply

even if made without consideration provided it is made in the course or
Let us understand the terms ‘related persons’ and ‘distinct persons’.
(i) Related persons: A person who is under influence

of another person is called a related person like
Related
members of the same family or subsidiaries of a
persons
group company etc. Under GST law, various
ted persons have been specified.
categories of related
The term ‘related person’ has been defined in
explanation to section 15. The said definition has been depicted by way
of a diagram as follows:
Persons including legal person are deemed as related persons if
Such persons are officers/directors of one another’s business
Such persons are legally recognised partners
Such persons are employer & employee

A third person controls/ owns/ holds (directly/ indirectly) ≥ 25%
voting stock/shares of both of them
One of them controls (directly/indirectly) the other
A third person controls (directly/indirectly) both of them
Such persons together control (directly/indirectly) a third person
Such persons are members of the same family*

One of them is the sole agent/sole distributor/sole concessionaire
of the other
*See the definition of ‘family’ as provided in heading 2. – Relevant Definitions.

(16) Ms. Priya holds 30% shares of ABC Ltd. and 35% shares of
XYZ Ltd. ABC Ltd. and XYZ Ltd. are related.
(17) Q Ltd. has a deciding role in corporate policy, operations
management and quality control of R Ltd. It can be said that Q Ltd.
controls R Ltd. Thus, Q Ltd. and R Ltd. are related.
(ii) Distinct Persons specified under section 25: Before we go through
the statutory provisions of ‘distinct persons’, let us
first have an overview of the registration
provisions for better understanding of the
Distinct
concept of distinct persons. Detailed and in-depth persons
analysis of the registration provisions is contained in
Chapter 9 – Registration in Module 2 of this Study
Material.
Under GST law, a supplier is required to obtain State-wise registration.
He has to obtain registration in every State/UT from where he makes a
taxable supply provided his aggregate turnover exceeds a specified
threshold limit. Thus, he is not required to obtain registration from a
State/UT from where he makes a non-taxable supply.
Since registration in GST is PAN based, once a supplier is liable to

register, he has to obtain registration in each of the States/UTs in which
he operates [and makes a taxable supply] under the same PAN. Further,
he is normally required to obtain single registration in a State/UT.
However, where he has multiple places of business in a State/UT, he can
get a single registration for said State/UT. He may also get separate
registration for any place(s) of business in such State/UT.
Now, let us understand the concept of distinct persons in simple terms:
The establishments of a person with separate registrations whether
within the same State/UT or in different States/UTs are considered as
distinct persons.
Where a person having one registered establishment in a State/UT has
another establishment in a different State/UT [not necessarily
registered], these establishments are considered as establishments of
distinct persons.

Statutory provisions relating to ‘distinct persons’ are contained in sub-

sections (4) and (5) of section 25. They have been explained with
examples as follows:
A person who has obtained/is required to obtain more than one
registration, whether in one State/Union territory or more than one
State/Union territory shall, in respect of each such registration, be
treated as distinct persons [Section 25(4)].
U U
(18) Mohan, a Chartered Accountant, has a registered head

office in Delhi. He has also obtained registration in the State
of West Bengal in respect of his newly opened branch office.
Mohan’s registrations under GST under same PAN in West Bengal and
Delhi shall be treated as distinct persons.
Distinct persons
Registered head Registered branch

office in Delhi office in West Bengal
Further, where a person who has obtained or is required to obtain

registration in a State or Union territory in respect of an establishment,
has an establishment in another State or Union territory, then such
establishments shall be treated as establishments of distinct persons
U
[Section 25(5)].
U
(19) Rishabh Enterprises, a registered supplier, owns an air-

conditioned restaurant in Virar, Maharashtra. It has opened a
liquor shop in Raipur, Uttarakhand for trading of alcoholic liquor for
human consumption. Since supply of alcoholic liquor for human
consumption in Uttarakhand is a non-taxable supply, Rishabh
Enterprises is not required to obtain registration with respect to the
same in Uttarakhand. In this case, air-conditioned restaurant in
Maharashtra and liquor shop [though unregistered] in Uttarakhand
shall be treated as establishments of distinct persons. Supply by
Maharashtra restaurant to Uttarakhand shop, in course or furtherance
of business, even without consideration will qualify as supply

Establishments of distinct persons
Registered restaurant Unregistered liquor

in Maharashtra shop in Uttarakhand
(iii) Stock transfers or branch transfers qualify as supply : It is a common

U
practice in business to transfer goods transferred amongst different

units of same entity, for instance, distribution of samples manufactured
in a factory to different branches or transfer of goods from factory to
depot/showroom for sale therefrom, from one warehouse to another
warehouse, from one branch to another branch where the demand of the
goods is higher. Since the transfer is within the same business, the
transferor unit would not charge any amount to the transferee unit.
Similarly, it is also possible that one branch supplies services to another
branch of the same entity without consideration. These transactions are
termed as self-supplies. Under GST, these transactions though undertaken
without consideration, will also qualify as supply, provided the transfer of
goods or services is between:
(i) different locations (with separate GST registrations) of same legal
entity as these are transactions between distinct persons, or
(ii) establishments of distinct persons.
(20) Raghubir Fabrics transfers 1000 shirts from his factory
located in Lucknow to his retail showroom in Delhi so that
the same can be sold from there. The factory and retail
showroom of Raghubir Fabrics are registered in the States where they
are located. Although no consideration is charged, supply of goods
from factory to retail showroom constitutes supply.
Stock Transfer -
Deemed Supply
Registered Lucknow
Registered Delhi
factory
showroom

However, transfer between two units of a legal entity under single GST
registration (apparently within same State) will not be considered as
supply. This can be understood with the help of the following example:
(21) Raghubir Fabrics transfers 1000 shirts from his factory
located in Lucknow to his retail showroom in Kanpur so that
the same can be sold from there. It has taken one registration
in the State of Uttar Pradesh declaring Lucknow factory as its principal
place of business and Kanpur showroom as its additional place of
business. Since no consideration is charged, supply of goods from
factory to retail showroom in same State under single registration does
not constitute supply.
Stock Transfer – Not a

Supply
Lucknow factory Kanpur showroom
Single registration in UP
However, in the above example, if Raghubir Fabrics obtains separate
registrations for Lucknow factory and Kanpur showroom, stock transfer
between the Lucknow factory and Kanpur showroom will constitute
supply. The concept arising from the above discussion is summarised
in below diagram (assuming a case where there are two places of
business in a State):
Whether separate Whether transfer

Whether the
registrations have between them will be
establishments have
been obtained for considered as supply
same PAN?
two places of business under GST?
within same State?
YES NO NO
YES YES YES

(iv) Supply of goods or services or both between an employer and

employee: In terms of the definition of related person given above,
employer and employee are related persons.
However, services provided by an employee to the employer in the

course of or in relation to his employment are outside the scope of GST
(treated as neither supply of goods nor as supply of services) as per
Schedule III to the CGST Act (discussed subsequently in this chapter)].
Gifts by employer to employee
Further, proviso to Para 2 of Schedule I provides that gifts upto ` 50,000

in value in a financial year by an employer to an employee shall not be
treated as supply of goods or services or both.
However, gifts of value more than ` 50,000 made without consideration
are supply and are subject to GST, when made in the course or
What
constitutes a
‘gift’?
The term ‘gift’ has not been defined in the GST law. In common
parlance, gift is made without consideration, is voluntary in nature and
is made occasionally. It cannot be demanded as a matter of right by the
employee and the employee cannot move a court of law for obtaining
a gift.
Perquisites by employer to employee
Since services by an employee to the employer in the course of or in

relation to his employment are outside the scope of GST, supply by the
employer to the employee in terms of contractual agreement entered

into between the employer and the employee will not be subjected to
GST.
Any perquisites provided by the

employer to its employees in terms
of contractual agreement entered
into between the employer and the
employee are in lieu of the services
provided by employee to the
employer in relation to his
employment.
It follows therefrom that perquisites provided by the employer to
the employee in terms of contractual agreement entered into
between the employer and the employee will not be subjected to
GST.
Further, the input tax credit (ITC) scheme under GST does not allow ITC
of membership of a club, health and fitness centre 13. It follows,
therefore, that if such services are provided free of charge to all the
employees by the employer then the same will not be subjected to GST.
The same would hold true for free housing to the employees, when the
same is provided in terms of the contract between the employer and
employee and is part and parcel of the cost-to company (C2C) 15 P1F14 P
13
Complete list of the goods and services in respect of which ITC is blocked has been
elaborated in Chapter 8 – Input Tax Credit in Module 2 of this Study Material.
14
Circular No. 172/04/2022 GST dated 06.07.2022 read with Ministry of Finance’s Press
Release on 10.07.2017
15
It is possible to take an alternative view in this regard. This scenario, i.e. the employer
providing services (free of charge) to the employee in lieu of the services provided by the
employee to the employer in the course of employment, is an exchange tr ansaction. In an
exchange transaction, both the parties independently assess their transaction status . Thus,
while service provided by employee to the employer being covered under Schedule III is not
a supply, service provided by employer to employee may constitute a supply in terms of
section 7(1)(c) read with para 2 of Schedule I since employer and employee are related
persons as per explanation to section 15. Provisions of section 15 have been discussed in
detail in Chapter 7 – Value of Supply in this Module of the Study Material.

III. Principal – Agent [Para 3 of Schedule I] : Supply of goods by a principal to

U U
his agent, without consideration, where

the agent undertakes to supply such
goods on behalf of the principal is
considered as supply.
Similarly, supply of goods by an agent to
his principal, without consideration,
where the agent undertakes to receive
such goods on behalf of the principal is
considered as supply.
Points which merit consideration, in this regard, are as follows:
• Only supply of goods and not supply of services is covered here.
• Supply of goods between principal and agent without consideration
is also supply.
Thus, the supply of services between the principal and the agent and vice
versa would require “consideration” to be present so as to be considered as
supply and thus, making it liable to GST.
In order to determine whether a particular principal-
agent relationship falls within the ambit of the
Para 3 of Schedule I as discussed above or not, the
deciding factor is whether the invoice for the
further supply of goods on behalf of the principal
is being issued by the agent or not? In other words, the crucial point is
whether or not the agent has the authority to pass or receive the title of the
goods on behalf of the principal.
❑ Where the invoice for further supply is being Invoice for further
issued by the agent in his name then, any supply to customer
provision of goods from the principal to the be issued in the
agent would fall within the fold of Para 3 above. agent’s name.
❑ However, where the invoice is issued by the agent to the customer

in the name of the principal, such agent shall not fall within the ambit
of Para 3 above.

❑ Similarly, where the goods being

Goods procured on behalf
procured by the agent on behalf of
of principal are invoiced
the principal are invoiced in the
in the agent’s name.
name of the agent then further
provision of the said goods by the agent to the principal would be
covered by Para 3 above [Circular No. 57/31/2018 GST dated
04.09.2018].
Where the invoice is issued Whether he will be an

by the agent to customer agent in terms of Para 3 of
in the name of: Schedule I?
Principal No
Agent Yes
The above clarification can be understood with the help of following scenario
based examples:
(22) Anmol appoints Bholu to procure certain goods from the
market. Bholu identifies various suppliers who can provide the
goods as desired by Anmol and asks the supplier (Golu) to send
the goods and to issue the invoice directly to Anmol.
In this scenario, Bholu is only acting as the procurement agent, and has in no
way involved himself in the supply or receipt of the goods. Hence, in
accordance with the provisions of this Act, Bholu is not an agent of Anmol for
supply of goods in terms of Para 3 of Schedule I.
(23) Manimani Bank, a banking company, appoints Mandaar

(auctioneer) to auction certain goods. The auctioneer arranges for
the auction and identifies the potential bidders.
The highest bid is accepted and the goods are sold to the highest bidder by
Manimani Bank. The invoice for the supply of the goods is issued by
Manimani Bank to the successful bidder.

In this scenario, the auctioneer is merely providing the auctioneering services

with no role played in the supply of the goods. Even in this scenario, Mandaar
is not an agent of Manimani Bank for the supply of goods in terms of Para 3
of Schedule I.
(24) Gautam, an artist, appoints Gambhir (auctioneer) to auction

his painting. Gambhir 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 Gambhir on the behalf
of Gautam but in his own name and the painting is delivered to the successful
bidder.
In this scenario, Gambhir is not merely providing auctioneering services, but
is also supplying the painting on behalf of Gautam to the bidder, and has the
authority to transfer the title of the painting on behalf of Gautam. This
scenario is covered under Para 3 of Schedule I.
(25) A C&F agent or commission agent takes possession of the

goods from the principal and issues the invoice in his own name.
In such cases, the C&F commission agent is an agent of the
principal for the supply of goods in terms of Para 3 of Schedule I. The
disclosure or non-disclosure of the name of the principal is immaterial in such
situations.
(26) Ravi sells agricultural produce by utilizing the services of Kavi

who is a commission agent as per the Agricultural Produce
Marketing Committee Act (APMC Act) of the State. Kavi identifies
the buyers and sells the agricultural produce on behalf of Ravi for which he
charges a commission from Ravi.
As per the APMC Act, the commission agent is a person who buys or sells the
agricultural produce on behalf of his principal, or facilitates buying and selling
of agricultural produce on behalf of his principal and receives, by way of
remuneration, a commission or percentage upon the amount involved in such
transaction.

In cases where the invoice is issued by Kavi to the buyer, then he is an agent
covered under Para 3 of Schedule I 16. However, in cases where the invoice is
P12F P
issued directly by Ravi to the buyer, the commission agent (Kavi) doesn’t fall
under the category of agent covered under Para 3.
Clarification of issues pertaining to Del-credere agent (DCA)
A question was posed by the industry - whether supply

between a principal and a Del-credere agent would also Del-
get covered under Schedule I. The Government clarified credere
the doubt of the industry by way of following clarification: agent
Before going through the clarification let us first understand
what is meant by a DCA? In commercial trade parlance, a DCA is a selling
agent who is engaged by a principal to assist in supply of goods or services
by contacting potential buyers on behalf of the principal.
The factor that differentiates a DCA from other agents is that the DCA
guarantees the payment to the supplier.
In such scenarios where the buyer fails to make payment to the principal by
the due date, DCA makes the payment to the principal on behalf of the buyer
(effectively providing an insurance against default by the buyer), and for this
reason the commission paid to the DCA may be relatively higher than that
paid to a normal agent.
In order to guarantee timely payment to the supplier, the DCA can resort to
various methods including extending short-term transaction-based loans to
the buyer or paying the supplier himself and recovering the amount from the
buyer with some interest at a later date.
This loan is to be repaid by the buyer along with an interest to the DCA at a
rate mutually agreed between DCA and buyer.
16
It is important to note that services provided by the commission agent for sale or purchase
of agricultural produce are exempt supply under GST. Said exemption has been discussed in
detail in Chapter 5 - Exemptions from GST in this Module of the Study Material.

Circular No. 73/47/2018 GST dated 05.11.2018 has clarified the following
issues in this regard:
Sl. No. Issue Clarification
1 Whether a DCA falls under As already clarified vide

the ambit of agent under Circular No. 57/31/2018 GST
Para 3 of Schedule I? (discussed above), whether or
not the DCA will fall under the
ambit of agent under Para 3 of
Schedule I depends on the
following possible scenarios:
❑ In case where the invoice U
for supply of goods is

U
issued by the supplier to

U
the customer , either U
himself or through DCA,

the DCA does not fall
U U
under the ambit of agent.

❑ In case where the invoice U U
for supply of goods is

issued by the DCA in his
U
own name , the DCA U
would fall under the

U U
ambit of agent.
2 Whether the temporary In such a scenario, following

short-term transaction activities are taking place:
based loan extended by the
1. Supply of goods from
DCA to the recipient (buyer),
supplier (principal) to
for which interest is charged
recipient;
by the DCA, is to be
included in the value of 2. Supply of agency services
goods being supplied by the from DCA to the supplier
supplier (principal) where or the recipient or both;
DCA is not an agent under
Para 3 of Schedule I?

3. Supply of extension of
loan services by the DCA
to the recipient.
It is clarified that in cases
where the DCA is not an agent
under Para 3 of Schedule I, the
temporary short-term
transaction based loan being
provided by DCA to the buyer
is a supply of service by the
DCA to the recipient on
Principal to Principal basis and
is an independent supply 17 . P13 F P
Therefore, the interest being

charged by the DCA would not
form part of the value of supply
of goods supplied (to the
buyer) by the supplier.
3. Where DCA is an agent In such a scenario following

under Para 3 of Schedule I activities are taking place:
and makes payment to the
1. Supply of goods by the
principal on behalf of the
supplier (principal) to the
buyer and charges interest
DCA;
to the buyer for delayed
payment along with the 2. Further supply of goods
value of goods being by the DCA to the
supplied, whether the recipient;
interest will form a part of 3. Supply of agency services
the value of supply of goods by the DCA to the
also or not? supplier or the recipient
17
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 supply vide Entry 27 of Notification No. 12/2017 CT(R) dated 28.06.2017 [Discussed in
detail in Chapter 5 – Exemptions under GST in this Module of the Study Material].

or both;
4. Extension of credit by the
DCA to the recipient.
It is clarified that in cases
where the DCA is an agent
under Para 3 of Schedule I, the
temporary short-term
transaction based credit being
provided by DCA to the buyer
no longer retains its character
of an independent supply and
is subsumed in the supply of
the goods by the DCA to the
recipient. It is emphasised that
the activity of extension of
credit by the DCA to the
recipient would not be
considered as a separate
supply as it is in the context of
the supply of goods made by
the DCA to the recipient.
It is further clarified that the
value of the interest charged
for such credit would be
required to be included in the
value of supply of goods by
DCA to the recipient as per
section 15(2)(d) 18 .
P14 F P
18
Section 15 has been discussed in detail in Chapter 7 – Value of Supply in this Module of
the Study Material.

Mr. Handsome, del-credere agent (DCA) of Charm Limited, agrees

Quiz
Quiz
to raise invoices in his own name and also guarantees for the
time!
Time! realization of payments from customers to Charm Limited. In
order to realize the payments from customers on time, he extends
short-term transaction-based loans to them and charges interest
1 for the same.
For the month of March, sale of goods by Mr. Handsome in his DCA capacity is ` 2,80,000
and interest earned from the said customers for short term credit facility provided for
timely payment of dues is ` 20,000. Further, commission charged from Charm Limited in
respect of DCA services provided is ` 30,000. The value of supply of goods to customers is
and value of supply of agency services to Charm Limited is ____________.
(a) ` 2,80,000; (c) ` 3,00,000; (d) ` 20,000;

(b) ` 20,000; Nil
` 30,000 ` 30,000 ` 30,000
IV. Importation of services [Para 4 of Schedule I]: Import of services by a

U
person from a related person or from his establishments located outside

India, without consideration, in the course or furtherance of business shall be
treated as “supply”.
(27) Jhumroo Associates received legal consultancy services from

its head office located in Malaysia. The head office has rendered
such consultancy services free of cost to its branch office.
Since Jhumroo Associates and the head office are related persons, services
received by Jhumroo Associates will qualify as supply even though the head
office has not charged anything from it.
(28) Chakmak, a proprietor registered in Delhi, has sought

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

In the course of
with
furtherance of business or Supply
consideration
not
Import
of
Related /distinct person in
Services Supply
the course of furtherance
without of business
consideration
Not a
Other Cases
supply
In the preceding paras, we have discussed the provisions of Schedule-I which

enumerates the cases where an activity is treated as supply even though it is
undertaken free of cost.
In this backdrop, let us now examine whether the

items given free of cost in case of some of the
sales promotion schemes qualify as supply or not.
Clarification on Sales promotion schemes
A number of sales promotion schemes are

commonly employed by the businesses to increase
sales volume or to encourage the use or trial of a
product or service so that new customers get
attracted towards their products.
For instance, certain sections of trade and industry, such as, pharmaceutical
companies often provide drug samples to
their stockists, dealers, medical
practitioners, etc., or sometimes, companies
announce offers like ‘Buy One, Get One free’

– i.e. buy one soap and get one soap free or get one tooth brush free along
with the purchase of tooth paste.
As we have already seen that as per section 7(1)(a), the 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.
In view of the same, few sales promotion schemes have been examined as
under:
U Free samples and gifts: Samples which are

U
supplied free of cost, without any consideration, do FREE

not qualify as “supply” under GST 19, except where
P 15 F P
SAMPLES
the activity falls within the ambit of Schedule I.
U Buy one get one free offer: It may appear at

U
first glance that in case of offers like “Buy One, Get

One Free”, one item is being “supplied free of Buy one get
cost” without any consideration. In fact, it is not an one free
individual supply of free goods, but a case of two
or more individual supplies where a single price is
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
accordingly – Concept of composite and mixed supply has been discussed
subsequently in this chapter. [Circular 92/11/2019 GST dated 07.03.2019]
19
ITC on inputs, input services and capital goods to the extent they are used in relation to
the gifts/free samples shall be available to the supplier only where the activity of distribution
of gifts/free samples falls within the scope of supply. The same has been discussed in detail
in Chapter 8 – Input Tax Credit in Module 2 of this Study Material.

Quiz
Quiz Mr. Venkat hired a professional firm based in UK to receive
time!
Time! the legal consultancy services for his family dispute. The
services received by Mr. Venkat _____________ in case such
2 services are received by Mr. Venkat (I) free of cost; or (II) for a
consideration of US$ 1,000.
(b) (I) do not (c) (I) amount (d) (I) do not

(a) (I) amount
amount to supply; to supply; (II) do amount to supply;
to supply; (II)
(II) amount to not amount to (II) do not amount
amount to supply
supply supply to supply
There has always been an ambiguity as to whether activities/ transactions

involving supply of goods/ services, by any person, other than an individual,
to its members or vice-versa fall within the purview of supply or not. Clause
(a) to section 7(1) brings in the certainty that said activities/ transact ions are
covered within the scope of supply under GST and ensures the levy of GST on
such activities/transactions. This has been discussed as under:
ACTIVITIES/TRANSACTIONS BETWEEN A PERSON,

OTHER THAN AN INDIVIDUAL, AND ITS MEMBERS/
CONSTITUENTS FOR CONSIDERATION
The activities or transactions (involving supply of goods

or services) between a person, other than an individual,
(i.e. association, club, etc.) and its members or Section
constituents, for cash, deferred payment or other 7(1)(aa)
valuable consideration are covered within the ambit of
‘supply’ as per section 7(1)(aa).
Further, explanation to clause (aa) to section 7(1) clarifies that for the purpose
of this clause, such person (association, club, etc.) and its members or
constituents shall be deemed to be two separate persons and the supply of
activities or transactions between them shall be deemed to take place from
one such person to another. The explanation starts with a non-obstante clause
and shall therefore, shall have an overriding effect over anything contained in

any other law for the time being in force or any judgment, decree or order of
any Court, tribunal or authority.
The aforesaid explanation prevents the application of doctrine of mutuality

by such person(s)20.
(29) Resident Welfare Association (RWA) of Sanskriti Society
supplies air-conditioners to its members at a concessional price.
(30) A Resident Welfare Association collects maintenance charges from its
members for services provided.
Here, in both the aforesaid examples, it shall be deemed that the Resident
Welfare Association (RWA) and its members are two separate persons and it
shall be deemed that the supply has taken place from Resident Welfare
Association (RWA) to its members.
ACTIVITIES/TRANSACTIONS TO BE TREATED AS SUPPLY

OF GOODS OR SUPPLY OF SERVICES
Section 7(1A) classifies certain activities/ transactions

constituting supply, either as supply of goods or supply of
services. Schedule II to the CGST Act contains the list of Section 7(1A)
read with
activities or transactions which have been classified either Schedule II
as supply of goods or supply of service.
This helps in mitigating the ambiguities which existed in
earlier laws.
(31) Under earlier tax regime, the restaurants used to charge both
service tax and VAT on the value of food served. This is so because both
sale of goods and provision of service were involved and therefore
taxable event under both the Statutes i.e. respective VAT law and service tax law
got triggered.
20
Section 7(1)(aa), in effect, overrules the judgment of the Hon’ble Supreme Court in State of
West Bengal v. Calcutta Club Limited wherein it was held that the transactions between a
Club and its members cannot be taxed owing to the doctrine of mutuality, i.e., a person cannot
make a profit from himself.

Under GST, the supply by a restaurant is treated as composite supply [concept of

composite supply is discussed subsequently in this chapter] since supply of food and
service is naturally bundled in ordinary course of business. Further, Entry 6(b) of
Schedule II [refer table below] specifically provides that such composite supply shall
be treated as supply of service. Hence, the entire value of invoice shall be treated
as value of service and leviable to GST accordingly.
The matters listed out in Schedule II are primarily those which had been entangled
in litigation in the earlier regime owing to their complex nature and susceptibility
to double taxation.
These are as follows :-
Para Activity/ Type Nature of

No. Transaction Supply
1. Transfer Any transfer of title in goods. Supply of
(32) Shivaji sells ready-made Goods
garments to its customers.
Any transfer of right in goods/ undivided Supply of
share in goods without transfer of title Services
thereof.
(33) Genius Equipments Ltd.
gives a machinery on rent to
Suhaasi Manufacturers.
Any transfer of title in goods under an Supply of
agreement which stipulates that property Goods
in goods shall pass at a future date upon
payment of full consideration as agreed.
(34) Dhruva Capitals supplied
goods on hire purchase basis to
customers.
(35) Optima Manufacturers supplies toys
to retailers on ‘sale or return basis’.

2. Land and Any lease, tenancy, easement, licence to Supply of

Building occupy land 21. P16F P Services
(36) Lease agreement for land.
Any lease or letting out of building Supply of
including a commercial, industrial or Services
residential complex for business or
commerce, wholly or partly.
(37) A shop let out in a busy
market area.
3. Treatment Any treatment or process which is applied Supply of
or Process to another person’s goods Services
(38) Damani Dying House dyes
the clothes given by Shubham
Textiles Ltd. on job work basis.
4. Transfer of Goods forming part of business assets are Supply of
Business transferred or disposed off by or under Goods
Assets directions of person carrying on the
business so as no longer to form part of
those assets.
Goods held/used for business are put to Supply of
private use or are made available to any Services
person for use for any purpose other than
business, by/ under directions of person
carrying on the business.
(39) A person manufacturing and
selling wooden furniture takes one
chair manufactured by him for use at his
house.
Goods forming part of assets of any Supply of
business carried on by a person who Goods
ceases to be a taxable person, shall be
deemed to be supplied by him, in the
course or furtherance of his business,
21
Refer Circular No. 44/18/2018 CGST dated 02.05.2018 discussed subsequently.

immediately before he ceases to be a

taxable person.
(40) Arun, a trader, is winding up
his business. Any goods left in
stock shall be deemed to be
supplied by him.
Exceptions:
❑ Business is transferred as a going
concern to another person 22.P17F P
❑ Business is carried on by a personal

representative who is deemed to be a
taxable person.
5. (a) Renting of immovable property
(41) Renting of a commercial complex.
(42) Renting of precincts of a religious place.
(43) Renting of property to an educational
institution.
(44) Permitting use of immoveable property for
placing vending/dispensing machines.
(b) Construction of complex, building, civil structure,
etc.
Construction of a complex, building, civil structure or
a part thereof, including a complex or building
intended for sale to a buyer, wholly or partly, except
where the entire consideration has been received Supply of
after issuance of completion certificate, where Services
required, by the competent authority or after its first
occupation, whichever is earlier.
(45) Rathi Builders has constructed
individual residential units for agreed
consideration of
` 1.2 crore per unit. ` 90 lakh per unit were received
before issuance of completion certificate by the
22
Services by way of transfer of a going concern, as a whole or an independent part thereof
are exempt supply under GST [Discussed in detail in Chapter 5 – Exemptions from GST in this
Module of the Study Material].

competent authority and its first occupation, and

balance after completion.
The term construction includes additions,
alterations, replacements, or remodeling of any
existing civil structure.
The term competent authority means the
Government or any authority authorised to issue
completion certificate under any law for the time
being in force and in case of non-requirement of
such certificate from such authority, from any of the
following, namely:—
(i) an architect registered with the Council of
Architecture constituted under the Architects
Act, 1972; or
(ii) a chartered engineer registered with the
Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local
body of the city or town or village or
development or planning authority.
(c) Temporary transfer or permitting use or enjoyment

of any intellectual property right
(46) Temporary transfer of patent.
(d) Development, design, programming, customisation,

adaptation, upgradation, enhancement,
implementation of IT software
(47) Suvidha Solutions develops an
accounting software for a business firm. Supply of
Services
(e) Agreeing to obligation to refrain from an act, or to
tolerate an act or situation, or to do an act.
(48) Cable operator - Sakharam has entered
into an agreement with Cable operator -
Aatmaram that Sakharam will not provide cable
connections in the specified areas where Aatmaram

is providing the connections. Non-compete

agreements constitute supply of service.
(49) Security deposit forfeited in the event of
cancellation of tour package by the customer.
Please refer the detailed discussion on this para of
Schedule-II given at the end of the Table.
(f) Transfer of right to use any goods for any purpose
(whether or not for specified period) for cash,
deferred payment or other valuable consideration.
(50) Machinery given on hire.
6. Following composite supplies:-

❑ Works contract
Works contract: means a contract for building,
construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, Supply of
repair, maintenance, renovation, alteration or Services
commissioning of any immovable property wherein
transfer of property in goods (whether as goods or in
some other form) is involved in the execution of such
contract [Section 2(119)].
❑ Supply, by way of or as part of any service or in any
other manner whatsoever, of goods, being food or
any other article for human consumption or any drink
(other than alcoholic liquor for human consumption),
where such supply or service is for cash, deferred
payment or other valuable consideration.
In this regard, following issues have been clarified by the CBIC:

1. Taxability of ‘tenancy rights’ under GST
CBIC has clarified the taxability of ‘tenancy rights’ under GST as under:

Pagadi system, i.e. transfer of tenancy rights

against tenancy premium, is prevalent in some
States. In Pagadi system, the tenant acquires
tenancy rights in the property against payment of
tenancy premium (pagadi). The landlord may be
owner of the property, but the possession of the
same lies with the tenant. The tenant pays periodic rent to the landlord as
long as he occupies the property. The tenant also usually has the option to
sell the tenancy right of the said property and in such a case has to share a
percentage of the proceeds with owner of land, as laid down in their tenancy
agreement.
Alternatively, the landlord pays to tenant the prevailing tenancy premium to

get the property vacated. Such properties in Maharashtra are governed by
Maharashtra Rent Control Act, 1999.
It has been clarified 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 Para 2 of Schedule II as discussed in table above 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
para 5 of Schedule III. Thus, it is not a negative list activity [this concept is
discussed under next heading] and consequently, a consideration for the said
activity shall attract levy of GST.
To sum up, the activity of transfer of ‘tenancy rights’ is squarely covered under
2T
the scope of supply and taxable per-se. Transfer of tenancy rights to a new
2T 2T
tenant against consideration in the form of tenancy premium is taxable.

However, 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 – Discussed in Chapter 5 – Exemptions from GST in this Module
of the Study Material]. Hence, 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. As regards 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 23.
2. Applicability on liquidated damages, compensation and penalty arising
out of breach of contract or other provisions of law
CBIC has clarified issues with respect to GST applicability on liquidated
damages, compensation and penalty arising out of breach of contract or
other provisions of law.
Clarification: “Agreeing to the obligation to refrain from an act or to
tolerate an act or a situation, or to do an act” has been specifically
declared to be a supply of service in para 5(e) of Schedule II if the same
constitutes a “supply” within the meaning of the CGST Act.
Expression “Agreeing to the obligation to

refrain from an act or to tolerate an act or a
situation, or to do an act” has three limbs
Agreeing to the Agreeing to the

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

(51) Example of activities that would be covered by this part of
the expression would include non-compete agreements, where
one party agrees not to compete with the other party in a product, service
or geographical area against a consideration paid by the other party.
23
Circular No. 44/2018 CT dated 02.05.2018

(52) Another example of such activities would be a builder

refraining from constructing more than a certain number of
floors, even though permitted to do so by the municipal authorities,
against a compensation paid by the neighbouring housing project, which
wants to protect its sunlight, or an industrial unit refraining from
manufacturing activity during certain hours against an agreed
compensation paid by a neighbouring school, which wants to avoid noise
during those hours.
b. Agreeing to the obligation to tolerate an act or a situation
This would include activities such a shopkeeper allowing a hawker to
operate from the common pavement in front of his shop against a
monthly payment by the hawker, or an RWA tolerating the use of loud
speakers for early morning prayers by a school located in the colony
subject to the school paying an agreed sum to the RWA as compensation.
c. Agreeing to the obligation to do an act
This would include the case where an industrial unit agrees to install
equipment for zero emission/discharge at the behest of the RWA of a
neighbouring residential complex against a consideration paid by such
RWA, even though the emission/discharge from the industrial unit was
within permissible limits and there was no legal obligation upon the
individual unit to do so.
Above three activities must comply with the following conditions:
(1) There must be an expressed or implied agreement or contract must

exist
Above three activities must be under an “agreement” or a
“contract” (whether express or implied) to fall within the ambit of
para 5(e) of Schedule II. In other words, one of the parties to such
agreement/contract (the first party) must be under a contractual
obligation to either (a) refrain or (b) tolerate or (c) do.
Such contractual arrangement must be an independent
arrangement in its own right. Such arrangement/agreement can
take the form of an independent stand- alone contract or may form

part of another contract.

Thus, a person (the first person) can be said to be making a supply
by way of refraining from doing something or tolerating some act
or situation to another person (the second person) if the first person
was under an obligation to do so and then performed accordingly.
Such a contract cannot be imagined or presumed to exist just
because there is a flow of money from one party to another. There
must be an expressed or implied promise by the recipient of money
to agree to do or abstain from doing something in return for the
money paid to him.
(2) Consideration must flow in return to this contract/agreement
Some “consideration” must flow in return from the other party to
this contract/agreement (the second party) to the first party for
such (a) refraining or (b) tolerating or (c) doing.
Taxability of some of the transactions has been discussed in detail
as under:
(A) Liquidated Damages
It is common for the parties entering
into a contract, to specify in the
contract itself, the compensation that
would be payable in the event of the
breach of the contract. Black’s Law
Dictionary defines ‘Liquidated
Damages’ as cash compensation
agreed to by a signed, written contract for
breach of contract, payable to the aggrieved party.
The taxability or otherwise of liquidated damages is clarified as
under:
It is argued that performance is the essence of a contract.

Liquidated damages cannot be said to be a consideration received
for tolerating the breach or non-performance of contract. They are
rather payments for not tolerating the breach of contract. Payment

of liquidated damages is stipulated in a contract to ensure

performance and to deter non-performance, unsatisfactory
performance or delayed performance.
Liquidated damages are a measure of loss and damage that the
parties agree would arise due to breach of contract. They do not act
as a remedy for the breach of contract. They do not restitute the
aggrieved person.
A contract is entered into for execution and not for its breach. The
liquidated damages or penalty are not the desired outcome of the
contract. By accepting the liquidated damages, the party aggrieved
by breach of contract cannot be said to have permitted or tolerated
the deviation or non-fulfilment of the promise by the other party.
Where the amount paid as ‘liquidated damages’ is an amount paid
only to compensate for injury, loss or damage suffered by the
aggrieved party due to breach of the contract and there is no
agreement, express or implied, by the aggrieved party receiving the
liquidated damages, to refrain from or tolerate an act or to do
anything for the party paying the liquidated damages, in such cases
liquidated damages are merely a flow of money from the party who
causes breach of the contract to the party who suffers loss or
damage due to such breach. Such payments do not constitute
consideration for a supply and are not taxable.
Examples of such cases are:
(53) damages resulting from damage to property,

negligence, piracy, unauthorized use of trade name, copyright,
(54) penalty stipulated in a contract for delayed construction of
houses,
(55) forfeiture of earnest money by a seller in case of breach of ‘an
agreement to sell’ an immovable property by the buyer or by
Government or local authority in the event of a successful
bidder failing to act after winning the bid, for allotment of
natural resources.

The key in such cases is to consider whether the impugned

payments constitute consideration for another independent
contract envisaging tolerating an act or situation or refraining
from doing any act or situation or simply doing an act. If the answer
is yes, then it constitutes a ‘supply’ irrespective of by what name it
is called, otherwise it is not a “supply”.
If the payment is merely an event in the course of the performance
of the agreement and it does not represent the ‘object’, as such, of
the contract then it cannot be considered ‘consideration’.
On the contrary, consider the following examples:
(56) A contract may provide that payment by the recipient
of goods or services shall be made before a certain date and failure
to make payment by the due date shall attract late fee or penalty.
(57) A contract for transport of passengers may stipulate that the
ticket amount shall be partly or wholly forfeited if the passenger
does not show up.
(58) A contract for package tour may stipulate forfeiture of
security deposit in the event of cancellation of tour by the customer.
(59) A contract for lease of movable or immovable property may
stipulate that the lessee shall not terminate the lease before a
certain period and if he does so he will have to pay certain amount
as early termination fee or penalty.
(60) Some banks similarly charge pre- payment penalty if the

borrower wishes to repay the loan before the maturity of the loan
period.
In the above examples, amounts paid for acceptance of late

payment, early termination of lease or for pre-payment of loan or
the amounts forfeited on cancellation of service by the customer as
contemplated by the contract as part of commercial terms agreed to
by the parties, constitute consideration for the supply of a facility,
namely, of acceptance of late payment, early termination of a lease
agreement, of prepayment of loan and of making arrangements for
the intended supply by the tour operator respectively.

Therefore, such payments, even though they may be referred to as

fine or penalty, are actually payments that amount to
consideration for supply, and are subject to GST, in cases where
such supply is taxable.
Since these supplies are ancillary to the principal supply for which
the contract is signed, they shall be eligible to be assessed as the
principal supply. Naturally, such payments will not be taxable if
the principal supply is exempt.
(B) Cheque dishonor fine/ penalty
The supplier wants payment to be received on
time and does not want cheque to be
dishonoured. There is never an implied or
express offer or willingness on part of the
supplier that he would tolerate deposit of an invalid, fake or
unworthy instrument of payment against consideration in the form
of cheque dishonour fine or penalty.
The fine or penalty that the supplier or a banker imposes, for
dishonour of a cheque, is a penalty imposed not for tolerating the
act or situation but a fine, or penalty imposed for not tolerating,
penalizing and thereby deterring and discouraging such an act or
situation. Therefore, cheque dishonor fine or penalty is not a
consideration for any service and not taxable.
(C) Penalty imposed for violation of laws
Penalty imposed for violation of laws
such as traffic violations, or for violation
of pollution norms or other laws are also
not consideration for any supply received
and are not taxable.
Same is the case with fines, penalties
imposed by the mining Department of a
Central or State Government or a local authority on discovering
mining of excess mineral beyond the permissible limit or of mining
activities in violation of the mining permit.

Laws are not framed for tolerating their violation. They stipulate
penalty not for tolerating violation but for not tolerating,
penalizing and deterring such violations. There is no agreement
between the Government and the violator specifying that violation
would be allowed or permitted against payment of fine or penalty.
There cannot be such an agreement as violation of law is never a
lawful object or consideration.
In short, fines and penalty chargeable by Government or a local
authority imposed for violation of a statute, bye-laws, rules or
regulations are not leviable to tax.
(D) Forfeiture of salary or payment of bond amount in the event of the
employee leaving the employment before the minimum agreed
period
The provisions for forfeiture of salary or recovery of bond amount
in the event of the employee leaving the employment before the
minimum agreed period are incorporated in the employment
contract to discourage non-serious candidates from taking up
employment.
The said amounts are recovered by the employer not as a

consideration for tolerating the act of such premature quitting of
employment but as penalties for dissuading the non-serious
employees from taking up employment and to discourage and deter
such a situation.
Further, the employee does not get anything in return from the
employer against payment of such amounts.
Therefore, such amounts recovered by the employer are not taxable
as consideration for the service of agreeing to tolerate an act or a
situation.

(E) Late payment surcharge or fee

The facility of accepting late payments with
interest or late payment fee, fine or penalty
is a facility granted by supplier naturally
bundled with the main supply. It is not
uncommon or unnatural for customers to
sometimes miss the last date of payment of
electricity, water, telecommunication services etc.
Almost all service providers across the world provide the facility of
accepting late payments with late fine or penalty.
Even if this service is described as a service of tolerating the act of
late payment, it is an ancillary supply naturally bundled and
supplied in conjunction with the principal supply, and therefore
should be assessed as the principal supply.
Since it is ancillary to and naturally bundled with the principal

supply such as of electricity, water, telecommunication, cooking
gas, insurance etc. it should be assessed at the same rate as the
principal supply.
However, the same cannot be said of cheque dishonor fine or
penalty as discussed earlier.
(F) Fixed charges for power
The price charged for electricity by the power
generating companies from the State
Electricity Boards (SEBs)/DISCOMS or by
SEBs/DISCOMs from individual customers has
two components, namely, a minimum fixed
charge (or capacity charge) and variable per unit charge.
The fact that the minimum fixed charges remain the same whether
electricity is consumed or not or it is scheduled/consumed below
the contracted or available capacity or a minimum threshold, does
not mean that minimum fixed charge or part of it is a charge for

tolerating the act of not scheduling or consuming the minimum the

contracted or available capacity or a minimum threshold.
Both the components of the price, the minimum fixed
charges/capacity charges and the variable/energy charges are
charged for sale of electricity and are thus not taxable as electricity
is exempt from GST.
(G) Cancellation charges
It is a common business practice for suppliers of services such as
hotel accommodation, tour and travel, transportation etc. to
provide the facility of cancellation of the intended supplies within
a certain time period on payment of cancellation fee.
Cancellation fee can be considered as the charges for the costs
involved in making arrangements for the intended supply and the
costs involved in cancellation of the supply, such as in cancellation
of reserved tickets by the Indian Railways.
Services such as transportation travel and tour constitute a bundle

of services. The transportation service, for instance, starts with
booking of the ticket for travel and lasts at least till exit of the
passenger from the destination terminal.
All services such as
making available
an online portal or
convenient booking
counters with basic
facilities at the
transportation terminal or in the city, to reserve the seats and issue
tickets for reserved seats much in advance
of the travel, giving preferred seats with or
without extra cost, lounge and waiting
room facilities at airports, railway stations
and bus terminals, provision of basic
necessities such as soap and other toiletries
in the wash rooms, clean drinking water in

the waiting area etc. form part and parcel of the transportation
service; they constitute the various elements of passenger
transportation service, a composite supply.
The facilitation service of allowing cancellation against payment
of cancellation charges is also a natural part of this bundle. It is
invariably supplied by all suppliers of passenger transportation
service as naturally bundled and in conjunction with the principal
supply of transportation in the ordinary course of business.
Therefore, facilitation supply of allowing cancellation of an
intended supply against payment of cancellation fee or retention or
forfeiture of a part or whole of the consideration or security deposit
in such cases should be assessed as the principal supply.
(61) Cancellation charges of railway tickets for a class
would attract GST at the same rate as applicable to the
class of travel (i.e., 5% GST on first class or air-
conditioned coach ticket and nil for other classes such as second
sleeper class). Same is the case for air travel.
Accordingly, the amount forfeited in the case of non-refundable

ticket for air travel or security deposit or earnest money forfeited
in case of the customer failing to avail the travel, tour operator or
hotel accommodation service or such other intended supplies
should be assessed at the same rate as applicable to the service
contract, say air transport or tour operator service, or other such
services.
However, as discussed earlier, forfeiture of earnest money by a
seller in case of breach of ‘an agreement to sell’ an immovable
property by the buyer or such forfeiture by Government or local
authority in the event of a successful bidder failing to act after
winning the bid for allotment of natural resources, is a mere flow
of money, as the buyer or the successful bidder does not get
anything in return for such forfeiture of earnest money.
Forfeiture of earnest money is stipulated in such cases not as a
consideration for tolerating the breach of contract but as a

compensation for the losses suffered and as a penalty for

discouraging the non-serious buyers or bidders. Such payments
being merely flow of money are not a consideration for any supply
and are not taxable 24.
Quiz
Quiz
time!
Time! Which of the following activities/transactions
qualify as supply of goods?
(b) Bigbang (c) Larsen

(a) Dhruvtara (d) Vigyaan
Steels Ltd. Technicians
Technologies
Electronics retreads the tyres
supplies a develops a
supplies washing given by
customised
machinery on Deendayal
machines to its software for a
rent to Jigayasa Automobiles on
customers. business school.
Manufacturers. job work basis.
NON-SUPPLIES UNDER GST

I. Activities/transactions specified under Schedule
III: Section 7(2)(a) provides activities or transactions
specified in Schedule III shall be treated neither as
Section 7(2)(a)
a supply of goods nor a supply of services. Schedule read with
Schedule III
III specifies transactions/ activities which shall be
neither treated as supply of goods nor as supply of
services. Thus, the activities/transactions specified under
this schedule can be termed as Non-Supplies under the GST regime. In a way, it
is a “Negative list” for the purposes of taxation in GST.
It is important to note that apart from the activities specified in Schedule III,
some activities have been notified by the Government vide different
notifications, which are also to be considered as non-supplies. Further, some
24
Circular No. 178/10/2022 GST dated 03.08.2022

circulars have been issued clarifying that certain transactions are to be

considered as non-supplies.
Hence, our discussion under this heading will revolve around the following:
A. Non-supplies listed in Schedule III
B. Non-supplies notified vide notification
C. Non-supplies clarified by way of circular
A. NON-SUPPLIES LISTED IN SCHEDULE III
Para No. Activities or transactions which shall be treated neither as a

supply of goods nor a supply of services
1. Services by an employee to the employer in the course of or in
relation to his employment.
(62) Services provided by casual worker to employer
who gives wages on daily basis to the worker are
services provided by the worker in the course of
employment.
(63) Casual workers employed by a construction contractor for
execution of a building contract for
him are services in the course of
employment. Similarly, casual
workers employed by a security
services agency for provision of security services to
a client are also services in the course of employment.
Only services that are provided by the employee to the
employer in the course of employment are outside the realm
of supply. However, services provided outside the ambit of
employment for a consideration would qualify as supply.
(64) Services provided on contract basis by a person to
another i.e. principal-to-principal basis are not services
provided in the course of employment 25. P18F P
(65) Any amount paid by employer to employee for not joining a

competing business is paid for providing the service of forbearance
25
Discussion based on Service Tax Education Guide issued under erstwhile service tax law.

to act and cannot be considered for providing services in the

course of employment.
2. Services by any court or Tribunal established under any law for the
time being in force.
Explanation – The term "Court" includes District Court, High Court
and Supreme Court.
3. (a) Functions performed by the
Members of Parliament, Members
of State Legislature, Members of
Panchayats, Members of
Municipalities and Members of other local authorities.
(b) Duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity.
(66) Duties performed by President of India, Vice
President of India, Prime Minister of India, Chief
Justice of India, Speaker of the Lok Sabha, Chief
Election Commissioner, Comptroller and Auditor General of
India, Chairman of Union Public Service Commission, Attorney
General of India, in that capacity.
(c) Duties performed by any person as a Chairperson or a Member
or a Director in a body established by the Central Government
or a State Government or local authority and who is not
deemed as an employee before the commencement of this
clause.
4. Services of funeral, burial, crematorium or mortuary including
transportation of the deceased.
5. Sale of land and, subject to paragraph 5(b) of

Schedule II, sale of building. (i.e. in case, where
entire consideration for sale of building
received after issuance of completion
certificate or after its first occupation, whichever is earlier)

6. Actionable claims, other than lottery, betting and gambling.

‘Actionable claims’ are specifically included in the definition of
goods under section 2(52) [Refer the definitions of ‘actionable
claims’ and ‘goods’ given under heading ‘Relevant Definitions’].
However, this para of Schedule III specifically excludes actionable
claims, other than lottery, betting and gambling from the ambit of
definition of supply. Co-joint reading of said provisions implies
that only lottery, betting and gambling are treated as supply.
All other actionable claims are outside the ambit of definition
of supply.
(67) Some of the other examples of actionable
claims are: Right to recover insurance money, claim for
arrears of rent, claims for future rents (if these can be
assigned), unsecured loans, unsecured debentures, bills
of exchange, promissory notes, bank guarantee, Fixed Deposit
Receipt, right to the benefit of a contract, etc. 26
P 19F
B. NON-SUPPLIES NOTIFIED VIDE NOTIFICATION

Government is empowered to notify the activities/ transactions
undertaken by the Central Government, a State
Government or any local authority in which they
are engaged as public authorities as the
activities/transactions which shall be treated Section 7(2)(b)
neither as supply of goods nor as supply of
services. Till now, following activities/
26
Schedule III has two more entries - Entry 7 and 8 [as enumerated below]. These entries are
covered in the syllabus of Paper 8: Indirect Tax Laws at Final Level.
7. Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home
consumption.
(b) 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.

transactions have been notified under said clause:

(i) Activity in relation to Panchayat/Municipality functions: Services
by way of any activity in relation to a
function entrusted to a
Panchayat Municipality
Panchayat under article 243G
Functions Functions
of the Constitution or to a
Municipality under article 243W
of the Constitution are treated neither as a
supply of goods nor as a supply of service 27. F P
(ii) Grant of alcoholic liquor licence: Services by way of grant of

U
alcoholic liquor licence by the State Governments are treated neither

as a supply of goods nor as a supply of service 28. P21F P
Such licence is granted against Grant of

consideration in the form of licence for
alcoholic
licence fee or application fee or
liquor
by whatever name it is called.
This special dispensation is applicable only to
supply of service by way of grant of liquor licenses by the State
Governments as an agreement between the Centre and States.
Hence, this is not applicable/has no precedence value in relation to
grant of other licenses and privileges for a fee in other situatio ns,
where GST is payable.
It may be noted that services provided by the Government to business
entities including by way of grant of privileges, licences, mining rights,
natural resources such as spectrum etc. against payment of
consideration in the form of fee, royalty etc. are taxable under GST.
Tax is required to be paid by the business entities on such services
under reverse charge 29 .
P 22 F P
27
notified vide Notification No. 14/2017 CT (R) dated 28.06.2017/ Notification No. 11/2017
IT (R) dated 28.06.2017 as amended
28
notified vide Notification No. 25/2019 CT (R) dated 30.09.2019/ Notification No. 24/2019
IT (R) dated 30.09.2019
29

C. NON-SUPPLIES CLARIFIED BY WAY OF CIRCULAR

CBIC has clarified that following activities / transactions are non-supplies:
(i)
U Inter-State movement of various modes of conveyance
Inter-State movement of various modes of conveyance, between
distinct persons including-
• Trains,
• Buses,
• Trucks,
• Tankers,
• Trailers,
• Vessels,
• Containers,
• Aircrafts,
(a) carrying goods or passengers or both; or
(b) for repairs and maintenance,

[except in cases where such movement is for further supply of the same
conveyance] shall be treated ‘neither as a supply of goods or supply of
service’ and therefore not be leviable to IGST.
However, applicable CGST/SGST/IGST, as the case may be, shall be

leviable on repairs and maintenance done for such conveyance [Circular
No. 1/1/2017 IGST dated 07.07.2017**].

(ii) Inter-State movement of rigs, tools and spares, and all goods on
wheels [like cranes]
**Above circular shall mutatis mutandis apply

to inter-State movement of rigs, tools and
spares, and all goods on wheels [like
cranes], [except in cases where movement of
such goods is for further supply of the same
goods], such inter-State movement shall be
treated ‘neither as a supply of goods or
supply of service,’ and consequently no IGST would be applicable on
such movements. In this context, it is also reiterated that applicable
CGST/SGST/IGST, as the case maybe, is leviable on repairs and
maintenance done for such goods [Circular No. 21/21/2017 GST dated
22.11.2017].
Quiz
Quiz
time!
Time!
Which of the following activities are considered

4 neither as supply of goods nor supply of services?
(a) Inter-
State movement (b) Grant of (c) Services
of trucks between mining rights by provided by an
(d) Lottery
distinct persons the Governments employer to the
for repairs and to businesses. employee.
maintenance.

In the preceding paras, we have discussed, how to determine whether a given

activity or transaction constitutes a supply. Once an activity or transaction qualifies
as supply, one needs to determine whether the same is leviable to GST or not.
Though the provisions relating to levy and collection of GST have been discussed
at length in Chapter 3 – Charge of GST in this Module of the Study Material, a brief
idea of the same is provided hereunder.
For a supply to attract GST, primarily two additional conditions need to be satisfied.
These are – (i) supply must be made by a taxable person and (ii) supply must be a
taxable supply. These two additional conditions have been discussed hereunder:
(i) Supply by a taxable person
A supply to attract GST should be made by a taxable person.
A supply attracting GST can

be made TO a non-taxable
person also.
The restriction of being a taxable person is only on the supplier whereas the
recipient can be either taxable or non-taxable.
Meaning of taxable person: A “taxable person” is a person who is registered
or liable to be registered under section 22 or section 24 [The said sections and
the concept of taxable person thereto have been discussed in detail in Chapter
9 – Registration in Module 2 of the Study Material].
Hence, a person who is liable to be registered but does not take a registration
and remains an unregistered person shall be construed as a taxable person.
Similarly, a person not liable to be registered, but has got himself registered
by taking a voluntary registration and is also a taxable person.
(ii) Taxable supply
For a supply to attract GST, the supply must be taxable. Taxable supply has
been broadly defined and means any supply of goods or services or both

which, is leviable to tax under the GST Law [Section 2(108)] [Refer Chapter-3:
Charge of GST in this Module of the Study Material for detailed discussion on
leviability of GST].
On the other hand, exempt supply means supply of any goods or services or
both which attract nil rate of tax or which may be wholly exempt from tax*
under section 11 of the CGST Act, or under section 6 of the IGST Act, and
includes non-taxable supply [Section 2(47)]
*Exemptions may be provided to the specified goods or services or to a specified
category of persons/ entities making supply [Refer Chapter-5: Exemptions from
GST in this Module of the Study Material for detailed discussion].
4. COMPOSITE AND MIXED SUPPLIES [SECTION 8]
Section 8 Tax liability on composite and mixed supplies
Clauses Particulars
The tax liability on a composite or a mixed supply shall

be determined in the following manner, namely:-
(a) a composite supply comprising two or more supplies,

one of which is a principal supply, shall be treated as a
supply of such principal supply; and
(b) a mixed supply comprising of two or more supplies

shall be treated as supply of that particular supply
that attracts highest rate of tax.
ANALYSIS
GST is payable on goods or services or both at the notified rates. Classification of
any supply (whether as goods or services, the category of goods or services) is

essential to determine the applicable rate of GST on the particular supply. The
application of rates poses no problem if the supply is of individual goods or
individual services, which is clearly identifiable and such goods or services are
subject to a particular rate of tax.
However, in certain cases, supplies are not such simple and clearly identifiable.
Sometimes supplies are a combination of goods or combination of services or
combination of goods and services both and each individual component of such
supplies may attract a different rate of tax.
In such a case, the rate of tax to be levied on such supplies may be a challenge. It
is for this reason, that the GST Law identifies composite supplies and mixed supplies
and provides certainty in respect of tax treatment under GST for such supplies.
In order to determine whether the supplies are ‘composite supplies’ or ‘mixed

supplies’, one needs to determine whether the supplies are naturally bundled or
not naturally bundled in ordinary course of business. The concept of ‘naturally
bundled’ supplies is emanating from the definition of ‘composite supply’.
COMPOSITE SUPPLIES
Composite supply means a supply made by a taxable person to a recipient and:
• comprises 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 [Section 2(30)].
This means that in a composite supply, goods or services or both are bundled owing
to natural necessities. The elements in a composite supply are dependent on the
‘principal supply’.

Principal supply means 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 [Section 2(90)].
Works contract and restaurant services are classic examples of composite

supplies, but the GST law identifies both as supply of services [as you would have
seen in the discussion on Schedule II to the CGST Act earlier in this Chapter] and
chargeable to specific rate of tax mentioned against each of such services (works
contract or restaurant).
However, in respect of other composite supplies (i.e. other than the two categories
mentioned above), the need to determine the supply as a composite one, will arise,
so as to determine the appropriate classification of such supply as supply of goods
or supply of services as also the appropriate rate of tax.
It will be necessary to determine as to whether a particular supply is naturally
bundled in the ordinary course of business and what constitutes principal supply in
such composite supplies.
How to determine whether the services are bundled in the ordinary course
U
of business?
Whether the services are bundled in the ordinary course of business or not, would
depend upon the normal or frequent practices followed in the area of business to
which services relate. Such normal and frequent practices adopted in a business
can be ascertained from several indicators some of which are listed below:
❑ The perception of the consumer or the service recipient - If large number
of service recipient of such bundle of services reasonably expect such services
to be provided as a package, then such a package could be treated as
naturally bundled in the ordinary course of business.
(68) Mobile phone is always sold with battery.
❑ Majority of service providers in a particular area of business provide
similar bundle of services.
(69) Bundle of services of catering on board and services of
transport by air is a bundle offered by a majority of airlines.
❑ The nature of the various services in a bundle of services will also help in
determining whether the services are bundled in the ordinary course of

business. If the nature of services is such that one of the services is the main
service and the other services combined with such service are in the nature of
incidental or ancillary services which help in better enjoyment of a main service,
then it would be treated as services bundled in the ordinary course of business.
(70) Service of stay in a hotel is often combined with provision of
breakfast and dinner provided free of cost during the stay. Such
service is an ancillary service to the provision of hotel
accommodation and the resultant package would be treated as services
naturally bundled in the ordinary course of business.
❑ Other illustrative indicators, not determinative but indicative of bundling of
services in the ordinary course of business are:
✓ There is a single price or the customer pays the same amount, no matter
how much of the package they actually receive or use.
✓ The elements are normally advertised as a package.
✓ The different elements are not available separately.

✓ The different elements are integral to one overall supply. If one or
more is removed, the nature of the supply would be affected.
No straight jacket formula can be laid down to determine

whether a service is naturally bundled in the ordinary course of
business. Each case has to be individually examined in the
backdrop of several factors some of which are outlined above.
The above principles explained in the light of what constitutes a naturally
bundled service can be gainfully adopted to determine whether a particular
supply constitutes a composite supply under GST and if so what constitutes
he principal supply so as to determine the right classification and rate of
tax of such composite supply.
Some of the examples of composite supplies have been given below:

(71) A 5 star hotel is booked for a conference of 100 delegates on a
lump sum package with the following facilities:
– Accommodation for the delegates

– Breakfast for the delegates,

– Tea and coffee during conference
– Access to fitness room for the delegates
– Availability of conference room
– Business centre
As is evident a bouquet of services is being provided, many of them are chargeable
to different effective rates of tax. If the principal service is described as convention
service it is able to capture the entire essence of the package. Thus, the principal
service may be judged as convention service and charged to tax accordingly.
However, it will be fully justifiable for the hotel to charge individually for the
services as long as there is no attempt to offload the value of one service on to
another service that is chargeable at a concessional rate.
(72) Poshaak Manufacturers entered into a contract with Cheeku Ltd.

for supply of readymade shirts packed in designer boxes at Cheeku Ltd.’s
outlet. Further, Poshaak Manufacturers would also get them insured
during transit. In this case, supply of goods, packing materials, transport &
insurance is a composite supply wherein supply of goods is principal supply.
(73) When a consumer buys a television set and he also gets mandatory
warranty and a maintenance contract with the TV, this supply is a
composite supply. In this example, supply of TV is the principal supply,
warranty and maintenance services are ancillary.
(74) A travel ticket from Mumbai to Delhi may include service of food
being served on board, free insurance, and the use of airport lounge. In
this case, the transportation of passenger, constitutes the pre-dominant
element of the composite supply, and is treated as the principal supply and all other
supplies are ancillary.
How to determine the tax liability on composite supplies?: A composite
supply comprising of two or more supplies, one of which is a principal supply,
shall be treated as a supply of such principal supply. Accordingly, the entire
value of composite supply [i.e. main supply + ancillary supply(ies)] shall be
classified under the category of main supply and shall be taxed at the GST rate

applicable to the main supply. This can be better understood with the help of
following example:
(75) Rati Computers supplies laptop (worth ` 52,000) alongwith laptop
bag (worth ` 3,000) to a customer for ` 55,000. Being naturally bundled,
supply of laptop bag along with the laptop is composite supply which is
treated as the supply of the principal supply [viz. laptop]. Assuming that the rate of
tax applicable on laptop is 18% and on laptop bag is 28%, in the given case, rate
of principal supply, i.e. laptop @ 18% will be charged on the entire value of ` 55,000.
CBIC, in the following cases, has clarified issues as to whether the given supplies
are composite supply and if yes, what constitutes the principal supply in the given
composite supply:
1. Printing industry issues
The printing industry in India in particular
faced a dilemma in determining whether
the nature of supply provided was that of
goods or services. Another doubt was
whether in case where certain contracts
involved both supply of goods and services,
whether the same would constitute a
supply of goods or services or if it would be
a composite supply and in case it is, then what would constitute the principal
supply.
Thus, it is 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 and the question, whether such supplies constitute
supply of goods or services would be determined on the basis of what
constitutes the principal supply.
In the case 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.
In case of supply of printed envelopes, letter cards, printed boxes, tissues,
napkins, wall paper etc. 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
goods30.
2. Food supplied to the patients

Food supplied to the in-patients as advised by the doctor/nutritionists is a
part of composite supply of health care and not separately taxable. Other
supplies of food by a hospital to patients (not admitted) or their attendants
or visitors are taxable 31.
3. Activity of bus body building
In the case of bus body building, there is supply of goods and services. Thus,
classification of this composite supply, as goods or service would depend on
which supply is the principal supply which may be determined on the basis
of facts and circumstances of each case 32.
4. Retreading of tyres
In retreading of tyres, which is a composite supply, the pre-dominant element
is process of retreading which is a supply of service. Rubber used for
retreading is an ancillary supply.
Supply of retreaded tyres, where the old tyres belong to the supplier of
retreaded tyres, is a supply of goods 33.
Retread tyres are revamped tyres on which the worn out tread (the part of the
tire that makes contact with the surface of the road) is replaced using new
tread.
30
31
32
Circular No. 34/8/2018-GST dated 01.03.2018
33
Circular No. 34/8/2018-GST dated 01.03.2018

MIXED SUPPLIES
Mixed supply means:
❑ two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable
person
❑ for a single price where such supply does not constitute a composite
supply [Section 2(74)].
The individual supplies are independent of each other and are not naturally
bundled.
How to determine if a particular supply is a mixed supply?: In order to identify

if the particular supply is a mixed supply, the first requisite is to rule out that the
supply is a composite supply.
A supply can be a mixed supply only if it is not a composite supply. As a corollary,

it can be said that if the transaction consists of supplies not naturally bundled in
the ordinary course of business, then the possibility of it being a mixed supply
needs to be checked.
Once the amenability of the transaction as a composite supply is ruled out, and a
single consideration is charged for the entire supply of different components, it
would be treated as a mixed supply, classified in terms of supply of goods or
services attracting highest rate of tax.
(76) A supply of a package consisting of canned foods, sweets,
chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied
for a single price is a mixed supply. Each of these items can be supplied
separately and is not dependent on any other. It shall not be a mixed supply if these
items are supplied separately or separate prices are charged.

(77) A shopkeeper selling storage water bottles along with refrigerator

for a single price. Bottles and the refrigerator can easily be priced and
sold, independently, and are not naturally bundled. So, such supplies are
mixed supplies.
(78) A house is given on rent through a single rent deed - one floor of
which is to be used as residence and the other for housing a printing
press, at a lump sum rent amount. Such renting for two different
purposes is not naturally bundled in the ordinary course of business. Said supplies
are mixed supply.
How to determine the tax liability on mixed supplies?: A mixed supply
comprising of two or more supplies shall be treated as supply of that particular
supply that attracts highest rate of tax.
(79) Sringaar Enterprises supplies 10,000 kits (at ` 50 each) amounting
to ` 5,00,000 to Raghav General Store. Each kit consists of 1 shampoo, 1
face wash and 1 kajal pencil. It is a mixed supply and is treated as supply
of that particular supply which attracts highest tax rate. Assuming that the rate of
tax applicable on shampoo is 18%, on face wash is 28% and on kajal pencil is 12%,
in the given case, highest tax rate [viz. face wash] @ 28% will be charged on the
entire value of ` 5,00,000.
More than one supply made together and taxed at the individual rates
There can also be a case where an activity/transaction involves more than one
supply of goods or services or both, but neither they are composite supplies nor
can be categorised as mixed supplies, that is, all supplies carry independent
significance. In such a case, if separate consideration is indicated against each
supply, each such supply shall be charged at the respective rate applicable to that
particular supply.
(80) In case of servicing of cars involving supply of both goods (spare
parts) and services (labour) where the value of goods and services are
shown separately, the goods and services would be liable to tax at the
rates as applicable to such goods and services separately 34.
34

Quiz
Quiz Jaskaran supplies gift packages at ` 30 each to its customers.
time!
Time! Each package consists of 2 chocolates, 2 fruit juice bottles and a
packet of toy balloons. Rates of GST applicable on chocolates,
5 fruit juice bottles and toy balloons are 18%, 12% and 5%
respectively. Jaskaran is liable to pay GST @________________.
(a) 18%, 12%

and 5% separately
(b) 18% on the (c) 12% on the (d) 5% on the
on value of supply
price charged for price charged for price charged for
of chocolates, fruit
the gift package the gift package the gift package
juice bottles and toy
balloons respectively
LET US RECAPITULATE
❑ The taxable event under GST is supply. The scope of supply under GST
can be understood in terms of following parameters:
Supply should be of goods Supply should be made for a Supply should be made in the
or services consideration course or furtherance of business
❑ While these parameters describe the concept of supply, under certain

circumstances, transactions have been deemed as supply even when the
supply is made without consideration or not in the course or furtherance
of business. Activities specified in Schedule I are deemed to be a supply
even without consideration. Further, import of services for a
consideration, whether or not in the course or furtherance of business is
treated as supply.
❑ Besides, some specified transactions/ activities are neither treated as
supply of goods nor a supply of services. Furthermore, certain activities
have been categorised as supply of goods or as supply of services.
❑ The discussion with respect to supply is broadly categorised into
following:

Supply with consideration in course or furtherance

of business.
Supply between a person, and its members or
constituents for cash, deferred payment or other valuable
consideration
includes Importation of services with consideration whether

or not in course or furtherance of business.
Supply
Supply without consideration
Activities to be treated as supply of goods or supply

of services
Activities neither the supply of goods nor the supply

excludes
of services
Sub-sections of section 7 alongwith related Schedules has been summarised as

follows:
1. Supply for consideration in course or furtherance of business
[Section 7(1)(a)]
Supply includes sale,

transfer, barter, exchange,
in the course or
licence, rental, lease, for consideration furtherance of
disposal, etc. business
Consideration
Supply
in course or furtherance
of business

2. Activities/transactions between a person, other than an individual,

and its members or constituents for valuable consideration [Section
7(1)(aa)]
Activities/transactions
Person (association, club, etc.) Members or Constituents
Consideration
3. Importation of services for consideration whether or not in course or
furtherance of business [Section 7(1)(b)]
Supply should be in course or furtherance of business. The exception to said
rule is import of services is deemed as supply even if the same has been
imported not in course/furtherance of business.
Consideration
Importation of
services
Supply
in course or furtherance of
business
4. Supply without consideration - Deemed Supply [Section 7(1)(c) read

with Schedule I]
This includes all supplies made to a taxable or non-taxable person, even if the
same is without consideration. These are specifically mentioned in
Schedule I appended to the CGST Act.
As per Schedule I, in the following four cases, supplies made without
S
consideration will be treated as supply under section 7:

I. Permanent Transfer/Disposal Of Business Assets
Input Tax Credit

Business
Deemed Supply
availed
Assets
Permanently
transferred/disposed
II. Supply Between Related Persons Or Distinct Persons
Related/Distinct
Deemed
Supply
Related/Distinct
Person 2
Person 1
Supply of goods or services

in course or furtherance of business
Employer Employee
Gifts ≤ ` 50,000 in a FY
Not supply
II. Supply Between Principal And Agent
Deemed Supply
supplies goods
Principal Agent
supplies goods on behalf of principal

and issues invoice to customer in his
own name
Buyer

Supplier Agent
Deemed Supply
Agent receives goods on behalf of
supplies
principal and receives invoice in
goods to
his own name
principal
Principal
IV. Importation of services
Related
Deemed Supply
persons
Person out Person in India

of India supplies services
in course or furtherance of business
The combined provisions of relating to import of services [as stipulated under

under section 7(1)(b) and section 7(1)(c) read with Schedule I] have been depicted
in the below mentioned diagram:
Import of services
Import of services
with consideration without consideration
in course or not in course or related person/distinct

Other
futherance of futherance of person + in course or
cases
business business futherance of business
Supply Not a supply

4. Activities or transactions to be treated as Supply of goods or Supply

of services [Section 7(1A) read with Schedule II]
Para Activity/ Type Supply of

No. Transaction goods/
services
1. Transfer (i) Title in goods Goods

(ii) Title in goods under an
agreement that property shall
pass at a future date. Goods
Right/undivided share in goods Services

without transfer of title in them
2. Land and Lease, tenancy, easement, Services

Building licence to occupy land
Lease/letting out of building Services

including a commercial/
industrial/ residential complex for
business/ commerce, wholly/
partly.
3. Treatment Applied to another person’s Services

or Process goods
4. Transfer of Goods forming part of business Goods

Business assets are transferred/disposed
Assets off by/under directions of person
carrying on business so as no
longer to form part of those
assets.
Goods held/used for business Services

are put to private use or are
made available to any person for
use for any purpose other than
business, by/under directions of
person carrying on the business.

Goods forming part of assets of Goods

any business carried on by a
person who ceases to be a
taxable person, shall be deemed
to be supplied by him, in the
course or furtherance of his
business, immediately before he
ceases to be a taxable person.
Exceptions:
❑ Business transferred as a
going concern.
❑ Business carried on by a
personal representative who
is deemed to be a taxable
person.
5. Renting of immovable property Services
Construction of complex, building, civil structure,

etc.
Exception:
Entire consideration received after issuance of
completion certificate or after its first
occupation, whichever is earlier.
Temporary transfer or permitting use or

enjoyment of any intellectual property right
Development, design, programming,

customisation, adaptation, upgradation,
enhancement, implementation of IT software
Agreeing to obligation to refrain from an act, or

to tolerate an act or situation, or to do an act.
Transfer of right to use any goods for any

purpose

6. Following composite supplies:- Services

❑ Works contract
❑ Supply of goods, being food or any other
article for human consumption or any drink.
5. Non-supplies under GST [Section 7(2)(a) read with Schedule III]
S. No. Activities or transactions which shall be treated

neither as a supply of goods nor a supply of services
1. Services by an employee to the employer in the course of

or in relation to his employment.
2. Services by any court or Tribunal established under any

law for the time being in force.
3. (a) Functions performed by the Members of Parliament,

Members of State Legislature, Members of
Panchayats, Members of Municipalities and Members
of other local authorities;
(b) Duties performed by any person who holds any post
in pursuance of the provisions of the Constitution in
that capacity; or
(c) Duties performed by any person as a Chairperson or
a Member or a Director in a body established by the
Central Government or a State Government or local
authority and who is not deemed as an employee
before the commencement of this clause.
4. Services of funeral, burial, crematorium or mortuary

including transportation of the deceased.
5. Sale of land and, subject to paragraph 5(b) of Schedule II,

sale of building.
6. Actionable claims, other than lottery, betting and

gambling.

The diagram on the next page summarises the steps to determine

whether an activity undertaken is Supply or not.
No
Is the activity a supply including supply of
goods/services such as sale, transfer, barter,
exchange, licence, rental, lease or disposal?
Yes
No Is it an activity No
Is it for a
consideration? specified under
Schedule I?
Yes Yes
Is it in course No
or furtherance
of business?
Is it
No
Is it in course
or furtherance import of
of business? No service?
Yes
Yes Yes
Is it an activity specified No
in Schedule III or Activity is
Activity is
section 7(2)(b)? Supply NOT
Supply
Yes

6. Composite and mixed supplies
Composite Supply Mixed Supply

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

1. Meghraj & Co. wishes to commence the business of supplying ready-made
garments within Punjab and in the neighbouring States of Delhi and Haryana.
Kindly state as to what is the taxable event under GST and leviability of CGST,
SGST/UTGST and IGST on the same?
2. Damodar Private Ltd., registered in Delhi, is planning to transfer some goods
to its branch, registered in West Bengal, without any consideration, so that the
goods can be sold from the branch. The company believes that the transaction
that will be undertaken by it would not qualify as supply as no consideration is
involved. Ascertain whether the transfer of goods by Damodar Private Ltd. to
its branch office would qualify as supply.

3. Prithvi Associates is engaged in supply of taxable goods. It enquires from its

tax advisor as to whether any activity can be treated as supply even if made
without consideration in accordance with the provisions of the GST law. You
are required to enumerate such activities, if any.
4. Composite supply is treated as supply of that particular goods or services which
attracts the highest rate of tax, for the purpose of considering tax liability.
Examine the validity of the statement.
5. Transfer of title and/or possession is necessary for a transaction to constitute
supply of goods. Examine.
6. Examine whether the following activities would amount to supply under
section 7 read with Schedule I:
(a) Sulekha Manufacturers have a factory in Delhi and a depot in Mumbai.
Both these establishments are registered in respective States. Finished
goods are sent from factory in Delhi to the Mumbai depot without
consideration so that the same can be sold from the depot.
(b) Raman is an architect in Chennai. His brother who is settled in London
is a well-known lawyer. Raman has taken legal advice from him free of
cost with regard to his family dispute.
(c) Would your answer be different if in the above case, Raman has taken
advice in respect of his business unit in Chennai?
7. State whether the following supplies would be treated as supply of goods or

supply of services as per Schedule II:
(a) Renting of immovable property.
(b) Goods forming part of business assets are transferred or disposed of

by/under directions of person carrying on the business so as no longer to
form part of those assets.
(c) Transfer of right in goods without the transfer of title in such goods.
(d) Transfer of title in goods under an agreement which stipulates that
property shall pass at a future date upon payment of full consideration
as agreed.

8. Determine whether the following supplies would be treated as supply of goods

or supply of services as per Schedule II:
(a) Temporary transfer or permitting use or enjoyment of any intellectual
property right.
(b) Any treatment or process which is applied to another person’s goods.
(c) Transfer of title in goods.
9. The goods supplied on hire purchase basis will be treated as supply of services.
10. Examine whether the activity of import of service in the following independent
cases would amount to supply under section 7:
(i) Miss Shriniti Kaushik received interior decoration services for her residence
located at Bandra, Mumbai from Mr. Racheal of Sydney (Australia). The
amount paid for the said service is 5,000 Australian dollar.
(ii) Miss Shriniti Kaushik received interior decoration services for her
residence located at Bandra, Mumbai from her brother, Mr. Varun
residing in Sydney (Australia) [wholly dependent on Miss Shriniti].
Further, Miss Shriniti did not pay any consideration for the said service.
(iii) Will your answer change if in the above case, if Miss Shriniti has taken
interior decoration services with regard to her business premises and not
her residence?
11. Dumdum Electronics has sold the following electronic items to Akbar Retail Store.
(i) Refrigerator (500 litres) taxable @ 18%
(ii) Stabilizer for refrigerator taxable @ 12%
(iii) LED television (42 inches) taxable @ 12%
(iv) Split air conditioner (2 Tons) taxable @ 28%

(v) Stabilizer for air conditioner taxable @12%
Dumdum Electronics has issued a single invoice, indicating price of each of the
above items separately in the same.

Akbar Retail Store has given a single cheque of ` 1,00,000/- for all the items as
a composite discounted price. State the type of supply and the tax rate
applicable in this case.
12. Manikaran, a registered supplier of Delhi, has supplied 20,000 packages at
` 30 each to Mukhija Gift Shop in Punjab. Each package consists of
2 chocolates, 2 fruit juice bottles and a packet of toy balloons. Determine the
rate(s) of GST applicable in the given case assuming the rates of GST to be as
under:
Goods/services supplied GST rate
Chocolates 18%
Fruit juice bottles 12%
Toy balloons 5%
13. Gagan Engineering Pvt. Ltd., registered in Haryana, is engaged in providing

maintenance and repair services for heavy steel machinery. For carrying out
the repair work, Gagan Engineering Pvt. Ltd. sends its container trucks equipped
with items like repair equipments, consumables, tools, parts etc. from Haryana
workshop to its own repairing centres (registered under GST law) located in
other States across India where the clients’ machinery are being brought and
are being repaired.
Discuss the leviability of GST on the inter-State movement of trucks from the
workshop of Gagan Engineering Pvt. Ltd. in Haryana to its own repairing
centres located in other States across India.
14. Sarvanna & Sons wishes to start supplying alcoholic liquor for human
consumption in the State of Tamil Nadu. Therefore, it applies for license to the
Tamil Nadu Government for selling liquor for which the State Government has
charged specified fee from it.
Examine whether the grant of alcoholic liquor license by the Tamil Nadu
Government to Sarvanna & Sons qualifies as supply.

ANSWERS/HINTS
1. Taxable event under GST is the supply of goods or services or both made
for consideration in the course or furtherance of business. CGST and SGST
will be levied on intra-State supplies. IGST will be levied on inter-State
supplies.
2. As per Schedule I read with section 7(1)(c), supply of goods or services or
both between related persons or between distinct persons as specified in
section 25, when made in the course or furtherance of business, is deemed as
supply even if made without consideration. In the given case, since the
Damodar Private Ltd. and its branch located in another State are distinct
persons, supply of goods between them would qualify as supply.
3. Section 7(1)(a) stipulates that the supply should be for a consideration and
should be in the course or furtherance of business. However, section 7(1)(c)
read with Schedule I enumerates the cases where an activity is treated as
supply, even if the same is without consideration. These are as follows:
(i) Permanent transfer or disposal of business assets where input tax
credit has been availed on such assets.
(ii) Supply of goods or services or both between related persons or
between distinct persons as specified in section 25, when made in
the course or furtherance of business.
However, gifts not exceeding ` 50,000 in value in a financial year by
an employer to an employee shall not be treated as supply of goods
or services or both.
(iii) Supply of goods —
(a) by a principal to his agent where the agent undertakes to supply
such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive
such goods on behalf of the principal.

(iv) Import of services by a person from a related person or from any of his
other establishments outside India, in the course or furtherance of
business.
4. The statement is not correct. For considering tax liability, composite supply
is treated as supply of the principal supply. It is the mixed supply that is
treated as supply of that particular goods or services which attracts the
highest rate of tax.
5. Title as well as possession both need to be transferred for a transaction to be
considered as a supply of goods.
In case title is not transferred, the transaction would be treated as supply of
service in terms of Schedule II(1)(b).
In some cases, possession may be transferred immediately, but title may be
transferred at a future date like in case of sale on approval basis or hire
purchase arrangement. Such transactions will also be termed as supply of
goods in terms of Schedule II.
6. (a) Schedule I read with section 7(1)(c), inter alia, stipulates that supply of
goods or services or both between related persons or between distinct
persons as specified in section 25, is supply even without consideration
provided it is made in the course or furtherance of business. Further, a
person who has obtained more than one registration, whether in one
State/Union territory or more than one State/Union territory shall, in
respect of each such registration, be treated as distinct persons
U U
[Section 25(4)].
In view of the same, factory and depot of Sulekha Manufacturers are

distinct persons. Therefore, supply of goods from Delhi factory of
Sulekha Manufacturers to Mumbai Depot without consideration, but in
course/furtherance of business, is supply under section 7 read with
Schedule I.
(b) Schedule I read with section 7(1)(c), inter alia, stipulates that import of
services by a taxable person from a related person located outside
India, without consideration is treated as supply if it is provided in the
course or furtherance of business. Explanation to section 15, inter alia,
provides that persons shall be deemed to be “related persons” if they

are members of the same family. Further, as per section 2(49), family
means, —
(ii) the parents, grand-parents, brothers and sisters of the person if

they are wholly or mainly dependent on the said person.
In the given case, Raman has received free of cost legal services from
his brother. However, in view of section 2(49)(ii) above, Raman and his
brother cannot be considered to be related as Raman’s brother is a well-
known lawyer and so, not wholly/mainly dependent on Raman. Further,
Raman has taken legal advice from him in personal matter and not in
course or furtherance of business. Consequently, services provided by
Raman’s brother to him would not be treated as supply under section
7 read with Schedule I.
(c) In the above case, if Raman has taken advice with regard to his business
unit, services provided by Raman’s brother to him would still not be
treated as supply under section 7 read with Schedule I as although the
same are provided in course or furtherance of business, but are
provided without consideration and such services have not been
received from a related person.
7. (a) Supply of services
(b) Supply of goods
(c) Supply of services

(d) Supply of goods
8. (a) Supply of services
(b) Supply of services

(d) Supply of goods
9. The statement is not correct. Supply of goods on hire purchase shall be
treated as supply of goods as there is transfer of title, albeit at a future date.
10. (i) Supply, under section 7, inter alia,
❑ includes import of services for a consideration

❑ even if it is not in the course or furtherance of business.

Thus, although the import of service for consideration by Miss. Shriniti
Kaushik is not in course or furtherance of business [as the interior
decoration services have been availed in respect of residence], it would
amount to supply.
(ii) Schedule I, inter alia, stipulates that import of services by a taxable

person from a related person located outside India, without
consideration is treated as supply only if it is provided in the course or
furtherance of business. Explanation to section 15, inter alia, provides
that persons shall be deemed to be “related persons” if they are
members of the same family. Further, as per section 2(49), family
means, —
(ii) the parents, grand-parents, brothers and sisters of the person if
they are wholly or mainly dependent on the said person.
In the given case, Miss Shriniti Kaushik has received interior decoration
services from her brother. In view of section 2(49)(ii) above, Miss
Shriniti and her brother shall be considered to be related as Miss
Shriniti’s brother is wholly dependent on her.
However, Miss Shrinti has taken interior decoration services for her
residence and not in course or furtherance of business. Consequently,
services provided by Miss Shrinti’s brother to her would not be treated
as supply under section 7 read with Schedule I.
(iii) In the above case, if Miss Shriniti has taken interior decoration services
with regard to her business premises, services provided by Miss
Shriniti’s brother to her would be treated as supply under section 7 read
with Schedule I, as the same are provided in course or furtherance of
business.
11. In the given case, the items supplied by Dumdum Electronics are not naturally
bundled in the ordinary course of business. Therefore, such supply is not a
composite supply. Further, although Akbar Retail Store has paid a composite
discounted price for these goods, Dumdum Electronics has not charged a

single price for the said supply. Therefore, said supply is also not a mixed
supply.
Supply of these goods is, therefore, supply of individual items which are
taxable at the respective rates applicable to them.
12. As per section 2(74), mixed supply means two or more individual supplies of
goods or services, or any combination thereof, made in conjunction with each
other by a taxable person for a single price where such supply does not
constitute a composite supply.
Supply of a package containing chocolates, fruit juice bottles and a packet of
toy balloons is a mixed supply as each of these items can be supplied
separately and is not dependent on any other. Further, as per section 8(b),
the mixed supply is treated as a supply of that particular supply which attracts
the highest rate of tax. Thus, in the given case, supply of packages is treated
as supply of chocolates [since it attracts the highest rate of tax] and the rate
of GST applicable on the package of ` 6,00,000 (20,000 × ` 30) is 18%.
13. As per section 25(4)35, a person who has obtained 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’.
Schedule I to the CGST Act specifies situations where activities are to be
treated as supply even if made without consideration. Supply of goods and/or
services between ‘distinct persons’ as specified in section 25, when made in
the course or furtherance of business is one such activity included in Schedule
I under para 2.
However, as per CBIC circular, the inter-State movement of various modes of

conveyance including, inter alia, trucks, carrying goods or passengers or both
or for repairs and maintenance, between ‘distinct persons’ as specified in
section 25(4), not involving further supply of such conveyance, may be treated
‘neither as a supply of goods nor supply of service’ and therefore, will not be
leviable to IGST. Applicable CGST/SGST/IGST, however, shall be leviable on
35
Provisions of section 25(4) have been discussed in detail in Chapter 9 – Registration in
Module 2 of this Study Material

repairs and maintenance done for such conveyance [Circular No. 1/1/2017
IGST dated 07.07.2017].
Thus, in the given case, inter-State movement of trucks from the workshop of
Gagan Engineering Pvt. Ltd. located in Haryana to its repair centres located
in other States is ‘neither a supply of goods nor supply of service’.
14. Services by way of grant of alcoholic liquor license by the State Governments
have been notified to be treated neither as a supply of goods nor as a supply
of service. Such licence is granted against consideration in the form of licence
fee or application fee or by whatever name it is called.
Thus, in the given case, the grant of alcoholic liquor license by the Tamil Nadu
Government to Sarvanna & Sons is neither a supply of goods nor a supply of
service.

CROSSWORD PUZZLE
1
2 3
4 5
6 7 8 9
10
11 12 13
14 15
16
17
18 19

ACROSS
2. Actionable claims, other than ______ , betting and gambling is neither supply
of goods nor supply of services.
6. Non-taxable territory means the territory which is ________ the taxable
territory.
13. ________ transfer or permitting use or enjoyment of any intellectual property
right is supply of services.
14. Business includes ____________.
16. Persons shall be deemed to be _________ if they are legally recognised

partners.
17. Services means anything other than goods, ________ and securities.
18. Taxable supply means a supply of goods or services or both which is ______ to
tax under CGST Act.
DOWNWARDS
1. ________ supply means two or more individual supplies made in conjunction

with each other for a single price where such supply does not constitute a
composite supply.
2. Sale of ______ is neither supply of goods nor supply of services.
3. Any lease, ___________, easement, licence to occupy land is supply of services.
4. Any transfer of ______ in goods is supply of goods.
5. ______ of immovable property is supply of services.

7. ____________ supply means a supply comprising of two or more taxable
supplies naturally bundled and supplied in conjunction with in the ordinary
course of business.
8. Manufacture means processing of raw material in any manner that results in
emergence of a new product having a ______name and character.
9. Admission of persons to any premises for a consideration is also included
in_________.

10. Taxable territory means the territory to which the _______ of CGST Act apply .
11. Supply should be made in the ______or furtherance of business.
12. Government means the ________ Government.
15. Any _______that is held for its numismatic value is not money.
19. Principal-agent relationship falls within the ambit of the Para 3 of Schedule I
of the CGST Act, 2017 if invoice is issued in the name of _________.
Scan the following QR code for accessing the answers to MCQs in Quiz T ime
and Cross word puzzle of this chapter.
Scan the code


CHAPTER a
3
CHARGE OF GST
LEARNING OUTCOMES

❑ explain the extent and commencement of CGST Act, IGST Act,
SGST Act & UTGST Act.
❑ describe the provisions pertaining to levy and collection of
CGST & IGST.
❑ identify and analyse the services on which tax is payable
under reverse charge mechanism.
❑ comprehend and analyse the composition levy - eligibility for
the same and conditions to be fulfilled.

CHAPTER OVERVIEW
Levy and collection of

GST in India Extent and commencement of CGST
Act/ UTGST Act/ SGST Act/IGST Act
Levy and collection of CGST/IGST
Composition levy
1. INTRODUCTION
Power to levy tax is drawn from the Constitution of India. To pave way for the
introduction of Goods and Services Tax (“GST”), 101st Constitutional Amendment
Act, 2016 was passed. By virtue of this Act, enabling provision was made to levy
GST on supply of goods or services or both in India. Central excise duty, State VAT
and certain State specific taxes and service tax were subsumed into a
comprehensive GST [Discussed in detail in Chapter-1: GST in India – An Introduction
in this Module of the Study Material].
The very basis for the charge of tax in any taxing statute is the taxable event i.e the
occurrence of the event which triggers levy of tax. As discussed earlier, the taxable
event under GST is SUPPLY [Discussed in detail in Chapter – 2: Supply under GST in
this Module of the Study Material]. CGST and SGST/UTGST are levied on all intra-
State supplies of goods and/or services while IGST is levied on all inter-State
supplies of goods and/ or services.
The provisions relating to levy and collection of CGST and IGST are contained in
section 9 of the CGST Act, 2017 and section 5 of the IGST Act, 2017, respectively.
Let us now have a fundamental idea of intra-State supply and inter-State supply.
As a general rule, where the location of the supplier and the place of supply of
goods or services are in the same State/Union
territory, it is treated as intra-State supply of
goods or services respectively.

CHARGE OF GST a 3.3 a
Similarly, where the location of the supplier and the place of supply of goods or
services are in (i) two different States or (ii) two
different Union Territories or (iii) a State and a
Union territory, it is treated as inter-State supply of goods or services
respectively.
The concepts of ‘place of supply’ and meaning of the ‘location of the supplier’
have been elaborated in the next chapter, Chapter 4 – Place of Supply, in this Module
of the Study Material. Consequently, the meaning of terms ‘inter-State supply’ and
‘intra-State supply’ has been explained in detail in that chapter.
It is important to note that at intermediate level, provisions pertaining to
import and export of goods and/or services have not been covered. These
provisions will be discussed in detail at the Final level.
❑ Central tax: means the central goods and services tax levied under section
9 of the CGST Act [Section 2(21)].
❑ Integrated tax: means the integrated goods and services tax levied under
❑ State tax: means the tax levied under any State Goods and Services Tax Act
[Section 2(104)].
❑ Goods: means every kind of movable property other than money and
attached to or forming part of the land which are agreed to be severed before
supply or under a contract of supply. [Section 2(52)].
❑ Electronic Commerce: means the supply of goods or services or both
including digital products over digital or electronic networks. [Section 2(44)]
❑ Electronic Commerce Operator: means any person who owns, operates or
manages a digital or electronic facility or platform for electronic commerce.
[Section 2(45)]
❑ Exempt supply: means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act, and includes
non-taxable supply [Section 2(47)].Non-taxable supply: means a supply of
goods or services or both which is not leviable to tax under this Act or under
the Integrated Goods and Services Tax Act [Section 2(79)].

❑ Aggregate turnover: means the aggregate value of all taxable supplies

(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-State supplies of persons having the same Permanent Account
be computed on all India basis but excludes central tax, State tax, Union
territory tax, integrated tax and cess [Section 2(6)].
❑ Prescribed: means prescribed by rules made under this Act on the
recommendations of the council. [Section 2(87)]
❑ Business: includes –
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any
other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to (a) above;
(c) any activity or transaction in the nature of (a) above, whether or not there is volume,
frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital assets and services in connection
with commencement or closure of business;
(e) provision by a club, association, society, or any such body for a subscription or any
other consideration) of the facilities or benefits to its members, as the case may be;
(f) admission, for a consideration, of persons to any premises; and
(g) services supplied by a person as the holder of an office which has been accepted by
him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or
activities of a licensed book maker in such club;
(i) any activity or transaction undertaken by the Central Government, a State Government
or any local authority in which they are engaged as public authorities
[Section 2(17)].
❑ Consideration: in relation to the supply of goods or services or both
includes:
✓ any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply of


Government or a State Government,
✓ the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government.
However, a deposit given in respect of the supply of goods or services or both
shall not be considered as payment made for such supply unless the supplier
applies such deposit as consideration for the said supply [Section 2(31)].
❑ Person: includes [Section 2(84)]-
An individual A HUF A company
An association of persons or
A Limited Liability a body of individuals,
A firm
Partnership whether incorporated or not,
in India or outside India
Any corporation established Any body corporate A co-operative society

by/under any Central, State or
incorporated by or registered under any law
Provincial Act or Government
company as defined in section under the laws of a relating to cooperative
2(45) of Companies Act, 2013 country outside India societies
Central Society as defined

A local authority Government/State under the Societies
Government Registration Act, 1860
Every artificial juridical

Trust person, not falling
above

❑ Recipient: of supply of goods and/or services means-

or both, the person who is liable to pay that consideration,
(b) where no consideration is payable for the supply of goods, the
person to whom the goods are delivered or made available, or to
whom possession or use of the goods is given or made available,
and
construed as a reference to the recipient of the supply and shall include
an agent acting as such on behalf of the recipient in relation to the goods
❑ Registered Person: means a person who is registered under section 25 but
does not include a person having unique identity number.
❑ Reverse charge: means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services
or both under section 9(3)/9(4), or under section 5(3)/5(4) of the IGST Act
[Section 2(98)].
❑ Services: means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged [Section 2(102)].
Explanation.––For the removal of doubts, it is hereby clarified that the
expression “services” includes facilitating or arranging transactions in
securities.
❑ Supplier: in relation to any goods or services or both, shall mean the
person supplying the said goods or services or both and shall include an
agent acting as such on behalf of such supplier in relation to the goods

❑ Taxable supply: means a supply of goods and/or services which is

leviable to tax under CGST Act [Section 2(108)].
❑ Taxable person: means a person who is registered or liable to be registered

under section 22 or section 24 of the CGST Act [Section 2(107)].
It is important to note that a person who is liable to be registered but

does not take a registration and remains an unregistered person shall be
construed as a taxable person. Similarly, a person not liable to be
registered, but has taken voluntary registration and got himself registered
is also a taxable person.
Section 22 enumerates the persons liable to be registered under CGST Act and section
24 lists the persons liable to be registered compulsorily under the GST law. The said
sections and the concept of taxable person thereto has been discussed in detail in
Chapter 9 – Registration in Module 2 of this Study Material.
3. EXTENT & COMMENCEMENT OF GST LAW

(i) Central Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the CGST Act].
India: “India” means [Section 2(56) of CGST Act]-

territory of India as referred to in article 1 of the Constitution
its territorial waters, seabed and sub-soil underlying such waters,

continental shelf, exclusive economic zone or any other maritime
zone as referred to in the Territorial Waters, Continental Shelf,
Exclusive Economic Zone and other Maritime Zones Act, 1976
the air space above its territory and territorial waters
24 200
12
NM NM
NM
Territoria
l Waters
(TWI) Contiguous High Sea
Zone
Exclusive Economic Zone

Baseline s
Continental Shelf
(ii) State GST law of the respective State/Union Territory with Legislature [Delhi,
Puducherry and Jammu & Kashmir]* extends to whole of that State/Union
Territory.
(1) Maharashtra GST Act, 2017 extends to whole of the State of the
Maharashtra.
*State: includes a Union territory with Legislature [Section 2(103) of the CGST
Act].
(iii) Integrated Goods and Services Tax Act, 2017 extends to the whole of India
[Section 1 of the IGST Act].

(iv) Union Territory Goods and Services Tax Act, 2017 extends to the Union
territories** of the Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli and Daman and Diu, Ladakh 1, Chandigarh and other territory,
i.e. the Union Territories without Legislature [Section 1 of the UTGST Act].
**Union territory: means the territory of—
means the territory of—
(a) the Andaman and Nicobar Islands;

(b) Lakshadweep;
(c) Dadra and Nagar Haveli and Daman and Diu;
(d) Ladakh
(e) Chandigarh; and
(f) other territory.
Explanation––For the purposes of this Act, each of the territories specified in

sub-clauses (a) to (f) shall be considered to be a separate Union territory
[Section 2(114) of CGST Act].
Quiz
Quiz
time!
Time! Sudhakar Enterprises has undertaken an intra-State
supply of taxable goods. CGST and UTGST will be
payable on said supply provided the supply is made
1 within _________________________.
(b) Jammu &

(a) Delhi (b) Puducherry (c) Ladakh
Kashmir
1
Students may note that the erstwhile State of Jammu and Kashmir has been reorganised
into the Union territory of Jammu and Kashmir (with Legislature) and Union territory of
Ladakh vide the Jammu and Kashmir Reorganisation Act, 2019. Further, the erstwhile Union
territories of Dadra and Nagar Haveli and Daman and Diu have been merged into a new
Union territory of Dadra and Nagar Haveli and Daman and Diu vide the Dadra and Nagar
Haveli and Daman and Diu (Merger of Union Territories) Act, 2019.

Our discussion in this Study Material will principally be confined to the

provisions of CGST and IGST laws as the specific State GST laws are outside
the scope of syllabus.
4. LEVY & COLLECTION OF CGST & IGST

[SECTION 9 OF THE CGST ACT & SECTION 5 OF
THE IGST ACT]
Section 9 of the Levy and collection (CGST)

CGST Act, 2017
Sub-section Particulars
(1) Subject to the provisions of sub-section (2), there shall be

levied a tax called the central goods and services tax on all
intra-State supplies of goods or services or both, except on
the supply of alcoholic liquor for human consumption, on the
value determined under section 15 and at such rates, not
exceeding twenty per cent., as may be notified by the
Government on the recommendations of the Council and
collected in such manner as may be prescribed and shall be
paid by the taxable person.
(2) The central tax on the supply of petroleum crude, high speed
diesel, motor spirit (commonly known as petrol), natural gas
and aviation turbine fuel shall be levied with effect from such
date as may be notified by the Government on the
recommendations of the Council.
(3) The Government may, on the recommendations of the

Council, by notification, specify categories of supply of
goods or services or both, the tax on which shall be paid

on reverse charge basis by the recipient of such goods or

services or both and all the provisions of this Act shall
apply to such recipient as if he is the person liable for
paying the tax in relation to the supply of such goods or
services or both.

Council, by notification, specify a class of registered
persons who shall, in respect of supply of specified
categories of goods or services or both received from an
unregistered supplier, pay the tax on reverse charge basis
as the recipient of such supply of goods or services or both,
and all the provisions of this Act shall apply to such
recipient as if he is the person liable for paying the tax in
relation to such supply of goods or services or both.
(5) The Government may, on the recommendations of the Council,

by notification, specify categories of services the tax on intra-
State supplies of which shall be paid by the electronic commerce
operator if such services are supplied through it, and all the
provisions of this Act shall apply to such electronic commerce
operator as if he is the supplier liable for paying the tax in
relation to the supply of such services.
Provided that where an electronic commerce operator does
not have a physical presence in the taxable territory, any
person representing such electronic commerce operator for
any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce
operator does not have a physical presence in the taxable
territory and also he does not have a representative in the
said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay tax.

Section 5 of the Levy and Collection of Tax (IGST)

IGST Act, 2017
(1) Subject to the provisions of sub-section (2), there shall be

levied a tax called the integrated goods and services tax on
all inter-State supplies of goods or services or both; except on
the supply of alcoholic liquor for human consumption, on the
value determined under section 15 of the Central Goods and
Services Tax Act and at such rates, not exceeding forty per
cent., as may be notified by the Government on the
recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the taxable
person.
(2) The integrated tax on the supply of petroleum crude, high

speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel shall be levied with
effect from such date as may be notified by the Government
on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council,

by notification, specify categories of supply of goods or services
or both, the tax on which shall be paid on reverse charge basis
by the recipient of such goods or services or both and all the
provisions of this Act shall apply to such recipient as if he is the
person liable for paying the tax in relation to the supply of such

Council, by notification, specify a class of registered persons
who shall, in respect of supply of specified categories of goods
or services or both received from an unregistered supplier,
pay the tax on reverse charge basis as the recipient of such
supply of goods or services or both, and all the provisions of
this Act shall apply to such recipient as if he is the person

liable for paying the tax in relation to such supply of goods

or services or both

Council, by notification, specify categories of services, the
tax on inter-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied
through it, and all the provisions of this Act shall apply to
such electronic commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such
services.
Provided that where an electronic commerce operator does
not have a physical presence in the taxable territory, any
person representing such electronic commerce operator for
any purpose in the taxable territory shall be liable to pay
tax.
Provided further that where an electronic commerce
operator does not have a physical presence in the taxable
territory and also does not have a representative in the
said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay tax.
ANALYSIS
Central Goods and Services Tax (CGST) shall be levied on all intra-State supplies of
goods or services or both 2.
The tax shall be collected in such manner as may be prescribed and shall be paid
by the taxable person. However, intra-State supply of alcoholic liquor for human
consumption is outside the purview of CGST.
2
IGST is leviable on import of goods and on import of services.

Value for levy: Transaction value under section 15 of the CGST Act– Discussed in
detail in Chapter 7 – Value of supply in this Module of Study Material.
Rates of CGST: Rates for CGST are rates as may be notified by the Government on
the recommendations of the GST Council. [Discussed in detail subsequently in this
Chapter]. Maximum rate of CGST can be 20%.
💡In case of inter-State supplies of goods and/or services, Integrated Goods and
Services Tax (IGST) is levied on the transaction value under section 15 of the CGST
Act. Since alcoholic liquor for human consumption is outside the purview of GST
law, IGST is also not leviable on the same. IGST is the sum total of CGST and
SGST/UTGST. The maximum rate of IGST can be 40%.
However, CGST/IGST on supply of the following items has not yet been levied. It
shall be levied with effect from such date as may be notified by the Government on
the recommendations of the Council:
❑ petroleum crude
❑ high speed diesel
❑ motor spirit (commonly known as petrol)
❑ natural gas and
❑ aviation turbine fuel
Tax payable on supply of goods or services or both under reverse charge
CGST/IGST shall be paid by the recipient of goods or services or both, on reverse
charge basis, in the following cases:
❑ Supply of such goods or services or both, as notified by the Government on
the recommendations of the GST Council.
❑ Supply of specified categories of goods or services or both by an

unregistered supplier to specified class of registered persons, as notified by
the Government on recommendation of GST Council.
All the provisions of the CGST Act/ IGST Act shall apply to the recipient in the
aforesaid cases as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both. Let us first understand the concept of
reverse charge mechanism:

Generally, the supplier of goods or services is liable to pay GST. However, under
the reverse charge mechanism, the liability to pay GST is cast on the recipient of
the goods or services.
Reverse charge means the liability to pay tax is on the recipient of supply of goods
or services instead of the supplier of such goods or services in respect of notified
categories of supply [Section 2(98)].
It may be noted that the underlying principle of an indirect tax is that burden of tax
has to be ultimately passed on to the recipient. GST being an indirect tax, this
principle holds good for GST. Under normal circumstances, the statutory liability to
deposit GST and undertake compliances [i.e. to obtain registration under GST, deposit
the tax with the Government, filing returns, etc.] is on the supplier while he may recover
the same from its recipient. However, under reverse charge mechanism, the
statutory liability to deposit GST and undertaking compliance requirements, [i.e. to
obtain registration under GST, deposit the tax with the Government, filing returns, etc.] shifts
from supplier to recipient.
There are two types of reverse charge scenarios provided in law.
(i) First scenario occurs in case of supply of specified categories of goods or
services, covered by section 9(3) of the CGST/ SGST (UTGST) Act. Similar
provisions are contained under section 5(3) of the IGST Act.
(ii) Second scenario occurs in case of supply of specified categories of goods
or services made by an unregistered supplier to specified class of
registered recipients, covered by section 9(4) of the CGST Act. Similar
provisions are contained under section 5(4) of the IGST Act. Goods
and services notified under this case have been discussed subsequently in
this chapter.
Goods and services notified under reverse charge mechanism under section
9(3) of the CGST Act/ section 5(3) of the IGST Act are as follows:
A. Supplies of goods taxable under reverse charge, i.e. supply of the
goods where tax is payable by the recipient: Goods like cashewnuts
[not shelled/peeled], bidi wrapper leaves, tobacco leaves and raw cotton

(when supplied by an agriculturist to any registered person), supply of

lottery (when supplied by State Government, Union Territory or any local
authority to lottery distributor or selling agent), silk yarn (when supplied
by manufacturer of silk yarn to any registered person), used vehicles,
seized and confiscated goods, old and used goods, waste and scrap (when
supplied by Central Government, State Government, Union Territory or
any local authority to any registered person), priority sector lending
certificate – when supplied by registered person to any registered person,
etc. are taxable under reverse charge 3.
B. Supply of services taxable under reverse charge under section 9(3) of
the CGST Act, i.e. the services where tax is payable by the recipient:
Notification No. 13/2017 CT (R) dated 28.06.2017 as amended has notified
the following categories of supply of services wherein whole of the tax
shall be paid on reverse charge basis by the recipient of services:
S. Category of supply Supplier of Recipient of

No. of services service Service
1. Supply of services by a Goods Transport (a) Any factory

Goods Transport Agency (GTA) registered
Agency (GTA) in under or
respect of governed by
transportation of the Factories
goods by road to- Act, 1948; or
(a) any factory (b) any society
registered registered
under or under the
governed by the Societies
Factories Act, Registration
1948; or Act, 1860 or
(b) any society under any
registered other law for
under the the time
3
Examples of goods on which tax is payable by the recipient under reverse charge have been
given hereunder only for the knowledge of the students. These are not relevant for
examination purposes.

Societies being in force

Registration Act, in any part of
1860 or under India; or
any other law (c) any co-
for the time operative
being in force in society
any part of established by
India; or or under any
(c) any co- law; or
operative (d) any person
society registered
established by under the
or under any CGST Act or
law; or the IGST Act
(d) any person or the SGST
registered Act or the
under the CGST UTGST Act; or
Act or the IGST (e) any body
Act or the SGST corporate
Act or the established,
UTGST Act; or by or under
(e) any body any law; or
corporate (f) any
established, by partnership
or under any firm whether
law; or registered or
(f) any partnership not under any
firm whether law including
registered or association of
not under any persons; or
law including (g) any casual
association of taxable
persons; or person;
(g) any casual located in the
taxable person. taxable territory.
[Hereinafter referred as
Specified recipients]

However, reverse charge mechanism (RCM) shall not apply to

services provided by a GTA, by way of transport of goods in a
goods carriage by road to-
(a) a Department/ establishment of the Central Government/
State Government/ Union territory; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the CGST Act only for the
purpose of deducting tax under section 51 4 and not for making a
taxable supply of goods or services 5.
Further, nothing contained in this entry shall apply where, -
i. the supplier has taken registration under the CGST Act,
2017 and exercised the option to pay tax on the services
of GTA in relation to transport of goods supplied by him
under forward charge; and
ii. the supplier has issued a tax invoice to the recipient
charging CGST at the applicable rates and has made the
prescribed declaration on such invoice issued by him.
2. Services provided by An individual Any business entity

an individual advocate including located in the
advocate including a a senior advocate taxable territory.
senior advocate or or firm of
firm of advocates by advocates.
way of legal services,
directly or indirectly.
“Legal service” means
any service provided
in relation to advice,
consultancy or
4
Provisions relating to tax deducted at source contained in section 51 shall be discussed in
Chapter 14 – Tax Deduction at Source and Collection of Tax at Source.
5
These services have been simultaneously exempted from GST vide entry 21B of Notification
No. 12/2017 CT(R) dated 28.06.2017. Thus, there will be no tax liability in this case. [Refer
Chapter 5: Exemptions from GST in this Module of the Study Material for discussion on this
exemption].

assistance in any
branch of law, in any
manner and includes
representational
services before any
court, tribunal or
authority.
3. Services supplied by An arbitral tribunal. Any business entity

an arbitral tribunal located in taxable
to a business entity. territory.
4. Services provided by Any person Any body corporate

way of sponsorship or partnership firm
to any body corporate located in the
or partnership firm. taxable territory.
5. Services supplied by Central Any business entity

the Central Government, State located in the
Government, State Government, taxable territory.
Government, Union Union territory or
territory or local local authority
authority to a
business entity
excluding, -
(1) renting of
immovable
property, and
(2) services
specified below-
(i) services by
the
Department
of Posts;
(ii) services in
relation to
an aircraft
or a vessel,
inside or

outside the
precincts of
a port or an
airport;
(iii) transport of
goods or
passengers.
5A. Services supplied by Central Any person

Central Government, Government, State registered under
State Government, Government, the CGST Act, 2017
Union territory or Union territory or
local authority by way local authority
of renting of
immovable property
to a person
registered under
CGST Act, 2017
5AA. Service by way of Any person Any registered

renting of residential person
dwelling to a
registered person
6. Services supplied by A director of a Company or a body

a director of a company or a body corporate located in
company/ body corporate the taxable
corporate to the said territory.
company/body
corporate.
7. Services supplied by An insurance agent Any person carrying

an insurance agent on insurance
to any person carrying business, located in
on insurance business. the taxable territory.
8. Services supplied by A recovery agent A banking

a recovery agent company/financial
to a banking company institution or a non-

or a financial banking financial

institution or a non- company, located in
banking financial the taxable territory.
company.
9. Supply of services by a Music composer, Music company,

music composer, photographer, producer or the like,
photographer, artist artist, or the like located in the
or the like by way of taxable territory.
transfer or permitting
the use or enjoyment
of a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original dramatic,
musical or artistic
works to a music
company, producer
or the like.
9A. Supply of services by Author Publisher located in

an author by way of the taxable
transfer or permitting territory.
the use or enjoyment
of a copyright covered
under section 13(1)(a)
of the Copyright Act,
1957 relating to
original literary works
to a publisher.
However, an author can choose to pay tax under forward

charge if-
(i) he has taken registration under the CGST Act and filed a
declaration, in the prescribed form, that he exercises the
option to pay CGST on the said service under forward charge
in accordance with section 9(1) and to comply with all the
provisions as they apply to a person liable for paying the tax

in relation to the supply of any goods and/or services and that

he shall not withdraw the said option within a period of 1 year
from the date of exercising such option;
(ii) he makes a declaration on the invoice issued by him in
prescribed form to the publisher.
10. Supply of services by Members of RBI

the members of Overseeing
Overseeing Committee
Committee to constituted by the
Reserve Bank of India RBI
(RBI)
11. Services supplied by Individual Direct A banking company

individual Direct Selling Agents or a NBFC, located
Selling Agents (DSAs) other than a in the taxable
(DSAs) other than a body corporate, territory
body corporate, partnership or LLP
partnership or limited firm
liability partnership
(LLP) firm to bank or
non-banking
financial company
(NBFCs).
12. Services provided by Business facilitator A banking

business facilitator company, located in
to a banking taxable territory
company.
13. Services provided by An agent of A business

an agent of business business correspondent,
correspondent to correspondent located in the
business taxable territory.
correspondent.
14. Security services Any person other A registered person,

(services provided by than a body located in the
way of supply of corporate taxable territory.

security personnel)
provided to a
registered person.
However, nothing
contained in this entry
shall apply to:
(i) (a) a Department
or
Establishmen
t of the
Central
Government
or State
Government
or Union
territory; or
(b) local
authority; or
(c) Governmental
agencies;
which has
taken
registration
under the
CGST Act,
2017 only for
the purpose
of deducting
tax under
section 51 of
the said Act
and not for
making a
taxable
supply of
goods or
services; or

(ii) a registered
person paying tax
under
composition
scheme.
15. Services provided by Any person, other Any body corporate

way of renting of any than a body located in the
motor vehicle corporate who taxable territory.
designed to carry supplies service to a
passengers where the body corporate &
cost of fuel is doesn’t issue an
included in the invoice charging
consideration CGST @ 6% to
charged from the service recipient.
service recipient,
provided to a body
corporate.
16. Services of lending of Lender i.e., a Borrower i.e., a

securities under person who person who
Securities Lending deposits securities borrows the
Scheme, 1997 6 registered in his securities under the
(“Scheme”) of name/in the name Scheme through an
Securities and of any other person approved
Exchange Board of duly authorised on intermediary of
India, as amended his behalf with an SEBI.
approved
intermediary for
the purpose of
lending under
Scheme of SEBI
🔔 All the above services have also been notified for reverse charge under
IGST Act vide Notification No. 10/2017 IT (R) dated 28.06.2017 as
6
Circular No. 116/35/2019 GST dated 11.10.2019 explaining the GST implication on security
lending mechanism under Securities Lending Scheme, 1997 has been covered at the Final level.

amended. In addition to them, following service is also notified by said

notification under reverse charge for IGST purposes:
Any service supplied by any person who is located in a non-taxable territory
to any person located in the taxable territory other than non-taxable online
recipient7 located in taxable territory. Thus, in case of import of service, tax
is payable by the person importing such service 8.
For purpose of the notification notifying the above services under
reverse charge mechanism, following explanations shall apply-
(a) The person who pays or is liable to pay freight for the transportation of
goods by road in goods carriage, located in the taxable territory shall
be treated as the person who receives the service for the purpose of
this notification.
(b) Body Corporate: has the same meaning as assigned to it in clause (11)
of section 2 of the Companies Act, 2013.
As per section 2(11) of the Companies Act, 2013, body corporate or
corporation includes a company incorporated outside India, but does
not include—
(i) a co-operative society registered under any law relating to
co-operative societies; and
(ii) any other body corporate (not being a company as defined in this
Act), which the Central Government may, by notification, specify
in this behalf.
(c) the business entity located in the taxable territory who is litigant,
applicant or petitioner, as the case may be, shall be treated as the
person who receives the legal services for the purpose of this
notification.
7
The concept of non-taxable online recipient has been discussed at the Final level.
8
Following service has also been notified under reverse charge vide Notification No. 10/2017 IT
(R) dated 28.06.2017 for IGST purposes:
Services supplied by a person located in non- taxable territory by way of transportation of goods
by a vessel from a place outside India up to the customs station of clearance in India to an
importer located in the taxable territory. Said service has not been covered at the Intermediate
level and shall be covered at the Final level.

(d) the words and expressions used and not defined in reverse charge
notification but defined in the CGST Act, the IGST Act, and the UTGST
Act shall have the same meanings as assigned to them in those Acts.
(e) Limited Liability Partnership formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 shall also be
considered as a partnership firm or a firm.
(f) Insurance agent means an insurance agent licensed under section 42
of the Insurance Act, 1938 who receives agrees to receive payment by
way of commission or other remuneration in consideration of his
soliciting or procuring insurance business including business relating to
the continuance, renewal or revival of policies of insurance [Section
2(10) of the Insurance Act, 1938].
(g) Renting of immovable property means allowing, permitting or
granting access, entry, occupation, use or any such facility, wholly or
partly, in an immovable property, with or without the transfer of
possession or control of the said immovable property and includes
letting, leasing, licensing or other similar arrangements in respect of
immovable property.
(h) the provisions of reverse charge notification, in so far as they apply to
the Central Government, State Government, shall also apply to the
Parliament and State Legislature, Courts and Tribunals.
GTA services are taxable at the following two rates:

(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) where GTA
has not taken the Input Tax Credit (ITC) on goods or
services used in supplying GTA service (there can be
either of the cases - where GTA exercises the option to itself pay GST
at said rate or /does not exercise the option to itself pay GST at said
rate, on services supplied by it) or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where GTA exercises the option
to itself pay GST at said rate on services supplied by it. In this case,

there is no restriction on availing ITC on goods or services used in

supplying GTA service by GTA.
In the following paras, we have explained as to who is the person liable to
pay tax in case of each of the above two rates:
Person liable to pay tax under GTA service where

Recipient** is one of the Specified Recipients
Registered GTA exercises the option to GTA does not exercise the option to
itself pay tax
itself pay tax
@ 12% @ 5% GST is payable @ 5%
Forward charge Forward charge Reverse charge
Person liable to pay Person liable to Person liable to pay GST

GST is GTA pay GST is GTA is recipient
Note - Where recipient is other than the specified recipients (Unregistered

individual end consumer or unregistered casual taxable person), GST will be
exempt – Discussed in detail in Chapter 5 – Exemptions under GST in this
Module of the Study Material.
** Recipient of GTA service is the person who pays/is liable to pay freight for
transportation of goods by road in goods carriage, located in the taxable
territory.
Service by way of renting of any motor vehicle designed to

carry passengers where the cost of fuel is included in the
consideration charged from the service recipient are
taxable at the following two rates:
(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided supplier of
services has taken only the limited ITC (of input services in the same
line of business) or

(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where supplier of services
opts to pay GST at said rate. In this case, there is no restriction on
availing ITC on goods or services used in supplying renting of motor
vehicles service by the supplier of service.
In the following paras, we have explained as to who is the person liable to
pay tax in case of each of the above two rates 9:
Person liable to pay tax under renting of motor vehicle service
Where GST is payable @ 5% Where GST is payable @

12%
Supplier is other than Supplier is Body

Body Corporate Corporate
Recipient is a Recipient is other Forward charge

Body Corporate than Body Corporate
Person liable to pay GST

Reverse charge is Supplier
**
Person liable to pay GST is Recipient
**
It is important to note here that when any service is placed under RCM, the supplier
shall not charge any tax from the service recipient as this is the settled procedure
under RCM. Thus, the notification specifies that RCM is applicable here only when
the supplier does not issue an invoice charging GST @12% (6% CGST+6%
SGST/UTGST or 12% IGST) from the service recipient.
9
Entry 15 of Notification No. 13/2017 CT (R) dated 28.06.2017 read with Circular No.
130/49/2019 GST dated 31.12.2019

Now there may arise a doubt as to whether RCM is applicable on:

(i) service of renting of motor vehicle designed to carry passengers
or
(ii) service of transportation of passengers.
It is clarified10 that there is a clear distinction between the two services which
is as under:
A. The two services fall under two different headings in the Tariff.
B. (i) Services of renting of motor vehicles designed to carry passengers
covers:
• renting of motor vehicle
• for transport of passengers
• for a period of time
• where the renter defines how and when the vehicles will be
operated, determining schedules, routes and other
operational considerations.
(ii) ‘Passenger transport services’ covers passenger transport services
over pre-determined routes on pre-determined schedules.
Accordingly, where the body corporate hires the motor vehicle (for transport
of employees etc.) for a period of time, during which the motor vehicle shall
be at the disposal of the body corporate, the service would fall under ‘services
of renting of motor vehicles designed to carry passengers’, and the body
corporate shall be liable to pay GST on the same under RCM.
Thus, reverse charge would apply on act of renting of vehicles by body
corporate and in such a case, it is for the body corporate to use in the manner
as it likes subject to agreement with the person providing vehicle on rent.
However, where the body corporate avails the passenger transport service for
specific journeys or voyages and does not take vehicle on rent for any
particular period of time, the service would fall under ‘passenger transport
services’ and the body corporate shall not be liable to pay GST on the same
under RCM.
10
vide Circular No. 177/09/2022 GST dated 03.08.2022

In order to determine the leviability of tax on the remuneration paid to the

directors, we first need to ascertain whether the director is an employee of the
company or not. Following two situations are possible:
(i) Services provided by the independent directors 11/those directors (by
whatever name called) who are not employees of the said company to such
company, in lieu of remuneration as the consideration for the said services,
are clearly outside the scope of Schedule III of the CGST Act12 and are
therefore taxable. As seen in the table given above illustrating the reverse
charge services (Entry No. 6), such remuneration paid to the directors is
taxable in hands of the company, on reverse charge basis.
(ii) In case where it is ascertained that a director, irrespective of name and
designation, is an employee, next step would be to examine whether all the
activities performed by the director are in the course of employer-employee
relation (i.e. a “contract of service”) or is there any element of “contract for
service”.
The part of director’s remuneration which are declared as Salaries in the books
of a company and subjected to TDS under section 192 of the Income-tax Act (IT
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 Para 1 of
Schedule III. Further, the part of employee director’s remuneration which is
declared separately other than salaries in the company’s accounts and subjected
to TDS under section 194J of the IT Act as fees for professional or technical services
are treated as consideration for providing services which are outside the scope
of Schedule III and is therefore, taxable. Besides, as already discussed, the
recipient of the said services i.e. the company, is liable to discharge the applicable
GST on it on reverse charge basis 13.
11
The definition of “independent directors” under section 149(6) of the Companies Act,
2013 read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 makes it
amply clear that the independent director should not have been an employee of the company.
12
As per Para 1 of Schedule III of the CGST Act, services by an employee to the employer in
the course of or in relation to his employment are non-supplies, i.e. they are neither supply
of goods nor supply of services. The provisions of Schedule III of the CGST Act have been
discussed in detail in Chapter 2 – Supply under GST in this Module of the Study Material.
13
as clarified vide Circular No. 140/10/2020 GST dated 10.06.2020

Quiz
Quiz
time!
Time!
Sindhu Transporters, an unregistered Goods Transport
Agency, provides the services of transportation of goods
by road to Bindusaar Manufacturers, registered under GST.
2 GST is payable by ___________ @ ___________, in the given
case.
(b) Bindusaar
(a) Sindhu (b) Sindhu (c) Bindusaar
Manufacturers;
Transporters; 5% Transporters; 12% Manufacturers; 5%
12%
Quiz
Quiz Nilanchal Chamber of Commerce organized a business
time!
Time! summit. Safal Private Limited, a manufacturer of
readymade garments, sponsored the summit and paid a
sponsorship fee of ` 1,20,000 to Nilanchal Chamber of
3 Commerce. Mr. Godbole, an independent director of Safal
Private Limited, provided the services worth ` 50,000 to the
company. The value on which Safal Private Limited is liable
to pay GST is ____________.
(a) ` 1,20,000 (b) ` 1,70,000 (c) ` 50,000 (b) Nil
Electronic Commerce Operator (ECO) is any

person who owns/operates/manages an electronic
platform for supply of goods/services/both.
Sometimes, ECO itself supplies the goods or services

or both through its electronic portal. However, many
a times, the products/services displayed on the electronic portal are actually
supplied by some other person to the consumer.

When a consumer places an order for a particular product/ service on this electronic
portal, the actual supplier supplies the selected product/ service to the
consumer. The price/ consideration for the product/ service is collected by the ECO
from the consumer and passed on to the actual supplier after the deduction of
commission by the ECO.
The Government may, on the recommendations of the

GST Council, notify specific categories of services the tax
[CGST/SGST/IGST] on supplies of which shall be paid by
the electronic commerce operator (ECO) if such
services are supplied through it. Such services shall be
notified on the recommendations of the GST Council.
Notification No. 17/2017 CT (R) dated 28.06.2017/ Notification No. 14/2017
IT (R) dated 28.06.2017 as amended has notified the following categories of
services supplied through ECO for this purpose –
(a) services by way of transportation of passengers by a radio-taxi, motorcab,
maxicab, motor cycle, omnibus or any other motor vehicle;
(b) services by way of providing accommodation in hotels, inns, guest houses,
clubs, campsites or other commercial places meant for residential or lodging
purposes, except where the person supplying such service through electronic
commerce operator is liable for registration under section 22(1) of the
CGST Act.
(c) services by way of house-keeping, such as plumbing, carpentering etc, except
where the person supplying such service through electronic commerce
operator is liable for registration under sub-section 22(1) of the CGST Act.
(d) supply of restaurant service other than the services supplied by

restaurant, eating joints etc. located at specified premises.
Meaning of various terms
(i) Radio taxi: means a taxi including a radio cab, by whatever name called,
which is in two- way radio communication with a central control office and
is enabled for tracking using Global Positioning System (GPS) or General
Packet Radio Service (GPRS).

(ii) Maxi cab: means any motor vehicle constructed or adapted to carry more
than 6 passengers, but not more than 12 passengers, excluding the driver,
for hire or reward.
Motor cab: means any motor vehicle constructed or adapted to carry not
more than 6 passengers excluding the driver for hire or reward.
Motor car: means any motor vehicle other than a transport vehicle,
omnibus, road-roller, tractor, motor cycle or invalid carriage.
Omnibus means any motor vehicle constructed or adapted to carry
more than 6 persons excluding the driver.
(iii) ‘Specified premises’ would mean premises providing hotel

accommodation service having declared tariff of any unit of
accommodation above ` 7,500 per unit per day or equivalent.
It is important to note here

that the above provision shall
apply only in case of supply of
services.
Tax on above services supplied through ECO shall be paid by the ECO. All the
provisions of the CGST/IGST Act shall apply to such ECO as if he is the supplier
liable for paying the tax in relation to the supply of above services.
The ECO may, on services notified under section 9(5), including on restaurant
service provided through ECO, pay GST, by furnishing the details in Form
GSTR-3B14, reporting them as outward taxable supplies.
14
Provisions relating to GST return in Form GSTR-3B have been discussed in Chapter 15 –
Returns in Module 2 of this Study Material.

In this regard, following issues have been clarified:

(i) ECOs not to collect TCS in respect of restaurant services so notified
ECOs will no longer be required to collect TCS (Tax Collected at Source)

and file Form GSTR-815 in respect of restaurant services on which it pays
tax in terms of section 9(5)16.
(ii) ECOs not required to take separate registration for paying tax on
restaurant service supplied through them
As ECOs are already registered in accordance with rule 8 (as a supplier
of their own goods or services), there would be no mandatory
requirement of taking separate registration by ECOs for payment of tax
on restaurant service under section 9(5).
(iii) ECO to pay tax on any restaurant services supplied through them
ECOs will be liable to pay GST on any restaurant service supplied through
them including services supplied by an unregistered person.
(iv) Supply of restaurant services to be included in aggregate turnover of
person supplying restaurant services through ECO
It is clarified that the aggregate turnover of person supplying restaurant
service through ECOs shall be computed in accordance with definition of
aggregate turnover under section 2(6) and shall include the aggregate
value of supplies made by the restaurant through ECOs. Accordingly, for
threshold consideration or any other purpose in the CGST Act, the person
providing restaurant service through ECO shall account for such services
in his aggregate turnover.
15
Provisions relating to Statement for tax collection at source in Form GSTR-8 have been
discussed in Chapter 15 – Returns in Module 2 of this Study Material.
16
Provisions relating to TCS contained in section 52 have been discussed in Chapter 14 – Tax
Deduction at Source and Collection of Tax at Source in Module 2 of this Study Material.

(v) Restaurant services provided through ECO not to be considered as inward

supply for ECOs liable to RCM
ECOs are not the recipient of restaurant service supplied through them.
Since these are not input services to ECO, these are not to be reported
as inward supply (liable to reverse charge) in Form GSTR-3B.
(vi) Reversal of proportionate ITC on input goods and services not required
by ECO
ECOs provide their own services as an electronic platform and as an
intermediary for which it would acquire inputs/input service on which
ECOs avail input tax credit (ITC). The ECO charges commission/fee etc.
for the services it provides. The ITC is utilised by ECO for payment of GST
on services provided by ECO on its own account (say, to a restaurant).
The situation in this regard remains unchanged even after ECO is made
liable to pay tax on restaurant service. ECO would be eligible to ITC as
before. Accordingly, it is clarified that ECO shall not be required to
reverse ITC on account of restaurant services on which it pays GST in
terms of section 9(5). It may also be noted that on restaurant service, ECO
shall pay the entire GST liability in cash (No ITC could be utilised for
payment of GST on restaurant service supplied through ECO).
(vii) GST to be paid by the supplier on services not notified under section 9(5)
of CGST Act but supplied through ECO
In respect of supplies not notified under section 9(5) but supplied through
ECO, the liability to pay GST continues on such supplier and ECO shall
continue to deposit TCS on such supplies.
(viii) ECO to raise invoice in respect of restaurant service supplied through ECO
The invoice in respect of restaurant service supplied through ECO under
section 9(5) will be issued by ECO.
(ix) Billing in case of ‘restaurant service’ and goods/services other than

restaurant service being sold by a restaurant to a customer under the
same order
There can a situation where ‘restaurant service’ and goods or services
other than restaurant service are sold by a restaurant to a customer

under the same order. The question arises as to who shall be liable for
raising invoices in such cases.
Considering that liability to pay GST on supplies

other than ‘restaurant service’ through the ECO,
and other compliances under the CGST Act,
including issuance of invoice to customer,
continues to lie with the respective suppliers (and
ECOs being liable only to collect tax at source (TCS) on such supplies), it
is advisable that ECO raises separate bill on restaurant service in such
cases where ECO provides other supplies to a customer under the same
order17.
Person liable to pay GST for above specified services when supplied
through ECO
If the ECO is located in taxable Person liable to pay tax is the ECO
territory
If the ECO does not have physical Person liable to pay tax is the person
presence in the taxable territory representing the ECO
If the ECO has neither the physical Person liable to pay tax is the person
presence nor any representative in the appointed by the ECO for the purpose
taxable territory of paying the tax
In order to determine the rate applicable on a particular supply of goods or services,

one needs to first determine the classification of such goods or services.
Classification of goods and services assumes significance since there are different
rates prescribed for supply of different goods and services. Therefore, classification
is crucial for determining the rate of tax applicable on a particular product or
service.
17

Classification of goods
Classification of goods means identification of the chapter, heading, sub-heading
and tariff item in which a particular product will be classified.
Sections
Chapter
Heading
Sub-heading
Tariff item
Chapter, heading, sub-heading and tariff item are referred in the Schedules of rate
notification for goods under GST are the Chapter, heading, sub-heading and tariff
item of the First Schedule to the Customs Tariff Act, 1975. Indian Customs Tariff is
based on HSN. HSN stands for Harmonized System of Nomenclature. It is a
multipurpose international product nomenclature developed by the World
Customs Organization (WCO) for the purpose of classifying goods across the World
in a systematic manner. It comprises of about 5,000 commodity groups; each
identified by a 6 digit code [code can be extended], arranged in a legal and logical
structure and is supported by well-defined rules to achieve uniform classification.
India has extended the HSN codes upto 8-digits.
Along the lines of HSN, the Indian Customs Tariff has a set of Rules of Interpretation
of the First Schedule and General Explanatory notes. These rules and the general
explanatory notes give clear direction as to how the nomenclature in the schedule
is to be interpreted. These Rules for Interpretation including section and chapter

notes and the General Explanatory Notes of the First Schedule 1819 apply to the
interpretation of the rate notification for goods under GST also.
Consequently, under GST, goods are classified on the basis of HSN in accordance
with the Rules for the Interpretation of the Customs Tariff.
Once classification for a product has been determined on this basis, applicable rate
has to be determined as per the rate prescribed in the rate notification issued under
GST.
Classification of services
A new Scheme of Classification of Services has been devised under GST. It is a
modified version of the United Nations Central Product Classification. Under this
scheme, the services of various descriptions have been classified under various
sections, headings and groups. Chapter 99 has been assigned for services. This
chapter has following sections:
Section 5 Construction Services

Section 6 Distributive Trade Services; Accommodation, Food and Beverage Service;
Transport Services; Gas and Electricity Distribution Services
Section 7 Financial and related services; real estate services; and rental and leasing
services
Section 8 Business and Production Services
Section 9 Community, social and personal services and other miscellaneous

services
18
The provisions relating to Customs Act and Customs Tariff Act will be discussed at Final
Level.
19
Sections: A group of Chapters representing a particular class of goods.Chapters:
Each section is divided into various chapters and sub-chapters. Each chapter contains
goods of one class.
Chapter notes: They are mentioned at the beginning of each chapter. These notes are
part of the statute and hence have the legal authority in determining the
classification of goods.
Heading: Each chapter and sub-chapter is further divided into various headings.
Sub-heading: Each heading is further divided into various sub-headings.

Each section is divided into various headings which are further divided into Groups.
Its further division is made in the form of ‘Tariff item’/ Service Codes.
Chapter
Section
Heading
Group
Tariff item/Service Code
Rate of tax is determined in accordance with the Service Code in which the service
is classified.
Broadly, six rates of CGST have been notified in six Schedules of

rate notification for goods, viz., 0.125%, 1.5%, 2.5%, 6%, 9% and
GST rates
14%. SGST/ UTGST at the equivalent rate is also leviable. With
for goods
regard to IGST, broadly six rates have been notified in six
Schedules of rate notification for goods, viz., 0.25%, 3%, 5%, 12%,
18% and 28%20. Certain specified goods have been exempted from tax.
Broadly, six rates of CGST have been notified for services, viz.,
GST rates
0.75%, 2.5%, 3.75%, 6%, 9% and 14%21. Equivalent rate of
for services
SGST/ UTGST will also be levied. For IGST, six rates have been
notified for services, viz., 1.5%, 5%, 7.5%, 12%, 18% and
28%2223. For certain specified services, nil rate of tax has been notified.
20
Students may refer the CBIC website for the complete Schedule of GST Rates for goods for
knowledge purposes. Rates for goods have been notified vide Notification No. 1/2017 CT (R)
dated 28.06.2017.
21
notified vide Notification No. 11/2017 CT (R) dated 28.06.2017
22
notified vide Notification No. 8/2017 IT (R) dated 28.06.2017
23
Students may refer the CBIC website for the complete Schedule of GST Rates for services
for knowledge purposes.

Services of gambling, services by way of admission to (a) casinos or race clubs or

any place having casinos or race clubs or (b) sporting events like IPL, services
provided by a race club by way of totalisator or a license to bookmaker in such
club, gambling etc. attract the highest rate of 28% (CGST @ 14% and SGST @ 14%
or IGST @ 28%).
A number of services are subject to a lower rate of 5% (CGST @ 2.5% and SGST @
2.5% or IGST @ 5%). For instance, GTA service is taxed @ 5% subject to the
condition that credit of input tax charged on goods/services used in supplying said
service has not been taken. Similarly, tax rate for supply of restaurant service, other
than at ‘specified premises 24’, is 5% without any input tax credit.
Services not covered under any specific heading are taxed at the rate of 18%
(CGST @ 9% and SGST @9% or IGST @ 18%).
In the following paras, applicability of GST in real estate sector has been briefly
discussed:
GST rates in real estate sector
The effective rate of GST on real estate sector for the new projects by promoters
are as follows:
(i) 1% without ITC on construction of affordable houses (area 60 sqm in
metros/ 90 sqm in non-metros and value upto ` 45 lakh).
(ii) 5% without ITC is applicable on construction of:

(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real
estate project (RREP) in which the carpet area of commercial
apartments is not more than 15% of total carpet area of all
apartments.
24
“Specified premises” means premises providing “hotel accommodation” services having
declared tariff of any unit of accommodation above ` 7,500 per unit per day or equivalent.

Conditions:
Above tax rates shall be available subject to following conditions:
(a) ITC shall not be available.
(b) 80% of inputs and input services [other than services by way of grant of
development rights, long term lease of land (against upfront payment in the form of
premium, salami, development charges etc.) or FSI (including additional FSI), electricity,
high speed diesel, motor spirit, natural gas] ,
used in supplying the service shall
be purchased from registered persons 25.
However, if value of inputs and input services purchased from registered
supplier is less than 80%, promoter has to pay GST
on reverse charge basis, under section 9(4) Supply of services
[discussed earlier], at the rate of 18% on all such notified under
inward supplies (to the extent short of 80% of the section 9(4)
inward supplies from registered supplier).
Further, where cement is received from an unregistered person, the promoter
shall pay tax on supply of such cement on reverse charge basis, under section
9(4), at the applicable rate which is 28% (CGST 14% + SGST 14%) at present.
Moreover, GST on capital goods shall be paid by the promoter on reverse
charge basis, under section 9(4) of the CGST Act at the applicable rates
[Notification No. 07/2019 CT (R) dated 29.03.2019/ Notification No. 07/2019
IT (R) dated 29.03.2019].
5. COMPOSITION LEVY [SECTION 10 OF THE

CGST ACT]
Section 10 Composition levy
(1) Notwithstanding anything to the contrary contained in this Act
but subject to the provisions of sub-sections (3) and (4) of section
25
Discussion in above paras highlighted in blue is solely for the purpose of knowledge of the
students and is not meant for examination purposes.

9, a registered person, whose aggregate turnover in the preceding

financial year did not exceed fifty lakh rupees, may opt to pay, in
lieu of the tax payable by him under sub-section (1) of section 9,
an amount of tax calculated at such rate as may be prescribed,
but not exceeding,––
a one percent.26 of the turnover in State or turnover in Union
territory in case of a manufacturer
b two and a half per cent. of the turnover in State or
turnover in Union territory in case of persons engaged in
making supplies referred to in clause (b) of paragraph 6
of Schedule II, and
c half per cent. of the turnover in State or turnover in
Union territory in case of other suppliers
subject to such conditions and restrictions as may be
prescribed.
Provided that the Government may, by notification, increase the
said limit of fifty lakh rupees to such higher amount, not exceeding
one crore and fifty lakh rupees27, as may be recommended by the
Council.
Provided further that a person who opts to pay tax under clause
(a) or clause (b) or clause (c) may supply services (other than those
referred to in clause (b) of paragraph 6 of Schedule II), of value not
exceeding ten percent of turnover in a State or Union territory in
the preceding financial year or five lakh rupees, whichever is
higher.
Explanation - For the purposes of second proviso, the value of
exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by
way of interest or discount shall not be taken into account for
determining the value of turnover in a State or Union territory.
26
Rate of tax prescribed in case of a manufacturer is half percent of the turnover in State /UT.
The same has been discussed in detail in subsequent paras.
27
The turnover limit for composition levy has been increased from ` 50 lakh to ` 1.5 crore
vide Notification No. 14/2019 CT dated 07.03.2019.

(2) The registered person shall be eligible to opt under sub-section (1),
if–
(a) save as provided in sub-section (1), he is not engaged in
the supply of services
(b) he is not engaged in making any supply of goods or
services which are not leviable to tax under this Act
(c) he is not engaged in making any inter-State outward
supplies of goods or services
(d) he is not engaged in making any supply of goods or services
through an electronic commerce operator who is required to
collect tax at source under section 52;
(e) he is not a manufacturer of such goods as may be notified by
the Government on the recommendations of the Council;
and
(f) he is neither a casual taxable person nor a non-resident
taxable person.
Provided that where more than one registered persons are having
the same Permanent Account Number (issued under the Income-
tax Act, 1961), the registered person shall not be eligible to opt
for the scheme under sub-section (1) unless all such registered
persons opt to pay tax under that sub-section.
(2A) Notwithstanding anything to the contrary contained in this Act,
but subject to the provisions of sub-sections (3) and (4) of section
9, a registered person, not eligible to opt to pay tax under sub-
section (1) and sub-section (2), whose aggregate turnover in the
preceding financial year did not exceed fifty lakh rupees, may opt
to pay, in lieu of the tax payable by him under sub-section (1) of
section 9, an amount of tax calculated at such rate as may be
prescribed, but not exceeding three per cent. of the turnover in
State or turnover in Union territory, if he is not––
(a) engaged in making any supply of goods or services which
are not leviable to tax under this Act;
(b) engaged in making any inter-State outward supplies of
goods or services;

(c) engaged in making any supply of goods or services through

an electronic commerce operator who is required to collect
tax at source under section 52;
(d) a manufacturer of such goods or supplier of such services
as may be notified by the Government on the
recommendations of the Council; and
(e) a casual taxable person or a non-resident taxable person.
Provided that where more than one registered person are having
the same Permanent Account Number issued under the Income-
tax Act, 1961, the registered person shall not be eligible to opt for
the scheme under this sub-section unless all such registered
persons opt to pay tax under this sub-section.
(3) The option availed of by a registered person under sub-section
(1) or sub-section (2A), as the case may be, shall lapse with effect
from the day on which his aggregate turnover during a financial
year exceeds the limit specified under sub-section (1) or sub-
section (2A), as the case may be.
(4) A taxable person to whom the provisions of sub-section (1) or, as
the case may be, sub-section (2A) apply shall not collect any tax
from the recipient on supplies made by him nor shall he be
entitled to any credit of input tax.
(5) If the proper officer has reasons to believe that a taxable person
has paid tax under sub-section (1) or sub-section (2A), as the case
may be despite not being eligible, such person shall, in addition
to any tax that may be payable by him under any other provisions
of this Act, be liable to a penalty and the provisions of section 73
or section 74 shall, mutatis mutandis, apply for determination of
tax and penalty.
Explanation 1 –– For the purposes of computing aggregate
turnover of a person for determining his eligibility to pay tax
under this section, the expression “aggregate turnover” shall
include the value of supplies made by such person from the 1st
day of April of a financial year upto the date when he becomes
liable for registration under this Act, but shall not include the
value of exempt supply of services provided by way of extending

deposits, loans or advances in so far as the consideration is

represented by way of interest or discount.
Explanation 2 –– For the purposes of determining the tax payable
by a person under this section, the expression “turnover in State
or turnover in Union territory” shall not include the value of
following supplies, namely:––
(i) supplies from the first day of April of a financial year upto
the date when such person becomes liable for registration
under this Act; and
(ii) exempt supply of services provided by way of extending
deposits, loans or advances in so far as the consideration is
ANALYSIS
(1) Overview of the Scheme
The composition levy is an alternative method of levy
of tax designed for small taxpayers whose turnover is Voluntary and
optional scheme
up to a prescribed limit. The objective of composition
scheme is to bring simplicity and to reduce the
compliance cost for the small taxpayers.
Initially, the scheme
was designed to
benefit the small
traders, manufacturers
and restaurant service
providers. So, the scheme was
fundamentally for the suppliers of goods
and only for restaurant service providers (not supplying alcoholic liquor for
human consumption). However, subsequently, suppliers availing
composition scheme were permitted to supply other services also, though
only upto a small specified value. This scheme is contained in sub-sections
(1) and (2) of section 10 of the CGST Act (hereinafter referred to as
composition scheme for goods).

Under this scheme, suppliers of goods have the option to pay tax at the
concessional rate of 1% (CGST + SGST/UTGST) of the turnover and restaurant
service providers (not supplying alcoholic liquor for human consumption)
have the option to pay tax @ 5% (CGST + SGST/UTGST) of the
turnover. Small taxpayers with an aggregate turnover in the
preceding financial year up to ` 1.5 crore are eligible to pay tax
at these rates in the current financial year upto an aggregate
turnover of ` 1.5 crore. However, a person engaged exclusively in supply of
services other than restaurant service is not eligible for this composition
scheme stipulated under sub-sections (1) and (2).
In order to provide benefit of composition

scheme to persons engaged in supply of
services other than restaurant service whose
aggregate turnover in the preceding
financial year is up to ` 50 lakh, a scheme to pay tax @ 6% (CGST + SGST/UTGST)
of the turnover was introduced subsequently. A mixed supplier who is

primarily engaged in supplying services other than restaurant service along
with marginal supply of goods could also avail the benefit of this scheme. The
provisions of this scheme are contained in sub-section (2A) of section 10 28.
Essentially, the composition scheme under sub-section (2A) (hereinafter

referred to as composition scheme for services) is for small service
providers like salon stylist, tailors, etc. This scheme provides an option to
such suppliers to pay tax @ 6% of the turnover in the current financial year
upto an aggregate turnover of ` 50 lakh.
Suppliers opting for composition levy need not Easy compliance as

worry about the classification of their goods or no elaborate
services or both, the rate of GST applicable on accounts and records
to be maintained
28
This scheme was initially introduced with effect from 1 st April, 2019 vide Notification No.
2/2019 CT (R) dated 07.03.2019. With effect from 01.01.2020, the provisions of this scheme
have been incorporated in sub-section (2A) of section 10 vide the Finance (No. 2) Act, 2019.
It is important to note that Notification No. 2/2019 CT (R) dated 07.03.2019 has not yet been
rescinded and is still operational.

their goods and/ or services, etc. They are not required to raise any tax
invoice, but simply need to issue a Bill of Supply 29 wherein no tax will be
charged from the recipient.
Simple annual An eligible person opting to pay tax under the

return composition scheme shall, instead of paying tax on
Quarterly every invoice at the specified rate, pay tax at the
payment of tax prescribed percentage of his turnover every quarter
through prescribed form [Form GST CMP 08].
At the end of a quarter, he would pay the tax, without availing the benefit of
input tax credit. Return is to be filed annually by a composition supplier.
Registration under GST law is compulsory for opting for the composition
scheme.
The provisions relating to composition levy are contained in section 10 of

CGST Act, 2017 and Chapter-II [Composition Levy] of Central Goods and
Services Tax (CGST) Rules, 2017. The said rules have been incorporated in the
discussion in the following paras at the relevant places.
As seen above, section 10 stipulates two types of composition schemes –

Composition scheme
under section 10
Composition scheme provided Hereinafter referred to as

under sections 10(1) & 10(2) Composition scheme for goods
Hereinafter referred to as
Composition scheme provided
Composition scheme for
under section 10(2A)
services
Provisions relating to these schemes have been discussed in detail in

subsequent paras:
29
Discussed in detail in Chapter-10: Tax Invoice, Credit and Debit Notes in Module-2 of this
Study Material.

(2) Turnover limit for opting for composition levy [Section 10(1), 10(2A)
& 10(3)]
Turnover limit in case of composition levy for goods
Section 10(1) provides the turnover limit of ` 50 lakh
in the preceding financial year for becoming eligible
for composition levy for goods. However, proviso to Turnover limit is
section 10(1) empowers the Government to increase ` 1.5 crore
the said limit of ` 50 lakh upto ` 1.5 crore, on the
recommendation of the GST Council. In view of
said power of the Government, the turnover limit for composition levy for
goods has been increased from ` 50 lakh to ` 1.5 crore vide Notification
No. 14/2019 CT dated 07.03.2019.
However, the said notification further stipulates that the turnover limit for
composition levy for goods shall be ` 75 lakh in respect of 8 of the
Special Category States namely:
Special Category States
Arunachal Pradesh Mizoram
Uttarakhand Nagaland
Manipur Sikkim
Meghalaya Tripura
In case of Special Category States of Assam, Himachal Pradesh and

Jammu and Kashmir, the turnover limit will be ` 1.5 crore only.
Thus, if the aggregate turnover of a supplier in a State/UT other than
Special Category States (except Assam, Himachal Pradesh and Jammu and
Kashmir) is upto ` 1.5 crore in the preceding financial year, said supplier
is eligible for composition scheme for goods. Further, it is important to
note that the aggregate turnover is computed on all India basis for a person
having same Permanent Account Number (PAN) – Refer the definition of
aggregate turnover discussed in subsequent paras.

Arunachal Pradesh
Turnover Limit for composition levy for goods

Uttarakhand
Manipur
Meghalaya
` 75 lakh
Mizoram
Nagaland
Sikkim
Tripura
` 1.5 crore All other States/UTs
(2) A shoes’ dealer ‘Prithviraj’ has offices in Maharashtra and Goa.

He makes intra-State supply of goods from both these offices. In
order to determine whether ‘Prithviraj’ is eligible to avail benefit of
the composition scheme for goods, turnover of both the offices would be
taken into account and if the same does not exceed ` 1.5 crore in the
preceding financial year, ‘Prithviraj’ can opt to avail the composition levy
scheme (subject to fulfilment of other prescribed conditions) for goods for
both the offices in the current financial year.
Further, the option of a registered person to avail composition scheme for
goods shall lapse with effect from the day on which his aggregate
turnover during a financial year exceeds the threshold limit of ` 1.5 crore
[` 75 lakh in 8 specified special category States] [Section 10(3)].
Turnover limit in case of composition levy for services
Section 10(2A) provides the turnover limit of ` 50 lakh in the preceding
financial year for becoming eligible for composition levy for services.

(3) A hair stylist ‘Billoo Barber’ has his salon in Delhi and
Haryana, making intra-State supplies.
In order to determine whether ‘Billoo’ is eligible to avail benefit

of the composition scheme for services, turnover of both the salons would be
taken into account and if the same does not exceed ` 50 lakh in the preceding
financial year, ‘Billoo’ can opt to avail the composition levy scheme (subject
to fulfilment of other prescribed conditions) for services for both the salons
in the current financial year.
Further, the option of a registered person to

avail composition scheme for services shall
lapse with effect from the day on which his Turnover limit is
aggregate turnover during a financial year ` 50 lakh
exceeds the threshold limit of ` 50 lakh
[Section 10(3)].
To summarise, a registered person opting for

composition scheme for goods should have an
aggregate turnover upto ` 1.5 crore [` 75 lakh in 8
Summary specified Special Category States] in the preceding
FY and he can avail the benefit of said scheme 30 for
the current FY till the time his aggregate turnover in
the current FY does not exceed ` 1.5 crore/` 75 lakh.
Similarly, a registered person opting for composition scheme for services
should have an aggregate turnover upto ` 50 lakh in the preceding FY and
he can avail the benefit of said scheme for the current FY till the time his
aggregate turnover in the current FY does not exceed ` 50 lakh.
From the above discussion, it is apparent that the term aggregate turnover
is of utmost importance. So, let us understand this term in detail.
30
Intimation for opting to pay tax under composition scheme must be filed prior to the
commencement of the FY for which said option is exercised [Rule 3].

(3) Aggregate turnover under composition levy [Section 2(6) read with
explanation 1 to section 10]
The definition of aggregate turnover as contained in section 2(6) of the
CGST Act is analysed as follows:
The aggregate turnover is the sum of value of all outward supplies falling in
the following four categories:
❑ Taxable supplies
❑ Exempt supplies
❑ Exports of goods or services or both
❑ Inter-State supplies
It excludes:
❑ The value of inward supplies on which tax is payable by a person on
reverse charge basis
❑ Taxes including cess paid under GST law.
It is computed on all India basis for a person having same Permanent Account
Number (PAN).
Further, explanation 1 to section 10 clarifies that for the purposes of
computing aggregate turnover of a registered person for determining his
eligibility to pay tax under this section, aggregate turnover includes value
of supplies from 1st April of a FY up to the date of his becoming liable for
registration and excludes value of exempt supply of services provided by way
of extending deposits, loans or advances in so far as the consideration is
On combined reading of the aforesaid provisions, the method of computing
the aggregate turnover for the purpose of determining the eligibility of a
registered person for the composition scheme [for both goods and services]
can be depicted in a diagram as follows:

While computing the threshold limit of ` 1.5 crore/ ` 75 lakh / ` 50 lakh,

inclusions in and exclusions from ‘aggregate turnover’ are as follows:
Excludes
Includes --CGST/ SGST/ UTGST/ IGST/ Cess

Value of all outward supplies --Value of inward supplies on which tax is
--Taxable supplies payable under reverse charge.
--Exempt supplies
--Value of exempt supply of services
--Exports*
provided by way of extending deposits,
--Inter-State supplies*
of persons having the same PAN be loans or advances in so far as the
computed on all India basis. consideration is represented by way of
interest or discount
These also include
Value of supplies made by

registered person from 1 st April of a
FY up to the date when he becomes
liable for registration under this Act
*Note: The value of exports and inter-State supplies are relevant only while
determining the aggregate turnover of the preceding FY. These values are not
relevant for determining the aggregate turnover of the current FY in which the
composition supplier has opted for composition levy as he is not permitted to make
inter-State supplies and exports in the said FY 31.
(4) Rates of tax under the composition levy scheme [Section 10(1) and
section 10(2A) read with rule 7]
Rule 7 prescribes the rates at which tax is payable by a registered person

opting for composition levy – composition levy for goods and composition
levy for services.
31
Section 10(2)(c)

Rates of tax in case of composition levy for goods

A registered person opting for composition levy for goods shall pay tax
calculated at the prescribed rates [mentioned in table below] during the
current FY, in lieu of the tax payable by him under regular scheme:
S. No. Category of registered persons Rate of tax

1 Manufacturers, other than ½ %32 of the
manufacturers of notified goods, i.e. turnover in the
ice cream, pan masala, tobacco, State/Union territory
aerated waters, fly ash bricks; fly ash
aggregate, fly ash blocks, bricks of
fossil meals or similar siliceous
earths, building bricks, earthen or
roofing tiles.
2 Suppliers making supplies referred to in 2½ %33 of the
clause (b) of paragraph 6 of Schedule II turnover in the
[referred to as “Restaurant service” in State/Union territory
discussion under this chapter]
3 Any other supplier eligible for ½ %34 of turnover of
composition levy under section 10 of taxable supplies of
CGST Act and Chapter-II goods & services in
[Composition Levy] of CGST Rules. the State/Union
territory
Note - Students may note that the ‘aggregate turnover’ of preceding FY is relevant for
the purpose of determining eligibility to avail composition scheme, but the tax has to
be paid in accordance with the applicable rates on the ‘turnover’ (or ‘turnover of
taxable supplies’ in case of third category of registered persons above) in a State/UT.
The concept of ‘Turnover in the State/UT’ under the composition levy has been
explained subsequently in this chapter.
ILLUSTRATION 1
Taxpayer ‘Tolaram’ is a manufacturer who has opted for composition levy for
goods, having one unit – A1 in UP and another unit – A2 in MP. Total turnover of
32
Effective rate 1% (CGST+ SGST/UTGST)
33
34

two units in preceding FY was ` 115 lakh (` 85 lakh + ` 30 lakh). Turnover of units
A1 and A2 in the first quarter of current financial year is ` 5 lakh and ` 10 lakh
respectively. Compute the amount payable under composition levy under section
10(1) & 10(2) of the CGST Act, 2017 by ‘Tolaram’.
ANSWER
Unit Location Turnover in Turnover in Total tax (@1%)

previous FY 1st quarter
of this FY
A1 U.P. ` 85 lakh ` 5 lakh ` 5,000
A2 M.P. ` 30 lakh ` 10 lakh ` 10,000
Total ` 115 lakh ` 15 lakh ` 15,000
ILLUSTRATION 2
Taxpayer ‘Bholaram’ is a trader (who has opted for composition levy for goods) of
both taxable and exempted goods (goods exempted by way of a notification).
It has one retail showroom – A1 in Punjab and another retail showroom – A2 in
Rajasthan, both selling taxable as well as exempted goods. Total turnover
(including taxable and exempted goods) of the two showrooms in last FY was
` 115 lakh (` 85 lakh + ` 30 lakh respectively).
Turnover of showrooms A1 and A2 in the first quarter of current financial year is
` 35 lakh [A1 - ` 15 lakh (` 5 lakh from sale of taxable goods and ` 10 lakh from
sale of exempted goods) and A2 - ` 20 lakh (` 10 lakh from sale of taxable goods
and ` 10 lakh from sale of exempted goods)]. Compute the amount payable under
composition levy under section 10(1) & 10(2) of the CGST Act, 2017 by ‘Bholaram’.
ANSWER
Retail Location Turnover Taxable Total tax

showroom in previous turnover* in 1st (@1%)
FY quarter of this FY
A1 Punjab ` 85 lakh ` 5 lakh ` 5,000
A2 Rajasthan ` 30 lakh ` 10 lakh ` 10,000
Total ` 115 lakh ` 15 lakh ` 15,000

*Note: A supplier, other than manufacturer and restaurant service provider, eligible for
composition levy under section 10(1) & 10(2) has to pay tax @ 1% (CGST+ SGST) of
the turnover of only taxable supplies of goods and services in the State.
Rates of tax in case of composition levy for services
A registered person opting for composition levy for services shall pay tax
@ 3% [Effective rate 6% (CGST+ SGST/UTGST) ] of the turnover of supplies of
goods and services in the State or Union territory.
ILLUSTRATION 3
Taxpayer ‘Padmavati’ is a salon stylist, who has opted for composition levy for
services, having one branch – B1 in Vasant Kunj, Delhi and another branch –
B2 in Gurgaon, Haryana. Total turnover of the two branches in last FY was
` 45 lakh (` 25 lakh + ` 20 lakh respectively ). The turnover of branches B1 and
B2 in the first quarter of current financial year is ` 5 lakh and ` 10 lakh
respectively. Compute the amount payable under composition levy under
section 10(2A) of the CGST Act, 2017 by ‘Padmavati’.
ANSWER
Branch Location Turnover in Turnover in 1st Total tax

previous FY quarter of this FY (@6%)
B1 Delhi ` 25 lakh ` 5 lakh ` 30,000

B2 Haryana ` 20 lakh ` 10 lakh ` 60,000
Total ` 45 lakh ` 15 lakh ` 90,000
As seen above, since the tax under composition scheme has to computed as a
specified % of the turnover in State or turnover in Union territory, it is pertinent
to understand what is turnover in `State or turnover in Union territory.
(5) Turnover in State or turnover in Union territory under composition
levy [Section 2(112) read with explanation 2 to section 10]
As per section 2(112), turnover in State/ turnover in Union territory means the
aggregate value of all taxable supplies (excluding the
value of inward supplies on which tax is payable by a
person on reverse charge basis) and exempt
supplies made within a State or Union territory by
a taxable person, exports of goods or services or
both and inter-State supplies of goods or services or both made from the

State or Union territory by the said taxable person but excludes central tax,
State tax, Union territory tax, integrated tax and cess.
Further, explanation 2 to section 10 clarifies that for the purposes of
determining the tax payable by a person under this section, the
expression turnover in State or turnover in Union territory shall not include
the value of following supplies, namely:
(i) supplies from 1st April of a FY up to the date when such person
becomes liable for registration under this Act; and
(ii) exempt supply of services provided by way of extending deposits,
loans or advances in so far as the consideration is represented by
way of interest or discount.
On combined reading of the aforesaid provisions, the method of computing
the turnover in a State/UT for paying tax under the composition scheme
can be depicted in a diagram on the next page:
While computing the Turnover in a State/UT to pay tax under

composition levy, inclusions and exclusions are as follows:
Excludes
Includes
--CGST/ SGST/ UTGST/ IGST/ Cess
--All taxable supplies and exempt --Value of inward supplies on which tax
is payable under reverse charge.
supplies made within the State/UT*
--Value of supplies from the first day of
(While computing turnover in a April of a FY up to the date when such
State/UT of a supplier, other than person becomes liable for registration
manufacturer and restaurant service under this Act
provider, eligible for composition levy
--Value of exempt supply of services
for goods - trader, etc., the exempt
provided by way of extending deposits,
supplies will not be taken into
loans or advances in so far as the
consideration)
consideration is represented by way of
interest or discount

(4) A photographer ‘Champak’ has commenced providing

photography services in Delhi from April this year. His turnover
for various quarters till December is as follows:
April-June ` 20 lakh
July-Sept ` 30 lakh
Oct-Dec ` 20 lakh
In the given case, since Champak has started the supply of services in the
current financial year, his aggregate turnover in the preceding FY is Nil.
Consequently, in the current FY, he is eligible for composition scheme for
services. He becomes eligible for the registration when his aggregate
turnover exceeds ` 20 lakh.
While registering under GST, he opts for composition scheme for services.
For determining his turnover of the State for payment of tax under
composition scheme for services, 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], he 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, his aggregate turnover reaches ` 50 lakh*.
Consequently, his option to avail composition scheme for services shall
lapse by the end of July-Sept quarter and thereafter, he is required to
pay tax at the normal rate of 18%. Thus, the tax payable for Oct-Dec
quarter is ` 20 lakh × 18%, i.e. ` 3,60,000.
*while computing aggregate turnover for determining Champak’s 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
included.

(6) Who are NOT eligible to opt for composition scheme? [Section 10(2)
and (2A)]
Registered person who is not eligible for Registered person who is not eligible for
composition scheme for goods composition scheme for services
Supplier engaged in making any Supplier engaged in making any

supply of goods or services supply of goods or services
which are not leviable to tax which are not leviable to tax
Supplier engaged in making any Supplier engaged in making any

inter-State outward supplies of inter-State outward supplies of
goods or services goods or services
Person supplying any goods or Person supplying any goods or

services through an electronic services through an electronic
commerce operator who is commerce operator who is
required to collect tax at source required to collect tax at source
under section 52* under section 52*
Manufacturer of ice cream,

panmasala, tobacco, aerated
waters, fly ash bricks; fly ash Manufacturer of notified goods
aggregate, fly ash blocks, or supplier of notified services
bricks of fossil meals or
similar siliceous earths,
building bricks, earthen or
Supplier who is either a casual
roofing tiles.
taxable person or a non-resident
Supplier who is either a casual taxable taxable person.
person or a non-resident taxable
person
Supplier of services, save as provided in section

10(1) [Refer discussion below diagram]
*Section 52 relating to tax collected at source has been discussed in detail in Chapter 14 –
Tax Deduction at Source and Collection of Tax at Source in Module 2 of this Study Material.

There is no restriction on
composition supplier to receive
inter-State inward supplies of
goods or services.
A person engaged in marginal supply of services other than

restaurant service also eligible for composition levy for goods
[Second proviso to section 10(1) read with section 10(2)(a)]
Fundamentally, the composition scheme for goods can be availed in

respect of goods and only one service namely, restaurant service.
However, there are cases where a manufacturer/ trader is also engaged in
supply of services other than restaurant service though the percentage of
such supply of services is very small as compared to the supplies of goods.
There may also be cases where a restaurant service provider is also
engaged in supplying a small percentage of other services.
With a view to enable such taxpayers to avail of the benefit of composition

scheme for goods, second proviso to section 10(1) permits marginal
supply of services [other than restaurant services – not supplying alcoholic
liquor for human consumption] for a specified value along with the supply
of goods and/or restaurant service, as the case may be. This specified
value is value not exceeding:
(a) 10% of the turnover in a State/U.T. in the preceding financial year

or
(b) ` 5 lakh,
whichever is higher.
Thus, it can be inferred that where the turnover of a registered person

opting for composition scheme for goods is upto ` 50 lakh in the
preceding financial year, he can supply services [other than restaurant
services] upto a maximum value of ` 5 lakh in the current financial year.
Further, where the turnover of a registered person opting for composition

scheme is more than ` 50 lakh and upto ` 1.5 crore in the preceding
financial year, he can supply services [other than restaurant services] in
the current financial year upto a maximum value of 10% of the turnover
in a State/Union territory in the preceding financial year.
(5) Ramsewak is engaged in supply of goods. His turnover in
preceding FY is ` 60 lakh. Since his aggregate turnover in the
preceding FY does not exceed ` 1.5 crore, he is eligible for
composition scheme for goods in current FY. Further, in current FY, he can
supply services [other than restaurant services] upto a value of not exceeding:
(a) 10% of ` 60 lakh, i.e. ` 6 lakh
or
(b) ` 5 lakh,
whichever is higher.
Thus, he can supply services upto a value of ` 6 lakh in current FY. If the value
of services supplied exceeds ` 6 lakh, he becomes ineligible for the
composition scheme for goods and has to opt out of the same.
Interest income to be excluded for determining the value of

turnover in a State or Union territory under second proviso to
section 10(1) [Explanation to second proviso to section 10(1)]
Generally, businesses tend to save and invest money in the form of

deposits, loans or advances. However, this way they get engaged in
supply of service by way of extending deposits, loans or advances 35 – a
service other than restaurant service. And where the income from such
services cause the value of services 36 supplied to exceed the value referred
in second proviso to section 10(1) 37 [10% of the turnover in the preceding
FY in a State/Union territory or ` 5 lakh, whichever is higher], said business
35
It is, however, pertinent to note that services by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or discount are
exempt from GST – Discussed in detail in Chapter 5 – Exemptions from GST in this Module of
the Study Material.
36
other than restaurant services
37
as discussed in preceding paras

would have become ineligible for the composition scheme for goods and
one has to opt out of the composition scheme. This can cause a lot of
hardship to small businesses.
In view of the above, an explanation is inserted after second proviso to

section 10(1) to clarify that for the purposes of second proviso to section
10(1), the value of supply of exempt services by way of extending deposits,
loans or advances in so far as the consideration is represented by way of
interest or discount, shall not be taken into account for determining the
value of turnover in a State or Union territory.
Under second proviso to section 10(1), a registered person opting for

composition scheme may supply services [other than restaurant services] of
value not exceeding 10% of the turnover in the preceding financial year in a
State/Union territory or ` 5 lakh, whichever is higher. Thus, while computing
value of services [other than restaurant services] as referred in this
proviso, interest on loans/deposit/advances will not be taken into
account.
The provisions relating to composition levy discussed hereafter are
applicable to both composition levy for goods as well as composition levy
for services.
(7) Conditions and restrictions for composition levy [Rule 5]
Person opting for composition levy has to comply with the following
conditions:
❑ he shall pay tax under section 9(3)/9(4) 38 (reverse charge) on inward

❑ he is neither a casual taxable person nor a non-resident taxable

person
❑ he shall mention the words “composition taxable person, not eligible

to collect tax on supplies” at the top of the bill of supply issued by
him; and
38
wherever applicable

❑ he shall mention the words “composition taxable person”

on every notice or signboard displayed at a prominent
place at his principal place of business and at every
additional place or places of business.
Further, where the goods held in stock by him are liable to be taxed under
reverse charge under section 9(4)39, the tax thereon has been paid under
reverse charge under section 9(4).
In addition to the above conditions, a registered person opting for

composition scheme for goods must not be engaged in the
manufacture of goods as notified under section 10(2)(e), during the
preceding FY. The following goods have been hereby notified vide
Notification No. 14/2019 CT dated 07.03.2019 as amended:
Tariff item, Description

subheading, heading or
Chapter*
2105 00 00 Ice cream and other edible ice,

whether or not containing
cocoa
2106 90 20 Pan masala Pan Masala
39
This condition applies in case where a builder/promoter opting for composition scheme has
the stock of the goods on which he is required to pay GST on reverse charge basis under
section 9(4) in one or more of the following cases:
(i) Builder/promoter must purchase at least 80% of inputs and input services used in
supplying the service, from registered persons. In case of shortfall, he’s required to pay
tax under reverse charge on all such inward supplies (to the extent short of 80% of the
inward supplies from registered supplier).
(ii) Where cement is received from an unregistered person, promoter/builder has to pay tax
on supply of such cement under reverse charge and
(iii) GST on capital goods is payable by the promoter on reverse charge basis.

24 All goods, i.e. Tobacco and

manufactured tobacco
substitutes
2202 1010 Aerated Waters
6815 Fly ash bricks; fly ash aggregate; Fly ash

blocks
6901 00 10 Bricks of fossil meals or similar siliceous

earths
6904 10 00 Building bricks
6905 10 00 Earthen or roofing tiles
* as specified in the First Schedule to the Customs Tariff Act, 1975
(8) Intimation of opting for composition levy [Rules 3 & 4]
(i) Intimation by person applying for registration: Any person who

is not registered and applies for registration may give an option to
pay tax under composition levy in Part B of the registration form,
viz., Form GST REG-01. The same shall be considered as an
intimation to pay tax under composition levy. Such intimation shall
be considered only after the grant of registration to the applicant .
The option to pay tax under composition levy shall be effective

from the date from which registration is effective 40.
40
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
thirty days from such date.
Where an application for registration has been submitted by the applicant after the expiry of
thirty days from the date of his becoming liable to registration, the effective date of
registration shall be the date of the grant of registration. Discussed in detail in Chapter 9 –
Registration in Module 2 of this Study Material.

(ii) Intimation by a registered person: A registered person who opts

to pay tax under composition levy scheme shall electronically file
an intimation in prescribed form on the GST Common Portal
[www.gst.gov.in]. The intimation shall be filed prior to the
commencement of the FY for which said option is exercised.
He shall also furnish the statement in prescribed form in

accordance with the provisions of rule 44(4) of CGST Rules, 2017
[Discussed in detail in Chapter 8 – Input Tax Credit in Module 2 of this
Study Material] within 60 days from the commencement of the
relevant FY.
Any intimation in respect of any place of business in a State/UT shall

be deemed to be an intimation in respect of all other places of
business registered on the same PAN.
The option to pay tax under composition levy shall be effective

from the beginning of the FY.
A person applying for registration can opt for

composition at the time of applying for registration
Summary [this time being any time of the financial year] and
composition levy shall be effective from the date from
which registration is effective.
A registered person can opt for composition scheme from the

beginning of any FY and composition levy shall be effective from the
beginning of said FY. Intimation for opting to pay tax under
composition scheme must be filed prior to the commencement of the
FY for which said option is exercised.

composition levy
can opt for shall be effective
composition levy from
•at any time •the date from

during the year which
while applying registration is
for registration effective
Person applying
for registration
composition levy
can opt for shall be effective
composition levy from
•from the •the

beginning of beginning of
any FY said FY
Registered
person
(9) Validity of composition levy [Section 10(3) read with rule 6 41]
I. Withdrawal from the composition scheme by a taxpayer who

ceases to satisfy any of the prescribed conditions
❑ The option exercised by a registered person to pay amount under
composition levy shall remain valid so long as he satisfies all the
conditions mentioned in the relevant section and rules. For instance,
the option to pay tax under composition scheme lapses from the day
on which aggregate turnover of a registered person exceeds the
specified limit (` 1.5 crore/ ` 75 lakh/ ` 50 lakh) during the FY.
41
read with Circular No. 77/51/2018 GST dated 31.12.2018

❑ Such person is required to pay tax under regular scheme under

section 9(1) from the day he ceases to satisfy any of the conditions
prescribed for composition levy. He shall issue tax invoice for
every taxable supply made thereafter. Further, he is required to
file an intimation for withdrawal from the scheme in prescribed
form within 7 days of the occurrence of such event.
❑ The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his intimation, but such date may not be prior
to the commencement of the financial year in which such
intimation is being filed.
II. Withdrawal from the composition scheme by a taxpayer who

intends to withdraw from the said scheme
❑ The registered person who intends to withdraw from the
composition scheme shall, before the date of such withdrawal, file
an application in prescribed form.
❑ The effective date from which withdrawal from the
composition scheme shall take effect shall be the date
indicated by him in his application, but such date may not be prior
to the commencement of the financial year in which such
application for withdrawal is being filed.
III. Denial of option to pay tax under the composition scheme by tax
authorities
❑ Where the proper officer has reasons to believe that the
registered person was not eligible to pay tax under composition
scheme or has contravened the provisions of the CGST Act or
provisions of this Chapter, he may issue a show cause notice (SCN)
to such person. Upon receipt of reply to SCN, the proper officer
shall pass an order either accepting the reply or denying the
option to pay tax under composition scheme from the date of the
option or from the date of the event concerning such
contravention, as the case may be.

❑ In case of denial of option to pay tax under composition levy by

the tax authorities, the effective date of such denial shall be from
a date, including any retrospective date, as may be determined by
tax authorities. However, such effective date shall not be prior to the
date of contravention of the provisions of the CGST Act/ CGST Rules.
In each of the above cases, such person may furnish a statement in prescribed
form containing details of the stock of inputs and inputs contained in semi-
finished or finished goods held in stock by him on the date on which the
option is withdrawn/denied, within a period of 30 days from the date from
which the option is withdrawn/ or from the date of the order denying
composition scheme.
Any intimation or application for withdrawal or denial of the option to pay
tax under section 10 in respect of any place of business in any State or Union
territory, shall be deemed to be an intimation in respect of all other places of
business registered on the same PAN.
(6) A person availing composition scheme during a financial year
crosses the turnover of ` 1.5 crore on 9th of December. The option
availed shall lapse from the day on which his aggregate turnover
during the financial year exceeds ` 1.5 crore, i.e. on 9th December, in this case.
(10) Composition scheme to be adopted uniformly by all the registered
persons having the same PAN [Proviso to section 10(2) and proviso
to section 10(2A)]
All registered persons having the same Permanent Account Number (PAN)
have to opt for composition scheme. If one such registered person opts for
normal scheme, others become ineligible for composition scheme.
(7) A dealer ‘Kishorilal & Sons’ has two offices in Delhi and is
eligible for composition levy for goods. If ‘Kishorilal & Sons’ opts
for the composition scheme for goods, both the offices would pay
taxes under composition scheme and abide by all the conditions as may be
prescribed for the said composition scheme.
(11) Composition scheme supplier cannot collect tax [Section 10(4)]
Taxable person opting for the composition scheme shall not collect tax from
the recipient on supplies made by him. It implies that a composition scheme
supplier cannot issue a tax invoice.

(12) Composition scheme supplier cannot enter into credit chain [Section 10(4)]
Taxable person opting for the composition scheme shall not be entitled to
any credit of input tax.
(13) Imposition of penalty in case of irregular availment of the
composition scheme [Section 10(5)]
If a taxable person has paid tax under the composition scheme though he
was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 of the CGST Act shall be applicable for
determination of tax and penalty.
Quiz
Quiz
time!
Time!
A registered person _______________ is not eligible for
composition scheme even though his aggregate turnover
4 does not exceed ` 1.5 crore in preceding FY.
(b) making supply

(c) receiving any
(a) trading in pan (b) manufacturing of goods
inter-State inward
masala aerated waters exempted by way
supplies of goods
of a notification
Quiz
Quiz Alladin Electronics is engaged in intra-State supply of air-
time!
Time! conditioners and has an aggregate turnover of ` 90 lakh in
the preceding financial year. In the current financial year, it
wishes to opt for composition scheme under section 10(1)
5 and 10(2). It will start providing services of repairing of air
conditioners also from 1st April of current financial year.
Alladin Electronics can provide services upto the value of
_______ to continue availing benefit of composition levy, in
the current financial year.
(a) ` 5 lakh (b) ` 4.5 lakh (c) ` 10 lakh (b) ` 9 lakh

LET US RECAPITULATE
1. Extent & commencement of CGST Act/ SGST Act/ UTGST Act/ IGST Act
Applicability CGST SGST UTGST IGST
Intra-State supply Inter-State

supply
States of
India
Union
Territories
with
Legislature
Union
Territories
without
Legislature
2. Levy and collection of CGST/IGST
Particulars CGST IGST
Levied on Intra-State supplies of Inter-State supplies of

goods/services/both goods/services/both
Collected and Taxable person

paid by
Supply outside Alcoholic liquor for human consumption

purview of GST

Value for levy Transaction value under section 15 of the CGST Act
Rates Rates as notified by IGST rate= CGST rate + SGST

Government. rate/UTGST rate
Maximum rate of CGST Maximum rate of IGST can be
can be 20%. 40%.
Supplies on ❑ petroleum crude

which tax ❑ high speed diesel
would be ❑ motor spirit (commonly known as petrol)
levied w.e.f. a ❑ natural gas and
notified date ❑ aviation turbine fuel
Tax payable ❑ Supply of goods or services or both, notified by the

under reverse Government.
charge ❑ Supply of specified categories of goods or services
or both by an unregistered supplier to specified
class of registered persons.
Tax payable by The Government may notify specific categories of

the electronic services the tax on supplies of which shall be paid by
commerce electronic commerce operator (ECO) as if such services
operator are supplied through it.
3. Composition levy [Section 10]
Composition levy
Advantages
•An option for specified
categories of small •Low rates of tax
taxpayers to pay GST at •Hassel free simple procedures for such
a very low rate on the taxpayers
basis of turnover. •Simple calculation of tax based on turnover
•A very simple annual return

Composition levy provided

•Referred in this chapter as composition levy for
under section 10(1) and
goods
10(2)
Composition levy provided •Referred in this chapter as composition levy for

under section 10(2A) services
Procedure for opting for the scheme
Category of persons How to exercise Effective date of

option composition levy
New registration under Intimation in the From the effective date of

GST registration form registration
Registered person opting Intimation in Beginning of the financial

for composition levy prescribed form year
Turnover limit for composition levy
Turnover limit in preceding FY to opt for composition levy for goods
For Special Category States • ` 75 lakh

except Assam, Himachal Pradesh
and J&K
• ` 1.5 crore
For remaining States
Turnover limit in preceding FY to opt for composition levy for services
Turnover for composition • ` 50 lakh

levy for services

Rates of tax
Composition Category of Rate

scheme registered persons
For goods Manufacturer 1% (½% CGST + ½%

SGST/UTGST) of turnover
Restaurant service 5% (2½% CGST + 2½%

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

SGST/UTGST) of turnover of
taxable supplies
For services 6% (3% CGST + 3% SGST/UTGST)

of turnover
Conditions and restrictions for composition levy
Person opting for composition:
is neither a casual taxable person nor a non-resident taxable person
shall pay tax under section 9(3)/9(4) on inward supply
is not engaged in the manufacture of notified goods** (or notified services also in
case of composition scheme for services)
shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him
shall mention the words “composition taxable person” at a prominent place at his
place of business
** Goods notified for a registered person opting for composition scheme for goods
are ice cream, pan masala, tobacco, aerated waters fly ash bricks, fly ash aggregate,
fly ash blocks, bricks of fossil meals or similar siliceous earths, building bricks,
earthen or roofing tiles.

Who are NOT eligible to opt for composition scheme?
Registered person who is not eligible Registered person who is not

for composition scheme for goods eligible for composition scheme
for services
Supplier engaged in making any supply Supplier engaged in making any

of goods or services which are not supply of goods or services which
leviable to tax i.e. non-taxable supplies are not leviable to tax i.e. non-
taxable supplies
Supplier engaged in making any inter- Supplier engaged in making any

State outward supplies of goods or inter-State outward supplies of
services goods or services
Person supplying any goods or services Person supplying any goods or

through an electronic commerce services through an electronic
operator who is required to collect tax commerce operator who is required
at source under section 52 to collect tax at source under section
52
Manufacturer of ice cream, panmasala, Manufacturer of notified goods or

tobacco, aerated waters fly ash bricks, supplier of notified services
fly ash aggregate, fly ash blocks,
bricks of fossil meals or similar
siliceous earths, building bricks,
earthen or roofing tiles.
Supplier who is either a casual taxable Supplier who is either a casual
person or a non-resident taxable taxable person or a non-resident
person taxable person.
Supplier of services, save as provided in

section 10(1)**
**A registered person opting for composition scheme for goods is allowed to supply services
[other than restaurant services] alongwith supply of goods or supply of restaurant services
of value not exceeding 10% of the turnover in the preceding financial year in a State/Union
territory or ` 5 lakh, whichever is higher. Here, while computing turnover in a State/UT,
interest on loans/deposit/advances will not be taken into account.

Other points
Bill of supply shall be issued instead of tax invoice.
Tax shall not be collected from recipient of supply
Input tax credit shall not be availed
Composition Scheme not applicable for tax payable under RCM
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. State the person liable to pay GST in the following independent cases provided
recipient is located in the taxable territory:
(a) Services provided by an arbitral tribunal to any business entity.
(b) Sponsorship services provided by a company to an individual.
(c) Renting of immovable property service provided by the Central
Government to a registered business entity.
2. Vivek Goyal, an independent director, appointed in accordance with the
provisions of the Companies Act, 2013, of A2Z Pvt. Ltd., has received sitting fee
amounting to ` 1 lakh from A2Z Pvt. Ltd for attending the Board meetings.
Who is the person liable to pay tax in this case?
3. Raghu Associates provided sponsorship services to WE-WIN Cricket Academy
LLP. Determine the person liable to pay tax in this case.
4. Legal Fees is received by Sushrut, an advocate, from M/s. Tatva Trading
Company, engaged in making taxable supplies and located in Maharashtra,

having turnover of ` 50 lakh in preceding financial year. Who is the person

liable to pay tax in this case?
5. State the person liable to pay GST in the following independent cases provided
recipient is located in the taxable territory:
(a) Services supplied by an insurance agent to an insurance company.
(b) Services supplied by a recovery agent to a car dealer.
(c) Security services (services provided by way of supply of security
personnel) provided by a partnership firm to a registered person paying
tax under regular scheme.
6. Sultan & Sons, a partnership firm, based in Nagpur, Maharashtra is a
wholesaler of a taxable product ‘P’ and product ‘Q’ exempt by way of a
notification, only within the State of Maharashtra. Its aggregate turnover in
the preceding financial year is ` 130 lakh. The firm wishes to opt for
composition scheme under sub-sections (1) & (2) of section 10 in the current
financial year. However, its accountant is of the view that a person engaged in
making supply of exempt goods is not eligible for the said scheme. Discuss.
Note: Assume that Sultan & Sons is not engaged in manufacture of goods as
notified under section 10(2)(e).
7. A person availing composition scheme, under sub-sections (1) & (2) of section
10, in Haryana during a financial year crosses the turnover of ` 1.5 crore in the
month of December. Will he be allowed to pay tax under composition scheme
for the remainder of the year, i.e. till 31st March? Please advise.
8. Determine whether the suppliers in the following cases are eligible for
composition levy, under section 10(1) & 10(2), provided their turnover in
preceding year does not exceed ` 1.5 crore:
(i) Mohan Enterprises is engaged only in trading of pan masala in
Rajasthan and is registered in the same State.
(ii) Sugam Manufacturers has registered offices in Punjab and Haryana

and sells goods manufactured by it in the neighbouring States.
9. Subramanian Enterprises has two registered places of business in Delhi. Its
aggregate turnover in the preceding financial year for both the places of
business is ` 120 lakh. It wishes to pay tax under composition levy, under
section 10(1) & 10(2), for one of the places of business for the current financial

while continuing paying under normal levy for other. You are required to advice
Subramanian Enterprises whether he can do so?
10. Mr. Ajay has a repair centre, registered under GST, where electronic goods are
repaired/serviced. His repair centre is located in State of Rajasthan and he is
not engaged in making any inter-State supply of services. His aggregate
turnover in the preceding financial year (FY) is ` 45 lakh.
With reference to the provisions of the CGST Act, 2017, examine whether Mr.
Ajay can opt for the composition scheme under section 10(1) &10(2) for the
current financial year? Or whether he is eligible to avail benefit of composition
scheme under section 10(2A)? Considering the option of payment of tax
available to Mr. Ajay, compute the amount of total tax payable by him in the
current F.Y. assuming that his aggregate turnover in the current financial year
is ` 35 lakh.
Will your answer be different if Mr. Ajay procures few items required for
providing repair services from neighbouring State of Madhya Pradesh?
11. M/s United Electronics, a registered dealer, is supplying all types of electronic
appliances in the State of Karnataka. Its aggregate turnover in the preceding
financial year by way of supply of appliances is ` 120 lakh.
The firm also expects to provide repair and maintenance service of such
appliances from the current financial year.
With reference to the provisions of the CGST Act, 2017, examine:
(i) Whether the firm can opt for the composition scheme, under section 10(1)
and 10(2), for the current financial year, as the turnover may include
supply of both goods and services?
(ii) If yes, up to what amount, the services can be supplied?
ANSWERS/HINTS
1. (a) Since GST on services provided or agreed to be provided by an arbitral

tribunal to any business entity located in the taxable territory is payable
under reverse charge, in the given case, GST is payable by the recipient
- business entity.

(b) GST on sponsorship services provided by any person to any body

corporate or partnership firm located in the taxable territory is
payable under reverse charge. Since in the given case, services have
been provided to an individual, reverse charge provisions will not be
attracted. GST is payable under forward charge by the supplier –
company.
(c) GST on services supplied by Central Government, State Government,
Union territory or local authority by way of renting of immovable
property to a person registered under CGST Act, 2017 is payable
under reverse charge. Therefore, in the given case, GST is payable
under reverse charge by the recipient – registered business entity.
2. GST on supply of services by director of a company to the said company
located in the taxable territory is payable on reverse charge basis.
Therefore, in the given case, person liable to pay GST is the recipient of
services, i.e., A2Z Pvt. Ltd.
3. In case of services provided by any person by way of sponsorship to any body
corporate or partnership firm, GST is liable to be paid under reverse charge
by such body corporate or partnership firm located in the taxable territory.
Further, for the reverse charge purposes, Limited Liability Partnership formed
and registered under the provisions of the Limited Liability Partnership Act,
2008 is also be considered as a partnership firm.
Therefore, in the given case, WE-WIN Cricket Academy LLP is liable to pay
GST under reverse charge.
4. GST on legal services supplied by an advocate [Mr. Sushrut] to any business
entity [M/s. Tatva Trading Company] located in the taxable territory is payable
on reverse charge basis.
Therefore, in the given case, person liable to pay GST is the recipient of
services, i.e., M/s. Tatva Trading Company.
5. (a) GST on services supplied by an insurance agent to any person
carrying on insurance business located in the taxable territory is
payable under reverse charge. Therefore, in the given case, GST is
payable under reverse charge by the recipient – Insurance Company.

(b) GST on services supplied by a recovery agent to a banking company

or a financial institution or a non-banking financial company located
in the taxable territory is payable under reverse charge. However,
since, in the given case, services are being supplied by a recovery
agent to a car dealer, GST is payable under forward charge by the
service provider - recovery agent.
(c) GST on security services (services provided by way of supply of
security personnel) provided by any person other than a body
corporate to a registered person, located in the taxable territory is
payable under reverse charge. Therefore, in the given case, GST is
payable under reverse charge by the recipient – registered person
receiving the services.
6. The view taken by the accountant of Sultan & Sons is not valid in law. A
registered person with an aggregate turnover in a preceding financial year up
to ` 1.5 crore is eligible for composition levy, under section 10(1) & 10(2), in
Delhi. Further, such person must not be engaged in making any supply of
goods or services which are not leviable to tax under this Act and must not
be engaged in making any inter-State outward supplies of goods or services,
for being eligible to pay tax under said scheme.
In the given case, the aggregate turnover of Sultan & Sons does not exceed
` 1.5 crore. Further, it is engaged in making only intra-State supply of goods
and Product P supplied by it is taxable and Product Q supplied by it is leviable
to tax, though exempted by way of notification. Therefore, it is eligible for
composition levy under section 10(1) & 10(2) in the current year.
7. No. The option to pay tax under composition scheme lapses immediately
from the day on which the aggregate turnover of the person availing
composition scheme for goods during the financial year exceeds the specified
limit (` 1.5 crore). Once he crosses the threshold, he is required to file an
intimation for withdrawal from the scheme in prescribed form within 7 days
of the occurrence of such event.
Every person who has furnished such an intimation, may electronically furnish
at the common portal, a statement in prescribed form containing details of
the stock of inputs and inputs contained in semi-finished or finished goods

held in stock by him on the date on which the option is withdrawn, within a
period of 30 days from the date from which the option is withdrawn.
8. (i) A supplier engaged in the manufacture of goods as notified under
section 10(2)(e), during the preceding FY is not eligible for composition
scheme under section 10(1) and 10(2). Ice cream and other edible ice,
whether or not containing cocoa, Pan masala, Tobacco and
manufactured tobacco substitutes, aerated waters, fly ash bricks, fly ash
aggregate, fly ash blocks, bricks of fossil meals or similar siliceous
earths, building bricks, earthen or roofing tiles are notified under this
category. However, in the given case, since Mohan Enterprises is
engaged in trading of pan masala and not manufacture and his turnover
does not exceed ` 1.5 crore, he is eligible for composition scheme
subject to fulfilment of specified conditions.
(ii) Since supplier of inter-State outward supplies of goods or services
is not eligible for composition levy, Sugam Manufacturers is not
eligible for composition levy.
9. A registered person with an aggregate turnover in a preceding financial year
up to ` 1.5 crore is eligible for composition levy, under section 10(1) & 10(2),
in Delhi. Since the aggregate turnover of Subramanian Enterprises does not
exceed ` 1.5 crore, it is eligible for composition levy in the current year.
However, all registered persons having the same Permanent Account Number
(PAN) have to opt for composition scheme. If one such registered person opts
for normal scheme, others become ineligible for composition scheme. Thus,
Subramanian Enterprises either have to opt for composition levy for both the
places of business or under normal levy for both the places of business.
10. Section 10(1) provides that a registered person, whose aggregate turnover in
the preceding financial year did not exceed ` 1.5 crore (` 75 lakh in Special
Category States except Assam, Himachal Pradesh and Jammu and Kashmir),
may opt to pay, in lieu of the tax payable by him, an amount calculated at the
specified rates. However, as per proviso to section 10(1), person who opts
to pay tax under composition scheme may supply services other than
restaurant services, of value not exceeding 10% of the turnover in a State or
Union territory in the preceding financial year or ` 5 lakh, whichever is higher.

In the given case, since Mr. Ajay is an exclusive supplier of services other
than restaurant services [viz. repair services], he is not eligible for
composition scheme under section 10(1) & 10(2).
However, section 10(2A) provides an option to a registered person
(subject to certain conditions) whose aggregate turnover in the preceding
financial year is upto ` 50 lakh and who is not eligible to pay tax under
composition scheme under section 10(1) & 10(2), to pay tax @ 3%
[Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of supplies of
goods and services in the State or Union territory.
Thus, in view of the above-mentioned provisions, Mr. Ajay is eligible to
avail the composition scheme under section 10(2A) as his aggregate
turnover in the preceding FY does not exceed ` 50 lakh and he is not
eligible to opt for the composition scheme under section 10(1) & 10(2).
Thus, the amount of tax payable by him as per the composition scheme
under section 10(2A) is ` 2,10,000 [6% of ` 35 lakh].
A registered person cannot opt for composition scheme under section
10(2A), if, inter alia, he is engaged in making any inter-State outward
supplies. However, there is no restriction on inter-State procurement of
goods. Hence, answer will remain the same even if Mr. Ajay procures few
items from neighboring State of Madhya Pradesh.
11. (i) The registered person, whose aggregate turnover in the preceding
financial year does not exceed ` 1.5 crore, may opt to pay tax under
composition levy, under section 10(1) and 10(2).
The scheme can be availed by an intra-State supplier of goods and
supplier of restaurant service.
However, the composition scheme permits supply of marginal
services (other than restaurant services) for a specified value along
with the supply of goods and restaurant service, as the case may be.
Thus, M/s United Electronics can opt for composition scheme for the
current financial year as its aggregate turnover is less than ` 1.5 crore
in the preceding financial year and it is not engaged in inter-State
outward supplies.

(ii) The registered person opting for composition scheme, under section
10(1) and 10(2), can also supply services (other than restaurant
services) for a value up to 10% of the turnover in the preceding year
or ` 5 lakh, whichever is higher, in the current financial year.
Thus, M/s United Electronics can supply repair and maintenance
services up to a value of ` 12 lakh [10% of ` 120 lakh or ` 5 lakh,
whichever is higher] in the current financial year.

CROSSWORD PUZZLE
6 7
10
11
ACROSS
3. Manufacturer of ___________are not eligible for opting for composition levy for
goods.
5. GST on _______ shall be levied with effect from such date as may be notified
by the Government on the recommendations of the Council.

6. Tax on service by way of renting of residential __________ to a registered

partnership firm is payable under reverse charge.
8. Tax on renting of immovable property services supplied by a __________
authority to a registered person is payable under reverse charge.
10. Supply of goods which attracts nil rate of tax is an ________ supply.
11. Supplier engaged in making any ______ State outward supplies of goods or
services is not eligible for opting for composition levy for goods.
DOWNWARDS
1. HSN stands for Harmonized ______________ of Nomenclature.
2. Tax on services provided by business __________ to a banking company is

payable under reverse charge.
4. Tax on supply of services of security personnel by a body corporate to a
registered person is payable under __________ charge.
5. Electronic Commerce means the supply of goods and/or services including
digital products over __________ or electronic networks.
7. Supplier engaged in making any supply of goods not ______to tax is not
eligible for opting for composition levy for goods.
9. CGST and __________ are payable on intra-State supply of goods in Ladakh.
(Acronym)
Scan the following QR code for accessing the answers to MCQs in Quiz Time
Scan the code

AMENDMENTS MADE VIDE THE FINANCE ACT, 2023

The Finance Act, 2023 has come into force from 31.03.2023. However, most of the
amendments made under the CGST Act and the IGST Act 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 30.04.2023.
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 section 10(2)(d) and 10(2A)(c)
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 Remarks

No. amended by the
Finance Act, 2023
10(2)(d) he is not engaged in he is not engaged in Presently, composition
making any supply of making any supply of supplier is barred from
goods or services goods or services making supply of goods
through an electronic through an electronic as well as services
commerce operator commerce operator through e commerce
who is required to who is required to operator.
collect tax at source collect tax at source It is now proposed to
under section 52. under section 52. permit composition
10(2A)(c) engaged in making engaged in making supplier to supply
any supply of goods any supply of goods goods through e
or services through an or services through commerce operator.
electronic commerce an electronic
operator who is commerce operator
required to collect tax who is required to
at source under collect tax at source
section 52. under section 52.



CHAPTER a 4
PLACE OF SUPPLY
The section numbers referred to in the Chapter pertain to the IGST Act, 2017, unless
LEARNING OUTCOMES
After studying this chapter, you would be able to -

 explain the provisions relating to determination of place of
supply of goods, in case of domestic transactions and analyse
the same to determine the place of supply in a given situation
 explain the provisions relating to determination of place of
supply of services, in case of domestic transactions and
analyse the same to determine the place of supply in a given
situation

a 4.2 GOODS AND SERVICES TAX
CHAPTER OVERVIEW
Place of supply
Place of supply of goods other than

supply of goods imported into, or
exported from INDIA [Section 10]
Place of supply of services where location

of supplier of service and the location of
the recipient of service is in INDIA
[Section 12]
1. INTRODUCTION
GST is a destination-based tax, i.e the tax is levied at the place where the goods or
services are consumed, rather than the place
where they are produced.
The determination of ‘place of supply’ and

the ‘location of the supplier’ is essential to
ascertain the nature of supply, i.e. whether a
supply is intra-State or inter- State. In other
words, these two factors are required to
determine whether a supply is subject to
SGST/UTGST plus CGST in a given State/
Union territory or else would attract IGST if it
is an inter-State supply.
If an inter-State transaction is wrongly treated as intra-State or vice-versa and tax
paid accordingly, the correct tax will be required to be paid and refund to be

a
PLACE OF SUPPLY 4.3 a
claimed for tax wrongly paid. Though no interest is levied in such a case, procedural
requirements increase and working capital gets blocked where the amount involved
is huge. Hence, determining correct place of supply is of the paramount
importance.
Section 2(86) of the CGST Act, 2017 defines ‘place of supply’ to mean the place of
supply as referred to in Chapter V of the Integrated Goods and Services Tax Act,
2017. Thus, in order to understand the provisions of the place of supply, we need
to refer the provisions of the relevant Chapter of the Integrated Goods and Services
Tax Act, 2017.
In simple words, ‘place of supply’ is the place where the supply is consumed. Thus,
place of supply determines the jurisdiction where the tax revenue should reach.
Now the question arises as how to determine the place of
supply?
Goods, usually being tangible do not pose any significant
problems for determination of their place of consumption.
Services, usually being intangible pose problems w.r.t
determination of place of supply mainly due to following
factors:
❑ The manner of delivery of a service could be altered
easily.
For example, telecom service could change from post-
paid to pre-paid or billing address of the customer could
be changed, repair or maintenance of software could be
changed from onsite to online; banking services earlier
required customer to go to the bank, now the customer
can avail service from anywhere.
❑ Service provider, service receiver and the service provided may not be
ascertainable or may easily be suppressed as nothing
tangible moves and there would hardly be any trail.
❑ For supplying a service, a fixed location of service
provider is not mandatory and even the service
recipient may receive service while on the move. The

location of billing could be changed overnight.

❑ Sometime the same element may flow to more
than one location, for example,
construction or other services in
respect of a railway line, a national
highway or a bridge on a river
which originate in one State and
end in the other State.
Similarly, a copyright for distribution and exhibition
of film could be assigned for many States in a
single transaction or an advertisement or a
programme is broadcasted across the country at
the same time.
An airline may issue seasonal tickets, containing say 10
vouchers which could be used for travel between any
two locations in the country.
The card issued by New Delhi metro could be used

by a person located in Noida, or New Delhi or
Faridabad, without the New Delhi metro being able
to distinguish the location or journeys at the time
of receipt of payment.
❑ Services are continuously evolving and thus,
continue to pose newer challenges. For example,
15-20 years back no one could have thought of
DTH, online information, online banking, online
booking of tickets, internet, mobile
telecommunication etc.
Considering the difficulties in determining the actual place of consumption of
services, the various elements involved in a service transaction are used as proxies
for determining the place of consumption or place of supply of such services. A
proxy which gives more appropriate result than others for determining the place of
supply, could be used for determining the place of supply.

a
The various elements used for determining the place of supply of a service are:
(a) location of service provider
(b) location of service receiver
(c) place where the activity takes place/
place of performance
(d) place where the service is consumed

(e) place/person to which/whom actual benefit flows
Proxy which gives more appropriate

result than others is used for
determining the place of supply
Location of
service
provider
Location of
service
receiver
Proxies for
determining
place of supply
of services
Actual
Place of
beneficiary
performance
place/person
Place of
consumption

Separate rules for determining place of supply in respect of B2B and

B2C transactions
In respect of B2B (business to business) transactions, the supply is made by a
registered person to another registered person and the taxes paid are taken as
credit by the recipient, so such transactions are just pass through. GST collected
on B2B supplies effectively create a liability for the Government and an asset for
the recipient of such supplies in as much as the recipient is entitled to use the input
tax credit (ITC) for payment of future tax liability. For B2B transactions, the
location of recipient takes care in almost all the situations as further credit is
to be taken by recipient. The recipient usually further supplies to another
customer.
The supply is consumed only when a B2B transaction is further converted into B2C
(business to consumer) transaction.
In respect of B2C transactions, the supply is made to an unregistered person who
consumes the same and the taxes paid actually reach the Government.
•In
In such type of transactions, the recipient is also
B2B - Business to a registered supplier and hence eligible to take
Business trasactions ITC
•In
In such type of transactions, the recipient is
B2B - Business to consumer or unregistered and hence, cannot
Consumer trasactions take ITC.
Provisions for determination of place of supply in GST law

Basis the above guiding principles, Chapter V of the IGST Act [Sections 10 to 14]
prescribes both general and specific rules to determine place of supply of goods
and services in various circumstances. These provisions prescribe the provisions
relating to place of supply of goods and services in domestic as well as cross-border
transactions.
At the intermediate level, our discussion will be restricted to the provisions relating
to the place of supply of goods and services in domestic transactions [Section
10 and Section 12] only.

a
❑ Continuous journey means a journey for which a single or more than one
ticket or invoice is issued at the same time, either by a single supplier of
service or through an agent acting on behalf of more than one supplier of
service, and which involves no stopover between any of the legs of the
journey for which one or more separate tickets or invoices are issued.
Explanation––For the purposes of this clause, the term “stopover” means a
place where a passenger can disembark either to transfer to another
conveyance or break his journey for a certain period in order to resume it
at a later point of time [Section 2(3)].
The term conveyance has been defined in section 2(34) of the CGST Act to
include a vessel, an aircraft and a vehicle.
❑ Fixed establishment means a place other than the place of business which
is characterised by a sufficient degree of permanence and suitable structure
in terms of human and technical resources to supply services, or to receive
and use services for its own needs [Section 2(7)].
❑ Location of the recipient of services means:

(a) where a supply is received at a place of business for which registration
has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of busin ess
for which registration has been obtained, that is to say, a fixed
establishment elsewhere, the location of such fixed establishment;
(c) where a supply is received at more than one establishment, whether the
place of business or fixed establishment, the location of the
establishment most directly concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence
of the recipient [Section 2(14)].

The definition of ‘fixed establishment’ for this purpose has been discussed
above. The definition of ‘place of business’ is discussed later.
The above definition relates only to services. The term

‘location of recipient of goods’ has not been defined in the
Act.
Place of business for

Location of such
which registration is
place of business
obtained
Location of recipient of services
Fixed establishment Location of such

Supply received at elsewhere fixed establishment
Location of the
More than one
establishment most
establishment, whether
directly concerned
place of business or fixed
with the receipt of
establishment
supply
In absence of such Usual place of residence

places of the recipient
❑ Location of the supplier of services means:

(a) where a supply is made from a place of business for which registration
has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business
for which registration has been obtained, that is to say, a fixed
establishment elsewhere, the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether the
place of business or fixed establishment, the location of the establishment
most directly concerned with the provision of the supply; and

a
(d) in absence of such places, the location of the usual place of residence
of the supplier [Section 2(15)].
The above definition relates only to services. The term

‘location of supplier of goods’ has not been defined in the Act.
Place of business for

Location of such
which registration is
place of business
obtained
Fixed establishment Location of such

Location of supplier of services
elsewhere fixed establishment

Supply made from
More than one Location of the

establishment, establishment most
whether place of directly concerned
business or fixed with the provision of
establishment supply
Usual place of
In absence of such
residence of the
places
supplier
As already pointed out that ‘Location of supplier of goods’ is not defined in the
law, only the location of supplier of services is defined. Services being intangible,
sometimes, leave no trail as to the location ‘from’ where they are supplied and
for that reason, a specific definition is required. Whereas in case of goods, it is
easier to determine as to where the goods are actually ‘located’. Taking a cue
from the definition of the place of supply (defined below), location of supplier of
goods is where business is ordinarily carried on or where the goods themselves
are located.
❑ Place of business includes

(a) a place from where the business is ordinarily carried
on, and includes a warehouse, a godown or any
other place where a taxable person stores his
goods, supplies or receives goods or services or
both; or

(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an

agent, by whatever name called; [Section 2(85)]
This is an inclusive definition and is applicable for both goods

and services.
❑ Supply shall have the same meaning as assigned to it in section 7 of the

Central Goods and Services Tax Act [Section 2(21)].
❑ Recipient of supply of goods or services or both, means—
• where a consideration is payable for the supply of goods or services

or both, the person who is liable to pay that consideration;
• where no consideration is payable for the supply of goods, the person

to whom the goods are delivered or made available, or to whom
possession or use of the goods is given or made available; and
• where no consideration is payable for the supply of a service, the

• and any reference to a person to whom a supply is made shall be

an agent acting as such on behalf of the recipient in relation to the
goods or services or both supplied [Section 2(93) of the CGST Act].
❑ Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied [Section 2(105) of the CGST Act].
❑ Words and expressions used and not defined in the IGST Act but defined in
the after supplies Central Goods and Services Tax Act, the Union Territory
Goods and Services Tax Act and the Goods and Services Tax (Compensation
to States) Act shall have the same meaning as assigned to them in those Acts
[Section 2(24)].

a
3. PLACE OF SUPPLY OF GOODS OTHER THAN

SUPPLY OF GOODS IMPORTED INTO, OR
EXPORTED FROM INDIA [SECTION 10]
Section 10 Place of supply of goods other than supply of goods imported

into, or exported from India
(1) The place of supply of goods, other than supply of goods imported
into, or exported from India, shall be as under,––
(a) 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;
(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;
(c) where the supply does not involve movement of goods,
whether by the supplier or the recipient, the place of
supply shall be the location of such goods at the time of
the delivery to the recipient;
(d) where the goods are assembled or installed at site, the
place of supply shall be the place of such installation or
assembly;

(e) where the goods are supplied on board a conveyance,

including a vessel, an aircraft, a train or a motor vehicle,
the place of supply shall be the location at which such
goods are taken on board.
(2) Where the place of supply of goods cannot be determined, the
place of supply shall be determined in such manner as may be
prescribed.
ANALYSIS
Section 10 prescribes the provisions for determining the place of supply of
goods in domestic transactions, i.e. within India. Sub-section (1) of section
10 sets out five rules to provide the place of supply of goods in the following
specific situations:
Supply
involving
movement
Rules to of goods
provide the Goods
place of supply delivered on
of goods ‘bill to ship
to’ model
Section 10(1)
Goods Supply not

supplied on involving
board a movement
conveyance of goods
Goods
assembled
/installed at
site
Each of the above situation is discussed below. For residual cases, sub-section
(2) of section 10 provides that where the place of supply of goods cannot be

a
determined, the Government may prescribe the manner to ascertain the same.
It must be kept in mind that the provisions of section 10 discussed
hereunder are all in relation to domestic supply of goods.
(i) Supply involving movement of goods [Section 10(1)(a)]
In case of supply involving movement of goods, the place of supply is
the location of the goods at the time when the movement of goods
terminates (ends) for delivery to the recipient.
The ‘location of the goods’ is a question of fact to be ascertained by
observing the journey that the goods so supplied make from their origin
(from supplier) to termination (with the recipient). This movement,
however, can be undertaken by the supplier or recipient or even any other
person (like transporter) after having disclosed the destination of the
movement of goods.
It is important to understand that this provision does not apply in cases
where there is no movement of goods. Also, the provision does not link
itself to transfer of property in goods but to the movement of the goods.
(1) Babban Pvt. Ltd. of Nasik, Maharashtra sells 10 refrigerators to
Chaggan Pvt. Ltd. of Pune, Maharashtra for delivery at place of
business of Chaggan Pvt. Ltd. in Pune. The place of supply is Pune
in Maharashtra.
(2) Babban Pvt. Ltd. of Nasik, Maharashtra sells 20 refrigerators to Dhakkan
Pvt. Ltd. of Ahmedabad, Gujarat for delivery at place of business of Dhakkan
Pvt. Ltd. in Ahmedabad. The place of supply is Ahmedabad.
(ii) Supply involving movement of goods where goods are delivered
to recipient on the instruction of third person – ‘Bill to Ship to’
Supply [Section 10(1)(b)]
Clause (b) of section 10(1) lays down the provisions to determine the place
of supply in cases where there is a tripartite arrangement of supply,
commonly known as ‘bill to ship to’ transactions or where there is a sale of
goods in transit by the original buyer/ agents.
As per section 10(1)(b),

If the goods are delivered to a recipient or any other person by the supplier
on the instructions of a third person (original buyer), who may be acting as

an agent or on his own account
before or during movement of goods (but not after the movement

terminates)
whether or not there is a transfer of documents of title to the goods
it is deemed that the third person has received the goods and the place of
supply is the principal place of business of such third person
In simple words, where goods are delivered by the supplier to the

recipient at the instruction of a third person, the place of supply is the
principal place of business of such third person and not of the actual
recipient.
It is important to identify the two supplies involved in this transaction– one
supply is by supplier to third person and second supply is by third person to
recipient. This provision deals only with the first limb of supply, i.e. supply
by supplier to third person.
Second limb of supply, i.e. supply by third person to recipient will be
governed by the provisions of section 10(1)(a), i.e. the place of supply will
be the location of the goods at the time when the movement of goods
terminates (ends) for delivery to the recipient.

a
Supply by supplier to third person
Gives instructions to
Supplier A in New Deemed to be received by Third person
Delhi B in Haryana
Issues invoice to B
Goods delivered
as per
instructions of B Place of supply: Location of
principal place of business of B
Recipient C in New (third person), i.e. Haryana –
Delhi Supply chargeable to IGST
Even though section 2(93) of CGST Act defines recipient, inter alia, as the
‘payer of the consideration’; in this provision, recipient’ is the one who
actually collects the goods and the third person is the one who enjoys
privity with the supplier to be able to direct him to deliver the goods and
also usually makes payment to the supplier.
Supply by third person to recipient
Supplier A in New Third person

Delhi B in Haryana
Place of supply: Location of

goods at the time when the
movement of goods terminates
Recipient C in New for delivery to C (recipient), i.e.
Delhi New Delhi – Supply chargeable to
IGST

Tolaram Ltd. (a supplier registered in Uttar Pradesh having

Quiz
Quiz principal place of business at Noida) asks Bholaram Ltd. of
time!
Time! Ahmedabad,Gujarat to deliver 50 washing machines to its buyer
Jholaram Ltd. at Jaipur, Rajasthan. The place of supply of supply
between Tolaram Ltd. and Jholaram Ltd. is ___________ and place
1 of supply of supply between Bholaram Ltd. and Tolaram Ltd. is
___________.
(a) Rajasthan; Uttar (b) Uttar Pradesh; (c) Uttar Pradesh; (d) Rajasthan;
Pradesh Gujarat; Rajasthan; Gujarat
(iii) Supply not involving movement of goods [Section 10(1)(c)]

If the supply does not involve movement of goods, the place of supply
is the location of goods at the time of delivery to the recipient.
(3) Newton Pvt. Ltd. (New Delhi) has leased its
machine (cost ` 8,00,000) to Gravity Pvt. Ltd.
(Noida, Uttar Pradesh) for production of goods
on a monthly rent of ` 35,000. After 12 months Gravity Pvt.
Ltd. requested Newton Pvt. Ltd. to sell the machine to it for
` 5,00,000, which is agreed to by Newton Pvt. Ltd.
In this case, there will be no movement of goods and the same will be sold
on as is where is basis. Thus, the location of the machine at the time of such
sale will be the place of supply, i.e. Noida.
(4) Gangadhar Ltd. (Mumbai, Maharashtra) opens
a new branch office at Gurugram, Haryana. It
purchases a building for office from Gajodhar
Builders (Gurugram). It also enters into a separate
contract with Gajodhar Builders for purchase of
pre-installed office furniture and fixtures in the
building.
Though there will be no GST liability on purchase of building (as sale of
building is covered under Schedule III to CGST Act), office furniture and

a
fixtures will be liable to GST. Since there is no movement of office furniture

and fixtures, the place of supply of such goods is their location at the time of
delivery to the recipient (Gangadhar Ltd.), i.e. Gurugram.
(iv) Supply involving installation or assembly of goods [Section

10(1)(d)]
If the supply involves goods which are to be installed or assembled at
site, the place of supply is the place of such
installation or assembly.
This is a case of composite supply of goods
wherein two supplies are involved, supply of
goods and ancillary supply of
installation/assembling service. The principal
supply is supply of goods which are being
installed.
(5) Ghoomghoom Pvt. Ltd. (New
Delhi) purchases a machine from
Dhoom Pvt. Ltd. (New Delhi) for
being installed in its factory at Noida,
Uttar Pradesh. The place of supply is the site at
which the machine is installed, i.e. Noida.
(6) Pure Refineries (Mumbai, Maharashtra) gives a
contract to Mowgli Ltd. (Ranchi, Jharkhand) to supply a
machine which is required to be assembled in a power
plant in its refinery located in Kutch, Gujarat. The place of
supply is the site of assembly of machine, i.e. Kutch even
though Pure refineries is located in Maharashtra.
(v) Goods supplied on board a conveyance [Section 10(1)(e)]

When goods are sold supplied during a journey on board a conveyance, it
becomes difficult to determine the place of supply of goods – whether it is the
location from where the journey originates or whether it is the destination or
whether it is any of the locations covered by the conveyance during the journey.

Therefore, section 10(1(e) specifically provides for determination of place of

supply of goods supplied on board a conveyance.
Examples of goods supplied on board a conveyance can be books and
miscellaneous items supplied by the hawkers in train etc.
Section 10(1)(e) lays down that place of supply of goods supplied on a
board a conveyance like aircraft, train, vessel, motor vehicle is the
location where such goods have been taken on board.
Place of supply of goods supplied on board a conveyance is determined under

this provision even if the supply has been made by any of the passenger on
board the conveyance and not by the carrier of the conveyance.
(7) Maurya (New Delhi) boards the New Delhi-Kota train at New
Delhi. He sells the goods taken on board by him (at New Delhi), in
the train, at Jaipur during the journey.
The place of supply of goods is the location at which the goods are taken on
board, i.e. New Delhi and not Jaipur where they have been sold.
4. PLACE OF SUPPLY OF SERVICES WHERE

LOCATION OF SUPPLIER OF SERVICE AND
THE LOCATION OF THE RECIPIENT OF
SERVICE IS IN INDIA [SECTION 12]
Section 12 Place of supply of services where location of supplier of

service and the location of the recipient of service is in India
(1) The provisions of this section shall apply to determine the place
of supply of services where the location of supplier of services
and the location of the recipient of services is in India.
(2) The place of supply of services, except the services specified in
sub-sections (3) to (14),––

a
(a) made to a registered person shall be the location of

such person;
(b) made to any person other than a registered person
shall be,––
(i) the location of the recipient where the address on
record exists; and
(ii) the location of the supplier of services in other
cases.
(3) The place of supply of services,––
(a) directly in relation to an immovable property, including
services provided by architects, interior decorators,
surveyors, engineers and other related experts or estate
agents, any service provided by way of grant of rights
to use immovable property or for carrying out or co-
ordination of construction work; or
(b) by way of lodging accommodation by a hotel, inn,
guest house, home stay, club or campsite, by whatever
name called, and including a house boat or any other
vessel; or
(c) by way of accommodation in any immovable property
for organising any marriage or reception or matters
related thereto, official, social, cultural, religious or
business function including services provided in
relation to such function at such property; or
(d) any services ancillary to the services referred to in
clauses (a), (b) and (c),
shall be the location at which the immovable property or boat or
vessel, as the case may be, is located or intended to be located:
Provided that if the location of the immovable property or boat
or vessel is located or intended to be located outside India, the
place of supply shall be the location of the recipient.
Explanation.––Where the immovable property or boat or vessel
is located in more than one State or Union territory, the supply
of services shall be treated as made in each of the respective

States or Union territories, in proportion to the value for services

separately collected or determined in terms of the contract or
agreement entered into in this regard or, in the absence of such
contract or agreement, on such other basis as may be prescribed.
(4) The place of supply of restaurant and catering services, personal
grooming, fitness, beauty treatment, health service including
cosmetic and plastic surgery shall be the location where the
services are actually performed.
(5) The place of supply of services in relation to training and
performance appraisal to
(a) a registered person, shall be the location of such
person;
(b) a person other than a registered person, shall be the
location where the services are actually performed.
(6) The place of supply of services provided by way of admission to
a cultural, artistic, sporting, scientific, educational,
entertainment event or amusement park or any other place and
services ancillary thereto, shall be the place where the event is
actually held or where the park or such other place is located.
(7) The place of supply of services provided by way of ,—
(a) organisation of a cultural, artistic, sporting, scientific,
educational or entertainment event including supply of
services in relation to a conference, fair, exhibition,
celebration or similar events; or
(b) services ancillary to organisation of any of the events
or services referred to in clause (a), or assigning of
sponsorship to such events,–
(i) to a registered person, shall be the location of such
person;
(ii) to a person other than a registered person, shall
be the place where the event is actually held and
if the event is held outside India, the place of
supply shall be the location of the recipient.
Explanation.––Where the event is held in more than one State or

a
Union territory and a consolidated amount is charged for supply

of services relating to such event, the place of supply of such
services shall be taken as being in each of the respective States
or Union territories in proportion to the value for services
separately collected or determined in terms of the contract or
agreement entered into in this regard or, in the absence of such
contract or agreement, on such other basis as may be prescribed.
(8) The place of supply of services by way of transportation of goods,
including by mail or courier to,––
person;
location at which such goods are handed over for their
transportation.
Provided that where the transportation of goods is to a place
outside India, the place of supply shall be the place of destination
of such goods.
(9) The place of supply of passenger transportation service to,—
person;
place where the passenger embarks on the conveyance
for a continuous journey:
Provided that where the right to passage is given for future use
and the point of embarkation is not known at the time of issue
of right to passage, the place of supply of such service shall be
determined in accordance with the provisions of sub-section (2).
Explanation.––For the purposes of this sub-section, the return
journey shall be treated as a separate journey, even if the right to
passage for onward and return journey is issued at the same time.
(10) The place of supply of services on board a conveyance, including
a vessel, an aircraft, a train or a motor vehicle, shall be the
location of the first scheduled point of departure of that
conveyance for the journey.

(11) The place of supply of telecommunication services including data

transfer, broadcasting, cable and direct to home television
services to any person shall,—
(a) in case of services by way of fixed telecommunication
line, leased circuits, internet leased circuit, cable or dish
antenna, be the location where the telecommunication
line, leased circuit or cable connection or dish antenna
is installed for receipt of services;
(b) in case of mobile connection for telecommunication
and internet services provided on post-paid basis, be
the location of billing address of the recipient of
services on the record of the supplier of services;
(c) in cases where mobile connection for
telecommunication, internet service and direct to home
television services are provided on pre-payment basis
through a voucher or any other means,––
(i) through a selling agent or a re-seller or a
distributor of subscriber identity module card or
re-charge voucher, be the address of the selling
agent or re-seller or distributor as per the record
of the supplier at the time of supply; or
(ii) by any person to the final subscriber, be the
location where such pre- payment is received or
such vouchers are sold;
(d) in other cases, be the address of the recipient as per the
records of the supplier of services and where such
address is not available, the place of supply shall be
location of the supplier of services:
Provided that where the address of the recipient as per the
records of the supplier of services is not available, the place of
supply shall be location of the supplier of services:
Provided further that if such pre-paid service is availed or the
recharge is made through internet banking or other electronic mode
of payment, the location of the recipient of services on the record of
the supplier of services shall be the place of supply of such services.

a
Explanation.––Where the leased circuit is installed in more

than one State or Union territory and a consolidated amount
is charged for supply of services relating to such circuit, the
place of supply of such services shall be taken as being in each
of the respective States or Union territories in proportion to
the value for services separately collected or determined in
terms of the contract or agreement entered into in this regard
or, in the absence of such contract or agreement, on such other
basis as may be prescribed.
(12) The place of supply of banking and other financial services,

including stock broking services to any person shall be the
location of the recipient of services on the records of the
supplier of services:
Provided that if the location of recipient of services is not on

the records of the supplier, the place of supply shall be the
location of the supplier of services.
(13) The place of supply of insurance services shall,––
(a) to a registered person, be the location of such person;
(b) to a person other than a registered person, be the

location of the recipient of services on the records of
the supplier of services.
(14) The place of supply of advertisement services to the Central

Government, a State Government, a statutory body or a local
authority meant for the States or Union territories identified
in the contract or agreement shall be taken as being in each
of such States or Union territories and the value of such
supplies specific to each State or Union territory shall be in
proportion to the amount attributable to services provided by
way of dissemination in the respective States or Union
territories as may be determined in terms of the contract or
agreement entered into in this regard or, in the absence of
such contract or agreement, on such other basis as may be
prescribed.

ANALYSIS
Section 12 contains the provisions for determining the place of supply of services
where both the ‘location of supplier of services’ and the ‘location of recipient of
services’ are in India 1.
Section 12 lays down a general rule to determine the place of supply of services
as well as few other rules to determine place of supply of certain specific services.
Thus, place of supply is determined as per general rule in respect of services
other than the ones covered by the specific rules. It is also important to note
that in many cases, the section provides different places of supply for a service
supplied to registered and unregistered persons.
It must be kept in mind that the provisions of section 12 discussed
hereunder are all in relation to the domestic supply of services.
(i) General Rule [Section 12(2)]

The rule is applicable only if the supply of service does not fall in any of the
specific cases provided under section 12. The rule provides that the place of
supply of services made to a registered person is the location of the
person receiving the services. Since the supplier has the GSTIN of the person
receiving the service, the location of such GSTIN is the place of supply.
•Place of supply is location of person receiving

General services
rule
However, if the services is supplied to an unregistered person, the place of

supply is:
a) the location of such unregistered person, if the address of the
unregistered person is available in the records of the supplier
b) the location of the supplier of services in other cases.
1
If either of the two persons (supplier or recipient) is outside India, the place of supply is
determined by section 13. Provisions relating to determination of place of supply of services
where location of supplier or location of recipient is outside India are covered at the Final level.

a
The provision can be summarized as under:
Nature of Supply Place of Supply
Recipient is Recipient is unregistered

registered
Supply of services Location of a) If the address of the

other than the recipient unregistered person is
ones specified in available in the records of
sub-sections (3) to the supplier, the location
(14) of section 12 of such unregistered
person.
b) In other cases, the location
of the supplier of services
✪ The default presumption for place of supply in respect of

registered recipients (B2B supply of services) is the location of
such person. Since the recipient is registered, address of
recipient is always there and the same can be taken as proxy for place
of supply.
✪ The default presumption for place of supply in respect of unregistered

recipients (B2C supply of services) is also the location of recipient.
However, in many cases, the address of recipient is not available; in such
cases, location of the supplier of services is taken as proxy for place of
supply.
For instance, there are various B2C services where the address of the
recipient is not recorded by the supplier of services. For instance, a person
may visit a bank branch where he is not a regular customer and may get
a demand draft against cash or request for conversion of foreign currency
into local currency. The bank branch charges commission towards its
consideration for the services supplied by it. The place of supply in such
cases would be determined based on the location of the branch of the bank
as the bank branch doesn’t have the address of the said service recipient
as a normal business practice.

(8) Mr. Aryabhatt (a Chartered Accountant registered in New

Delhi) makes a supply of service to his client Champak Pvt. Ltd. of
Noida, Uttar Pradesh (registered in Uttar Pradesh). In this case,
since the supply is made to a registered person, the place of supply is the
location of the registered recipient, i.e. Noida.
(9) Mr. Heeralal, a Chartered Accountant in Gurugram, Haryana, (registered
in Haryana) provides consultancy services to his client Mr. Pannalal who is
a resident of New Delhi but is not registered under GST. If the address of
Mr. Pannalal is available in the records of Mr. Heeralal, location of Mr.
Pannalal, i.e. New Delhi will be the place of supply, else the location of Mr.
Heeralal, which is Gurugram, will be the place of supply.
(ii) Services in relation to an immovable property or lodging
accommodation in a hotel/boat/vessel etc. [Section 12(3)]
Section 12(3) covers supplies of services which are (i) directly in relation to an
immovable property, or (ii) by way of lodging accommodation in a hotel, etc.
or a house-boat or vessel, or accommodation in any immovable property for
organizing social, business functions etc. Such services are classified in the
following major categories:
(a) Services provided directly in relation to an immovable property
including those by
• architects,
• interior decorators,
• surveyors,
• engineers and other related experts,
• estate agents
(b) Service provided by way of grant of rights to use immovable

property or for carrying out or co-ordination of construction work

a
(c) Services provided by way of lodging accommodation by a:
• hotel
• inn
• guest house
• home stay
• club
• campsite
• house boat
• vessel
(d) Services provided by way of accommodation in an immovable
property for organizing
• any marriage/reception or matters

related thereto,
• official, social, cultural, religious or

business functions
• including services provided in

relation to such function at such
property
(e) Services ancillary to the above-mentioned services

In all above cases, location of the immovable property or the boat or
the vessel or where such immovable property or the boat or the vessel
is intended to be located, is the place of
supply.
If the immovable
This provision is applicable on property
property/boat/vessel is
already constructed/ developed as well as located or intended to be
on the property yet to be constructed/ located outside India, the
developed. For example, if the services location of recipient of
have been supplied for an immovable the services shall be the
place of supply.
property which is yet to be

constructed/developed (e.g. architect’s services for drawing the plan of a

building), the place where such immovable property is intended to be
located is the place of supply.
(10) Sunami Builders (Mumbai) is
constructing a factory building for Skylab
Pvt. Ltd. (Kolkata), in New Delhi. The place
of supply is the location of immovable
property, i.e. New Delhi.
(11) Shah and Shah, an architectural firm at Kolkata, has been hired by
Maurya Builders of Mumbai to draw up a plan for a high rise building to be
constructed by them in Ahmedabad, Gujarat. The place of supply is the
place where the immovable property is intended to be located, i.e.
Ahmedabad.
(12) Kautilya, a Chartered Accountant, (New Delhi) travels to Mumbai for

business and stays in a hotel there. The place of supply of accommodation
service is the place where the hotel is located, i.e. Mumbai.
(13) Goluram, a consulting engineer based in Mumbai, Maharashtra

renders professional services in respect of an immovable property of
Bholuram of Bangalore located in Australia. Since the immovable property
is located outside India, the place of supply of service is the location of
recipient, i.e. Bangalore and not the place where the immovable property
is located (Australia) 2.
The provision can be summarized as under:
Nature of Supply Location of Place of

immovable Supply
property/ boat/
vessel
Supply of services relating to In India Location of
immovable property or lodging such
2
It is important to note that this case should not be confused with the case where either the
supplier or recipient is located outside India. Here, the property is located outside India
and both supplier and recipients are located in India.

a
accommodation in a hotel/boat/ immovable

vessel or accommodation in an property/
immovable property for boat/ vessel
social/business/religious/cultural
Outside India Location of
functions
the recipient
Immovable property/Boat/Vessel located in more than one

State/Union territory
Sometimes immovable property may extend to

more than one location, for example, a railway line,
a national highway or a bridge on a river may
originate in one State and end in the other State or
a house boat stay may traverse more than one State.
In such cases, i.e. where the immovable property or boat or vessel is located
in more than one State/Union territory, the service is deemed to have been
supplied in each of the respective States/Union territories, in proportion
to the value for the services determined in terms of the contract or
agreement entered into in this regard.
Manner of determining proportionate value of service in the absence
of a contract or agreement
In the absence of a contract or agreement between the supplier and recipient
of services, the proportionate value of services supplied in different
States/Union territories (where the immovable property or boat or vessel is
located) is computed in accordance with rule 4 of the IGST Rules as under:
S. Type of service in relation to Factor which determines the

No. immovable property proportionate value of service
supplied in different
States/Union territories
(a) Service provided by way of Number of nights stayed in such

lodging accommodation by property
hotel, inn, guest house etc. and Refer Example 14 on next page
its ancillary services (other than

the cases where such property is

a single property located in 2 or
more contiguous States/ Union
territories or both)
(b) • All other services provided in Area of the immovable property

relation to immovable lying in each State/ Union
property including services territories
by way of accommodation in Refer Example 15
any immovable property for
organising any marriage or
reception etc. and in cases of
supply of accommodation
by a hotel, inn, guest house,
club or campsite, by
whatever name called where
such property is a single
property located in 2 or
more contiguous States
or/and Union territories
• Services ancillary to services
mentioned above
(c) Services by way of lodging Time spent by the boat or vessel

accommodation by a house boat in each such State/ Union
or vessel and its ancillary services territories, to be determined on
the basis of declaration made
by the service provider
Refer Example 16
Example 14 - Lodging accommodation by hotel/inn/guest

house etc. and ancillary services excluding the property located
in 2 or more contiguous States/ Union territories or both

a
Dondrila Hotel chain charges a consolidated sum of

` 30,000/- for stay in its two establishments in Delhi
and Agra, where the stay in Delhi is for 2 nights and
the stay in Agra is for 1 night. The place of supply
in this case is both Delhi and Uttar Pradesh and the
service shall be deemed to have been provided in
Delhi and Uttar Pradesh in the ratio of 2:1 respectively. The value of services
provided will thus be apportioned as ` 20,000/- in Delhi and ` 10,000/- in
Uttar Pradesh.
Example 15 - Other services provided in relation to immovable
property
There is a piece of land of area 20,000 square feet which is partly

in State S1 say 12,000 square feet and partly in State S2, say 8000 square
feet. Site preparation work has been entrusted to
Munna Constructions. The ratio of land in the two
States works out to 12:8 or 3:2 (simplified).
The place of supply is in both S1 and S2. The service
shall be deemed to have been provided in the ratio
of 12:8 or 3:2 (simplified) in the States S1 and S2 respectively. The value of
the service shall be accordingly apportioned between the States.
Example 16 - Lodging accommodation by a house boat or vessel

and its ancillary services
A company C provides the service of 24
hours accommodation in a houseboat, which will
transit both in Kerala and Karnataka in as much as the
guests board the house boat in Kerala and stay there
for 22 hours but it also moves into Karnataka for 2 hours (as declared by the
service provider). The place of supply of this service is in the States of Kerala
and Karnataka. The service shall be deemed to have been provided in the
ratio of 22:2 or 11:1 (simplified) in the States of Kerala and Karnataka,
respectively. The value of the service shall be accordingly apportioned
between the States.

Quiz
Quiz
Mr. Brijraj is on a business trip for 5 days where he has to stay
time!
Time!
for 3 days in Mumbai (Maharashtra) and 2 days in Ahmedabad
(Gujarat). He stays in the hotels of Royal Group of Hotels for
which a consolidated sum of ` 50,000/- was charged by the
2 hotel for stay in its two establishments in Mumbai and
Ahmedabad for 3 nights and 2 nights respectively. The place
of supply in this case is in __________________.
(a) Maharashtra and (c) Maharashtra and

Gujarat both and the Gujarat both and the
service shall be service shall be
(b) Maharashtra as his
deemed to have been deemed to have been
stay was longer in (b) Gujarat
provided in provided in
Mumbai.
Maharashtra and Maharashtra and
Gujarat in the ratio 3:2 Gujarat in the ratio 1:1
respectively. respectively.
(iii) Restaurant and catering service, personal grooming, fitness, beauty

and health services [Section 12(4)]
The place of supply of restaurant and catering services, personal
grooming, fitness, beauty treatment, health service including cosmetic
and plastic surgery is the location where such services are actually
performed.

a
(17) Mr. Dadlani, a businessman from Hyderabad dines in a

restaurant at Mumbai while on a business trip. The place of
supply of restaurant service is the location where such service
is performed, i.e. Mumbai.
(18) Timmy Ferreira, a makeup artist at Kolkata, goes to Jaipur, Rajasthan

for doing the makeup of Ms. Simran Kapoor, a Bollywood actress based in
Mumbai. The place of supply is the location where such service is
performed, i.e. Jaipur.
(iv) Training and performance appraisal services [Section 12(5)]
The place of supply of services in

relation to training and performance
appraisal depends upon whether the
supply is B2B or B2C.
In B2B supply, i.e. where the recipient

of service is a registered person, the
place of supply is the location of such
person.
However, in case of B2C supply, i.e. where the recipient of service is

unregistered, the place of supply is the place where the service is
actually performed.
(19) Mr. Suresh (unregistered

person based in Noida) signs up
with Excellent Linguistics (New
Delhi) for receiving training on English
speaking at their New Delhi Centre. Since
the recipient is unregistered, the place of
supply is the location where services are
provided, i.e. New Delhi.

Quiz
Quiz
time!
Time! DEO Consultants (Kolkata) impart GST training to accounts
and finance personnel of Sun Cements Ltd., Guwahati, Assam
(registered office) at the company’s Mumbai (Maharashtra)
3 office which is also registered under GST. The contract is
entered with Guwahati office. In the given case, place of
supply is ___________.
(b) Either Assam or

Maharashtra at the
(a) Kolkata (b) Assam (c) Maharashtra option of Sun
Cements Ltd.
(v) Services by way of ADMISSION to events/amusement park/other

places [Section 12(6)]
The place of supply of following services-
(i) services provided by way of ADMISSION to following types of
events:
Cultural
Sporting
Educational,
Scientific
Entertainment
Artistic

a
(ii) services provided by way of ADMISSION to amusement park or any

other place
(iii) services ancillary to the above-mentioned services

is the place where the event is actually held or where the park or such
other place is located.
(20) Virubhai Virani, a resident of Ghaziabad, Uttar Pradesh,
buys a ticket for a circus organized at Gurugram, Haryana by a
circus company based in New Delhi. The place of supply is the
location where the circus is held, i.e. Gurugram.
(21) Manasvi of New Delhi buys a ticket for an amusement park located in
Noida, Uttar Pradesh. The place of the supply is the location where the
park is located, i.e. Noida.
(vi) ORGANISATION of events [Section 12(7)]
For supplies related to ORGANISATION of events or assigning
sponsorship to such events, the place of supply depends on whether the
supply is made to a registered person or an unregistered person.
When such service is provided to a registered person, the place of supply is
location of recipient.
When it 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.
The event can be a cultural, artistic, sporting, scientific, educational or
entertainment event. It can also be a conference, fair, exhibition,
celebration or other similar event.
Place of supply of services ancillary to organisation of such type of events
or assigning of sponsorship to such events is also determined under sub-
section (7) of section 12, i.e. in the manner described above. The provision
can be summarized as under:

Recipient is Recipient is
registered unregistered
Organisation of events or Location of Location where

services ancillary to the same or recipient the event is held
assigning of sponsorship to such
events
Organisation of events outside Location of

India recipient
(22) Mega Events, an event management company at New

Delhi, organizes an award function for Shah Diamond
Merchants of Ahmedabad (registered in Gujarat), at Mumbai.
Since the recipient is a registered person, the place of supply is the location
of the recipient, i.e. Ahmedabad.
(23) Mega Events, an event management company at New Delhi, organizes
an award function for Shah Diamond Merchants of Ahmedabad (registered
in Gujarat), in Mauritius. Since the recipient is a registered person, the place
of supply is the location of the recipient, i.e. Ahmedabad.
Event held in more than one State/Union territory
If the event is held in more than one State/Union territory and a
consolidated amount is charged for services relating to such event, the
place of supply of such services is deemed to be in each of the respective
States/Union territories in proportion to the value for services determined
in terms of the contract or agreement entered into in this regard.
The above provision is applicable only when the recipient is
unregistered, as for a registered recipient, the place of supply is the
location of such recipient.

a
Manner of determining proportionate value of service in the absence of

a contract or agreement
of services, the proportionate value of services made in different States/Union
territories (where the event is held) is computed in accordance with rule 5 of
the IGST Rules by the application of generally accepted accounting principles.
(24) An event management company -
Moonlight Events Private Limited - has
to organize some promotional events in
States S1 and S2 for a recipient Mr. Atmaram
(unregistered). 3 events are to be organized in S1
and 2 in S2. They charge a consolidated amount of ` 10,00,000 from Mr.
Atmaram.
The place of supply of this service is in both the States S1 and S2. Say the
proportion arrived at by the application of generally accepted accounting
principles is 3:2. The service shall be deemed to have been provided in the
ratio 3:2 in S1 and S2 respectively. The value of services provided will thus
be apportioned as ` 6,00,000/- in S1 and ` 4,00,000/- in S2.
Quiz
Quiz Grand Wedding Planners (Chennai) is hired by Laddoo Singh
time!
Time! (unregistered person based in Hyderabad) to plan and
organise his wedding. The place of supply is (i) __________ if
wedding is to be held at New Delhi, or (ii) __________ if
4 wedding is to be held in Seychelles.
(a) New Delhi; (b) New Delhi; (c) Chennai; (b) Chennai;
Hyderabad Seychelles Seychelles Hyderabad

(vii) Transportation of goods including mail or courier [Section 12(8)]

The place of supply of services by way of
transportation of goods, including by
mail or courier, etc. provided to a If the goods are
registered person, is the location of such transported outside
person. However, where such services are India, the destination
of such goods is the
provided to an unregistered person, the
place of supply.
place of supply is the location at which
such goods are handed over for their
transportation.
(25) M/s Sukhiram Pvt. Ltd. is a registered company in New Delhi.

It sends its courier to Pune through M/s Brue Air Courier Service.
The recipient being registered person, the place of supply is the
location of recipient, i.e. New Delhi.
(26) Mr. Bindisaar, an unregistered person, of New Delhi sends a courier
to his brother in Amritsar, Punjab. The recipient being unregistered person,
the place of supply is the location where goods are handed over for their
transportation, i.e. New Delhi.
(27) Pinelaps Pvt. Ltd., a Goods Transportation Agency based in Kanpur, Uttar
Pradesh, is hired by Hezal Enterprises (registered supplier in Kanpur) to
transport its consignment of goods to a buyer in New Delhi. The recipient
being registered, the place of supply is the location of recipient, i.e. Kanpur.
(28) Sukhwinder Transports Pvt. Ltd., a Goods Transportation Agency
based in Noida, Uttar Pradesh, is hired by Chhaya Trade Links (registered
supplier in New Delhi) to transport its consignment of goods to a buyer in
Kanpur, Uttar Pradesh. The recipient being registered, the place of supply
is the location of recipient, i.e. New Delhi.

a
(29) Mr. Srikant, a manager in a Bank, is transferred from Bareilly, Uttar

Pradesh to Bhopal, Madhya Pradesh. Mr. Srikant’s family is stationed in
Kanpur, Uttar Pradeh. He hires Goel Carriers of Lucknow, Uttar Pradesh
(registered in Uttar Pradesh), to transport his household goods from
Kanpur to Bhopal. The recipient being unregistered person, the place of
supply is the location where goods are handed over for their transportation ,
i.e. Kanpur.
(viii) Passenger transportation service [Section 12(9)]
Recipient is Recipient is unregistered

registered
Passenger Location of the Location where the passenger

transportation recipient embarks on the conveyance for
a continuous journey [See
definition]
Issue of right to a) If the address of the

passage for future unregistered person is
use and the point of available in the records of
boarding not known the supplier, the location of
at the time of issue such unregistered person.
of right to passage b) In other cases, the location
of the supplier of services
The return journey is treated as a separate journey, even if the tickets for
onward and return journey are issued at the same time.
(30) Mr. Amar (registered person in New Delhi) travels from
Mumbai to Bangalore in Airjet flight. Mr. Amar has bought the
tickets for the journey from Airjet’s office registered in New
Delhi. The place of supply is the location of recipient, i.e. New Delhi.
(31) Mr. Subramanian (unregistered person in Chennai) has come to Delhi
on a vacation. He buys pre-paid Delhi Metro Card from Delhi Metro (New
Delhi) for hassle free commute in the National Capital Region. Recipient

being unregistered person, the place of supply is the address of

Mr. Subramanian, i.e. Chennai. If address of Mr. Subramanian is not
available with the Delhi Metro, the place of supply will be the location of
the supplier of services, i.e. New Delhi.
(32) Mr. Shyam, an unregistered person, based in Gurugram, Haryana
books a two-way air journey ticket from New Delhi to Mumbai on 5th
December. He leaves New Delhi on 10th December in a late-night flight
and lands in Mumbai the next day. He leaves Mumbai on 14th December
in a morning flight and lands in New Delhi the same day. The return journey
is treated as a separate journey, even if the tickets for onward and return
journey are issued at the same time. Thus, being an unregistered person, the
place of supply for the outward and return journeys are the locations where
the unregistered person embarks on the conveyance for the continuous
journey, i.e. New Delhi and Mumbai respectively.
Examples of issue of right to passage for future use-point of
boarding not known at the time of issue of right
(33) An airline may issue seasonal tickets, containing say 10 vouchers which
could be used for travel between any two locations in the country.
(34) The card issued by New Delhi metro could be used by a person located
in Noida, or New Delhi or Faridabad, without the New Delhi metro being able
to distinguish the location or journeys at the time of receipt of payment.
(ix) Service supplied on board a conveyance [Section 12(10)]
Service supplied on Location of the first scheduled point of departure

board a conveyance* of that conveyance for the journey
* Note - Conveyance includes a vessel, an aircraft, a train or a motor vehicle.

You may recollect that the proxy for place of supply of goods on board a
conveyance is the location at which the goods are taken on board. Services
being intangible, the same proxy cannot be used for determining the place
of supply for services supplied on board a conveyance. Therefore, for

a
services, the proxy is the location of the first scheduled point of departure of
that conveyance for the journey However, for determining the place of
supply of both goods and services supplied on board a conveyance, no
distinction is made between registered and unregistered recipients.
(35) Mr. Raidhan is travelling from Delhi to Mumbai in an Airjet
flight. He desires to watch an English movie during the journey
by making the necessary payment. The place of supply of such
service of showing ‘movie on demand’ is the first scheduled point of
departure of the conveyance for the journey, i.e. Delhi.
(x) Telecommunication service [Section 12(11)]
Telecommunication services include the services of telephone, data transfer
(internet), broadcasting, cable, DTH (Direct to home) services, etc. Section
12(11) classifies the telecommunication services into 3 categories for the
purpose of determining the place of supply as under:
❑ Services provided using a fixed
telecommunication line, leased circuits,
internet leased circuit, cable or dish
antenna
❑ Post-paid mobile connection and post-paid internet services
❑ Pre-paid mobile connection and pre-
paid internet and DTH services
Fixed Post-paid
telecommuni- mobile
cation line, connection
leased circuit, and internet
internet leased services
circuit, cable,
dish antenna Pre-paid
mobile
connection,
internet &
DTH
services
Telecommunication Services

The place of supply of the various types of telecommunication services is

tabulated as under:
Nature of Supply Place of Supply Recipient

❑ Fixed Location where the
telecommunication line telecommunication line,
❑ Leased circuits leased circuit or cable
❑ Internet leased circuit connection or dish antenna is
❑ Cable or dish antenna installed for receipt of services
Post-paid mobile connection • Location of billing address

and internet services of the recipient of services
in the records of the
supplier of services
• Location of the supplier of
services, if the address is
not available
Pre-paid mobile connection,
ANY PERSON
internet services and DTH
services (recharge coupon,
vouchers, net pack etc.)
Services provided through a
❑ selling agent Address of the selling agent/
❑ re-seller re-seller/ distributor at the
❑ distributor of subscriber time of supply
identity module card or
recharge voucher
Services provided by any Location where such pre-
person to final subscriber payment is received or such
vouchers are sold
Pre-paid services, the Location of the recipient of
payment for which is made services in the records of the
through internet supplier of services
banking/other electronic
mode of payment

a
Other cases • The address of the

recipient as per the
records of the supplier of
services
• Location of the supplier of
services, if the address is
not available
(36) Mr. Samudragupta (Kolkata) gets a landline phone

installed at his home in Kolkata from Skybel Ltd. The place of
supply is the location where the telecommunication line is
installed, i.e. Kolkata.
(37) Mr. Rajkumar (Mumbai) gets a DTH installed at his home in his village
in Uttar Pradesh from RT Ltd. The place of supply is the location where the
DTH is installed, i.e. Uttar Pradesh.
(38) Mr. Shastri (Mumbai) takes a post-paid mobile connection in Mumbai
from Blubel Ltd. and gives his residence address at Mumbai as the address
for billing with supplier. The place of supply is the location of billing
address of the recipient, i.e. Mumbai.
(39) Mr. George (New Delhi) gets his post-paid mobile bill (billing address
New Delhi) paid online from Goa. The place of supply is the location of the
billing address of the recipient, i.e. New Delhi.
(40) Mr. Jhumroo (Pune) purchases a pre-paid card from a selling agent in
Mumbai. The place of supply is the address of the selling agent or re-seller,
i.e. Mumbai.
(41) Mr. Freddy (Puducherry) gets a pre-paid mobile recharged from a
grocery shop in Chennai. The place of supply is the location where such
pre-payment is received, i.e. Chennai.
Leased circuit is installed in more than one State/Union territory
If the leased circuit is installed in more than one State/Union territory and
a consolidated amount is charged for supply of services, the place of supply
is deemed to be in each of the respective States/Union territories in
proportion to the value for services determined in terms of the contract or

agreement entered into in this regard.

In the absence of a contract or agreement between the supplier and
recipient of services, the value of services supplied in different States/Union
territories (where the leased circuit is installed) is determined in accordance
with rule 6 of the IGST Rules in proportion to the number of points lying in
each such State/ Union territory.
The number of points in a circuit is determined in the following manner -
(i) In the case of a circuit between two points or places, the starting point
or place of the circuit and the end point or place of the circuit will
invariably constitute two points – Refer Example 42
(ii) Any intermediate point or place in the circuit will also constitute a point
provided that the benefit of the leased circuit is also available at that
intermediate point – Refer Example 43 & 44
Example 42 – Circuit between two points or places
Trinity Ltd. installs a leased circuit between the Delhi and

Mumbai offices of Inertia Pvt. Ltd. The starting point of this
circuit is in Delhi and the end point of the circuit is in Mumbai. Hence, one
point of this circuit is in Delhi and another in Maharashtra. The place of
supply of this service is in the Union territory of Delhi and the State of
Maharashtra. The service shall be deemed to have been provided in the
ratio of 1:1 in the Union territory of Delhi and the State of Maharashtra,
respectively.
Example 43 – Intermediate point or place in the circuit
Turbo Ltd. installs a leased circuit between the Chennai,

Bengaluru and Mysuru offices of Rio Ltd. The starting point of
this circuit is in Chennai and the end point of the circuit is in Mysuru. The
circuit also connects Bengaluru. Hence, one point of this circuit is in Tamil
Nadu and two points in Karnataka. The place of supply of this service is in
the States of Tamil Nadu and Karnataka. The service shall be deemed to

a
have been provided in the ratio of 1:2 in the States of Tamil Nadu and
Karnataka, respectively.
Example 44 – Intermediate point or place in the circuit

Sriram Ltd. installs a leased circuit between the Kolkata, Patna and
Guwahati offices of Srishyam Ltd. There are 3 points in this circuit in
Kolkata, Patna and Guwahati. One point each of this circuit is, therefore, in
West Bengal, Bihar and Assam. The place of supply of this service is in the
States of West Bengal, Bihar and Assam. The service shall be deemed to
have been provided in the ratio of 1:1:1 in the States of West Bengal, Bihar
and Assam, respectively.
(xi) Financial and stock broking services [Section 12(12)]
The place of supply of
banking and other
financial services,
including stock broking
services to any person is
the location of the recipient of services in the records of the supplier
of services. However, if the location of recipient of services is not available
in the records of the supplier, the place of supply is the location of the
supplier of services.
(45) Mr. Debdas (Chennai) buys shares from a broker in BSE
(Mumbai). The place of supply is the location of the recipient of
services in the records of the supplier, i.e. Chennai.
(46) Mr. Arihant (New Delhi) withdraws money from Best Bank’s ATM in
Amritsar. Mr. Arihant has crossed his limit of free ATM withdrawals. The
place of supply is the location of the recipient of services in the records of
the supplier, i.e. New Delhi.
(47) Mr. Rishabh from Varanasi, Uttar Pradesh, visits a bank registered in
New Delhi to get a demand draft made. Mr. Rishabh does not have any
account with the said bank. Therefore, since the location of recipient is not
available in the records of the supplier, the place of supply is the location
of the supplier of services, i.e. New Delhi.

(xii) Insurance services [Section 12(13)]

The place of supply of insurance services is
the location of recipient when provided
to a registered recipient.
If such services are provided to a person other
than a registered person, the place of supply
is the location of the recipient of services
in the records of the supplier of services.
(48) Mr. Shantaram, CEO of Shaurya Ltd., Mumbai (a company
registered in Maharashtra) buys insurance cover for the inventory
stored in company’s factory located at Mumbai, from Excellent
Insurers, Chennai (registered in Tamil Nadu). The place of supply is the
location of the registered recipient, i.e. Mumbai.
(49) Ms. Barbie (unregistered resident of Kolkata) goes to her native place
Patna, Bihar and buys a medical insurance policy for her parents there from
Safe Insurers, Patna (registered in Bihar). The place of supply is the location
of the recipient of services in the records of the supplier, i.e. Patna.
(xiii) Advertisement service to the Government [Section 12(14)]
Advertisement service to the Central Each of such States/ Union

Government/ State Government/ Statutory territories where the
body/ Local authority meant for the advertisement is
State/Union territory identified in contract or broadcasted/ run / played/
agreement disseminated.
The value of such supplies specific to each State/Union territory is in

proportion to the amount attributable to the services provided by way of
dissemination in the respective States/Union territories determined in terms
of the contract or agreement entered into in this regard.

a

In the absence of a contract or agreement between the supplier and
recipient of services, the proportionate value of advertisement services
attributable to different States/Union territories (where the advertisement
is broadcasted/ run /played/disseminated) is computed in accordance with
rule 3 of the IGST Rules as under:
Sl. Type of advertisement Value of service attributable to

No. dissemination in different
States/Union territories where the
advertisement is broadcasted/ run
/played/disseminated
1. Advertisements in Amount payable for publishing an

newspapers and advertisement in all the editions of a
publications newspaper or publication, which are
published in each State/Union
territory
Refer Example 50
2. Advertisements through Amount payable for the distribution of

printed material like a specific number of such material in
pamphlets, leaflets, each State/Union territory
diaries, calendars, T- Refer Example 51
shirts, etc.
3. Advertisements in Amount payable for the hoardings

hoardings (other than located in each State/ Union territory
those on trains) Refer Example 52
4. Advertisements on Amount attributable to each

trains State/Union territory calculated in the
ratio of length of the railway track in
each of such State/Union territory, for
that train
Refer Example 53

5. Advertisements on the Amount payable to each State/Union

back of utility bills of oil territory for the advertisements on bills
and gas companies, etc. pertaining to consumers having billing
addresses in each of such State/Union
territory

railway tickets State/Union territory calculated in the
ratio of number of Railway Stations in
each of such State/Union territory
Refer Example 54
7. Advertisements on Amount payable to such radio station,

radio stations which by virtue of its name is part of
each State/Union territory
Refer Example 55
8. Advertisement on Amount attributable to each

television channels State/Union territory calculated basis
the viewership of such channel in each
of such State/ Union territory which
shall be derived as under:
(a) Viewership can be ascertained
from the channel viewership
figures published by the
Broadcast Audience Research
Council.
(b) Figures for the last week of a
given quarter is used for
calculating viewership for the
succeeding quarter.
(c) Where the channel viewership
figures relate to a region
comprising of more than one
State/Union territory, the
viewership figures for a State/
Union territory of that region, is
calculated in ratio of the

a
populations of that State/Union

territory, as determined in the
latest Census.
(d) The ratio of the viewership
figures for each State or Union
territory so calculated, when
applied to the amount payable
for the service, shall represent the
portion of the value attributable
to the dissemination in that State
or Union territory
Refer Example 56
9. Advertisements in Amount payable to a cinema hall or

cinema halls screens in a multiplex in each State/
Union territory.
Refer Example 57

internet State/Union territory calculated basis
It is deemed that such the internet subscribers in each of such
service is provided all State/ Union territory which shall be
over India. derived in the following manner:
(a) Internet subscribers can be
ascertained from the internet
subscriber figures published by
the Telecom Regulatory Authority
of India (TRAI).
(b) Figures for the last quarter of a
given financial year will be used
for calculating the number of
internet subscribers for the
succeeding financial year.
(c) Where the internet subscriber
figures relate to a region
comprising of more than one
State/Union territory, the
subscriber figures for a

State/Union territory of that

region shall be calculated in the
ratio of the populations of that
State/Union territory, as
determined in the latest census.
(d) The ratio of the subscriber figures
for each State or Union territory so
calculated, when applied to the
amount payable for the service,
shall represent the portion of the
value attributable to the
dissemination in that State or
Union territory
Refer Example 58
11. Advertisements through Amount attributable to each

SMS State/Union territory calculated on the
basis of the telecom subscribers in each
of such State/ Union territory.
(a) Telecom subscribers in a telecom
circle can be ascertained from the
telecom subscribers figures
published by the TRAI. Figures for
a given quarter will be used for
calculating the subscribers for the
succeeding quarter.
(b) Where such figures relate to a
telecom circle comprising of more
than one State/Union territory,
the subscriber figures for that
State/Union territory shall be
calculated in the ratio of the
populations of that State/Union
territory, as determined in the
latest census.
Refer Examples 59-62

a
Example 50 - Advertisements in newspapers and

publications
ABC is a government agency which deals with the all the advertisement and
publicity of the Government. It has various wings dealing with various types
of publicity. In furtherance thereof, it issues release orders to various
agencies and entities. These agencies and entities
thereafter provide the service and then issue
invoices to ABC indicating the amount to be paid
by them. ABC issues a release order to a newspaper
for an advertisement on ‘Beti bachao beti padhao’,
to be published in the newspaper DEF (whose head
office is in Delhi) for the editions of Delhi, Pune,
Mumbai, Lucknow and Jaipur. The release order will have details of the
newspaper like the periodicity, language, size of the advertisement and the
amount to be paid to such a newspaper.
The place of supply of this service shall be in the Union territory of Delhi,
and the States of Maharashtra, Uttar Pradesh and Rajasthan. The amounts
payable to the Pune and Mumbai editions would constitute the proportion
of value for the State of Maharashtra which is attributable to the
dissemination in Maharashtra. Likewise, the amount payable to the Delhi,
Lucknow and Jaipur editions would constitute the proportion of value
attributable to the dissemination in the Union territory of Delhi and States
of Uttar Pradesh and Rajasthan respectively. DEF should issue separate
State-wise and Union territory-wise invoices based on the editions.
Example 51 - Advertisements through printed material like
pamphlets, leaflets, diaries, calendars, T-shirts, etc.
As a part of the campaign ‘Swachh Bharat’, ABC has engaged a
company GH for printing of 1,00,000 pamphlets (at a
total cost of ` 1,00,000) to be distributed in the States
of Haryana, Uttar Pradesh and Rajasthan. In such a
case, ABC should ascertain the breakup of the
pamphlets to be distributed in each of the three States,
i.e. Haryana, Uttar Pradesh and Rajasthan, from the Ministry or department
concerned at the time of giving the print order. Let us assume that this
breakup is 20,000, 50,000 and 30,000 respectively. This breakup should be
indicated in the print order.

The place of supply of this service is in Haryana, Uttar Pradesh and

Rajasthan. The ratio of this breakup, i.e. 2:5:3 will form the basis of value
attributable to the dissemination in each of the three States. Separate
invoices will have to be issued State-wise by GH to ABC indicating the value
pertaining to that State, i.e. ` 20,000 - Haryana, ` 50,000 - Uttar Pradesh
and ` 30,000 - Rajasthan.
Example 52 - Advertisements in hoardings (other than
those on trains
ABC as part of the campaign ‘Saakshar
Bharat’ has engaged a firm IJ for putting up hoardings
near the Airports in the 4 metros, i.e. Delhi, Mumbai,
Chennai and Kolkata. The release order issued by
ABC to IJ will have the city-wise, location-wise
breakup of the amount payable for such hoardings.
The place of supply of this service is in the Union territory of Delhi and th e
States of Maharashtra, Tamil Nadu and West Bengal. In such a case, the
amount actually paid to IJ for the hoardings in each of the 4 metros will
constitute the value attributable to the dissemination in the Union territory
of Delhi and the States of Maharashtra, Tamil Nadu and West Bengal
respectively. Separate invoices will have to be issued State-wise and Union
territory-wise by IJ to ABC indicating the value pertaining to that State/UT.
Example 53 - Advertisements on trains
ABC places an order on KL for advertisements to be placed on
a train with regard to the ‘Janani Suraksha Yojana’. The length
of a track in a State will vary from train to train. Thus, for advertisements to
be placed on the Hazrat Nizamuddin
Vasco Da Gama Goa Express which runs
through Delhi, Haryana, Uttar Pradesh,
Madhya Pradesh, Maharashtra, Karnataka
and Goa, KL may ascertain the total
length of the track from Hazrat
Nizamuddin to Vasco Da Gama as well as
the length of the track in each of these
States and Union territory from the website www.indianrail.gov.in.

a
The place of supply of this service is in the Union territory of Delhi and
States of Haryana, Uttar Pradesh, Madhya Pradesh, Maharashtra Karnataka
and Goa. The value of the supply in each of these States and Union territory
attributable to the dissemination in these States will be in the ratio of the
length of the track in each of these States and Union territory. If this ratio
works out to say 0.5:0.5:2:2:3:3:1, and the amount to be paid to KL is Rs.
1,20,000, then KL will have to calculate the State-wise and Union territory-
wise breakup of the value of the service, which will be in the ratio of the
length of the track in each State and Union territory.
In the given example, the State-wise and Union territory-wise breakup
works out to Delhi (` 5,000), Haryana (` 5,000), Uttar Pradesh
(` 20,000), Madhya Pradesh (` 20,000), Maharashtra (` 30,000), Karnataka
(` 30,000) and Goa (` 10,000). Separate invoices will have to be issued
State-wise and Union territory-wise by KL to ABC indicating the value
pertaining to that State or Union territory.
Example 54 - Advertisements on railway tickets
ABC has issued a release order to MN for display of
advertisements relating to the ‘Ujjwala’ scheme on the railway
tickets that are sold from all the Stations in the States of Madhya Pradesh
and Chattisgarh.
The place of supply of this service is in Madhya Pradesh and Chattisgarh.

The value of advertisement service
attributable to these two States will be in
the ratio of the number of railway
stations in each State as ascertained from
the Railways or from the website
www.indianrail.gov.in.
Let us assume that this ratio is 713:251
and the total bill is ` 9,640. The breakup
of the amount between Madhya Pradesh
and Chattisgarh in this ratio of 713:251
works out to ` 7,130 and ` 2,510 respectively. Separate invoices will have
to be issued State-wise by MN to ABC indicating the value pertaining to

that State.
Example 55 - Advertisements on radio stations
For an advertisement on ‘Pradhan Mantri Ujjwala Yojana’, to be
broadcast on a FM radio station OP, for
the radio stations of OP Kolkata, OP Bhubaneswar,
OP Patna, OP Ranchi and OP Delhi, the release order
issued by ABC will show the breakup of the amount
which is to be paid to each of these radio stations.
The place of supply of this service is in West Bengal,
Odisha, Bihar, Jharkhand and Delhi. The place of
supply of OP Delhi is in Delhi even though the studio may be physically
located in another State. Separate invoices will have to be issued State-
wise and Union territory-wise by MN to ABC based on the value pertaining
to each State or Union territory.
Example 56 - Advertisement on
television channels
ABC issues a release order with QR
channel for telecasting an advertisement relating to
the ‘Pradhan Mantri Kaushal Vikas Yojana’ in the
month of November, 2017. In the first phase, this will
be telecast in the Union territory of Delhi, States of Uttar Pr adesh,
Uttarakhand, Bihar and Jharkhand.
The place of supply of this service is in Delhi, Uttar Pradesh, Uttarakhand,
Bihar and Jharkhand. In order to calculate the value of supply attributable
to Delhi, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand, QR has to
proceed as under —
I. QR will ascertain the viewership figures for their channel in the last week
of September 2017 from the Broadcast Audience Research Council. Let us
assume it is 1,00,000 for Delhi and 2,00,000 for the region comprising of
Uttar Pradesh and Uttarakhand and 1,00,000 for the region comprising of
Bihar and Jharkhand.
II. Since the Broadcast Audience Research Council clubs Uttar Pradesh and
Uttarakhand into one region and Bihar and Jharkhand into another region,
QR will ascertain the population figures for Uttar Pradesh, Uttarakhand,

a
Bihar and Jharkhand from the latest census.

III. By applying the ratio of the populations of Uttar Pradesh and
Uttarakhand, as so ascertained, to the Broadcast Audience Research
Council viewership figures for their channel for this region, the viewership
figures for Uttar Pradesh and Uttarakhand can be calculated. Let us assume
that the ratio of the populations of Uttar Pradesh and Uttarakhand works
out to 9:1. When this ratio is applied to the viewership figures of 2,00,000
for this region, the viewership figures for Uttar Pradesh and Uttarakhand
work out to 1,80,000 and 20,000 respectively.
IV. In a similar manner, the breakup of the viewership figures for Bihar and
Jharkhand can be calculated. Let us assume that the ratio of populations
is 4:1 and when this is applied to the viewership figure of 1,00,000 for this
region, the viewership figure for Bihar and Jharkhand works out to 80,000
and 20,000 respectively.
V. The viewership figure for each State works out to Delhi (1,00,000), Uttar
Pradesh (1,80,000), Uttarakhand (20,000), Bihar (80,000) and Jharkhand
(20,000). The ratio is thus 10:18:2:8:2 or 5:9:1:4:1 (simplification).
VI. This ratio has to be applied when indicating the breakup of the amou nt
pertaining to each State. Thus, if the total amount payable to QR by ABC
is ` 20,00,000, the State-wise breakup is ` 5,00,000 (Delhi), ` 9,00,000 (Uttar
Pradesh) ` 1,00,000 (Uttarakhand), ` 4,00,000 (Bihar) and ` 1,00,000
(Jharkhand). Separate invoices will have to be issued State-wise and Union
territory-wise by QR to ABC indicating the value pertaining to that State or
Union territory.
Example 57 - Advertisements in cinema halls
ABC commissions ST for an advertisement on ‘Pradhan Mantri
Awas Yojana’ to be displayed in the cinema
halls in Chennai and Hyderabad. The place of supply of
this service is in the States of Tamil Nadu and
Telangana. The amount actually paid to the cinema hall
or screens in a multiplex, in Tamil Nadu and Telangana
as the case may be, is the value of advertisement service in Tamil Nadu and
Telangana respectively. Separate invoices will have to be issued State-wise

and Union territory-wise by ST to ABC indicating the value pertaining to

that State.
Example 58 - Advertisements on internet
ABC issues a release order to WX for a campaign over internet
regarding linking Aadhaar with one’s bank account and mobile
number. WX runs this campaign over certain websites. In order to ascertain
the State-wise breakup of the value of this service which is to be reflected
in the invoice issued by WX to ABC, WX has to first refer to the Telecom
Regulatory Authority of India figures for quarter ending March, 2017, as
indicated on their website www.trai.gov.in. These figures show the service
area wise internet subscribers. There are 22 service areas. Some relate to
individual States some to two or more States and some to part of one State
and another complete State. Some of these areas are metropolitan areas.
In order to calculate the State-wise breakup,
first the State-wise breakup of the number of
internet subscribers is arrived at. (In case
figures of internet subscribers of one or more
States are clubbed, the subscribers in each
State is to be arrived at by applying the ratio
of the respective populations of these States as per the latest census.). Once
the actual number of subscribers for each State has been determined, the
second step for WX involves calculating the State-wise ratio of internet
subscribers. Let us assume that this works out to 8:1:2….. and so on for
Andhra Pradesh, Arunachal Pradesh, Assam… and so on. The third step for
WX will be to apply these ratios to the total amount payable to WX so as
to arrive at the value attributable to each State. Separate invoices will have
to be issued State-wise and Union territory-wise by WX to ABC indicating
the value pertaining to that State or Union territory.
Advertisements through SMS
(59) In the case of the telecom circle of Assam, the amount

attributed to the telecom circle of Assam is the value of
advertisement service in Assam.

a
(60) The telecom circle of North East covers the

States of Arunachal Pradesh, Meghalaya, Mizoram,
Nagaland, Manipur and Tripura. The ratio of
populations of each of these States in the latest
census will have to be determined and this ratio
applied to the total number of subscribers for this
telecom circle so as to arrive at the State-wise
figures of telecom subscribers. Separate invoices will have to be issued
State-wise by the service provider to ABC indicating the value pertaining to
that State.
(61) ABC commissions UV to send short messaging service to voters asking
them to exercise their franchise in elections to be held in Maharashtra and
Goa. The place of supply of this service is in Maharashtra and Goa. The
telecom circle of Maharashtra consists of the area of the State of Maharashtra
(excluding the areas covered by Mumbai which forms another circle) and the
State of Goa. When calculating the number of subscribers pertaining to
Maharashtra and Goa, UV has to -
I. obtain the subscriber figures for Maharashtra circle and Mumbai
circle and add them to obtain a combined figure of subscribers;
II. obtain the figures of the population of Maharashtra and Goa from the
latest census and derive the ratio of these two populations;
III. this ratio will then have to be applied to the combined figure of
subscribers so as to arrive at the separate figures of subscribers
pertaining to Maharashtra and Goa;
IV. the ratio of these subscribers when applied to the amount payable for
the short messaging service in Maharashtra circle and Mumbai circle,
will give breakup of the amount pertaining to Maharashtra and Goa.
Separate invoices will have to be issued State-wise by UV to ABC
indicating the value pertaining to that State.
(62) The telecom circle of Andhra Pradesh consists of the areas of the States
of Andhra Pradesh, Telangana and Yanam, an area of the Union territory of
Puducherry. The subscribers attributable to Telangana and Yanam will have
to be excluded when calculating the subscribers pertaining to Andhra Pradesh.

After understanding the concept of ‘place of supply’ and meaning of the ‘location
of the supplier’, you will now be in a position to better appreciate the meaning of
the terms - inter-State supply, intra-State supply and supply in course of territorial
waters. Therefore, these terms have been discussed in detail hereunder:
5. INTER-STATE SUPPLY [SECTION 7 OF THE

IGST ACT]
Section 7 Inter-State Supply

(Relevant
Extract)
(1) Subject to the provisions of section 10, supply of goods, where

the location of the supplier and the place of supply are in––
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of goods in the course of inter-
State trade or commerce.
(3) Subject to the provisions of section 12, supply of services,

where the location of the supplier and the place of supply are
in––
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-
State trade or commerce.
(5) Supply of goods or services or both,––

a
(c) in the taxable territory, not being an intra-State supply

and not covered elsewhere in this section,
shall be treated to be a supply of goods or services or both in
the course of inter-State trade or commerce.
ANALYSIS
This section provides as to when the supplies of goods and/or services shall be
treated as Supply in the course of inter-State trade/commerce.
Inter-State Supplies
Supply of goods/ services when location of the supplier and the

place of supply are in two different States / UTs
Supply in the taxable territory, not being an intra-State supply & not
specified anywhere
A. ‘SUPPLY OF GOODS’ in the course of inter-State trade/commerce

[Section 7(1) of the IGST Act]
It primarily covers two kinds of supplies – Supply of
goods within India and supply of goods imported into
India. Our discussion here will be restricted to the supply
of goods within India since provisions relating to import
and export of goods are not covered at Intermediate level; they have been
discussed in detail at Final level.
Supplies within India
Supply of goods shall be considered as supply of goods in course of inter-
State trade or commerce in the following cases:
Location of the
supplier AND Place of supply
two different a State and a

two different
Union Union
States OR OR
territories territory

Please note that the place of supply here will be determined based on the
provisions of Section 10 as discussed earlier in this Chapter. The above
concept can be easily understood with the help of following examples. In
each of the following cases, supplies of goods shall be treated as supply
of goods in course of inter-State trade/commerce.
Location of Supplier Place of Supply
(63)
Punjab Haryana
(64)
Punjab Daman and Diu
(65)
Daman and Diu Chandigarh
B. ‘SUPPLY OF SERVICES’ in the course of inter-State trade/commerce

[Section 7(3) of the IGST Act]
It primarily covers two kinds of supplies – supply of services within India and
import of services into India. Our discussion here will be restricted to the
supply of services within India since provisions relating to import and export of
services are not covered at Intermediate level; they have been discussed in
detail at Final level.
Supplies within India
Supply of services shall be considered as supply of services in course of inter-
State trade or commerce in the following cases:
Location of the
supplier AND Place of supply
two different a State and a

two different
Union Union
States
OR territories OR territory

a
Please note that the place of supply here will be determined based on the
provisions of section 12 as discussed earlier in this Chapter.
C. SUPPLY OF GOODS OR SERVICES OR BOTH in the course of inter-State
trade or commerce [Section 7(5)(c) of the IGST Act]
Certain supplies are treated as supplies in the course of inter-State trade or
commerce and shall equally apply to supply of goods and to supply of
services. Clause (c) of section 7(5) is a residuary clause and stipulates that
supply of goods and/or services in the taxable territory, not being an intra-
State supply & not covered elsewhere in this section 7(5) are considered as
inter-State supplies3.
6. INTRA-STATE SUPPLY [SECTION 8 OF THE

IGST ACT]
Section 8 Intra-State Supply

(Relevant
Extract)
3
As already discussed, provisions relating to import and export of goods and /or services are not
covered at the Intermediate level. However, for the purpose of knowledge, students may note that
following supplies shall also be treated as a supply of goods in the course of inter-State trade or
commerce:
(i) Supply of goods imported into the territory of India, till they cross the customs frontiers of India
(ii) Supply of services which are imported into territory of India
(iii) Supply of goods or services or both when the supplier is located in India and the place of
supply is outside India
(iv) Supply of goods or services or both to or by a Special Economic Zone developer/ Special
Economic Zone unit; SEZ is a geographically bound zone within India where the economic
laws relating to export and import are more liberal as compared to other parts of the
country. For all tax purposes, SEZ is considered to be a place outside India. Further, supply
of goods or services or both to a Special Economic Zone developer or a Special Economic
Zone unit are zero-rated supplies.
Above information is not relevant from the examination point of view.

(1) Subject to the provisions of section 10, supply of goods where the
location of the supplier and the place of supply of goods are in the
same State or same Union territory shall be treated as intra-State
supply.
(2) Subject to the provisions of section 12, supply of services where

the location of the supplier and the place of supply of services are
in the same State or same Union territory shall be treated as
intra-State supply.
Explanation 1. - For the purposes of this Act, where a person

has, -
(ii) an establishment in a State or Union territory and any
other establishment outside that State or Union territory;
or
(iii) an establishment in a State or Union territory and any
other establishment registered within that State or
Union territory,
then such establishments shall be treated as establishments of
distinct persons.
Explanation 2. - A person carrying on a business through a

branch or an agency or a representational office in any territory
shall be treated as having an establishment in that territory.
ANALYSIS
This section provides as to when the supplies of goods and/or services shall be
treated as intra-State supply.
Which supplies of goods/services shall be treated as intra-State supplies?
[Section 8(1) and 8(2) of the IGST Act]
Supply of goods/services where the location of the supplier and the place of supply
of goods/services are in the same State or same Union territory shall be treated as

a
intra-State supply. Such supplies are exigible to CGST and SGST/UTGST4.
Location of the AND

Place of supply
supplier
Same State or Union Territory
The concept discussed above has been explained by way of following examples:
Location of Supplier Place of Whether qualifies

Supply as intra-State
supply?
(66) Punjab Punjab Yes
(67) London Delhi No
(68) Delhi Gujarat No
(69) Puducherry Puducherry Yes
4
As already discussed, provisions relating to import and export of goods and/or services are not
covered at the Intermediate level. However, for the purpose of knowledge, students may note that
as per the proviso to section 8(1) and proviso to section 8(2) of the IGST Act, following supplies
shall not be treated as a supply of goods in the course of intra-State trade or commerce even
when the location of supplier and place of supply fall within the same State/ Union Territory:
(i) Supply of goods/services to or by SEZ Unit or SEZ Developer.
(ii) Supply of goods made to a tourist [referred to in section 15 of the IGST Act].
(iii) Goods imported in India.

Establishments of distinct persons

Establishments of same entity shall be considered as establishments of distinct
persons where a person has:
(i) an establishment in a State or Union territory and any other establishment

outside that State or Union territory; or
(ii) an establishment in a State or Union territory and any other establishment
registered within that State or Union territory 5.
Thus, any supply between any of the above establishments shall be treated as
supply between establishments of distinct persons. Further, a person carrying on
a business through a branch or an agency or a representational office in any
territory shall be treated as having an establishment in that territory.
7. SUPPLIES IN TERRITORIAL WATERS

[SECTION 9 OF THE IGST ACT]
Section 9 Supplies in territorial waters

Notwithstanding anything contained in this Act -
(a) where the location of the supplier is in the territorial waters, the location of such
supplier; or
(b) where the place of supply is in the territorial waters, the place of supply,
shall, for the purposes of this Act, be deemed to be in the coastal State or Union
territory where the nearest point of the appropriate baseline is located.
5
It may be noted that where a person has an establishment in India and any other
establishment outside India, such establishments of same entity shall also be considered as
establishments of distinct persons. This is only for the knowledge of the students and not
relevant from the examination point of view.

a
ANALYSIS
This section determines the location of supplier and/or the place of supply when such
location of supplier and/or the place of supply is in territorial waters. Before that,
let us understand the term “territorial waters”.
The term ‘Territorial waters’ has not been defined in the GST law. However, as
per United Nations Convention on the Law of the Sea, the term ‘territorial sea’ is
a belt of coastal waters extending atmost 12 nautical miles from the baseline of a
coastal state. Section 3(2) of the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and Other Maritime Zones Act, 1976 stipulates that the limit of
territorial waters is the line every point of which is at a distance of 12 nautical miles
from the nearest point of the appropriate base line. Refer the pictorial diagram
showing ‘territorial waters’ given in Chapter 3 – Charge of GST.
Section 9 of the IGST Act provides that where the location of the supplier is in the
territorial waters, it shall be deemed that location of such supplier is in the coastal
State or Union Territory where the nearest point of the appropriate baseline is
located. Similarly, in case where the place of supply is in territorial waters, the place
of supply shall be deemed to be in the coastal State or Union Territory where the
nearest point of the appropriate baseline is located.
LET US RECAPITULATE
A. Place of supply of goods other than import and export [Section 10]
S. Nature of Supply Place of Supply

No.
1. Where the supply involves the Location of the goods at the

movement of goods, whether by time at which, the movement of
the supplier or the recipient or goods terminates for delivery
by any other person to the recipient
2. Where the goods are delivered Principal place of business of

to the recipient or any person on such third person
the direction of the third person

by way of transfer of title or

otherwise
3. Where there is no movement of Location of such goods at the

goods either by supplier or time of delivery to the recipient
recipient
4. Where goods are assembled or Place where the goods are

installed at site assembled or installed
5. Where the goods are supplied Place where such goods are
on-board a conveyance like a taken on-board the conveyance
vessel, aircraft, train or motor
vehicle
6. Where the place of supply of To be determined in the

goods cannot be determined in prescribed manner
terms of the above provisions
B. Place of supply of services where location of supplier AND recipient

is in India [Section 12]
(i) In respect of the following 12 categories of services, the place of supply
is determined with reference to a proxy; rest of the services are
governed by the default provision.
S. Nature of Service Place of Supply

No.
1. Immovable property ❑ Location at which the

related-services including immovable property or boat or
accommodation in vessel is located or intended to
hotel/boat/vessel be located
❑ If located outside India: Location
of the recipient
If the immovable property Each such State in proportion to the

or boat or vessel is located value of services provided in each
in more than one State State – Refer point (ii) below

a
2. Restaurant and catering Location where the services are

services, personal actually performed
grooming, fitness, beauty
treatment and health
service
3. Training and performance ❑ B2B: Location of such registered

appraisal person
❑ B2C: Location where the services
are actually performed
4. Admission to an event or Place where the event is actually

amusement park held or where the park or the other
place is located
5. Organisation of an event ❑ B2B: Location of such

including ancillary services registered person
and assigning of ❑ B2C: Location where the event
sponsorship to such is actually held
events
• If the event is held
outside India: Location
of the recipient
If the event is held in more Each such State in proportion to the

than one State (in cases of value of services provided in each
unregistered recipient) State – Refer point (iii) below
6. Transportation of goods, ❑ B2B: Location of such

including mails or courier registered person
❑ B2C: Location at which such
goods are handed over for
their transportation
❑ If the goods are transported
outside India: Location of the
destination of goods
7. Passenger transportation ❑ B2B: Location of such

registered person
❑ B2C: Place where the

passenger embarks on the

conveyance for a continuous
journey
8. Services on board a Location of the first scheduled point

conveyance of departure of that conveyance for
the journey
9. Banking and other ❑ Location of the recipient of

financial services including services in the records of the
stock broking supplier
❑ Location of the supplier of
services if the location of the
recipient of services is not
available
10. Insurance services ❑ B2B: Location of such

registered person
❑ B2C: Location of the recipient
of services in the records of
the supplier
11. Advertisement services to ❑ Each of States/Union territory

the Government where the advertisement is
broadcasted/displayed/run/di
sseminated
❑ Proportionate value in case of
multiple States – Refer point
(iv) below
12. Telecommunication ❑ Services involving fixed line,

services leased and internet leased
circuits, dish antenna etc:
Location of such fixed
equipment
❑ Post-paid mobile/ internet
services: Location of billing
address of the recipient and if
the same is not available,

a
location of supplier
❑ Pre-paid mobile/
internet/DTH services
provided:
• Through selling
agent/re-
seller/distributor:
Address of such selling
agent/re-
seller/distributor in the
records of supplier at
the time of supply
• By any person to final
subscriber: Location
where pre-payment is
received or place of sale
of vouchers
• When payment made
through electronic
mode - Location of
recipient in records of
supplier
❑ Other cases: Address of the
recipient in the records of the
supplier and if the same is not
available, location of supplier
If the leased circuit is Each such State in proportion to the
installed in more than one value of services provided in each
State State – Refer point (v) below
(ii) Manner of determining proportionate value of immovable property

related service attributable to different States/Union territories – where
the immovable property/boat/vessel is located - in the absence of a
contract or agreement in this regard
S. Type of service in relation to Factor determining the

No. immovable property proportionate value of

service
(a) Service provided by way of Number of nights stayed in

lodging accommodation by hotel/ such property
inn/guest house etc. and its
ancillary services (other than the
cases where such property is a
single property located in 2 or
more contiguous States/ Union
territories or both)
(b) All other services provided in Area of the immovable

relation to immovable property property lying in each State/
including organising any marriage Union territories
or reception etc., accommodation
in a single property located in 2 or
more contiguous States or/and
Union territories, services ancillary
to such services
(c) Services by way of lodging Time spent by the boat or

accommodation by a house boat vessel in each such State/
or vessel and its ancillary services Union territories, to be
determined on the basis of
declaration made by the
service provider
(iii) Manner of determining proportionate value of service relating to

organization of event, attributable to different States/Union territories
– where the event is held - in the absence of a contract or agreement in
this regard
Organization of
an event/ Proportionate
Generally
services ancillary value of such
accepted
thereto/ service to be
accounting
assigning of computed by
principles
sponsorship to application of
such event

a
(iv) Manner of determining proportionate value of advertisement service

attributable to different States/Union territories – where the
advertisement is broadcasted/ run /played/disseminated - in the
absence of a contract or agreement in this regard
Sl. Type of Proportionate value of service

No. advertisement
1. Advertisements in Amount payable for publishing an

newspapers and advertisement in all the editions of a
publications newspaper or publication, which are
published in each State/Union territory
2. Advertisements Amount payable for the distribution of a

through printed specific number of such material in each
material like State/Union territory
pamphlets,
leaflets, diaries,
calendars, T-
shirts, etc.
3. Advertisements in Amount payable for the hoardings

hoardings (other located in each State/ Union territory
than those on
trains)
4. Advertisements Amount attributable to each

on trains State/Union territory calculated in the
ratio of length of the railway track in
each of such State/Union territory, for
that train
5. Advertisements Amount payable to each State/Union

on the back of territory for the advertisements on bills
utility bills of oil pertaining to consumers having billing
and gas addresses in each of such State/Union
companies, etc. territory


on railway tickets State/Union territory calculated in the
ratio of number of Railway Stations in
each of such State/Union territory
7. Advertisements Amount payable to such radio station,

on radio stations which by virtue of its name is part of
each State/Union territory
8. Advertisement on Amount attributable to each

television State/Union territory calculated on the
channels basis of the viewership of such channel in
each of such State/ Union territory.
Viewership figures for the last week of a
given quarter as published by BARC can
be used for calculating viewership for the
succeeding quarter. Figures pertaining
to more than one State/Union territory
are apportioned in ratio of the
populations of those States/Union
territories, as per the latest Census.
9. Advertisements in Amount payable to a cinema hall or

cinema halls screens in a multiplex in each State/ Union
territory.

on internet State/Union territory calculated on the
It is deemed that basis of the internet subscribers in each of
such service is such State/ Union territory.
provided all over Internet subscriber figures for the last
India. quarter of a given financial year as
published by TRAI can be used for
calculating the subscribers for the
succeeding financial year. Figures
pertaining to more than one State/Union

a
territory are apportioned in the ratio of

the populations of those States/Union
territories, as per the latest census.

through SMS State/Union territory calculated on the
basis of the telecom subscribers in each
of such State/ Union territory.
Telecom subscribers figures in a telecom
circle for a given quarter as published by
TRAI can be used for calculating the
subscribers for the succeeding quarter.
Figures pertaining to a telecom circle
comprising of more than one State/Union
territory are apportioned in the ratio of
the populations of those States/Union
territories, as per the latest census.
(v) Manner of determining proportionate value of service relating to

installation of a leased circuit, attributable to different States/Union
territories – where the circuit is installed - in the absence of a contract
or agreement in this regard
Proportionate
Number of
value of such
Installation of points lying in
service
leased circuit the State/
computed on
Union territory
the basis of

Starting point/place of
For a circuit
circuit and end
between two
point/place of circuit
points/places
constitute two points
the benefit of the Intermediate

leased circuit is also point/ place in
available at that circuit constitute
intermediate point a point if
(vi) For the rest of the services other than those specified above, the default
provision has been prescribed as under:
Default rule for the services other than the 12 specified services
S. No. Description of Place of Supply
Supply
1. B2B Location of such registered person
2. B2C ❑ Where the address on record
exists: Location of the recipient
❑ Other cases: Location of the
supplier of services
TEST YOUR KNOWLEDGE

1. In case of a domestic supply, what is the place of supply where goods are
removed?
2. What will be the place of supply if the goods are delivered by the supplier to
another person on the direction of a third person?
3. What is the place of supply where the goods or services are supplied on board
a conveyance, such as a vessel, an aircraft, a train or a motor vehicle?
4. The place of supply in relation to immovable property (situated in India) is the
location of immovable property. Suppose a road is constructed from Delhi to
Mumbai covering multiple states.

a
What will be the place of supply of construction services?

5. What would be the place of supply of services provided by an event
management company for organizing a sporting event for a Sports Federation
which is held in multiple States?
6. What is the place of supply of services by way of transportation of good s,
including by mail or courier when both the supplier and the recipient of the
services are located in India?
7. What will be the place of supply of passenger transportation service, if a person
travels from Mumbai to Delhi and back to Mumbai?
8. What is the place of supply for mobile connection? Can it be the location of
supplier?
9. A person from Mumbai goes to Kullu-Manali and takes some services from ICICI
Bank in Manali.
What is the place of supply?
10. An unregistered person from Gurugram travels by Air India flight from Mumbai
to Delhi and gets his travel insurance done in Mumbai.
What is the place of supply of insurance services?
ANSWERS/HINTS
1. As per section 10(1)(a), the place of supply of goods is the location of the
goods at the time at which the movement of goods terminates for delivery
to the recipient.
2. As per section 10(1)(b), it would be deemed that the third person has received
the goods and the place of supply of such goods will be the principal place
of business of such person.
3. As per section 10(1)(e), in respect of goods, the place of supply is the location
at which such goods are taken on board.

However, in respect of services, the place of supply is the location of the first
scheduled point of departure of that conveyance for the journey in terms of
sections 12(10).
4. Where the immovable property is located in more than one State, the supply
of service is treated as made in each of the States in proportion to the value
for services separately collected or determined, in terms of the contract or
agreement entered into in this regard or, in the absence of such contract or
agreement, on such other reasonable basis as may be prescribed in this behalf
[Explanation to section 12(3)].
of services in this regard, the proportionate value of services supplied in
different States/Union territories (where the immovable property is located)
is computed on the basis of the area of the immovable property lying in each
State/ Union territories [Rule 4 of the IGST Rules].
5. In case of an event, if the recipient of service is registered, the place of supply
of services for organizing the event is the location of such person. However,
if the recipient is not registered, the place of supply is the place where event
is held.
Since the event is being held in multiple states and a consolidated amount is
charged for such services, the place of supply will be deemed to be in each
State in proportion to the value for services determined in terms of the
contract or agreement entered into in this regard [Explanation to section
12(7)].
of services, the proportionate value of services made in each State (where the
event is held) will be computed in accordance with rule 5 of the IGST Rules
by the application of generally accepted accounting principles.
6. If the recipient is registered, the location of such person is the place of supply.
However, if the recipient is not registered, the place of supply is the place
where the goods are handed over for transportation. Further, if the goods
are transported outside India, the destination of such goods is the place of

a
7. If the person is registered, the place of supply of passenger transportation

service will be the location of recipient. If the person is not registered, the
place of supply for the forward journey from Mumbai to Delhi will be Mumbai,
the place where he embarks [Section 12(9)].
However, for the return journey, the place of supply will be Delhi as the return
journey has to be treated as separate journey [Explanation to section 12(9)].
8. The location of supplier of mobile services cannot be the place of supply as
the mobile companies are providing services in multiple states and many of
these services are inter-state. The consumption principle will be broken if the
location of supplier is taken as place of supply and all the revenue may go to
a few states where the suppliers are located.
The place of supply for mobile connection would depend on whether the
connection is on postpaid or prepaid basis. In case of postpaid connections,
the place of supply is the location of billing address of the recipient of services
on the record of supplier of services.
In case of pre-paid connections, if the service is supplied:-
(i) through a selling agent or a re-seller or a distributor of SIM card or
re-charge voucher, the place of supply is the place address of the selling
agent or re-seller or distributor as per the record of the supplier at the
time of supply; or
(ii) by any person to the final subscriber, the place of supply is the location
where such prepayment is received or such vouchers are sold;
(iii) in other cases, the place of supply is the address of the recipient as per
the records of the supplier of services and where such address is not
available, the place of supply shall be location of the supplier of
services.
However, if the recharge is done through internet/e-payment, the location of

recipient of service on record of the supplier will be taken as the place of
9. The place of supply in case of banking services to any person shall be the
location of the recipient of services on the records of the supplier of services.
However, if the location of recipient of services is not on the records of the

supplier, the place of supply shall be the location of the supplier of services
i.e. Kullu-Manali, Himachal Pradesh [Section 12(12)].
10. When insurance service is provided to an unregistered person, the location
of the recipient of services on the records of the supplier of insurance services
is the place of supply. So Gurugram is the place of supply [Section 12(13)].

a
CROSSWORD PUZZLE
2 3
ACROSS
2. Conveyance includes a________, an aircraft and a vehicle.
7. The place of supply in case of banking services to any person shall be the
location of the _____________ of services on the records of the supplier of
services.

9. The place of supply of services by way of transportation of goods,

including by _____ or courier, etc. provided to a registered person, is the
location of such person.
DOWNWARDS
1. Place of supply determines the jurisdiction where the tax revenue should
______.
3. _________means a place where a passenger can disembark either to
transfer to another conveyance or break his journey for a certain period
in order to resume it at a later point of time.
4. The term supplier includes an ________ acting as such on behalf of such
supplier in relation to the goods or services or both supplied.
5. If the supply involves goods which are to be assembled at site, the place
of supply is the place of __________.
6. If the supply does not involve movement of goods, the place of supply is
the location of goods at the _______ of delivery to the recipient.
8. Service supplied on board a _________ is the location of the first scheduled
point of departure for the journey.
Note – In all cases relating to determination of place of supply above, it
has been assumed that the location of supplier as well as recipient is in
India.
Scan the following QR code for accessing the answers to MCQs in Quiz Time and
Cross word puzzle of this chapter.
Scan the code

a

amendments made under the CGST Act and the IGST Act 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 30.04.2023. 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 12(8) of the IGST Act, 2017 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.

No. amended by the
Finance Act, 2023
12(8) The place of supply of The place of supply ofProviso to sub-section
services by way of services by way of (8) of section 12 of the
transportation of transportation of
IGST Act is to be
goods, including by goods, including by omitted so as to
mail or courier to,- mail or courier to,- specify the place of
supply, irrespective of
(a) ……….. (a) ……….. destination of the
goods, in cases where
(b) ……………….. (b) ……………….. the supplier of services
and recipient of
Provided that where Provided that where services are located in
the transportation of the transportation of India.
goods is to a place goods is to a place
outside India, the outside India, the
place of supply shall place of supply shall
be the place of be the place of
destination of such destination of such
goods. goods.


a a
CHAPTER a
5
EXEMPTIONS FROM
GST
otherwise specified. Examples/illustrations/Questions and Answers given in the Chapter
are based on the position of GST law existing as on 30.04.2023.
LEARNING OUTCOMES
❑ describe the power of the Government to grant exemption

from CGST/IGST.
❑ provide an overview of the goods exempt from GST.
❑ identify and analyse various services exempt from GST.

CHAPTER OVERVIEW
Power of the Government to grant exemption from tax

Exemption from GST in
India
Goods exempt from tax
Services exempt from tax
1. INTRODUCTION
When a supply of goods and/or
services falls within the purview of
charging section, such supply is
chargeable to GST. However, for
determining the liability to pay the
tax, one needs to further check
whether such supply of goods
and/or services are exempt from
tax.
Exempt supply has been defined
as supply of any goods or services
or both which attracts nil rate of
tax or which may be wholly exempt from tax and includes non-taxable supply
[Section 2(47)].
Non-taxable supply means a supply of goods or services or both which is not
leviable to tax under CGST Act or under the IGST Act [Section 2(78)]. Thus, under
GST, a supply not leviable to tax is also included within the purview of ‘exempt
supply’.

a 5.3
EXEMPTIONS FROM GST a
Supplies not leviable to tax are alcoholic liquor for human consumption, specified
petroleum products namely Petroleum Crude, High Speed Diesel, Motor spirit
(commonly known Petrol), Natural Gas and Aviation Turbine Fuel.
Power to grant exemption from GST has been granted vide section 11 of the CGST
Act and vide section 6 of the IGST Act. State GST laws also contain identical
provisions granting power to exempt SGST. Under GST, essential goods/services,
i.e. public consumption products/services, have been exempted. Items such as
unpacked food grains, milk, eggs, curd, lassi and fresh vegetables are among the
items exempted from GST. Further, essential services like health care services,
education services, etc. have also been exempted.
It is important to note that exemption under GST may be provided in any of the
following manner:
(a) Exemption to specified activities or transactions

Sometimes, exemption is provided in respect of specified activities or
transactions. Consequently, the status of the supplier or recipient
becomes immaterial.
(1) Services by way of transfer of a going concern, as a whole
or an independent part thereof.
(2) Services by way of loading, unloading, packing, storage
or warehousing of rice.
(b) Exemption to specified suppliers

At times, exemption is given to specified suppliers only. Here, the status
of recipient becomes immaterial.
(3) Services provided by the Central Government, State
Government, Union territory or local authority where the
consideration for such services does not exceed ` 5,000.
(4) Services by an entity registered under section 12AA or 12AB of the
Income-tax Act, 1961 by way of charitable activities.
(c) Exemption to specified recipients

In some cases, exemption is given to specified recipient only. Here, the
status of supplier becomes immaterial.

(6) Services provided to the Central Government, State

Government, Union territory under any insurance scheme for
which total premium is paid by the Central Government,
State Government, Union territory.
(7) Services provided to the Central Government, State Government,
Union territory administration under any training programme, for which
75% or more of the total expenditure is borne by the Central
Government, State Government, Union territory administration.
(d) Exemption to specified suppliers and specified recipients

Sometimes, exemption is given only when activities or transactions are
carried out by specified suppliers for specified recipients only.
(8) Services by the Employees’ State Insurance Corporation
to persons governed under the Employees’ State Insurance
Act, 1948.
(9) Services by National Pension System (NPS) Trust to its members
against consideration in the form of administrative fee.
In this chapter, we shall discuss the power to grant exemption from tax under CGST
Act/IGST Act, list of services exempt from GST in detail and an overview of the
goods exempt from tax.
2. POWER TO GRANT EXEMPTION FROM TAX

[SECTION 11 OF THE CGST ACT/SECTION 6 OF
THE IGST ACT]
Section 11 Power to grant exemption from tax
(1) Where the Government is satisfied that it is necessary in the

public interest so to do, it may, on the recommendations of the

a 5.5
Council, by notification, exempt generally, either absolutely or

subject to such conditions as may be specified therein, goods or
services or both of any specified description from the whole or
any part of the tax leviable thereon with effect from such date as
may be specified in such notification
(2) Where the Government is satisfied that it is necessary in the

public interest so to do, it may, on the recommendations of the
Council, by special order in each case, under circumstances of
an exceptional nature to be stated in such order, exempt from
payment of tax any goods or services or both on which tax is
leviable.
(3) The Government may, if it considers necessary or expedient so to

do for the purpose of clarifying the scope or applicability of any
notification issued under sub-section (1) or order issued under
sub-section (2), insert an explanation in such notification or
order, as the case may be, by notification at any time within one
year of issue of the notification under sub-section (1) or order
under sub-section (2), and every such explanation shall have
effect as if it had always been the part of the first such notification
or order, as the case may be.
Explanation––For the purposes of this section, where an exemption in respect of

any goods or services or both from the whole or part of the tax leviable thereon
has been granted absolutely, the registered person supplying such goods or
services or both shall not collect the tax, in excess of the effective rate, on such
ANALYSIS
(i) Exemption from payment of tax: GST law empowers the Central
Government or State Government, as the case may be, to grant exemption
from tax. The exemption is granted on recommendation of the GST Council.

Exemption can be from whole of the tax or part of

Exemption can be
the tax. It should be granted in public interest.
from whole of tax
Exemption can be granted to or part of tax
Exemption can be goods or services or both of
granted by a any specified description, by way of issuance of
notification or by notification, either absolutely [i.e. unconditional
a special order exemption; exemption is not subject to any
condition(s)] or conditionally [i.e. exemption is
subject to specified condition(s)]. Exemption may be granted by a special
order in case of the circumstances of an exceptional nature.
The absolute/ unconditional exemption is
mandatory in nature. Where the supply of the goods Unconditional
or services or both are unconditionally exempted exemption is
from whole of the tax, the registered person doesn’t mandatory
have option to collect and pay tax on such supply of
Where the supply of the goods or services or both are unconditionally
exempted from part of the tax, the registered person doesn’t have option
to collect and pay the tax, in excess of the effective rate, on such supply of
However, where the exemption is conditional, it is at Conditional
the option of the registered person whether to avail exemption is
optional
the same or not.
The above provisions have been explained by way of a diagram as follows:
The Government may

generally exempt on
BY
supply of goods and/ recommendation
NOTIFICATION
or services of any of the GST council
specified description
with effect from either absolutely or subject

such date as may wholly/ to such conditions as may
be specified in partly be specified in the
such notification. notification

a 5.7
The Government may

BY
exempt any goods and/or on recommendation
SPECIAL
services on which tax is of the GST Council
ORDER
leviable from payment of tax
under circumstances of an in the

exceptional nature to be public wholly
stated in such order interest
(ii) Explanation inserted within 1 year, for the purpose of clarifying the
scope or applicability of any notification/order, to have retrospective
effect: Wherever the Government feels that there is a need to clarify the
scope or applicability of any notification/order issued under this section , it
can issue an explanation within 1 year of issue of said notification/ order.
Such explanation shall have effect as if it was there when first such
notification/ order was issued, i.e. explanation so inserted would be
effective retrospectively.
It is hereby clarified that the explanation so inserted for a particular entry in

the notification, is effective from the inception of the entry in notification and
not from the date from which the notification (that inserted said explanation)
becomes effective.
(10) Principal Notification No. 11/2017 CT (R) dated 28.06.2017 1
came into force with effect from 01.07.2017. Thereafter, a new
entry - Entry no. 3(vi) was inserted w.e.f. 21.09.2017. Subsequently,
an explanation was also inserted with respect to entry no. 3(vi) by issue of a
notification on 26.07.2018 [i.e. within 1 year of the insertion of entry 3(vi)].
Although the effective date mentioned in the notification which inserted said
explanation was 27.07.2018, said explanation will be effective from the
inception of entry 3(vi) in notification i.e. 21.09.2017 and not 27.07.2018.
[Circular No. 120/39/2019 GST dated 11.10.2019]
1
This notification notifies the rate of tax applicable on various services.

Similar provisions granting power to exempt IGST have been

provided under section 6 of the IGST Act.
3. GOODS EXEMPT FROM TAX

A list of items has been notified under section 11(1) of the CGST Act, 2017/ section
6(1) of the IGST Act, 2017. These items have been exempted from whole of the tax.
Under GST, everyday items used by the
common man have been included in the list
of exempted items. Items such as unbranded
atta/ maida/ besan, unpacked food grains,
milk, eggs, curd, lassi and fresh vegetables are
among the items exempted from GST.
Some of the examples of the goods exempted
from tax have been provided herein 2:
Live fish (0301) Fresh Milk (0401) Potatoes (0701)
Grapes (0806) Indian National Flag (63) Plastic Bangles (3926)
2
Students may go through the complete list of goods exempt from GST on CBIC website –
www.cbic.gov.in, for knowledge purposes.

a 5.9
4. LIST OF SERVICES EXEMPT FROM TAX
I. SPECIFIC SERVICES EXEMPT FROM CGST AND IGST
Notification No. 12/2017 Central Tax (Rate) dated 28.06.20173 (hereafter

referred to as “the Notification”) unless otherwise specified, has exempted
various services wholly from CGST. Each of the entries of the exemption
notification have been discussed below:
1. Services related to charitable and religious activities
Entry Description of services

No.4
1 Services by an entity registered under section 12AA or 12AB of the

Income-tax Act, 1961 by way of charitable activities.
13 Services by a person by way of-

(a) conduct of any religious ceremony;
(b) renting of precincts of a religious place meant for general public,
owned or managed by an entity registered as a charitable or
religious trust under section 12AA or 12AB of the Income-tax Act,
1961 or a trust or an institution registered under section
10(23C)(v) of the Income-tax Act or a body or an authority covered
under section 10(23BBA) of the said Income-tax Act.
However, nothing contained in entry (b) of this exemption shall
apply to-
(i) renting of rooms where charges are ` 1,000 or more per
3
Exemption from IGST has been granted to various services vide Notification No. 9/2017
Integrated Tax (Rate) dated 28.06.2017. All the services exempted from CGST & SGST/UTGST
have also been exempted from IGST. Apart from these, there are few additional s ervices
which have been exempted only under IGST law. Such services will be discussed at the
Final Level.
4
Entry Nos. mentioned herein correspond to entries in Notification No. 12/2017 Central Tax
(Rate) dated 28.06.2017. However, these entry numbers have been given only for reference
purposes and are not relevant for examination purpose.

day;
(ii) renting of premises, community halls, kalyanmandapam
or open area, and the like where charges are ` 10,000 or
more per day;
(iii) renting of shops or other spaces for business or
commerce where charges are ` 10,000 or more per month.
60 Services by a specified organisation in respect of a religious pilgrimage

facilitated by the Government of India, under bilateral arrangement.
80 Services by way of training or coaching in-

(a) recreational activities relating to arts or culture, by an
individual, or
(b) sports by charitable entities registered under section 12AA or
12AB of the Income-tax Act.
ANALYSIS
A. SERVICES PROVIDED BY CHARITABLE/RELIGIOUS TRUST
Entry 1 exempts services supplied by an entity registered under section 12AA or
12AB of the Income-tax Act, 1961 by way of charitable activities. Thus, in order to
claim exemption under Entry 1, following two conditions must be satisfied:-
(i) The entity should be registered under section 12AA or 12AB of the
Income-tax Act, 1961, and
(ii) The entity must carry out one or more of the specified charitable activities.
Before proceeding further, let us first understand the meaning of term ‘charitable
activities’. The term ‘charitable activities’ mean activities relating to-
(i) PUBLIC HEALTH by way of-
(A) care or counseling of
(I) terminally ill persons or persons with severe
physical or mental disability;
(II) persons afflicted with HIV or AIDS;

a 5.11
(III) persons addicted to a dependence-forming substance such as

narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or prevention of
HIV infection;
(ii) ADVANCEMENT OF RELIGION, SPIRITUALITY OR YOGA;
(iii) ADVANCEMENT OF EDUCATIONAL PROGRAMMES/SKILL DEVELOPMENT
relating to,-
(A) abandoned, orphaned or homeless children;

(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;

(iv) PRESERVATION OF ENVIRONMENT including watershed, forests & wildlife.
Thus, only those services provided by a charitable and religious trusts [registered
under section 12AA or 12AB of the Income-tax Act] which fall within the above
definition of charitable activities, are eligible for exemption from GST. There could
be many other services provided by such charitable and religious trusts which are
not covered by the definition of charitable activities and hence, such services would
attract GST.
For instance, grant of advertising rights to a person for publicity, on the premises
of the charitable/religious trust or on publications of the trust, or granting
admission to events, functions, celebrations, shows against admission tickets or fee
etc. would attract GST.
In the following paras, we have examined some of the services supplied by the
entities registered under section 12AA or 12AB of the Income-tax Act:
Management of educational institutions by charitable trusts
Activities of schools, colleges or any other educational institutions run by
charitable trusts by way of education or skill development of abandoned,
orphans, homeless children, physically or mentally abused persons, prisoners, or
persons over age of 65 years or above residing in a rural area, will be considered
as charitable activities and income from such supplies will be wholly exempt from
GST.

The term rural area means the area comprised in a village as defined in land
revenue records, excluding the area under any municipal committee, municipal
corporation, town area committee, cantonment board or notified area committee;
or any area that may be notified as an urban area by the Central Government or a
State Government.
(11) Shiksha Academy, an educational institute run by Sarvsewa Trust,
a charitable trust registered under section 12AB of the Income-tax Act,
1961, has organized a Skill Development Programme for the old age
people over the age of 65 years residing in Bangalore city (an urban area).
Services provided by Shiksha Academy do not fall within the purview of ‘charitable
activities’. The activities relating to advancement of skill development relating to
persons over the age of 65 years, are covered under the definition of ‘charitable
activities’ only when such persons are residing in rural area.
Activities of a school, college or an institution run by a trust which do not come

within the ambit of charitable activities will not be exempt under Entry 1. However,
such activities may be exempt under Entry 66 [discussed later in this chapter]
provided the school, college or institution qualifies as an 'educational institution'.
Hostel accommodation provided by trusts
Hostel accommodation services provided by trusts to students do not fall within
the ambit of charitable activities as defined above.
Religious yatras or pilgrimage

Religious yatras/pilgrimage organised by any charitable or religious trust are not
exempt.
Only such services of religious pilgrimage as are provided by specified
organization in respect of a religious pilgrimage facilitated by the Government
of India (GoI), under bilateral arrangement, are exempt from GST. [See Entry 60 in
above table]. The term specified organization as referred herein means-
➢ Kumaon Mandal Vikas Nigam Limited (KMVN), a Government of

Uttarakhand Undertaking; or
➢ ‘Haj Committee of India’ or ‘State Haj Committee
including Joint State Committee’.

a 5.13
In short, as per Entry 60, the services provided by the Haj Committee and KMVN
in relation to pilgrimage to Mecca and Kailash - Mansarovar respectively are not
liable to GST.
(12) KMVN supplies numerous services, namely, medical facilities,
catering services, security, accommodation services, etc. to the pilgrims
undertaking Kailash-Mansarovar pilgrimage. Such services provided by
KMVN in respect of the religious pilgrimage to Kailash-Mansarovar are covered
under entry 60 and thus, are exempt.
Arranging yoga and meditation camp by charitable trusts
As discussed above, services provided by entity registered under
section 12AA or 12AB of the Income-tax Act, 1961 by way of
advancement of religion, spirituality or yoga are exempt as such
activities are covered in definition of charitable activities.
Fee or consideration charged in any other form from the
participants for participating in a religious, yoga or meditation programme or camp
meant for advancement of religion, spirituality or yoga shall be exempt.
Residential programmes or camps where the fee charged
includes cost of lodging and boarding shall also be exempt
as long as the primary and predominant activity,
objective and purpose of such residential programmes or
camps is advancement of religion, spirituality or yoga.
However, if charitable or religious trusts merely or primarily provide

accommodation or serve food and drinks against consideration in any form
including donation, such activities will be taxable. Similarly, activities such as
holding of fitness camps or classes such as those in aerobics, dance, music etc. will
be taxable5.
(13) Bhavyajyoti Foundation, a charitable trust registered under section
12AB of the Income-tax Act, 1961, has organized a ‘Yoga Meditation
Camp’ for the old age people. GST would be exempt on the same as
services provided by entity registered under section 12AB of the
Income-tax Act, 1961 by way of advancement of religion, spirituality or yoga are
exempt.
5

Hospitals managed by charitable trusts

Exemption available to health care services under Entry 74
[discussed later in this chapter] is also applicable to the health
care services provided by a clinical establishment, an
authorised medical practitioner or paramedics of a
religious or charitable trust also.
Training or coaching in arts, culture or sports
As per Entry 80, services by way of training or coaching in-
(a) recreational activities relating to arts or culture, by an individual, or
(b) sports by charitable entities registered under section 12AA or 12AB of the
Income-tax Act
are exempt from GST.
It is important to note that the exemption with regard to services provided by
way of training or coaching in recreational activities relating to arts or culture
is available when the same is provided by an individual. Similarly, services of
training or coaching in sports are exempt only when such services are provided
by a charitable entity registered under section 12AA or 12AB of Income-tax
Act.
Let us now analyse the term
‘recreational activities’. The
term recreational activities is
very wide. However, under
this entry, the scope of
training or coaching in recreational activities is restricted to the area of arts
and culture. Hence, the training or coaching in recreational activities relating
to the areas other than arts or culture is outside the purview of this entry.
Further, training or coaching in all forms of arts, culture or sports is covered

under this entry, namely, dance, music, painting, sculpture making, literary
activities, theatre, etc. of any school, tradition or language or any of the sports.
(14) Manavtaa Sansthaan, a charitable trust registered under section
12AB of the Income-tax Act, 1961, has organized a ‘Basketball Training
Camp’ for teenagers. GST would be exempt on the same as services provided by

a 5.15
entity registered under section 12AB of the Income-tax Act, 1961 by way of training
or coaching in sports are exempt.
GST on services provided TO charitable trusts
Services provided to charitable or religious trusts are not outside the ambit of GST.
Unless specifically exempted, all goods and services supplied to charitable or
religious trusts are leviable to GST.
B. CONDUCT OF ANY RELIGIOUS CEREMONY
Going through Entry 13(a), it can be inferred that the amount charged, by
whatever name called, for the conduct of any religious ceremony is exempt from
GST. Religious ceremonies are life-cycle rituals including special religious poojas
conducted in terms of religious texts by a person so authorized by such religious
texts. Occasions like birth, marriage, and death involve elaborate religious
ceremonies.
(15) Raamanand Joshi, a priest, charges ` 12,000 for conducting a
religious ceremony on the birthday of Ghanshyam’s son. The amount
charged for the conduct of any religious ceremony is exempt from GST.
C. RENTING OF PRECINCTS OF RELIGIOUS PLACE MEANT FOR
GENERAL PUBLIC
❑ Entry 13(b) exempts renting of precincts of a religious place meant for
general public owned by an entity registered under any of the specified
sections of the Income Tax Act provided the consideration charged
for such renting does not exceed the prescribed ceiling limits as
given in said entry. Thus, this exemption is determined on the
basis of amount of consideration charged for such renting. Let us
understand the meaning of the terms ‘religious place’, ‘general public’ and
‘precincts’ referred herein.
❑ Religious place means a place which is primarily meant for conduct of
prayers or worship pertaining to a religion, meditation, or spirituality.
❑ General public means the body of people at large sufficiently defined by
some common quality of public or impersonal nature.
❑ The word 'precincts' is not to be interpreted in a restricted manner and all
immovable property of the religious place located within the outer

boundary walls of the complex (of buildings and facilities) in which the
religious place is located, is to be considered as being located in the precincts
of the religious place. The immovable property located in the immediate
vicinity and surrounding of the religious place and owned by the religious
place or under the same management as the religious place, may be
considered as being located in the precincts of the religious place and
extended the benefit of above exemption.
❑ Activities other than - conduct of religious ceremony and renting of precincts
of religious place - will be taxable irrespective of the manner or the name in
which the consideration is received.
For example, if donation is received with specific instructions/mutual
understanding between the donor and the receiver that religious place will
host an advertisement promoting business of the donor, such donation will
be subject to GST. However, where the donation is received without such
instructions or 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). In other words,
there is no obligation (quid pro quo) on part of recipient of the donation or
gift to do anything (supply a service). Therefore, there is no GST liability on
such consideration6.
(16) Durgadevi Trust, a religious trust registered under section 12AB of
the Income-tax Act, owns and manages a temple in their locality. It rents
the commercial shops located in the precincts of the temple for a rent of
` 10,000 per month per shop. The consideration so received is liable to GST as such
services are exempt only when the consideration is less than ` 10,000 per month.
(17) Sarvodaya Trust, a religious trust, registered under section

10(23BBA) of the Income-tax Act, owns and manages a gurudwara. It
rents the community hall located in the precincts of the gurudwara for a
6
Discussion under this heading is primarily based on CBIC GST Flyer – Chapter 39 - GST on
Charitable and Religious Trusts and other clarifications issued by CBIC

a 5.17
rent of ` 9,000 per day for a marriage function. The consideration so received is
exempt from GST as the consideration is less than ` 10,000 per day.
Quiz ABC Trust, a charitable trust registered under

Time section 12AB of the Income-tax Act, is registered
! under GST in Rajasthan. It provided coaching for
cricket to teenagers, yoga training to middle-aged
1 people and skill development services to persons
over the age of 65 years residing in a metro city, in the
month of June. ABC Trust is liable to pay GST on:
(c) Coaching
(a) Skill
(b) Skill for cricket, yoga (d) Coaching
development
development training and skill for cricket and
services and yoga
services development yoga training
training
services
2. Agriculture related services

No.
24 Services by way of loading, unloading, packing, storage or warehousing

of rice.
24A Services by way of warehousing of minor forest produce.
24B Services by way of storage/ warehousing of cereals, pulses, fruits

and vegetables.
54 Services relating to cultivation of plants and rearing

of all life forms of animals, except the rearing of
horses, for food, fibre, fuel, raw material or other
similar products or agricultural produce by way of—

(a) agricultural operations directly related to production of any

agricultural produce including cultivation, harvesting, threshing,
plant protection or testing;
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including tending,
pruning, cutting, harvesting, drying, cleaning, trimming, sun drying,
fumigating, curing, sorting, grading, cooling or bulk packaging and
such like operations which do not alter the essential characteristics
of agricultural produce but make it only marketable for the primary
market;
(d) renting or leasing of agro machinery or vacant land with or
without a structure incidental to its use;
(e) loading, unloading, packing, storage or warehousing of
agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing Committee or
Board or services provided by a commission agent for sale or
purchase of agricultural produce.
55 Carrying out an intermediate production process as job work in relation

to cultivation of plants and rearing of all life forms of animals, except
the rearing of horses, for food, fibre, fuel, raw material or other similar
products or agricultural produce.
55A Services by way of artificial insemination of livestock (other than horses).
ANALYSIS
ENTRY 54
The words ‘Services relating to cultivation of plants and rearing of all life forms
of animals, except the rearing of horses, for food, fibre, fuel,
raw material or other similar products’ used in Entry 54
include activities like breeding of fish (pisciculture), rearing of silk
worms (sericulture), cultivation of ornamental flowers
(floriculture) and horticulture, forestry, etc.

a 5.19
Further, the term ‘agricultural produce’ means any produce out of cultivation of
plants and rearing of all life forms of animals, except the rearing of horses, for food,
fibre, fuel, raw material or other similar products, on which
either no further processing is done or such processing is
done as is usually done by a cultivator or producer which
does not alter its essential characteristics, but makes it
marketable for primary market.
It is important to note that agricultural produce is either

subject to no further processing at all or if any processing is
undertaken on the agricultural produce it should not alter its
essential characteristics but may
make it marketable for primary
market. Few instances of such
processes are the processes carried
out at an agricultural farm including tending, pruning,
cutting, harvesting, drying, cleaning, trimming, etc.
Let us examine what is exempt under Entry 54.
Entry 54 exempts the agricultural operations directly related to production of any
agricultural produce such as cultivation, harvesting, threshing, plant protection or
testing. Further, processes carried out at an agricultural farm including tending,
pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating,
curing, sorting, grading, cooling or bulk packaging and such like operations which
do not alter the essential characteristics of agricultural produce but make it
only marketable for the primary market are also exempt. In view of the same,
following processes are outside the purview of this entry and thus, are liable to
GST:-
(a) Process which alters the essential characteristics of the agricultural

produce: For instance, potato chips or tomato ketchup, etc. are manufactured
through processes which alter the essential characteristic of farm produce
(potatoes and tomatoes in this case).
(b) Process which makes agricultural produce marketable in the retail
market: The processes of grinding, sterilizing, extraction packaging in retail
packs of agricultural products, which make the agricultural products

marketable in retail market, would NOT be covered in this entry. Only such
processes are covered in this entry which makes agricultural produce
marketable in the primary market and not retail market.
Apart from this, supply of farm labour is also exempt from GST.
Renting or leasing of agro machinery or vacant land
Item (d) of the entry exempts renting or leasing of agro
machinery or vacant land with or without a structure incidental
to its use.
(18) Moolchand has leased out to a farmer – Tulsidas - a vacant land

for agriculture. The land has a greenhouse and a storage shed which
are incidental to its use for agriculture. Such service of leasing of vacant
land with a greenhouse and a storage shed which is incidental to its use for
agriculture is exempt from GST.
Agricultural extension services
Item (f) of the entry exempts Agricultural Extension Services (AES). Said services
have been defined under the notification to mean the application of scientific
research and knowledge to agricultural practices through farmer education or
training.
The main objective of AES is to transmit latest technical know-how to farmers. It
also focuses on enhancing farmers' knowledge about crop techniques and help
them to increase productivity. This is done through training courses, kisan call
centres, farm visits, on-farm trials, kisan melas, kisan clubs, advisory bulletins and
the like.
Agricultural Produce Marketing Committee services
Services by any Agricultural Produce Marketing
Committee or Board or services provided by a
commission agent for sale or purchase of agricultural
produce are not liable to GST. Agricultural Produce
Marketing Committee or Board means any committee or
board set up under a State Law for the time being in force for purpose of regulating
the marketing of agricultural produce.

a 5.21
Such marketing committees or boards have been set up in most of the States and
provide a variety of support services for facilitating the marketing of agricultural
produce by provision of facilities and amenities like, sheds, water, light, electr icity,
grading facilities etc. They also take measures for prevention of sale or purchase of
agricultural produce below the minimum support price. APMCs collect market
fees, license fees, rents etc.
Services provided by such Agricultural Produce Marketing Committee or Board are
covered in item (g) of entry 54. However, any service provided by such bodies
which is not directly related to cultivation of plants and rearing of all life forms
of animals, except the rearing of horses, for food, fibre, fuel, raw material or other
similar products or agricultural produce, will be liable to tax e.g. renting of shops
or other property for commercial purposes.
Warehousing of agriculture produce
Item (e) of entry 54 exempts loading, unloading, packing, storage or warehousing
of agricultural produce. In this regard, following may be noted:
Processed Tea and coffee
Tea used for making the beverage, such as black tea,
green tea, white tea is a processed product made in
tea factories after carrying out several processes,
such as drying, rolling, shaping, refining, oxidation,
packing etc. on green leaf and is the processed output of the same. Thus, green
tea leaves and not tea is the “agricultural produce” eligible for exemption under
entry 54 where such exemption is available for loading, unloading, packing, storage
or warehousing of agricultural produce. Same is the case with coffee obtained after
processing of coffee beans.
Jaggery
Similarly, processing of sugarcane into jaggery
changes its essential characteristics. Thus, jaggery is
also not an agricultural produce.

Pulses
Pulses commonly known as dal are obtained after
dehusking or splitting or both. The process of dehusking
or splitting is usually not carried out by farmers or at farm
level but by the pulse millers. Therefore, pulses (dehusked
or split) are also not agricultural produce. However, whole
pulse grains such as whole gram, rajma etc. are covered in
the definition of agricultural produce.
In view of the above, it is inferred that processed products such as tea (i.e. black
tea, white tea etc.), processed coffee beans or powder, pulses (dehusked or split),
jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall
outside the definition of agricultural produce and therefore do not fall within item
(e) of entry 547.
ENTRY 55
Custom milling of paddy into rice

Carrying out an intermediate production process as job work in relation to
cultivation of plants and rearing of all life forms of animals, except the rearing of
horses, for food, fibre, fuel, raw material or other similar products or agricultural
produce is exempt under GST.
Milling of paddy is not an intermediate
production process in relation to cultivation of
plants. It is a process carried out after the process
of cultivation is over and paddy has been
harvested.
Further, processing of paddy into rice is not usually carried out by cultivators, but
by rice millers.
Milling of paddy into rice also changes its essential characteristics.

Therefore, milling of paddy into rice cannot be considered as an intermediate
production process in relation to cultivation of plants for food, fibre or other similar
products or agricultural produce.
7

a 5.23
In view of the above, it is clarified that milling of paddy into rice is not eligible for
exemption under Entry 558.
Quiz
Time!
Which of the following services relating to agriculture are not

2 exempt from GST?
(a) Loading,
unloading,
(b) Milling of (c) Agricultural (d) Renting of
packing, storage
paddy into rice extension services agro machinery
or warehousing of
rice.
3. Educational services

No.
66 Services provided -
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance
examination against consideration in the form of entrance fee;
(b) to an educational institution, by way of,-
(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;
8

(iv) services relating to admission to, or conduct of examination

by, such institution;
(v) supply of online educational journals or periodicals.

However, nothing contained in sub-items (i), (ii) and (iii) of item (b) shall
apply to an educational institution other than an institution providing
services by way of pre-school education and education up to higher
secondary school or equivalent.
Further, nothing contained in sub-item (v) of item (b) shall apply to an
institution providing services by way of,-
(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.
ANALYSIS
Education is fundamental to the nation building process.

The term “Education” is not defined in the CGST Act, 2017,
but as per Apex Court decision in “Loka Shikshana Trust v.
CIT”, education is process of training and developing
knowledge, skill and character of students by normal
schooling.
Taxing the Education Sector has always been a sensitive issue, as education is seen
more as a social activity than a business one. The Government has a constitutional
obligation to provide free and compulsory elementary education to every child.
Thus, to promote education, it would be beneficial if educational services are
exempted from tax.
However, commercialization of education is also a reality.
The distinction between core and ancillary education is
blurring and education is now an organised industry with
huge revenues. The GST law tries to maintain a fine
balance whereby core educational services provided and

a 5.25
specified services received by educational institutions are exempt and other

services are sought to be taxed.
Exemption from GST granted vide Entry 66 stated above can be discussed under
two broad categories – output services and input services of an educational
institution. The discussion in succeeding paras fundamentally revolves around
these two areas:
❑ Services provided by an educational institution to its

students, faculty and staff and by way of conduct of
entrance examination against consideration in the
form of entrance fee are exempt from GST.
Since exemption with respect to said services is available only when these
services are provided BY ‘educational institution’, it is important to analyse
the term EDUCATIONAL INSTITUTION first:
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;
(iii) education as a part of an approved vocational education course.
❑ It is to be noted that only those institutions, whose operations conform to

the specifics given in the definition of the term “educational
institution”, would be treated as one entitled to avail
exemptions provided by the law.
❑ Sub-clause (ii) : The term ‘education as a part of

curriculum for obtaining a qualification recognised by
any law for the time being in force’ means the education delivered as ‘a
part’ of the curriculum that has been prescribed for obtaining a qualification
prescribed by law. Thus, in order to be covered under Entry 66, the education
service should be delivered as part of curriculum. In view of same, it can be
inferred that:

Education services provided Covered Reasons

in sub-
clause (ii)
Conduct of degree courses by
colleges, universities or ✓ These courses lead to
grant of qualifications
institutions recognized by law
Training given by private coaching
institutes  Such training does not
lead to grant of a
recognized qualification.
Education as a part of a prescribed
curriculum for obtaining a  Only a course recognized
by an Indian law is
qualification recognized by a law covered herein.
of a foreign country
(19) ‘Dharam Institute of Technology’ (DIT), a private engineering

college in M.P., offers post graduate engineering programmes. All
the engineering courses including the distance learning post
graduate engineering programme offered by DIT are recognised by the law
[The All India Council for Technical Education (AICTE)]. Since DIT imparts
education as a part of a curriculum for obtaining a qualification recognised
by the Indian law, the same is an educational institution.
❑ Sub-clause (i): An institution providing pre-school education and

education up to higher secondary school or equivalent qualify as an
educational institution.
(20) ‘Littleways Public School’ is a school loacted in Tamil Nadu.
The school has two branches – one is a pre-school and another is
a higher secondary school affiliated to CBSE. A pre-school and a
higher secondary school are educational institutions. Thus, Littleways Public
School qualifies as an educational institution.
❑ Sub-clause (iii) covers institutions providing services by way of education

as a part of approved vocational education course.

a 5.27
An approved vocational education course means, -

➢ a course run by an ITI/ ITC9 affiliated to the National Council
for Vocational Training (NCVT) or State Council for Vocational
Training (SCVT) offering courses in designated trades**
notified under the Apprentices Act, 1961 or
➢ a Modular Employable Skill Course, approved by the NCVT, run by a
person registered with the Directorate General of Training, Ministry of
Skill Development and Entrepreneurship.
The Modular Employable Skills is the minimum skill set which is
sufficient for gainful employment or self-employment in the world of
work. It provides employable skills to early school drop-outs, existing
workers seeking skill upgradation, workers seeking certification of their
skills acquired informally, etc. to improve their employability and
provides certification after completion of the course.
**Designated trade means any trade or occupation or any subject field in
engineering or non-engineering or technology or any vocational course
which the Central Government, after consultation with the Central
Apprenticeship Council, may, by notification in the Official Gazette, specify as
a designated trade for the purposes of Apprentices Act, 1961 10.
(21) Kaladrishti ITI, Gorakhpur is engaged in providing skill
development courses in other than designated trades notified
under the Apprentices Act, 1961. Since courses offered by
Kaladrishti ITI are not in designated trades notified under the Apprentices
Act, 1961, education provided by it is not approved as vocational educational
course as defined above. Resultantly, it doesn’t qualify as an educational
institution.
9
Industrial Training Institute/ Industrial Training Centre
10
Some of the designated trades notified under the Apprentices Act, 1961 are electrician,
wireman, carpenter, plumber, mason, mechanic, tool and die maker, baker and confectioner,
weaver, tailor, footwear maker, photographer, beautician, painter, desk top publishing operator,
gardener, cable television operator, library assistant, etc.

In view of the above definition, some of the institutions providing education

services have been examined as under:
Private ITIs
❑ Private ITls qualify as an educational institution if the

education provided by these ITls is approved as
vocational educational course as defined above.
Accordingly, services provided by a private ITI only in respect of
designated trades notified under Apprentices Act, 1961 are
exempt from GST under this entry. Services in respect
of other than designated trades are liable to GST.
Further, in case of designated trades, services provided by
private ITI by way of conduct of entrance examination against
consideration in the form of entrance fee will also be exempt.
Moreover, in respect of such designated trades, services
provided TO private ITIs relating to admission to or
conduct of examination by a private ITI will also be
exempt.
In case of other than designated trades in private ITIs, GST is payable on
the aforesaid services provided by/to the private ITIs11.
Government ITIs
As far as Government ITls are concerned, services provided by

a Government ITI to individual trainees/ students, are exempt
under Entry 6 as these are in the nature of services provided by
the Central or State Government to individuals [Entry 6 is
discussed in detail subsequently].
Such exemption in relation to services provided by Government ITI would
cover both - vocational training and examinations conducted by these
Government ITls12.
11
12

a 5.29
Unrecognized educational institutions

❑ Private coaching centres or other unrecognized institutions, though self-
styled as educational institutions, would not be treated as educational
institutions under GST and thus cannot avail exemptions available to an
educational institution.
22) ‘Super Minds’, a coaching institute in Raipur, provides
coaching for Institute of Banking Personnel Selection (IBPS)
Probationary Officers Exam. Super Minds, being a coaching centre
which trains candidates to secure a banking job, is not an educational
institution in terms of the exemption notification.
Educational institutions up to Higher secondary schools
❑ By virtue of Entry 66, educational institutions up to Higher Secondary School

level do not suffer GST on output services and also on specified input services
[discussed in subsequent paras]. However, some of the input services like
repairs and maintenance etc. provided by private players to educational
institutions are subject to GST.
❑ Output services of lodging/boarding in hostels
provided by such educational institutions which are
providing pre-school education and education up to
higher secondary school or equivalent or education
leading to a qualification recognised by law, are fully
exempt from GST. Annual subscription/fees charged as lodging/boarding
charges by such educational institutions from its students for hostel
accommodation shall therefore, not attract GST.
❑ Boarding schools provide service of education coupled with other services
like providing dwelling units for residence and food. This may be a case of
composite supply if the charges for education and lodging and boarding are
inseparable. Their taxability will be determined in terms of the principles laid
down in section 2(30) read with section 8 13.
13
Section 2(30) provides the definition of composite supply and section 8 contains the
provisions relating to tax liability on composite and mixed supplies. The concept of composite
and mixed supply has been discussed in detail in Chapter 2 – Supply under GST in this Module
of the Study Material.

Such services in the case of boarding schools are naturally bundled and
supplied in the ordinary course of business. Therefore, the bundle of services
will be treated as consisting entirely of the principal supply, which means the
service which forms the predominant element of such a bundle.
In this case since the predominant nature is determined by the service of

education, the other service of providing residential dwelling will not be
considered for the purpose of determining the tax liability and in this case,
the entire consideration for the supply will be exempt.
Educational institutions providing qualification recognized by law
❑ We have already seen that the institutions 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 qualify as educational institutions.
However, the question arises that in case where a course in a college leads
to dual qualification only one of which is recognized by law, would service
provided by the college by way of such education be covered by the
exemption notification?
❑ Provision of dual qualifications is in the nature of two separate services as the
curriculum and fees for each of such qualifications are prescribed separately.
Service in respect of each qualification would, therefore, be assessed
separately.
If an artificial bundle of service is created by clubbing
Dual
two courses together, when only single fee is charged
qualifications
for both, only one of which leads to a qualification
where only one is
recognized by law, then by application of the rule of recognised by law
determination of taxability of a supply which is not
bundled in the ordinary course of business, it shall be
treated as a mixed supply as per provisions contained in section 2(74) 14 read
with section 8.
The taxability will be determined by the supply which attracts highest rate of
GST.
14
Section 2(74) provides the definition of mixed supply.

a 5.31
❑ However, incidental auxiliary courses provided by way of hobby classes

or extra-curricular activities in furtherance of overall well-being will be
an example of naturally bundled course, and
Incidental
therefore treated as composite supply. One relevant
auxiliary courses
consideration in such cases will be the amount of
extra billing being done for the unrecognized
component viz-a-viz the recognized course.
If extra billing is being done, it may be a case of artificial bundling of two
different supplies, not supplied together in the ordinary course of business,
and therefore will be treated as a mixed supply, attracting the rate of the
higher taxed component for the entire consideration 15.
IIMs
❑ 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.
❑ IIMs provide various long duration
programs (1 year or more) for which they Long duration programs of
award diploma/ degree certificate duly IIMs - Exempt
recommended by Board of Governors as per
the power vested in them under the IIM Act, 2017. Services provided by IIMs
to their students in all such long duration programs (one year or more), are
exempt from levy of GST.
15
The view taken in the preceding paras, that education coupled with other incidental services is
a composite supply and is exempt since the principal supply [education service] is exempt, is based
on the CBIC Flyer - Chapter 40 – ‘GST on Education Services’. However, it is also possible to take
a different view since as per the definition of composite supply under section 2(30), composite
supply consists of two or more taxable supplies.

❑ IIMs also provide various short duration/

short term programs (less than 1 year) for Short duration programs
which they award participation certificate of IIMs – Not exempt
to the executives/ professionals as they are
considered as “participants” of the said
programmes. These participation certificates are not any qualification
recognized by law.
❑ Such participants are also not considered as students of IIM. Services
provided by IIMs as an educational institution to such participants is not
exempt from GST and GST is payable on the same 16.
Conduct of entrance examination by authority/board/body set up by CG/SG
Any authority, board or body set up by the Central

Government or State Government (including National
Testing Agency) for conduct of entrance examination
for admission to educational institutions shall be
treated as educational institution for the limited
purpose of providing services by way of conduct of
entrance examination for admission to educational institutions.
Central and State Education Boards
It is important to note that the Central and State Educational Boards shall be treated
as ‘Educational Institution’ for the limited purpose of providing services by way of
conduct of examination to the students. In this regard, following is clarified:
❑ Various services are supplied by Centre and State Boards such as
National Board of Examination (NBE). These services include entrance
examination (on charging a fee) for admission to educational institution,
input services for conducting such entrance examination for students,
accreditation of educational institutions or professional so as to
authorise them to provide their respective services.
16

a 5.33
❑ For example, NBE provides services of conducting

entrance examinations for admission to courses
including Diplomat National Board (DNB) and
Fellow of National Board (FNB), prescribes courses
and curricula for PG medical studies, holds
examinations and grant degrees, diplomas and
other academic distinctions. It carries out all functions as are normally
carried out by central or state educational boards and is thus a central
educational board. “Central and State Educational Boards” are treated
as educational institutions for the limited purpose of providing services
by way of conduct of examination to the students. Therefore, NBE is an
‘educational institution’ in so far as it provides services by way of
conduct of examination, including any entrance examination, to the
students.
❑ It is clarified that:
(i) GST is exempt on services provided by Central or State Boards
(including the boards such as NBE) by way of conduct of
examination for the students, including conduct of entrance
examination for admission to educational institution under Entry
66(aa). Therefore, GST shall not apply to any fee or any amount
charged by such Boards for conduct of such examinations including
entrance examinations.
(ii) GST is also exempt on input services relating to admission to, or

conduct of examination, such as online testing service, result
publication, printing of notification for examination, admit card
and questions papers etc, when provided to such Boards under Entry
66(b)(iv).
(iii) GST is applicable to other services provided by such Boards, namely
of providing accreditation to an institution or to a professional
[accreditation fee or registration fee such as fee for FMGE (Foreign
Medical Graduate Examination) screening test] so as to authorise
them to provide their respective services 17.
17

Supply of food in a mess or canteen
❑ Educational institutions generally have mess facility for providing food to

their students and staff.
Such facility is either:
(i) run by the institution/ students themselves or
(ii) outsourced to a third person.
❑ If the catering services is one of the services
provided by an educational institution to its
students, faculty and staff and the said educational
institution is covered by the definition of
‘educational institution’ as given above, then the
same is exempt [covered under item (a) of entry 66].
❑ If the catering services, i.e., supply of food or drink in a mess or canteen,
is provided by anyone other than the educational institution, i.e. the
institution outsources the catering activity to an outside contractor, then it is
a supply of service to the concerned educational institution by such outside
caterer and attracts GST.
However, said services when provided to an educational institution providing
pre-school education or education up to higher secondary school or
equivalent are exempt from tax [covered under item (b)(ii) of Entry 66].
Supply of food in anganwadis and schools
❑ An anganwadi, inter alia, provides pre-school non-formal education.

Hence, anganwadi is covered by the definition of educational institution
(as pre-school).
❑ As seen above that as per entry 66(b)(ii), any catering service provided
to an educational institution (pre-school and schools) is exempt from
GST and it includes mid- day meal service also. The scope of this entry is
thus wide enough to cover any serving of any food to a school (including
pre-school).
❑ It is further clarified that services provided to an educational institution
by way of serving of food (catering including mid- day meals) is exempt

a 5.35
from levy of GST irrespective of its funding from government grants or

corporate donations.
❑ Hence, serving of food to anganwadi shall also be covered by said
exemption, whether sponsored by government or through donation from
corporates18.
Entrance fee for conduct of entrance examination/ fee for admission/
issuance of migration certificate
❑ As discussed earlier, Entry 66 exempts, inter alia, services provided –

(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance
examination against consideration in the form of entrance fee.
❑ Therefore, it can be seen that all services supplied by an ‘educational
institution’ to its students are exempt from GST. Consideration charged
by the educational institutes by way of entrance fee for conduct of
entrance examination is also exempt.
❑ The exemption is wide enough to cover the amount or fee charged for
admission or entrance, or amount charged for application fee for
entrance, or the fee charged from prospective students for issuance of
eligibility certificate to them in the process of their entrance/admission
to the educational institution.
❑ Services supplied by an educational institution by way of issuance of
migration certificate to the leaving or ex-students are also covered by
the exemption. Accordingly, such activities of educational institutions
are also exempt 19.
Fees charged from prospective employers
Educational institutes such as IITs, IIMs charge a fee from prospective employers
like corporate houses/MNCs, who come to the institutes for recruiting candidates
through campus interviews in relation to campus recruitments. Such services shall
also be liable to tax.
18
19

Maritime courses approved by DG Shipping
❑ Maritime Training Institutes and their training courses are approved by the
Director General of Shipping which are duly recognised under the provisions of
the Merchant Shipping Act, 1958 read with the Merchant Shipping (standards of
training, certification and watch-keeping for Seafarers) Rules, 2014.
❑ Therefore, Maritime Training Institutes are educational institutions and the
courses conducted by them are exempt subject to fulfilment of other
conditions specified herein20.
❑ Regarding, input services, it may be noted that where

output services are exempted, the educational
institutions may not be able to avail credit of tax paid
on the input side. The auxiliary education services
[services which educational institutions ordinarily carry out
themselves, but may obtain as outsourced services from any other
person] specified in item (b) of entry 66 only have been exempted [Sub-items
(i) to (v) of item (b) of Entry 66].
❑ However, the said exemption comes with a rider. Auxiliary services of (i)
transportation of students, faculty, and staff, (ii) catering including any mid-
day meals scheme sponsored by Government and (iii) security or cleaning or
housekeeping services are exempt only if such auxiliary education services
are provided to educational institutions providing services by way of
education up to higher secondary or equivalent, (from pre-school to HSC).
Thus, if such auxiliary education services are provided to educational
institutions providing degree or higher education or institutions providing
approved vocational education course, the same would not be exempt.
❑ Similarly, services of supply of online educational journals/periodicals are
exempt only if they are provided to 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 21.
20
21
The discussion in the foregoing paras is primarily based on CBIC Flyer - Chapter 40 – ‘GST on
Education Services’ unless otherwise specified.

a 5.37
(23) Little Millennium – a pre school in outskirts of Mumbai – has

subscribed the online journals on child development and experiential
learning. Services of supply of online educational journals or
periodicals provided, inter alia, to an institution providing services by
way of pre-school education are not exempt.
(24) SM Transporters has provided services of transportation of

students and faculty from their residence to school and back, to
Pathwheels School - a higher secondary school. Services of
transportation of students, faculty and staff provided, inter alia, to an institution
providing services by way of education up to higher secondary school or equivalent
are exempt.
(25) Shiksha College, offering degree courses (recognised by law), has

to conduct its half yearly examination in November. For this purpose, it
has paid the honorarium to paper setters and examiners (not on the rolls
of Shiksha College) for their services. Further, it availed the printing services for
printing the question papers (paper and content are provided by Shiksha College)
for conducting examination. Services provided to an educational institution relating
to admission to, or conduct of examination by, such institution are exempt.
Therefore, services of paper setters and examiners and printing services availed by
Shiksha College are exempt.
(26) Gyaani Public School – a higher secondary school – has hired

Suvidha Services Ltd. for security and housekeeping services in the
school. Security and housekeeping services provided within the
premises of, inter alia, a higher secondary school are exempt. Therefore, said
services provided by Suvidha Services Ltd. are exempt.
The school susbequently hired Suvidha Services Ltd. for providing the security and
housekeeping services at School’s Annual Day function organised in an auditorium
outside the school campus. Security and housekeeping services provided to Gyaani
Public School for School’s Annual Day function organised outside the school
campus will be taxable as only the security and housekeeping services performed
within the premises of the higher secondary school are exempt.
The exemptions available in respect of input and output services of an educational

institution have been tabulated as follows:

Type of educational institution
Educational institution Educational Educational

providing pre-school institution institution
education and education providing providing
up to higher secondary education as a education as a
school or equivalent part of a part of
curriculum for approved
obtaining a vocational
recognised education
qualification course
Exempt (i) transportation of (i) services Services relating

input students, faculty and relating to to admission to,
services staff; admission to, or conduct of
(ii) catering, including any or conduct of examination by,
mid-day meals scheme examination such institution.
sponsored by the by, such
Central Government, institution
State Government or (ii) supply of
Union territory; online
(iii) security or cleaning or educational
house-keeping services journals or
performed in such periodicals
educational institution;
(iv) services relating to
admission to, or
conduct of
examination by, such
institution
Exempt Services provided by an educational institution -

output (a) to its students, faculty and staff;
services (aa) by way of conduct of entrance examination against consideration
in the form of entrance fee.

a 5.39
.
Quiz
Time!
3 Which of the following educational services are not exempt

from GST?
(c) Coaching
(b) Long
(a) JEE Mains for preparation of
duration programs (d) Catering
entrance exam UPSC entrance
(2 years) services provided
conducted by examination
conducted by to Little Angels
National Testing provided by
Indian Institutes of Public School
Agency. perfect coaching
Management
classes .
4. Health care services

No.
46 Services by a veterinary clinic in relation to health care of animals or

birds.
74 Services by way of-

(a) health care services by a clinical
establishment, an authorised medical
practitioner or para-medics;
However, nothing in this entry shall
apply to the services provided by a
clinical establishment by way of providing room [other than
Intensive Care Unit (ICU)/Critical Care Unit (CCU)/Intensive
Cardiac Care Unit (ICCU)/Neo natal Intensive Care Unit
(NICU)] having room charges exceeding ` 5000 per day to a
person receiving health care services.
(b) services provided by way of transportation of a patient in an

ambulance, other than those specified in (a) above.
ANALYSIS
Entry 74 - Health care services by a clinical establishment, an

authorised medical practitioner or para-medics are exempt
from GST [Entry 74(a)].
However, services provided by a clinical establishment by

way of providing room [other than Intensive Care Unit (ICU)/Critical Care Unit
(CCU)/Intensive Cardiac Care Unit (ICCU)/Neo natal Intensive Care Unit
(NICU)] having room charges exceeding ` 5000 per day to a person receiving
health care services will not be exempt.
The term ‘health care services’ is defined as follows:
Health care services
❑ means 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.
❑ As it is apparent from the definition of health care services, only services in
recognized systems of medicines in India are exempt under this entry.
Following systems of medicines are the recognized systems of medicines in
India22:-
22
Section 2(h) of the Clinical Establishments (Registration and Regulation) Act, 2010

a 5.41
❑ Allopathy
❑ Yoga
❑ Naturopathy
❑ Ayurveda
❑ Homeopathy
❑ Siddha
❑ Unani
❑ Any other system of medicine that may be recognized by Central Government
Let us now understand the meaning of terms - ‘clinical establishment’, ‘authorised
medical practitioner’ and ‘paramedics’.
Clinical establishment: means a hospital, nursing
home, clinic, sanatorium or any other institution by,
whatever name called, that offers services or facilities
requiring diagnosis or treatment or care for illness,
injury, deformity, abnormality or pregnancy in any
recognised system of medicines in India, or a place established as an independent
entity or a part of an establishment to carry out diagnostic or investigative services
of diseases.
Thus, diagnostic or investigative services of diseases provided by pathological labs
are not liable to GST.
Authorised medical practitioner: means a medical practitioner
registered with any of the councils of recognised system of
medicines established/recognised by law in India & includes a
medical professional having requisite qualification to practice in
any recognised system of medicines in India as per any law for
the time being in force.
Further, Paramedics are trained health care professionals, for
example, nursing staff, physiotherapists, technicians, lab assistants
etc. Services by them in a clinical establishment would be in the
capacity of employee and not provided in independent capacity and

will thus be considered as services by such clinical establishment. Similar services

in independent capacity are also exempted.
Rent of rooms provided to in-patients
Rent of the rooms having room charges upto ` 5000 per day to a person
receiving health care services in hospitals is exempt23.
Services provided by senior doctors/ consultants/ technicians
❑ Hospitals hire senior doctors/ consultants/ technicians independently. Such
persons do not have any contract with the patient. Hospitals pay them
consultancy charges and there is no employer-employee relationship
between them.
❑ It is clarified by CBIC that services provided by such senior doctors/
consultants/ technicians, whether employees or not, are healthcare services
which are exempt from GST [Circular No. 32/06/2018 GST dated 12.02.2018].
Amount charged by hospitals from the patients
❑ In above cases, suppose hospitals charge the
patients, say, ` 10,000/- and pay to the
consultants/technicians only ` 7,500/- and keep the
balance for providing ancillary services which
include nursing care, infrastructure facilities,
paramedic care, emergency services, checking of
temperature, weight, blood pressure, etc. Going through the definition of
health care services [given above], it can be inferred that hospitals also
provide healthcare services.
❑ The entire amount charged by them 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
[Circular No. 32/06/2018 GST dated 12.02.2018].
23
Circular No. 27/01/2018 GST dated 04.01.2018 read with proviso to Entry 74(a)

a 5.43
Food supplied to the patients

❑ Health care services provided by the clinical establishments will
include food supplied to the patients; but such food may be
prepared by the canteens run by the hospitals or may be
outsourced by the hospitals from outdoor caterers.
❑ When outsourced, there is no ambiguity that the suppliers shall
charge tax as applicable and hospital will get no ITC.
❑ Food supplied to the in-patients as advised by the doctor/nutritionists is a
part of composite supply of healthcare and not separately taxable.
❑ Other supplies of food by a hospital to patients (not admitted) or their
attendants or visitors are taxable [Circular No. 32/06/2018 GST dated
12.02.2018]24.
Services other than health care services in clinical establishment’s premises
❑ Supply of services other than healthcare services such as renting of shops,
auditoriums in the premises of the clinical establishment, display of
advertisements etc. will be subject to GST25.
Services by way of Assisted Reproductive Technology (ART) procedures such

as In vitro fertilization (IVF)
❑ As per the definition of health care services given earlier, it means 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.
24
The view taken in the preceding paras, that health care services coupled with other incidental
services is a composite supply and is exempt since the principal supply [health care service] is
exempt, is based on Circular No. 32/06/2018 GST dated 12.02.2018. However, it is also possible
to take a different view since as per the definition of composite supply under section 2(30) of the
CGST Act, composite supply consists of two or more taxable supplies.
25
As clarified by the CBIC GST Flyer – Chapter 39 - GST on Charitable and Religious Trusts

❑ Since, the abnormality/disease/ailment of infertility is treated using ART

procedure such as IVF, it is clarified that services by way of IVF are also
covered under the definition of health care services 26.
ILLUSTRATION 1
Good Health Medical Centre, a clinical establishment, offers the following services:
(i) Reiki healing treatments.
(ii) Plastic surgeries. One such surgery was conducted to repair cleft lip of a new
born baby.
(iii) Air ambulance services to transport critically ill patients from distant locations
to the Medical Centre.
(iv) Palliative care for terminally ill patients. On request, such care is also provided
to patients at their homes. (Palliative care is given to improve the quality of
life of patients who have a serious or life-threatening disease but the goal of
such care is not to cure the disease).
(v) Alternative medical treatments by way of yoga.
Good Health Medical Centre also operates a cord blood bank which provides services
in relation to preservation of stem cells.
Good Health Medical Centre is of the view that since it is a clinical establishment, all
the health care services provided by it as well as all the taxable services provided to
it are exempt from GST.
You are required to examine the situation in the light of relevant statutory provisions.
ANSWER
Health care services provided by a clinical establishment, an authorised medical

practitioner or para-medics are exempt from GST under Entry 74. In light of the
same, the eligibility to exemption in respect of each service offered by Good Health
Medical Centre is examined below:
26

a 5.45
(i) Not Exempt. Since reiki healing is not a recognized system of medicine in
terms of section 2(h) of Clinical Establishments Act, 2010, it would not be
exempt and thus, GST would be payable thereon.
(ii) Exempt. Health care service does not include, inter alia, 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.
Therefore, plastic surgeries will not be entitled to the said exemption and
thus, GST would be payable thereon. However, plastic surgery conducted to
repair a cleft lip will be eligible for exemption as it reconstructs anatomy or
functions of body affected due to congenital defects (cleft lip).
(iii) Exempt. Health care service includes services by way of transportation of the
patient to and from a clinical establishment. Thus, air ambulance service to
transport critically ill patients to Good Health Medical Centre would be
eligible for exemption under the said notification.
(iv) Exempt. Health care service means any service by way of diagnosis or
treatment or care for illness, injury, deformity, abnormality or pregnancy in
any recognized system of medicines in India. It is immaterial whether such
service is provided at the clinical establishment or at the home of the patient
or at any other place. Thus, palliative care for terminally ill patients is exempt.
(v) Exempt. Since Yoga is a recognized system of medicine in terms of section

2(h) of Clinical Establishments Act, 2010, the same would be eligible for
exemption under the said notification.
Further, services provided by cord blood banks by way of preservation of stem cells
or any other service in relation to such preservation are not exempt from GST.
Therefore, services provided in relation to preservation of stem cells by the cord
blood bank operated by Good Health Medical Centre will be liable to GST.
It is important to note that Entry 74 of the exemption notification grants exemption

to health care services provided BY a clinical establishment and not to services
provided TO a clinical establishment. Therefore, Good Health Medical Centre’s
contention that since it is a clinical establishment, all the services provided to it are
also exempt from GST is not correct in law.

Quiz
Time!
Which of the following services provided by Healthy Wealthy

4 Nursing Home are not exempt from GST?
(d) Services
(a) Renting of
provided in
rooms with per (b) Food (c) Healing of
Intensive Care Unit
day charges of supplied to in- patients through
for which `12,000
` 6,000 to in- patients. naturopathy
are charged per
patients.
day.
5. Services provided by Government

No.
4 Services by governmental authority by way of any activity in relation

to any function entrusted to a municipality under article 243W of the
Constitution are exempt.
5 Services by a governmental authority by way of any activity in relation

to any function entrusted to a Panchayat under article 243G of the
Constitution.
6 Services by the Central Government, State Government, Union territory

or local authority excluding the following services—
(a) services by the Department of Posts;
(b) services in relation to an aircraft or a vessel, inside or outside
the precincts of a port or an airport;
(c) transport of goods or passengers; or
(d) any service, other than services covered under entries (a) to (c)
above, provided to business entities.

a 5.47
7 Services provided by the Central Government, State Government, Union

territory or local authority to a business entity with an aggregate
turnover of up to such amount in the preceding financial year as
makes it eligible for exemption from registration under the Central
Goods and Services Tax Act, 2017.
Explanation - For the purposes of this entry, it is hereby clarified that
the provisions of this entry shall not be applicable to following services:-
(i) item (a), (b) and (c) of Entry 6 above.
(ii) services by way of renting of immovable property.

territory or local authority to another Central Government, State
Government, Union territory or local authority.
However, nothing contained in this entry shall apply to services referred
in item (a), (b) and (c) of Entry 6 above.
9 Services provided by Central Government, State Government, Union

territory or a local authority where the consideration for such services
does not exceed ` 5,000.
However, nothing contained in this entry shall apply to services referred
in item (a), (b) and (c) of Entry 6 above
Further, in case where continuous supply of service* is provided by
the Central Government, State Government, Union territory or a local
authority, the exemption shall apply only where the consideration
charged for such service does not exceed ` 5,000 in a FY.
*as defined in section 2(33)
9C Supply of service by a Government Entity to Central Government, State

Government, Union territory, local authority or any person specified by
Central Government, State Government, Union territory or local
authority against consideration received from Central Government,
State Government, Union territory or local authority, in the form of
grants.

9D Services by:
an old age home
run by:
✓ Central Government, State Government or
✓ an entity registered under section 12AA or 12AB of the Income-
tax Act, 1961
to its residents (aged 60 years or more)
against consideration upto ` 25,000 per month per member,
provided that the consideration charged is inclusive of charges for
boarding, lodging and maintenance.
24C Services by the Department of Posts by way of post card, inland

letter, book post and ordinary post (envelopes weighing less than
10 grams).
34A Services supplied by Central Government, State Government, Union

territory to their undertakings or Public Sector Undertakings (PSUs) by
way of guaranteeing the loans taken by such undertakings or PSUs from
the banking companies and financial institutions 27.

territory or local authority by way of-
(a) registration required under any law for the time being in force;
(b) testing, calibration, safety check or certification relating to
protection or safety of workers, consumers or public at large,
including fire license, required under any law for the time being
in force.

territory or local authority by way of issuance of passport, visa,
driving license, birth certificate or death certificate.

territory or local authority by way of tolerating non-performance of
27
Circular No.154/10/2021 GST dated 17.06.2021 reiterates that guaranteeing of loans by
Central or State Government for their undertaking or PSU is specifically exempt under Entry 34A.

a 5.49
a contract for which consideration in the form of fines or liquidated

damages is payable to the Central Government, State Government,
Union territory or local authority under such contract.

territory or local authority by way of assignment of right to use
natural resources to an individual farmer for cultivation of plants
and rearing of all life forms of animals, except the rearing of horses,
for food, fibre, fuel, raw material or other similar products.

territory by way of deputing officers after office hours or on holidays
for inspection or container stuffing or such other duties in relation to
import export cargo on payment of Merchant Overtime charges.
65B Services supplied by a State Government to Excess Royalty Collection

Contractor (ERCC) by way of assigning the right to collect royalty on
behalf of the State Government on the mineral dispatched by the
mining lease holders.
However, at the end of the contract period, ERCC shall submit an
account to the State Government and certify that the amount of GST
deposited by mining lease holders on royalty is more than the GST
exempted on the service provided by State Government to the ERCC of
assignment of right to collect royalty and where such amount of GST
paid by mining lease holders is less than the amount of GST exempted,
the exemption shall be restricted to such amount as is equal to the
amount of GST paid by the mining lease holders and the ERCC shall
pay the difference between GST exempted on the service provided by
State Government to the ERCC of assignment of right to collect royalty
and GST paid by the mining lease holders on royalty.
Explanation- Mining lease holder means a person who has been
granted mining lease, quarry lease or license or other mineral
concession under the Mines and Minerals (Development and
Regulation) Act, 1957, the rules made thereunder or the rules made by
a State Government under section 15(1) of the said Act.
74A Services provided by rehabilitation

professionals recognised under the
Rehabilitation Council of India Act, 1992 by

way of rehabilitation, therapy or counselling and such other activity as

covered by the said Act at medical establishments, educational
institutions, rehabilitation centers established by Central Government,
State Government or Union territory or an entity registered under
section 12AA or 12ABof the Income-tax Act, 1961.
ANALYSIS
Relevant definitions are as under:

• Business entity: means any person carrying
out business.
• Governmental authority: means 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 90%, or more participation by way of equity or control, to carry out any
function entrusted to a Municipality under article 243W of the Constitution
or to a Panchayat under article 243G of the Constitution.
• Government Entity: means an authority or a board or any other body

including a society, trust, corporation,
(i) set up by an Act of Parliament or State Legislature; or
with 90%, or more participation by way of equity or control, to carry out a

function entrusted by the Central Government, State Government, Union
Territory or a local authority.
• Aircraft: means any machine which can derive support in the atmosphere
from reactions of the air, other than reactions of the air against the earth's
surface and includes balloons, whether fixed or free, airships, kites, gliders
and flying machines [Section 2(1) of the Aircraft Act, 1934] .

a 5.51
• Airport: means a landing and taking off area for aircrafts, usually with
runways and aircraft maintenance and passenger facilities and includes
aerodrome as defined in section 2(2) of the Aircraft Act, 1934 [Section 2(b) of the
Airports Authority of India Act, 1994] .
Exemption to services provided by Government

❑ Not all services provided by the Government or a local authority
are exempt from tax. As for instance, following services are not
exempt:
(a) services by the Department of Posts;
(b) services in relation to an aircraft or a vessel, inside or
outside the precincts of an airport or a port;
(c) transport of goods or passengers; or
(d) any service, other than services covered under (a) to (c) above provided
to business entities [with aggregate turnover exceeding such amount in
the preceding financial year as makes it eligible for exemption from
registration under CGST Act].
Services mentioned in clause (a) to (c) above have been referred to as

“specified services” in discussion hereunder.
Applicability of GST on accommodation services supplied by Air Force
Mess and other similar messes to its personnel
❑ Accommodation services provided by Air Force Mess and other similar
messes, such as, Army mess, Navy mess, Paramilitary and Police forces
mess to their personnel or any person other than a business entity are
covered by Entry 6 provided the services supplied by such messes qualify to
be considered as services supplied by Central Government, State
Government, Union Territory or local authority28.
28

Let us first understand what does ‘Government’ and ‘local authority’ mean?
Meaning of Government
❑ As per section 2(53), ‘Government’ means the Central
Government.
❑ Various State/ Union Territories (with Legislatures) GST
Acts define ‘Government’ as Government of respective
State Government/ Union Territory. For Union Territories (without State
Legislatures), ‘Government’ means the Administrator or any Authority or
officer authorized to act as Administrator by the Central Government.
❑ Regulatory bodies/agencies, for instance, Competition Commission of India,
Press Council of India, Directorate General of Civil Aviation, Forward Market
Commission, Inland Water Supply Authority of India, Central Pollution Control
Board, Securities and Exchange Board of India, do not fall under the definition
of Government.
Meaning of local authority
❑ Local authority is defined in section 2(69) and means the following:
✓ a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
✓ a “Municipality” as defined in clause (e) of article 243P of the

Constitution;
✓ a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central
Government or any State Government with the control or management
of a municipal or local fund;
✓ a Cantonment Board as defined in section 3 of the Cantonments
Act, 2006;
✓ a Regional Council or a District Council constituted under the Sixth
Schedule to the Constitution;
✓ a Development Board constituted under article 371 and article 371J
of the Constitution;
✓ a Regional Council constituted under article 371A of the Constitution.

a 5.53
Thus, ‘local authority’ includes only those bodies which are listed in the above
definition. It would not include other body which is merely described as a
‘local body’ by virtue of a local law. For example, local developmental
authorities - setup by State Governments to undertake developmental works
- like Delhi Development Authority, Ahmedabad Development Authority,
Bangalore Development Authority, etc. are not qualified as local authorities.
In the subsequent paras, we have examined some of the Government services:
Services provided to a business entity

❑ Entry 7 provides that services provided to a business entity are exempt if its
aggregate turnover is upto such amount in the preceding financial year as
makes it eligible for exemption from registration under the CGST Act.
❑ However, this exemption is not applicable to specified services, and renting
of immovable property. Renting in relation to immovable property means
allowing, permitting or granting access, entry, occupation, use or any such
facility, wholly or partly, in an immovable property, with or without the
transfer of possession or control of the said immovable property and includes
letting, leasing, licensing or other similar arrangements in respect of
immovable property.
❑ GST on services, other than specified services, supplied by the Central
Government, State Government, Union territory or local authority to a
business entity [whose turnover exceeds such amount in the preceding FY as
makes it eligible for exemption from registration under the CGST Act] is
payable under reverse charge by such business entity.
However, reverse charge provisions are not applicable to renting of
immovable property services provided to unregistered persons and where
‘specified services’ are being provided to such business entity [See the
reverse charge provisions as discussed in Chapter – 3: Charge of GST in this
Module of the Study Material].
Services provided by the Department of Posts

❑ Department of Posts provide basic mail services known as postal services such
as post card, inland letter, book post, registered post provided exclusively by
the Department of Posts to meet the universal postal obligations. It also

provides services of transfer of money through money

orders, operation of savings accounts, issue of postal
orders, pension payments and other such services.
❑ Moreover, it provides services like distribution of
mutual funds, bonds, passport applications, collection
of telephone and electricity bills on commission basis. These services are in
the nature of intermediary and are generally called agency services.
❑ Entry 6 stipulates that the services provided by the Central
Government, State Government, Union territory or local
authority are exempt excluding the services by the Department
of Posts. Further, entry 24C exempts the services provided
by the Department of Posts by way of post card, inland
letter, book post and ordinary post (envelopes weighing less than 10
grams). Thus, on remaining services provided by the Department of Posts,
it is liable to pay tax without the application of reverse charge.
Services provided by one Department of the Government to another
Department of the Government
❑ Services (except specified services) provided by one Department of the
Central Government/ State Government to another Department of the Central
Government/ State Government are exempt under Entry 8.
Services by governmental authority by way of any activity in relation to
any function entrusted to Panchayat/ Municipality
Services provided by
governmental authority by
way of any activity in relation
to any function entrusted to a
municipality under Article 243W of the Constitution 29 and
29
The functions entrusted to municipality under the Twelfth Schedule to Article 243W of the
Constitution include urban planning including town planning, roads and bridges, public health,
sanitation conservancy and solid waste management, fire services, slum improvement and
upgradation, promotion of cultural, educational and aesthetic aspects, provision of urban
amenities and facilities such as parks, gardens, playgrounds, public amenities including street
lighting, parking lots, bus stops and public conveniences, etc.

a 5.55
services by a governmental authority by way of any activity in relation to any

function entrusted to a Panchayat under article 243G of the Constitution 30 are
exempt vide Entry 4 and Entry 5 respectively.
Services provided by police/security agencies of Government to
PSUs/corporate entities/sports events held by private entities
❑ Services provided by Police/security agencies of

Government to PSU/private business entities are not
exempt from GST.
❑ Such services are taxable supplies and the recipients are

required to pay the tax under reverse charge mechanism on the amount of
consideration paid to Government for such supply of services [See the reverse
charge provisions as discussed in Chapter – 3: Charge of GST in this Module of
the Study Material].
(28) The Karnataka Cricket Association, Bangalore requests the

Commissioner of Police, Bangalore to provide security in and
around the Cricket Stadium for the purpose of conducting the
cricket match.
The Commissioner of Police arranges the required security for an agreed

consideration. In this case, services of providing security by the police
personnel are not exempt.
As the services are provided by Government, Karnataka Cricket Association is

liable to pay the tax on the consideration paid, albeit under reverse charge
mechanism.
Services provided by way of tolerating non-performance of a contract
❑ Non-performance of a contract or breach of contract is one of the conditions

normally stipulated in the Government contracts for supply of goods or
30
The functions entrusted to Panchayat under the Eleventh Schedule to Article 243G of the
Constitution include Agriculture, including agricultural extension, Animal husbandry, dairying
and poultry, Fisheries, Small scale industries, including food processing industries, Drinking water,
Fuel and fodder, Rural electrification, including distribution of electricity, Health and sanitation,
including hospitals, primary health centres and dispensaries, Women and child development,
Public distribution system, etc.

services. The agreement entered into between the parties stipulates that both
the service provider and service recipient abide by the terms and conditions
of the contract.
❑ In case any of the parties breach the contract for any reason including non-
performance of the contract, then such person is liable to pay damages in the
form of fines or penalty to the other party. Tolerating non-performance of
a contract is an activity or transaction which is treated as a supply of
service [as per Schedule II – as explained in Chapter 2 – Supply under GST in
this Module of the Study Material] and the person is deemed to have received
the consideration in the form of fines or penalty and is, accordingly,
required to pay tax on such amount 31.
❑ However, in case of supplies made to Government, services [provided by

Government] by way of tolerating the non-performance of contract by
the supplier of service is covered under the exemption under
Entry 62. Thus, any consideration received by the Government from any
person or supplier for non-performance of contract is exempted from tax.
(29) Public Works Department of Karnataka entered into an
agreement with M/s. ABC, a construction company, for
construction of its office complex for an agreed consideration. In
the agreement dated 10 th July, it was agreed by both the parties that M/s.
ABC shall complete the construction work and handover the project on or
before 31st December.
It was further agreed that any breach of the terms of contract by either party
would give right to the other party to claim for damages or penalty.
M/s. ABC did not complete the construction and did not handover the project
by the specified date i.e., on or before 31st December.
31
As per the clarification of CBIC in Circular No. 178/08/2022.GST dated 03.08.2022, where
the amount paid as ‘liquidated damages’ is an amount paid only to compensate for injury,
loss or damage suffered by the aggrieved party due to breach of the contract and there is no
agreement, express or implied, by the aggrieved party receiving the liquidated damages, to
refrain from or tolerate an act or to do anything for the party paying the liquidated damages,
in such cases liquidated damages are mere a flow of money from the party who causes breach
of the contract to the party who suffers loss or damage due to such breach. Such payments
do not constitute consideration for a supply and are not taxable.

a 5.57
As per the contract, the Department asked for damages/penalty from M/s.
ABC and threatened to go to the court if not paid. Resultantly, M/s. ABC paid
an amount of ` 10,00,000/- to the Department for non-performance of
contract. Amount paid by M/s. ABC to Department is exempt from payment
of tax.
6. Construction services

No.
10 Services provided by way of pure labour contracts

of construction, erection, commissioning,
installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil
structure or any other original works pertaining to the beneficiary-led
individual house construction or enhancement under the Housing for
All (Urban) Mission or Pradhan Mantri Awas Yojana.
10A Services supplied by Electricity Distribution Utilities by way of

construction, erection, commissioning, or installation of infrastructure
for extending electricity distribution network upto the tube well of the
farmer or agriculturalist for agricultural use.
11 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 .
ANALYSIS
Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana (hereinafter
referred to as PMAY) is a programme launched by the Ministry of Housing and
Urban Poverty Alleviation (MoHUPA) which envisions provision of Housing for All
by 2022 when the nation completes 75 years of its independence.

The mission seeks to address the housing requirement of urban poor including
slum dwellers through following, inter alia, programme verticals:
❑ Slum rehabilitation of Slum Dwellers with participation of private developers
using land as a resource.
❑ Promotion of Affordable Housing for weaker section through credit linked
subsidy.
❑ Affordable Housing in Partnership with Public & Private sectors.
❑ Subsidy for beneficiary-led individual house construction/enhancement.

Last component of the mission is assistance to individual eligible families belonging
to Economically Weaker Section (EWS) categories to either construct new houses
or enhance existing houses on their own to cover the beneficiaries who are not able
to take advantage of other components of the mission. Such families may avail
specified amount of central assistance for construction of new houses or for
enhancement of existing users under the mission.
Entry 10 exempts the services provided by way of pure labour contracts of
construction, erection, commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil structure or any other original
works pertaining to the beneficiary-led individual house construction or
enhancement under the PMAY from GST.
The term ‘original works’ means-
❑ all new constructions;
❑ all types of additions and alterations to abandoned
or damaged structures on land that are required to
make them workable;
❑ erection, commissioning or installation of plant, machinery or equipment
or structures, whether pre-fabricated or otherwise.
Entry 11 exempts the 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 from GST.
The term ‘residential complex’ means any complex comprising of a building or
buildings, having more than one single residential unit. Further, ‘single residential

a 5.59
unit’ means a self-contained residential unit which is designed for use, wholly or
principally, for residential purposes for one family.
7. Passenger transportation services

No.
15 Transport of passengers, with/ without accompanied belongings, by –

(a) air, in economy class, embarking from or terminating in an
airport located in the State of Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura
or at Bagdogra located in West Bengal;
(b) non-air conditioned contract carriage other than radio taxi, for
transportation of passengers, excluding tourism, conducted tour,
charter or hire; or
(c) stage carriage other than air- conditioned stage carriage.
However, nothing contained in items (b) and (c) above shall apply
to services supplied through an electronic commerce operator, and
notified under sub-section (5) of Section 9 of the CGST, 2017.
16 Services provided to the Central Government,

by way of transport of passengers with or without accompanied
belongings, by air,
embarking from or terminating at a RCS (Regional Connectivity
Scheme) airport, against consideration in the form of viability gap
funding.
However, nothing contained in this entry shall apply on or after the
expiry of a period of 3 years from the date of commencement of
operations of the RCS airport as notified by the Ministry of Civil Aviation.
17 Service of transportation of passengers, with or without accompanied

belongings, by—
(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;
(b) metro, monorail or tramway;

(c) inland waterways;

(d) public transport, other than predominantly for tourism purpose,
in a vessel between places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).
However, nothing contained in item (e) above shall apply to
services supplied through an electronic commerce operator, and
notified under sub-section (5) of Section 9 of the CGST, 2017.
ANALYSIS
Services of transportation of passengers are usually chargeable to GST. Entry 6
[Services provided by Government - discussed earlier] specifically excludes the
transport of passengers’ services provided by the Government or local authority
from its purview, which implies that transport of passengers’ services provided by
the Government or local authority are liable to GST. However, services of
transportation of passengers specified in Entries 15, 16 and 17 mentioned above
are exempt from GST (whether provided by Government or otherwise) with or
without accompanied belongings.
Services provided by way of transportation of passengers have been analysed as

follows:
Entry 15
Clause (a)
❑ Transport of passengers by air, embarking from or terminating in an airport

located in the States of North-East India or at Bagdogra located in West
Bengal is exempt from GST provided said transportation is in economy class.
(30) Rituraj has booked air tickets in economy class of a flight

from Delhi to Guwahati, Assam. Transport of passengers by air
terminating in an airport located in Assam is exempt from GST.
Clause (b)
❑ Passenger transportation service provided by a non-air conditioned contract

carriage other than radio taxi, for transportation of passengers, excluding

a 5.61
tourism, conducted tour, charter or hire, are exempt from GST. Conducted
tour is a short visit to a place in which someone shows you around and tells
you information about it 32.
The term contract carriage means a motor vehicle which carries a passenger
or passengers for hire or reward and is engaged under a contract, whether
expressed or implied, for the use of such vehicle as a whole for the carriage
of passengers mentioned therein and entered into by a person with a holder
of a permit in relation to such vehicle or any person authorised by him in this

behalf on a fixed or an agreed rate or sum-
(a) on a time basis, whether or not with reference to any route or distance;
or
(b) from one point to another, and in either case, without stopping to pick
up or set down passengers not included in the contract anywhere
during the journey, and includes--
(i) a maxicab; and
(ii) a motor cab notwithstanding that separate fares are charged for
its passengers [Section 2(7) of Motor Vehicles Act, 1988] .
Further, radio taxi means a taxi including a radio cab, by whatever name
called, which is in two-way radio communication with a central control office
and is enabled for tracking using the Global Positioning System or General
Packet Radio Service.
(31) Subroto has hired a non-air conditioned bus from Mohit
Travels for organising a recreation tour from Delhi to Jaipur.
Transport of passengers by a non-air-conditioned contract
carriage are exempt from GST. However, said transportation of passengers
for tourism purposes is excluded therefrom. Therefore, in the given case,
passenger transportation services are taxable.
32
www.macmillandictionary.com

Hiring of non-air conditioned contract carriages by firms for

transportation of their employees to and from work
Exemption under this clause would apply to passenger transportation
services by non-air conditioned contract carriages where transportation
takes place over pre-determined route on a pre-determined schedule.
The exemption shall not be applicable where contract carriage is hired
for a period of time, during which the contract carriage is at the disposal
of the service recipient and the recipient is thus free to decide the manner
of usage (route and schedule) subject to conditions of agreement entered
into with the service provider 33.
Clause (c)
❑ Passenger transportation services provided by a stage carriage other than

air conditioned stage carriage are also exempt.
The term stage carriage means a motor vehicle constructed or adapted to
carry more than 6 passengers excluding the driver for hire or reward at
separate fares paid by or for individual passengers, either for the
whole journey or for stages of the journey [Section 2(40) of the Motor
Vehicles Act, 1988] .
(32) The non-air conditioned buses are being operated by a State Transport
Corporation for carrying passengers within the State. The passengers are
being picked and dropped from and to various points by issuing individual
tickets to the passengers. Such services provided by said State Transport
Corporation are exempt from GST.
Proviso
It is important to note that in case where services of transport of passengers,
by non-air conditioned contract carriage other than radio taxi excluding
tourism, conducted tour, charter or hire or by non-air conditioned stage
carriage, are supplied through Electronic Commerce Operator (ECO)34, such
services are not exempt from GST. Further, tax on such services shall be
paid by ECO.
33
Provisions relating to ECOs have been discussed in detail in Chapter 3 – Charge of GST in this
34

a 5.63
Entry 16
❑ Services provided to the Central Government, by way of transport of
passengers by air, embarking from or terminating at a RCS airport, against
consideration in the form of viability gap funding are exempt.
A Regional Connectivity Scheme is introduced to facilitate / stimulate
regional air connectivity by making it affordable by supporting airline
operators through (1) concessions by Central Government/State
Governments and airport operators to reduce the cost of airline operations
on regional routes/other support measures and (2) financial (viability gap
funding or VGF) support to meet the gap, if any, between the cost of airline
operations and expected revenues on such routes.
Under RCS, the underserved airports of India are aimed to be connected to
key airports through flights that will cost ` 2,500 for per hour flight.
Entry 17
❑ Transportation of passengers by following specified modes of transport is
exempt:
(a) railways in a class other than—
(i) first class; or

(ii) an air-conditioned coach;

(d) public transport, other than predominantly for tourism purpose, in a
vessel between places located in India; and

The term metered cab means any contract carriage on which
an automatic device, of the type and make approved under the
relevant rules by the State Transport Authority, is fitted which
indicates reading of the fare chargeable at any moment and
that is charged accordingly under the conditions of its permit issued under
the Motor Vehicles Act, 1988 and the rules made thereunder (but does not
include radio taxi).

The term E-rickshaw means a special purpose battery

powered vehicle of power not exceeding 4000 watts, having
three wheels for carrying goods or passengers, as the case
may be, for hire or reward, manufactured, constructed or
adapted, equipped and maintained in accordance with such specifications, as
may be prescribed in this behalf.
It is important to note that in case where service of
transport of passengers by metered cabs or auto rickshaws
(including e-rickshaws) are supplied through ECO, such
services are not exempt from GST. Further, tax on such
services shall be paid by ECO.
Clause (d) of Entry 17
As regards transportation of passengers by vessels in clause (d) of Entry 17
[See the table given above], the words ‘other than predominantly for
tourism purpose’ qualify the preceding words “public transport”. This
implies that to qualify for exemption under this entry, the public transport by
a vessel between places located in India should not be predominantly for
tourism purposes.
Normal public ships or other vessels that sail between places located in India
would be covered in this entry even if some of the passengers on board are
using the service for tourism because predominantly, such service is not for
tourism purpose. However, services provided by leisure/charter vessels/a
cruise ship, predominant purpose of which is tourism, would not be covered
in here even if some of the passengers in such vessels are not tourists.
(33) Services by way of transportation of passengers [not
predominantly for tourism purpose] on a vessel, from Kolkata to
Port Blair (mainland to island) or Port Blair to Neil Island (inter
island) is covered in clause (d) of Entry 17 since such transportation is
between two places located in India.
Where such public transport is owned by private operators. For instance,
private ferries are used as means of transport from one island to another
in Andaman and Nicobar Islands. Exemption under Entry 17(d) would
apply to tickets purchased for transportation from one point to another

a 5.65
irrespective of whether the ferry is owned or operated by a private sector

enterprise or by a PSU/government.
The expression ‘public transport’ used in this Entry only means that the
transport should be open to public. It can be privately or publicly owned.
Only exclusion is on transportation which is predominantly for tourism,
such as services which may combine with transportation, sightseeing,
food and beverages, music, accommodation such as in shikara, cruise
etc35.
Quiz
Time!
Which of the following services are not exempt from GST?
(a) Services of
transportation of
employees in air (d)
(b)
conditioned vans (c) Transporta
Transporta
for pick up and Transporta tion of passengers
tion of passengers
drop over pre- tion of passengers by air, in economy
by railways in
determined route in autorickshaw. class, from Delhi to
sleeper class.
on a pre- Manipur.
determined
schedule.
8. Goods transportation services

No.
18 Services by way of transportation of goods-
(a) by road except the services of—
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways.
35

20 Services by way of transportation by rail or a vessel from one place in

India to another of the following goods –
(a) relief materials meant for victims of natural or
man-made disasters, calamities, accidents or
mishap;
(b) defence or military equipments;
(c) newspaper or magazines registered with the
Registrar of Newspapers;
(e) agricultural produce;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.
Goods Transport Agency (GTA) Service
21 Services provided by a goods transport agency, by way of transport in
a goods carriage of –
(a) agricultural produce;
(d) milk, salt and food grain including flour, pulses
and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of
Newspapers;
(g) relief materials meant for victims of natural or man-made
disasters, calamities, accidents or mishap; or
(h) defence or military equipments.
21A Services provided by a GTA to an unregistered person, including an
unregistered casual taxable person, other than the following recipients,
namely: -
(a) any factory registered under/governed by the Factories Act, 1948;
or
(b) any Society registered under the Societies Registration Act, 1860
or under any other law for the time being in force in any part of
India; or
(c) any Co-operative Society established by or under any law for the
time being in force; or
(d) any body corporate established, by or under any law for the time
being in force; or

a 5.67
(e) any partnership firm whether registered or not under any law
including association of persons;
(f) any casual taxable person registered under the Central Goods
and Services Tax Act or the Integrated Goods and Services Tax Act
or the State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act.
21B Services provided by a GTA, by way of transport of goods in a goods
carriage, to, -
(a) a Department or Establishment of the Central Government or
State Government or Union territory; or
(c) Governmental agencies, which has taken registration under the
Central Goods and Services Tax Act, 2017 only for the purpose of
deducting tax under section 51 and not for making a taxable
supply of goods or services.
ANALYSIS
Exemptions granted to transport of specified goods through rail or a vessel or

by a GTA in goods carriage** are presented in the following table:
Transportation of the following goods by rail / vessel / GTA in goods

carriage is exempt
(a) agricultural produce

(b) milk, salt and food grain including flours, pulses and rice
(c) organic manure
(d) newspaper or magazines registered with the Registrar of Newspapers
(e) relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap
(f) defence or military equipments

**Goods carriage means any motor vehicle constructed or adapted for use solely
for the carriage of goods, or any motor vehicle not so constructed or adapted when
used for the carriage of goods.
❑ The services of transportation of goods by road are exempt from GST under
Entry 18. Services of GTA and courier services are an exception to this
exemption. However, GTA services provided to an unregistered person
[including unregistered casual taxable person 36] are exempt from GST by
virtue of Entry 21A.
❑ Further, GTA services provided to registered casual taxable person and
following persons, even if unregistered under GST law, are liable to tax:
(i) factory registered under Factories Act,
(ii) society registered under Societies Act,
(iii) Co-operative society,

(iv) body corporate and
(v) partnership firm including AOP.
❑ In other words, the GTA services provided to only an unregistered individual end
consumer, whether being a casual taxable person or not, are exempt from GST.
❑ Thus, GTA services provided to:
✓ person registered under GST law & registered casual taxable person,
and
✓ a factory registered under Factories Act, society registered under Societies
Act, Co-operative society, body corporate and partnership firm including
AOP – whether or not registered under GST law, are liable to tax.
❑ Transportation of goods service provided by GTA in a goods carriage, to a
Central/State Government (Union Territory) Department or Establishment or
local authority or Governmental agencies which has taken registration under
36
The concept of ‘casual taxable person’ has been discussed in detail in Chapter 9 – Registration
in Module 2 of this Study Material.

a 5.69
GST law only for the purpose of deducting TDS under section 51 and not for
making a taxable supply of goods or services are exempt under
Entry 21B.
Before proceeding further, we shall now understand the meaning of GTA:
Who is a
GTA?
Who is a GTA – Goods Transport Agency?

Let us understand the meaning of Goods Transport agency (GTA). Goods transport
agency has been defined in the Notification to mean any person who:
❖ provides service in relation to transport of goods by road and
❖ issues consignment note, by whatever name called.
❑ Thus, it can be seen that issuance of a consignment note is the sine-qua-
non for a supplier of service to be considered as a GTA. If such a
consignment note is not issued by the transporter, the service provider will
not come within the ambit of GTA.
❑ If a consignment note is issued, it indicates that the lien on the goods
has been transferred (to the transporter) and the transporter becomes
responsible for the goods till its safe delivery to the consignee. It is only the
services of such GTA, which assumes agency functions, that has been brought
into the GST net.
❑ Individual truck/tempo operators who do not issue any consignment
note are not covered within the meaning of the term GTA. As a result, the
services provided by such individual transporters who do not issue a
consignment note will be covered by the entry at Entry 18 of Notification,
which are exempt from GST.
(34) Hari Prasad owns a truck and operates it himself. He carries
the goods booked for his truck without issuance of consignment
note. Services provided by Hari Prasad by way of transportation of
goods by road are exempt under Entry 18.

❑ Consignment note means a document, issued by a

GTA against the receipt of goods for the purpose of
transport of goods by road in a goods carriage, which
Consignment
is serially numbered, and contains: Note
✓ the name of the consignor and consignee,
✓ registration number of the goods carriage in which the goods are
transported,
✓ details of the goods transported,

✓ details of the place of origin and destination,
✓ gross weight of the consignment;
✓ GSTIN of the person liable for paying tax whether consignor, consignee
or GTA
✓ other particulars as prescribed for a tax invoice 37.
Significance of the term ‘in relation to’ in the definition of GTA
The use of the phrase ‘in relation to’ has extended the
scope of the definition of GTA. It includes not only the
actual transportation of goods, but also various
intermediary and ancillary services, such as,
loading/ unloading, packing/ unpacking,
transshipment and temporary warehousing, which
are provided in the course of transport of goods by
road. These services are not provided as
independent services but as ancillary to the
principal service, namely, transportation of goods by road. The invoice issued by
the GTA for providing the said service includes the value of intermediary and
ancillary services.
In view of this, if any intermediary and ancillary service is provided in relation to

transportation of goods by road, and charges, if any, for such services are included
in the invoice issued by the GTA, such service would form part of the GTA service,
37
Meaning of GTA and consignment note elaborated in foregoing paras is primarily based on
CBIC GST flyer - Chapter 38 – Goods Transport Agency in GST.

a 5.71
being a composite supply, and would not be treated as a separate supply. However,
if such incidental services are provided as separate services and charged separately,
whether in the same invoice or separate invoices, they shall be treated as separate
supplies38.
What is courier agency?
Courier agency has been defined in the Notification to mean any
person engaged in the door-to-door transportation of time-sensitive
documents, goods or articles utilising the services of a person, either
directly or indirectly, to carry or accompany such documents, goods or
articles.
Express cargo service: Some transporters undertake door-to-door transportation
of goods or articles and they have made special arrangements for speedy
transportation and timely delivery of such goods or articles.
Such services are known as ‘Express Cargo Service’ with assurance of timely
delivery. The nature of service provided by ‘Express Cargo Service’ falls within the
scope and definition of the courier agency. Hence, the said service relating to
transportation of goods by road is not exempt.
Transport of minerals within a mining area by vehicles deployed with driver
for a specific duration of time
The issue which arose for consideration was whether transport of minerals
within a mining area, say from mining pit head to railway siding,
beneficiation plant etc., by vehicles deployed with driver for a specific
duration of time would be covered under Entry 18 which exempts transport of
goods by road except by a GTA.
Usually in such cases the vehicles such as tippers, dumpers, loader, trucks etc.,
are given on hire to the mining lease operator. Expenses for fuel are generally
borne by the recipient of service. The vehicles with driver are at the disposal
of the mining lease operator for transport of minerals within the mine area
(mining pit to railway siding, beneficiation plant etc.) as per his requirement
during the period of contract.
38
As clarified in answer to question no. 6 of CBIC FAQs on Transport & Logistics.

Such services are nothing but “rental services of transport vehicles with
operator”. The person who takes the vehicle on rent defines how and when the
vehicles will be operated, determines schedules, routes and other operational
considerations.
The person who gives the vehicles on rent with operator cannot be said to be
supplying the service by way of transport of goods.
Accordingly, it is clarified that such renting of trucks and other freight vehicles
with driver for a period of time is a service of renting of transport vehicles with
operator and not service of transportation of goods by road. Consequently, it
is not eligible for exemption under Entry 18 39.
Quiz
Time!
Which of the following servies provided by Sundar Transporters,

6 a GTA, are not exempt from GST?
(c) Transportation
(b) Transportation (d) Transportation
of goods provided
(a) Transport of of household of goods provided
to Malhotra &
organic manure to items provided to to Municipal
Malhotra Co. – a
Agro Brothers Ltd. Mrs. Riddhima Corporation of
unregistered
(unregistered). Delhi.
partnership firm.
9. Banking and financial services

No.
27 Services by way of—
39

a 5.73
(a) 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);
(b) inter se sale or purchase of foreign currency amongst banks or
authorised dealers of foreign exchange or amongst banks and
such dealers.
27A Services provided by a banking company to Basic Saving Bank

Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan
Yojana (PMJDY).
34 Services by an acquiring bank, to any person in relation to settlement

of an amount upto ` 2,000 in a single transaction transacted through
credit card, debit card, charge card or other payment card service.
Explanation.— For the purposes of this entry, “acquiring bank” means
any banking company, financial institution including non-banking
financial company or any other person, who makes the payment to any
person who accepts such card.
39A Services by an intermediary of financial services located in a multi

services SEZ with International Financial Services Centre (IFSC) status to
a customer located outside India for international financial services in
currencies other than Indian rupees (INR).
Explanation.- For the purposes of this entry, the intermediary of
financial services in IFSC is a person,-
(i) who is permitted or recognised as such by the Government of
India or any Regulator appointed for regulation of IFSC; or
(ii) who is treated as a person resident outside India under the
Foreign Exchange Management (International Financial Services
Centre) Regulations, 2015; or
(iii) who is registered under the Insurance Regulatory and
Development Authority of India (International Financial Service
Centre) Guidelines, 2015 as IFSC Insurance Office; or
(iv) who is permitted as such by Securities and Exchange Board of
India (SEBI) under the Securities and Exchange Board of India
(International Financial Services Centres) Guidelines, 2015.

ANALYSIS
Banks and financial institutions provide a bouquet of financial
services relating to lending or borrowing of money or investments
in money.
Specified banking services exempt from GST vide Entry 27 have
been discussed below:
(A) Services by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount: This
entry covers any such service wherein moneys due are allowed to be used or
retained on payment of interest or on a discount. The words used are ‘deposits,
loans or advances’ and have to be taken in the generic sense.
They would cover any facility by which an amount of money
is lent or allowed to be used or retained on payment of what
is commonly called the time value of money which could be
in the form of an interest or a discount. This entry would
not cover investments by way of equity or any other manner where the
investor is entitled to a share of profit.
Interest: means interest payable in any manner in respect of any
moneys borrowed or debt incurred (including a deposit, claim or
other similar right or obligation) but does not include any service
fee or other charge in respect of the moneys borrowed or debt incurred or in
respect of any credit facility which has not been utilized.
❑ Illustrations of services exempt under Entry 27 are -
✓ Fixed deposits or saving deposits or any other
such deposits in a bank or a financial institution
for which return is received by way of interest.
✓ Providing a loan or overdraft facility or a credit limit
facility in consideration for payment of interest.
✓ Mortgages or loans with a collateral security to the
extent that the consideration for advancing such loans or
advances are represented by way of interest.

a 5.75
✓ Corporate deposits to the extent that the consideration for

advancing such loans or advances are represented by way of
interest or discount.
❑ 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 thus, represent taxable consideration.
❑ Invoice discounting/ cheque discounting or any other similar form
of discounting is covered only to the extent consideration is
represented by way of discount as such discounting is a manner of
extending a credit facility or a loan.
❑ Any interest/ delayed payment charges charged to clients for delay
in payment of brokerage amount/ settlement obligations/ margin
trading facility: is exempt from GST since settlement obligations/
margin trading facilities are transactions which are in the nature of
extending loans or advances and are covered by Entry 2740.
❑ Charges for late payment of outstanding dues on credit card:
Interest charged on outstanding credit card balances has been
specifically excluded from Entry 27. Hence, the same is liable to GST.
❑ Additional/ penal interest on the overdue loan: In cases where the
Equated Monthly Instalment (EMI)41 is not paid at the scheduled time,
there is a levy of additional/ penal interest on account of delay in
payment of EMI.
There may arise a doubt as to whether this additional / penal interest
on the overdue loan is exempt under Entry 27 or such penal interest is
to be treated as consideration for liquidated damages [amounting to a
separate taxable supply of services under GST covered under entry 5(e)
of Schedule II i.e. “agreeing to the obligation to refrain from an act, or
to tolerate an act or a situation, or to do an act”]
There are two transaction options involving EMI that are prevalent in
the trade. These two options, alongwith the GST applicability
40
As clarified vide FAQs on Banking, Insurance and Stock Brokers Sector issued by CBIC.
41
An Equated Monthly Instalments (EMI) is a fixed amount paid by a borrower to a lender at
a specified date every calendar month. EMIs are used to pay off both interest and principal
every month, so that over a specified period, the loan is fully paid off along with interest.

on them, have been explained with the help of illustrations as under –

(35) X sells a mobile phone to Y. The cost of mobile phone
is ` 40,000. However, X gives Y an option to pay in
installments, ` 11,000 every month before 10 th day of the
following month, over next four months (` 11,000/- × 4 = ` 44,000/-).
As per the contract, if there is any delay in payment by Y beyond the
scheduled date, Y would be liable to pay additional/ penal interest
amounting to ` 500/- per month for the delay.
In some instances, X is charging Y ` 40,000/- for the mobile and is
separately issuing another invoice for providing the services of
extending loans to Y, the consideration for which is the interest of 2.5%
per month and an additional/ penal interest amounting to
` 500/- per month for each delay in payment.
In this case, the amount of penal interest is to be included in the value
of supply42. The transaction between X and Y is for supply of taxable
goods i.e. mobile phone. Accordingly, the penal interest would be
taxable as it would be included in the value of the mobile, irrespective
of the manner of invoicing.
(36) X sells a mobile phone to Y. The cost of mobile phone is
` 40,000/-. Y has the option to avail a loan at interest of 2.5% per month
for purchasing the mobile from M/s. ABC Ltd. The terms of the loan
from M/s. ABC Ltd. allows Y a period of four months to repay the loan
and an additional/ penal interest @ 1.25% per month for any delay in
payment.
Here, the additional/ penal interest is charged for a transaction between
Y and M/s. ABC Ltd., and the same is getting covered under exemption
Entry 27. Consequently, in this case the 'penal interest' charged thereon
on a transaction between Y and M/s. ABC Ltd. would not be subject to
GST as the same would be covered under said exemption entry.
However, any service fee/ charge or any other charges, if any, are levied
by M/s. ABC Ltd. in respect of the transaction related to extending
42
Here, the amount of penal interest is to be included in the value of supply in terms of the
provisions of section 15(2)(d). Section 15(2)(d) provides that the value of supply shall include
interest or late fee or penalty for delayed payment of any consideration for any supply. The
provisions of section 15 have been discussed in detail in Chapter 7: Value of Supply in this Module

a 5.77
deposits, loans or advances does not qualify to be interest as defined

in exemption notification, and accordingly will not be exempt.
Moreover, the value of supply of mobile by X to Y would be
` 40,000/- for the purpose of levy of GST.
Since this levy of additional/ penal interest satisfies the definition of
“interest” as contained in Entry 27 above, the same cannot be treated
as consideration for liquidated damages. Consequently, transaction of
levy of additional/ penal interest does not fall within the ambit of
Schedule II i.e. “agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act” 43 [Circular No.
102/21/2019-GST dated 28.06.2019].
(B) Services provided by banks or authorized dealers of foreign exchange
by way of sale of foreign exchange: The term ‘authorised
dealer of foreign exchange’ means an authorised dealer,
money changer, off-shore banking unit or any other person for
the time being authorised under section 10(1) of FEMA, 1999 to
deal in foreign exchange or foreign securities [Section 2(c) of the Foreign Exchange
Management Act, 1999] .
It is important to note that such services provided to general

public will not be covered in this entry as this entry only covers
sale or purchase of foreign exchange:-
(i) amongst banks or
(ii) amongst authorized dealers of foreign exchange or
(iii) amongst banks and such dealers.
Services provided by commercial banks to RBI would be taxable as these are
not covered by any of the exemptions/exclusions under the GST law.
ILLUSTRATION 2
M/s. Apna Bank Limited, a scheduled commercial bank, has furnished the
following details for the month of August:
43
Schedule II has been discussed in detail in Chapter 2 – Supply under GST in this Module of the
Study Material.

Particulars Amount [` in
crores]
(excluding GST)
Extended housing loan to its customers 100
Processing fees collected from its customers on 20
sanction of loan
Commission collected from its customers on bank 30
guarantee
Interest income on credit card issued by the bank 40
Interest received on housing loan extended by the 25
bank
Minimum balance charges collected from current 01
account and saving account holder
Compute the value of taxable outward supply.
ANSWER
Computation of value of taxable outward supply of M/s. Apna Bank

Limited for the month of August:
Particulars Amount
in crores
(`)
Housing loan extended to customers Nil

[Since money does not constitute goods, extending housing
loan is not a supply.]
Processing fee collected on sanction of loan 20

[Interest does not include processing fee on sanction of the
loan. Hence, the same is taxable.]
Commission collected on bank guarantee 30

[Any commission collected over and above interest on loan,
advance or deposit are not exempt.]

a 5.79
Interest income on credit card issued by the bank 40

[Services by way of extending loans in so far as the
consideration is represented by way of interest are exempt
from tax. However, interest involved in credit card services is
specifically excluded from this exemption entry.]
Interest received on housing loan Nil

[Services by way of extending loans in so far as the
consideration is represented by way of interest are exempt
from tax.]
Minimum balance charges collected from current account 01

and saving account holder
[Any charges collected over and above interest on loan,
advance or deposit are not exempt.]
Value of taxable outward supply 91
Quiz
Time!
Which of the following amounts received by Sindhbad Bank

7 are not exempt from GST?
(c) Charges
(a) Cheque (b) Interest for late payment (d) Interest
discounting on overdraft of outstanding received on
charges received facility dues on credit housing loan
card
10. Life insurance business services

No.
28 Services of life insurance business provided by way of annuity under

the National Pension System regulated by the Pension Fund

Regulatory and Development Authority of India under the Pension

Fund Regulatory and Development Authority Act, 2013.
29 Services of life insurance business provided or agreed to be provided

by the Army, Naval and Air Force Group Insurance Funds to
members of the Army, Navy and Air Force, respectively, under the
Group Insurance Schemes of the Central Government.
29A Services of life insurance provided or agreed to be provided by the

Naval Group Insurance Fund to the personnel of Coast Guard under
the Group Insurance Schemes of the Central Government.
29B Services of life insurance provided/agreed to be provided by the

Central Armed Police Forces (under Ministry of Home Affairs) Group
Insurance Funds to their members under the Group Insurance
Schemes of the concerned Central Armed Police Force.
36 Services of life insurance business provided under following schemes-

(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product** as approved by the Insurance

Regulatory and Development Authority, having maximum
amount of cover of ` 2,00,000;
(d) Varishtha Pension Bima Yojana;
(e) Pradhan Mantri Jeevan Jyoti Bima Yojana;
(f) Pradhan Mantri Jan Dhan Yojana;
(g) Pradhan Mantri Vaya Vandan Yojana.

**Life micro-insurance product means any term insurance contract
with/without return of premium, any endowment insurance contract or
health insurance contract, with/without an accident benefit rider,
either on individual/group basis, as per terms stated in Schedule-II
appended to the regulations [Regulation 2(e) of the Insurance Regulatory and
Development Authority (Micro-insurance) Regulations, 2005].

a 5.81
11. Services provided by specified bodies

No.
30 Services by the Employees’ State Insurance Corporation to

persons governed under the Employees’ State Insurance Act,
1948.
31 Services provided by the Employees Provident Fund

Organisation to the persons governed under the Employees
Provident Funds and the Miscellaneous Provisions Act, 1952.
31A Services by Coal Mines Provident Fund Organisation to persons

governed by the Coal Mines Provident Fund and Miscellaneous
Provisions Act, 1948.
31B Services by National Pension System (NPS) Trust

to its members against consideration in the form of
administrative fee.
12. General insurance business services

No.
35 Services of general insurance business provided under following
schemes –
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna 44;
(c) Scheme for Insurance of Tribals;

(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
44
earlier known as Integrated Rural Development Programme

(g) premia collected on export credit insurance;

(h) Restructured Weather Based Crop Insurance Scheme (RWCIS),
approved by the Government of India and implemented by the
Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) Pradhan Mantri Fasal Bima Yojana (PMFBY);

(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;

(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha Bima Yojna;

(q) Niramaya Health Insurance Scheme implemented by the Trust
constituted under the provisions of the National Trust for the
Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities Act, 1999.
(r) Bangla Shasya Bima
36A Services by way of reinsurance of the insurance schemes specified in

serial number 35 or 36 or 4045.
13. Pension schemes

No.
37 Services by way of collection of contribution under the Atal Pension Yojana.
38 Services by way of collection of contribution under any pension
scheme of the State Governments.
45
Entry 40 is discussed subsequently under heading 15. ‘Services provided to Government’.

a 5.83
14. Business facilitator/correspondent

Entry 39: Services by the following persons in respective capacities –
(a) business facilitator or a business correspondent to a banking company with
respect to accounts in its rural area branch;
(b) any person as an intermediary to a business facilitator or a business
correspondent with respect to services mentioned in entry (a); or
(c) business facilitator or a business correspondent to an insurance company in
a rural area.
ANALYSIS
It is still a big challenge for India to make the financial services accessible in rural
areas. In many rural areas, either there are no banks or number of banks is
insufficient. In order to counter this problem and ensure greater financial inclusion,
the Reserve Bank of India (RBI) introduced the Business Correspondents and
Business Facilitator Model through guidelines in 2006 allowing banks to employ
two categories of intermediaries – known as Business facilitators (BFs) and Business
correspondents (BCs).
BCs/BFs help villagers to open bank accounts and provide other banking services
to them. They act as an intermediary between the bank and its customers. Banks,
in turn, pay commission/ fee to the BCs/BFs.
According to the RBI guidelines, while the BCs are permitted to carry out
transactions on behalf of the bank as agents, the BFs can refer clients, pursue the
clients’ proposal and facilitate the bank to carry out its transactions, but cannot
transact on behalf of the bank 46.
46
BFs provide a wide range of services including identification of borrowers and fitment of
activities, collection and preliminary processing of loan applications, processing and
submission of applications to banks, follow-up for recovery, etc. BCs, in addition to these
activities, also undertake disbursal of small value credit, recovery of principal / collection of
interest, collection of small value deposits, sale of micro insurance/ mutual fund products/
pension products/ other third party products, receipt and delivery of small value remittances/
other payment instruments, etc.

Similarly, insurance companies engage the BCs/BFs to provide the insurance

services in remote areas.
Entry 39 exempts the services provided by BF/BC to a banking company with
respect to accounts in its rural area branch and services provided by any person as
an intermediary to a BF/BC with respect to said services are exempt from GST.
Further, the services provided by BF/BC to an insurance company in a rural area are
also exempt.
It is important to note that for the purpose of availing exemption from GST under
this Entry, services provided by a BF/BC to a banking company in their respective
individual capacities should be with respect to accounts in a branch located in the
rural area of the banking company.
Wherever the services provided by BF/BC to banking company and services
provided by intermediary of BF/BC to BF/BC do not fall within the scope of this
entry, GST is payable on such services.
However, the banking company is the person liable to pay GST under reverse
charge in respect of commission/fees charged for the taxable services provided by
BF to a banking company. Similarly, GST on taxable services provided by an agent
of BC to BC is payable under reverse charge by the BC.
Further, as seen above, as per RBI’s guidelines, banks may pay reasonable
commission/fee to the BC. The agreement of banks with the BC specifically
prohibits them from directly charging any fee to the customers for services
rendered by them on behalf of the bank. On the other hand, banks (and not BCs)
are permitted to collect reasonable service charges from the customers for such
service in a transparent manner.
The arrangements of banks with the BCs specify the requirement that the
transactions are accounted for and reflected in the bank's books by end of the day
or the next working day, and all agreements/contracts with the customer shall
clearly specify that the bank is responsible to the customer for acts of omission and
commission of the BF/BC.
Hence, banking company is the service provider to the ultimate customer in the BF
model/BC model. The banking company is liable to pay GST on the entire value of
service charge or fee charged to customers whether or not received via BF/BC47.
47

a 5.85
Other relevant definitions under this entry are as follows:
• Insurance company: means a company carrying on life insurance business

or general insurance business.
• Intermediary means 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 [Section 2(13) of the IGST Act, 2017] .
• Rural area: means the area comprised in a village as defined in land revenue
records, excluding the area under any municipal committee, municipal
corporation, town area committee, cantonment board or notified area
committee; or any area that may be notified as an urban area by the Central
Government or a State Government.
• Exemption Notification defines BF/BC as an intermediary appointed under the
BF model or BC model by a banking company or an insurance company under
the guidelines issued by the RBI.
15. Services provided to Government

No.
3 Pure services provided TO Government:

❑ Pure services (excluding works contract service or other
composite supplies involving supply of any goods)
❑ provided to the Central Government, State Government or Union
territory or local authority
❑ by way of any activity:
✓ in relation to any function entrusted to a Panchayat under
article 243G of the Constitution or
✓ in relation to any function entrusted to a Municipality under
article 243W of the Constitution.
3A Composite supply of goods and services TO Government:

❑ 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 the Central Government, State Government or Union
territory or local authority
❑ by way of any activity:
✓ in relation to any function entrusted to a Panchayat under
article 243G of the Constitution or
✓ in relation to any function entrusted to a Municipality under
article 243W of the Constitution.
11A Service provided by Fair Price Shops to Central

Government, State Government or Union territory
by way of sale of food grains, kerosene, sugar,
edible oil, etc. under Public Distribution System
against consideration in the form of commission
or margin.
40 Services provided to the Central Government, State Government, Union

territory under any insurance scheme for which total premium is paid
by the Central Government, State Government, Union territory.
72 Services provided to the Central Government, State Government, Union

territory administration under any training programme for which 75%
or more of the total expenditure is borne by the Central Government,
State Government, Union territory administration.
It is clarified 48 that free coaching services provided by coaching
institutions and NGOs under the central scheme of “Scholarships
for students with Disabilities” where 75% or more of the
expenditure49 is borne by the Government to coaching institutions
48
49
This circular was issued prior to amendment in Entry 72 when the exemption was available
only when total expenditure under the training programme was borne by the Central
Government, State Government, Union territory administration.
However, as seen earlier in this chapter, Entry 72 has subsequently been amended and now
exemption is available even when 75% or more of the total expenditure under the training
programme is borne by the Central Government, State Government, Union territory
administration.
Hence, the words “total expenditure” have been substituted with “75% or more of the total
expenditure” in the above discussion pertaining to circular.

a 5.87
by way of grant in aid is covered under this entry and hence is

exempt from GST.
ANALYSIS
Entry 3 exempts the supply of ‘pure services’ to Government. Supply of ‘pure
services’ means supply of services without involving any supply of goods.
Further, ‘composite supply of goods and services’* to Government is exempted
vide Entry 3A.
*in which value of supply of goods constitutes not more than 25% of value of such
composite supply.
Let us understand the concept of supply of ‘pure services’ and ‘composite supply
of goods and services’ to Government by following examples:
(37) Supply of manpower for cleanliness of roads, public places,
architect services, consulting engineer services, advisory services, and
like services provided by business entities not involving any supply of
goods would be treated as supply of pure services.
(38) A local authority awards the work of maintenance of street-lights

in a Municipal area to an agency which involves apart from maintenance,
replacement of defunct lights and other spares. In this case, the scope
of the service involves maintenance work and supply of goods, i.e. composite
supply of goods and services.
It is clarified that if such services are procured by Indian Army or any other
Government Ministry/Department which does not perform any functions listed
in the 11th and 12th Schedule, in the manner as a local authority does for the
general public, the same are not eligible for exemption under Entries 3 and 3A 50.
16. Leasing services

No.
41 Upfront amount (called as premium, salami, cost, price, development
50

charges or by any other name) payable in respect of service by way of

granting of long term lease of 30 years, or more) of industrial plots or
plots for development of infrastructure for financial business, provided
by the State Government Industrial Development Corporations or
Undertakings or by any other entity having 20% or more ownership of
Central Government, State Government, Union territory to the
industrial units or the developers in any industrial or financial business
area.
Upfront amount paid in instalments
Aforesaid exemption is admissible irrespective of whether such upfront
amount is payable/paid in one/more instalments, provided the amount
is determined upfront 51.
Location charges or preferential location charges (PLC) collected
in addition to the lease premium for long term lease
Upfront amount is exempt from GST. Allowing choice of location
of plot is integral part of supply of long-term lease of plot and
therefore, location charge is nothing, but part of consideration
charged for long term lease of plot. Being charged upfront along
with the upfront amount for the lease, the same is exempt.
Accordingly, it is clarified that location charges or preferential
location charges (PLC) paid upfront in addition to the lease
premium for long term lease of land constitute part of upfront
amount charged for long term lease of land and are eligible for
the same tax treatment, and thus eligible for exemption under
Entry 4152.
Explanation - For the purpose of this exemption, the Central
Government, State Government or Union territory shall have 20% or
more ownership in the entity directly or through an entity which is
wholly owned by the Central Government, State Government or Union
territory.
Conditions:
1. The leased plots shall be used for the purpose for which they are
allotted, that is, for industrial or financial activity in an industrial
51
As clarified vide Circular No. 101/20/2019 GST dated 30.04.2019
52
As clarified vide Circular No. 177/09/2022 GST dated 03.08.2022

a 5.89
or financial business area.

2. State Government concerned shall monitor and enforce the
above condition as per the order issued by the State Government
in this regard.
3. In case of any violation or subsequent change of land use, due
to any reason whatsoever, the original lessor, original lessee as
well as any subsequent lessee/ buyer/ owner shall be jointly and
severally liable to pay such amount of central tax, as would have
been payable on the upfront amount charged for the long term
lease of the plots but for the exemption contained herein, along
with the applicable interest and penalty.
4. The lease agreement entered into by the original lessor with the
original lessee or subsequent lessee, or sub- lessee, as well as
any subsequent lease/ sale agreements, for lease or sale of such
plots to subsequent lessees or buyers or owners shall
incorporate in the terms and conditions, the fact that the central
tax was exempted on the long term lease of the plots by the
original lessor to the original lessee subject to above condition
and that the parties to the said agreements undertake to comply
with the same.
17. Legal services

Entry 45: Services provided by-
(a) an arbitral tribunal to –
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to such amount in the

preceding FY as makes it eligible for exemption from registration under
the CGST Act, 2017;
(iii) the Central Government, State Government, Union territory, local

authority, Governmental Authority or Government Entity.
(b) a partnership firm of advocates or an individual as an advocate other than a
senior advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;

(ii) any person other than a business entity; or
(iii) a business entity with an aggregate turnover up to such amount in the

the CGST Act, 2017;
(iv) the Central Government, State Government, Union territory, local
(c) a senior advocate by way of legal services to-
(i) any person other than a business entity; or

(ii) a business entity with an aggregate turnover up to such amount in the
the CGST Act, 2017.
(iii) the Central Government, State Government, Union territory, local
ANALYSIS
Relevant definitions are as under:
• Legal service: means any service provided in relation to advice, consultancy

or assistance in any branch of law, in any manner and includes
representational services before any court, tribunal or authority.
• Advocate: means an advocate entered in any roll under the provisions of the
Advocates Act, 1961 [Section 2(1)(a) of the Advocates Act, 1961] .
• Arbitral tribunal: means a sole arbitrator or a panel of arbitrators [Section 2(d)
of the Arbitration and Conciliation Act, 1996] .
• Senior advocate: An advocate may, with his consent, be designated as senior

advocate if the Supreme Court or a High Court is of opinion that by virtue of
his ability standing at the Bar or special knowledge or experience in law he is
deserving of such distinction. Senior advocates shall, in the matter of their
practice, be subject to such restrictions as the Bar Council of India may, in the
interest of the legal profession, prescribe.

a 5.91
Under Entry 45, following services are exempt from GST
--Arbitral tribunal --any person other than BE

Legal services provided by
--Partnership firm of --Business Entity with an
provided to
advocates or an individual as aggregate turnover up to such
an advocate other than a amount in the preceding FY as
senior advocate by way of makes it eligible for exemption
legal services from registration under the CGST

Act, 2017
--Senior advocate by way of
legal services --CG/SG/UT/LA/GA/GE
Legal services provided by a partnership firm of advocates/ individual as an

advocate other than a senior advocate to another advocate/ partnership firm
of advocates providing legal services.
Thus, legal services provided to a business entity with an aggregate turnover

exceeding such amount in the preceding FY as makes it eligible for exemption from
registration under the CGST Act, 2017 are liable to GST. Further, tax is payable by
the business entity on such services under reverse charge.
(39) Pyarelal & Co. has obtained registration under GST in the
preceding financial year as its aggregate turnover exceeded the
threshold exemption limit. In the current FY, it sought legal consultancy
services for its business from Nyay Advocates – a partnership firm of advocates.
The legal services so received by Pyarelal & Co. are not exempt because its
aggregate turnover exceeds the threshold exemption limit of registration in the
preceding financial year. Further, the tax on the said legal services is payable by
Pyarelal & Co. under reverse charge.

Quiz
Time!
Which of the following services are liable to GST?
(a) Services
provided by (c) Legal (c) Services
(d) Services by
business provided by a
services provided way of collection
correspondent to a by senior advocate banking company
of contribution
banking company to an unregistered to Basic Saving
under Atal Pension
with respect to business entity. Bank A/c under PM
Yojana.
accounts in its Jan Dhan Yojana.
urban area branch.
18. Sponsorship of sports events

Entry 53: Services by way of sponsorship of sporting events organised -
(a) by a national sports federation, or its affiliated federations, where the participating
teams or individuals represent any district, State, zone or Country;
(b) by Association of Indian Universities, Inter-University Sports Board, School Games
Federation of India, All India Sports Council for the Deaf, Paralympic Committee of
India or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic Association; or

(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
19. Skill Development services

No.
69 Any services provided by, _

a 5.93
(a) the National Skill Development Corporation set up by the

Government of India;
(b) a Sector Skill Council approved by the National Skill
Development Corporation;
(c) an assessment agency approved by the Sector Skill Council or
the National Skill Development Corporation;
(d) a training partner approved by the National Skill Development
Corporation or the Sector Skill Council,
in relation to-
(i) the National Skill Development Programme implemented by the
National Skill Development Corporation; or
(ii) a vocational skill development course under the National Skill
Certification and Monetary Reward Scheme; or
(iii) any other Scheme implemented by the National Skill
Development Corporation.
70 Services of assessing bodies empanelled centrally by the Directorate

General of Training, Ministry of Skill Development and
Entrepreneurship by way of assessments under the Skill Development
Initiative Scheme.
71 Services provided by training providers (Project implementation

agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana
(DDUGKY) implemented by the Ministry of Rural Development,
Government of India by way of offering skill or vocational training
courses certified by the National Council for Vocational Training.
20. Performance by an artist

Entry 78: Services by an artist by way of a performance in folk or classical art forms
of-
(a) music, or
(b) dance, or
(c) theatre,

if the consideration charged for such performance is not more than

` 1,50,000 are exempt from GST.
The activities by a performing artist in folk or classical art forms of music, dance, or
theatre are exempt if consideration does not exceed ` 1,50,000. However, if
consideration from such activities exceeds ` 1,50,000, entire consideration is
subject to GST.
Further, all other activities by an artist in other art forms e.g. western music or
dance, modern theatres, performance of actors in films or television serials would
be taxable. Similarly, activities of artists in still art forms e.g. painting, sculpture
making etc. are taxable.
However, the exemption shall not apply to service provided by such artist as a
brand ambassador.
‘Brand ambassador’ means a person engaged for promotion or marketing of a
brand of goods, service, property or actionable claim, event or endorsement of
name, including a trade name, logo or house mark of any person.
ILLUSTRATION 3
Determine the GST payable, if any, in each of the following independent cases,
assuming that the rate of GST is 18% and that the service providers are registered:
(a) Bollywood dance performance by a film actor in a film and consideration
charged is ` 1,45,000.
(b) Carnatic music performance by a classical singer to promote a brand of

readymade garments and consideration charged is ` 1,30,000.
(c) Carnatic music performance by a classical singer in a music concert and
consideration charged is ` 1,55,000.
(d) Kathak dance performance by a classical dancer in a cultural programme and
consideration charged is ` 1,45,000.
ANSWER
(a) Bollywood Dance performance by a film actor in a film is not exempt from GST
even though the consideration charged is less than threshold limit of
` 1,50,000. The reason for the same is that the dance performance by an artist
is exempt only if it is a performance in folk or classical art forms of dance.

a 5.95
(b) Carnatic music performance by a classical singer to promote a brand of

readymade garments is not exempt from GST even though, the consideration
charged is less than threshold limit of ` 1,50,000 and it is a performance in
classical art forms of music. The reason for the same is that the said
exemption is not applicable to service provided by such artist as a brand
ambassador.
(c) Carnatic music performance by a classical singer in a music concert is not
exempt from GST even though it is a performance in classical art forms of
music. The reason for the same is the consideration charged for the service
exceeds ` 1,50,000. Consequently, entire consideration charged is subject to
GST as follows:
= ` 1,55,000 × 18% = ` 27,900
(d) Kathak dance performance by a classical dancer in a cultural programme is
exempt from GST as it is a performance in classical art forms of dance and
consideration charged does not exceed ` 1,50,000 [i.e. ` 1,45,000].
21. Right to admission to various events

No.
79 Services by way of admission to a museum, national park, wildlife

sanctuary, tiger reserve or zoo**.
**Zoo means an establishment, whether stationary or mobile, where
captive animals are kept for exhibition to the public and includes a
circus and rescue centres but does not include an establishment of a
licensed dealer in captive animals. [Section 2(39) of the Wild Life (Protection)
Act, 1972] .
79A Services by way of admission to a protected monument so declared

under the Ancient Monuments and Archaeological Sites & Remains Act
1958 or any of the State Acts, for the time being in force.
81 Services by way of right to admission to-

(a) circus, dance, or theatrical performance including drama or
ballet;

(b) award function, concert, pageant, musical performance or any

sporting event other than a recognised sporting event🕙;
(c) recognised sporting event;
(d) planetarium,
where the consideration for right to admission to the events or places
as referred to in items (a), (b), (c) or (d) above is not more than ` 500
per person.
🕙 Recognised sporting event means any sporting event,-
(i) organised by a recognised sports body⚫⚫ where the
participating team or individual represent any district, state, zone
or country;
(ii) organized
(A) by a national sports federation, or its affiliated federations,
where the participating teams or individuals represent any
district, State or zone;
(B) by Association of Indian Universities, Inter-University
Sports Board, School Games Federation of India, All India
Sports Council for the Deaf, Paralympic Committee of India
or Special Olympics Bharat;
(C) by Central Civil Services Cultural and Sports Board;
(D) as part of national games, by Indian Olympic Association;
or
(E) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA)
Scheme.
⚫⚫ Recognised sports body means –
(i) the Indian Olympic Association;
(ii) Sports Authority of India;
(iii) a national sports federation recognised by the Ministry of Sports
and Youth Affairs of the Central Government, and its affiliate
federations;
(iv) national sports promotion organisations recognised by the
Ministry of Sports and Youth Affairs of the Central Government;
(v) the International Olympic Association or a federation recognised
by the International Olympic Association; or

a 5.97
(vi) a federation or a body which regulates a sport at international

level and its affiliated federations or bodies regulating a sport in India.
22. Services by an unincorporated body or a non- profit entity

No.
77 Service by an unincorporated body or a non- profit entity registered
under any law for the time being in force, to its own members by way
of reimbursement of charges or share of contribution –
(a) as a trade union
(b) for the provision of carrying out any activity which is exempt
from the levy of Goods and Services Tax; or
(c) up to an amount of ` 7,500 per month per member for sourcing
of goods or services from a third person for the common use of
its members in a housing society or a residential complex.
77A Services provided by an unincorporated body or a non-profit entity
registered under any law for the time being in force, engaged in,-
(i) activities relating to the welfare of industrial or agricultural
labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art, science,
literature, culture, sports, education, social welfare, charitable
activities and protection of environment,
to its own members against consideration in the form of membership
fee upto an amount of ` 1000/- per member per year.
ANALYSIS
Co-operative Housing Society
Co-operative Housing Societies are entities registered
under the co-operative laws of the respective States. A
Co-operative Housing Society is a collective body of
persons, who stay in a residential society and as a
collective body, they supply certain services to its

members, like collecting statutory dues from its members and remitting to
statutory authorities, maintenance of the building, security etc.
A Co-operative Housing Society is akin to a club, which is composed of its
members. Service provided by a Housing Society [Resident Welfare Association
(RWA)] to its members is treated as service provided by one person to another. The
activities of the housing society/RWA would attract the levy of GST and the housing
society would be required to register if its aggregate turnover exceeds the
threshold limit and comply with the GST Law, unless specifically exempted.
GST exemption on services provided by a Co-operative Housing Society
If the aggregate turnover of housing society/RWA providing services to its

members is above the applicable threshold limit for registration53, it needs to take
registration under GST in terms of section 22 [Refer Chapter-9: Registration in
Module 2 of this Study Material for detailed discussion on registration].
However, taking registration does not mean that the housing society has to
compulsorily charge GST in the monthly maintenance bills raised on its members.
If the services provided by it are exempt under an exemption notification, then it is
not required to charge GST on the said services, even if it is registered under GST.
For instance, in view of entry 77(c) above, supply of service by a RWA

(unincorporated body or a non- profit entity registered under any law) to its own
members by way of reimbursement of charges or share of contribution up to an
amount of ` 7500 per month per member for providing services and goods for the
common use of its members in a housing society/a residential complex are exempt
from GST.
So, there can be case where a society is registered under GST, but the monthly
contribution received from all the members is less than ` 7,500/- per member (and
the amount is for the purpose of sourcing of goods and services from a third person
for the common use of its members). In such a case, no GST is to be charged by
the housing society on the monthly bill raised by the society.
53
Threshold limit is ` 10 lakh for specified Special Category States, namely, Manipur, Mizoram,
Nagaland and Tripura and ` 20 lakh for all other States.

a 5.99
(40) RWA of Chulbul Housing Society, registered under GST, collected

the maintenance charges of ` 6,000 per month per member. In this case,
no GST is to be charged by the RWA.
However, in above case, if the monthly contribution exceeds ` 7,500/- per member,
entire contribution is taxable.
(41) If, in above example, other things remaining the same, the RWA of
Chulbul Housing Society collected the maintenance charges of ` 9,000
per month per member, GST @18% shall be payable on the entire
amount of ` 9,000 and not on [` 9,000 - ` 7,500] = ` 1,500.
There can also be a case where the aggregate turnover of the society/RWA is less
than the applicable threshold limit for registration and the monthly contribution of
all the individual members towards maintenance is less than ` 7,500/- (such services
being exempt). Further, the society is providing no other taxable service to its
members or outsiders. In this case, the society (essentially exclusively providing
wholly exempt services) need not take registration under GST.
(42) The turnover of RWA of Bulbul Housing Society located in New
Delhi in a financial year is ` 15 lakh. It has collected the maintenance
charges of ` 6,000 per month per member. RWA is not providing any
other taxable service to its members. In this case, RWA is not required to take
registration under GST since its aggregate turnover is less than the applicable
threshold limit of ` 20 lakh.
However, an RWA is not required to obtain registration even though the amount
of maintenance charges exceeds ` 7500 per month per member but aggregate
turnover of the RWA in a financial year does not exceed the threshold limit for
registration.
(43) In the above example, other things remaining the same, if the
maintenance charges collected by the RWA are ` 8,000 per month per
member, RWA is still not required to take registration under GST since
its aggregate turnover is less than the applicable threshold limit of ` 20 lakh.

The above discussion has been summarized as under:
RWA/Housing society
Are monthly
Is unregistered RWA’s No maintenance
annual turnover in a charges > ` 7,500
FY> ` 20 lakh*? No
per member?
Yes
Yes
Are monthly
maintenance charges
No Tax not
> ` 7,500 per
member?
payable
Yes
Tax payable
* ` 10 lakh in case of Special Category States of Manipur, Mizoram, Nagaland and Tripura
Thus, RWA shall be required to pay GST on monthly subscription/ contribution

charged from its members, only if such subscription is more than ` 7500/- per
month per member and the annual aggregate turnover of RWA by way of supplying
of services or goods or both is also more than ` 20 lakh.
In other words,
Annual turnover of Monthly maintenance Whether exempt?

RWA charge
More than ` 20 lakh* More than ` 7500/- No
` 7500/- or less Yes

a 5.101
` 20 lakh or less More than ` 7500/- Yes
` 7500/- or less Yes
* ` 10 lakh in case of Special Category States of Manipur, Mizoram, Nagaland and

Tripura
There may also be cases where a person owns 2 or more flats in the housing
society/residential complex. The question arises whether the ceiling of ` 7500/-
per month per member on the maintenance for the exemption to be available shall
be applied per residential apartment or per person.
As per general business sense, a person who owns 2 or more residential apartments
in a housing society or a residential complex shall normally be a member of the
RWA for each residential apartment owned by him separately. Consequently, the
ceiling of ` 7500/- per month per member shall be applied separately for each
residential apartment owned by him.
(44) Gareeb Chand owns two residential apartments in a residential
complex and pays ` 15,000/- per month as maintenance charges
towards maintenance of these two apartments to the RWA (` 7,500/- per
month in respect of each residential apartment). In this case, the exemption from
GST shall be available with respect to maintenance charges paid for each
apartment.
It is important to note that RWA is entitled to take ITC of GST paid by them on
capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes,
other sanitary/hardware fillings etc.) and input services such as repair and
maintenance services, used by it for making supplies to its members and use such
ITC for discharge of GST liability on such supplies where the amount charged for
such supplies is more than ` 7,500 per month per member. [Refer Chapter-8: Input
Tax Credit in Module 2 of this Study Material for detailed discussion on ITC provisions]
(45) RWA of Tintin Housing Society, registered under GST, has collected
the maintenance charges of ` 9,000 per month per member from 1,000
members of the society in the month of May. For paying the GST of
` 16,20,000 [payable @ 18% on the amount of ` 90,00,000], RWA can utilise the ITC
of GST of ` 1,00,000 paid by it on purchase of swings for garden, ITC of ` 20,000

on electric cables and ITC of ` 15,000 on plumbing services, which were

made/availed during the month of May.
✪ Statutory dues such as property tax, electricity charges etc. forming part of the
monthly maintenance bill raised by the society on its members would be excluded
while computing the aforesaid monthly limit of ` 7,50054.
Quiz
Time!
Which of the following services are not exempt from GST?
(c) Classical
(d) Sponsorship
(b) Right to music
of sporting events
(a) Services by admission to a performance by a
organized under
way of admission circus where the singer where
Panchayat Yuva
to a museum. ticket cost is `550 consideration
Kreeda Aur Khel
person. charged is
Abhiyaan Scheme
`1,45,000.
23. Other exempt services

No.
2 Services by way of transfer of a going concern, as a whole or an

independent part thereof.
Transfer of a going concern means transfer of a running business
which is capable of being carried on by the purchaser as an
independent business, but shall not cover mere or predominant
transfer of an activity comprising a service. Transfer of business for a
lump sum consideration commonly referred to as slump sale is covered
under this entry.
54
Discussion under this entry in forgoing paras is primarily based on Circular No. 109/28/2019
GST dated 22.07.2019, CBIC GST Flyer ‘GST on Co-Operative Housing Societies’ and CBIC FAQs
on levy of GST on Supply of Services to Co-operative Society.

a 5.103
Such sale of business as a whole will comprise comprehensive sale of

immovable property, goods and transfer of unexecuted orders,
employees, goodwill etc. Since the transfer in title is not merely a
transfer in title of either the immovable property or goods or even
both it may amount to service and has thus been exempted.
(46) Royal Hotel Group is in the business of running a chain
of restaurants. It intends to sell its business as a going
concern. It would not be required to pay GST on such sale
of its business.
12 Services by way of renting of residential dwelling for use as

residence except where the residential dwelling is rented to a
registered person.
Explanation — For the purpose of exemption under this entry, this
entry shall cover services by way of renting of residential dwelling
to a registered person where, –
(i) the registered person is proprietor of a proprietorship
concern and rents the residential dwelling in his personal
capacity for use as his own residence; and
(ii) such renting is on his own account and not that of the
proprietorship concern.
Thus, renting of residential dwelling either by a registered person
or an unregistered person for use as residence to UNREGISTERED
PERSON is exempt from GST.
Renting of residential dwelling for use as residence to a registered
person (other than proprietor covered in explanation above) as
well as renting of residential dwelling for commercial use to
registered or unregistered person is liable to GST.
Further, tax on renting of residential dwelling to a registered
person is payable by the registered person under reverse charge 55
55
Provisions relating to reverse charge mechanism are contained in Notification No. 13/2017 CT
(R) dated 28.06.2017 which has been discussed in detail in Chapter 3 – Charge of GST in this
Module of Study Material.

whether such residential dwelling is being used for commercial

purposes or residential purposes.
19C Satellite launch services supplied by Indian Space Research

Organisation, Antrix Corporation Limited or New Space India Limited.
22 Services by way of giving on hire –

(a) to a State Transport Undertaking (STU), a motor vehicle meant
to carry more than 12 passengers**; or
State Transport Undertaking: means any undertaking
providing road transport service, where such undertaking is
carried on by-
i. the Central Government or a State Government;
ii. any Road Transport Corporation established under section
3 of the Road Transport Corporations Act, 1950.
iii. any municipality or any corporation or company owned or
controlled by the Central Government or one or more State
Governments, or by the Central Government and one or
more State Governments.
Explanation - For the purposes of this clause, road transport
service means a service of motor vehicles carrying passengers or
goods or both by road for hire or reward [Section 2(42) of the Motor
Vehicles Act, 1988] .
Generally, such STUs/ Corporations are established with a view

to providing public transport facility to the commuters. If
transport undertakings hire the buses on lease basis from private
persons on payment of consideration, the services by way of
supply of motor vehicles to such STU are exempt from payment
of tax. However, supplies of motor vehicles to Government
Departments other than the STUs are taxable 56.
(aa) to a local authority, an Electrically operated vehicle (EOV) meant
to carry more than 12 passengers;
56
As clarified vide question 26 of CBIC FAQs on Government Services

a 5.105
EOV means vehicle falling under Chapter 87 in the First Schedule

to the Customs Tariff Act, 1975 which is run solely on electrical
energy derived from an external source or from one/more
electrical batteries fitted to such road vehicle.
The expression “giving on hire” in this entry includes renting of
vehicles. Accordingly, where the said vehicles are rented or given
on hire to STUs or Local Authorities, said services are eligible for
above exemption irrespective of whether such vehicles are run on
routes, timings as decided by the STUs or Local Authorities and
under effective control of STUs or Local Authorities which
determines the rules of operation or plying of vehicles 57.
(b) to a goods transport agency, a means of transportation of goods.
(47) Nishant owns a truck which he has rented to Sindhu
and Bansal Transport Agency - a GTA. Services by way of
giving on hire a means of transportation of goods [truck in
the given case] to a GTA [Sindhu and Bansal Transport Agency], are
exempt from tax. However, if Nishant had rented a vehicle designed
to carry passengers to such GTA, said activity is not exempt under this
entry.
(c) 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.
23 Service by way of access to a road or a bridge on payment of toll

charges.
With regard to said entry, following issues have been clarified:
(i) Ministry of Road Transport and
Highways (MORTH) permitted the
overloaded vehicles to ply on the
national highways after payment of
higher toll charges. It has been
57

clarified58 that overloading charges at toll plazas would get

the same treatment as given to toll charges.
(ii) MORTH59 has directed to collect additional amount from the

users of the road to the extent of two times of the fees
applicable to that category of vehicle which is not having a
valid functional Fastag.
Essentially, the additional amount collected from the users
of the road not having a functional Fastag, is in the nature
of toll charges and should be treated as additional toll
charges. Therefore, it is clarified 60 that additional fee
collected in the form of higher toll charges from vehicles not
having Fastag is essentially payment of toll for allowing
access to roads or bridges to such vehicles and may be given
the same treatment as given to toll charges.
25 Transmission/distribution of electricity by an electricity

transmission / distribution utility.
However, in this regard CBIC has clarified that the other
services provided by DISCOMS (distribution companies) to consumer
against charges are liable to GST such as,-
i. Application fee for releasing connection of electricity;
ii. Rental Charges against metering equipment;
iii. Testing fee for meters/transformers, capacitors etc.;
iv. Labour charges from customers for shifting of meters or shifting
of service lines;
v. charges for duplicate bill 61.
44 Services provided by an incubatee up to a total turnover of ` 50 lakh

in a financial year subject to the following conditions, namely:-
58
59
vide circular dated 16.02.2021
60
61

a 5.107
(a) the total turnover had not exceeded ` 50 lakh during the
preceding financial year; and
(b) a period of 3 years has not elapsed from the date of entering
into an agreement as an incubatee.
Incubatee: means an entrepreneur located within the premises of a
Technology Business Incubator (TBI)/ Science and Technology
Entrepreneurship Park (STEP) recognised by the National Science and
Technology Entrepreneurship Development Board of the Department
of Science and Technology, Government of India (NSTEDB) and who
has entered into an agreement with the TBI/STEP to enable himself to
develop and produce hi-tech and innovative products.
48 Taxable services, provided or to be provided, by a TBI/STEP recognised

by NSTEDB or bio- incubators recognised by the Biotechnology
Industry Research Assistance Council, under the Department of
Biotechnology, Government of India (BIRAC).
49 Services by way of collecting or providing news by an independent

journalist, Press Trust of India or United News of India.
50 Services of public libraries by way of lending of books, publications

or any other knowledge-enhancing content or material.
52 Services by an organiser to any person in respect of a business

exhibition held outside India.
57 Services by way of pre-conditioning, pre- cooling, ripening, waxing,

retail packing, labelling of fruits and vegetables which do not change
or alter the essential characteristics of the said fruits or vegetables.
58 Services provided by the National Centre for Cold Chain

Development under the Ministry of Agriculture, Cooperation and
Farmer’s Welfare by way of cold chain knowledge dissemination.
59 Services by a foreign diplomatic mission located in India.
61A Services by way of granting National Permit to a goods carriage

to operate through-out India/ contiguous States

65A Services by way of providing information under the RTI Act (Right
to Information Act, 2005).
68 Services provided to a recognised sports body by-

(a) an individual as a player, referee, umpire, coach or team manager
for participation in a sporting event organised by a recognized
sports body;
(b) another recognised sports body.
However, services by individuals such as selectors, commentators,
curators, technical experts are taxable. The service of a player to a
franchisee which is not a recognized sports body is also taxable. The
term ‘recognised sports body’ has been defined earlier in this chapter.
76 Services by way of public conveniences such as provision of facilities

of bathroom, washrooms, lavatories, urinal or toilets.
Note: For the purpose of this exemption notification, a “Limited Liability

Partnership” formed and registered under the provisions of the Limited Liability
Partnership Act, 2008 shall also be considered as a partnership firm or a firm.
Quiz
Time!
10
Which of the following services are exempt from GST?
(b) Services
(a) Services by an organiser to
(c) Services
to a foreign any person in
by way of transfer (d) Services
diplomatic respect of a
of a going provided by RBI.
mission located in business
concern.
India. exhibition held in
India.

a 5.109
GST on payment of honorarium to the Guest Anchors

Circular No. 177/09/2022 GST dated 03.08.2022 clarifies the applicability of
GST on honorarium paid to Guest Anchors. Sansad TV and other TV channels
invite guest anchors to participate in their shows and pay remuneration to
them in the form of honorarium.
It is clarified that supply of all goods & services are taxable unless exempt or
declared as ‘neither a supply of goods nor a supply of service’. Services
provided by the guest anchors in lieu of honorarium attract GST liability.
However, guest anchors whose aggregate turnover in a financial year does not
exceed ` 20 lakh (` 10 lakh in case of specified Special Category States) shall
not be liable to take registration and pay GST.
Students may note that some of the entries granting exemption from GST are
similar to the negative list entry/entry granting exemption under the erstwhile
service tax law.
Therefore, clarifications pertaining to said negative list entry/exemption provided
under the erstwhile service tax law, wherever it seems relevant under the GST law,
have been incorporated at relevant places.

LET US RECAPITULATE
1. Power to exempt from tax [Section 11 of the CGST Act/ section 6 of

IGST Act]
Power to exempt from tax
by way of issuance of
Notification Special order
• exempt generally exempt from payment of tax under

• either absolutely or subject to such circumstances of an exceptional
conditions as may be specified,
nature to be stated in such order,
• goods and/or services of any
in public interest.
specified description.
2. List of services exempt from GST
Services Exempt Services
Services Charitable activities BY an entity registered under section

related to 12AA or 12AB of Income-tax Act.
charitable
and Services by a person by way of-
religious
(a) conduct of any religious ceremony;
activities
(b) renting of precincts of a religious place meant for
general public, owned/managed by
institutions/entities/trusts, registered under section
12AA/12AB/10(23C)(v) of the Income tax Act or
body/authority covered under section 10(23BBA) of the
said Act, except where-
(i) charges for renting of rooms ≥ ` 1,000 per day;

a 5.111
(ii) charges for renting of premises, community

halls, kalyanmandapam, open area, etc. are ≥
` 10,000 per day;
(iii) charges for renting of shops/spaces for
business/commerce are ≥ ` 10,000 per month.
Services by a specified organisation [KMVN/Haj Committee]

in respect of a religious pilgrimage [Haj and Kailash
Mansarovar Yatra].
Training/coaching in
(a) recreational activities relating to arts/culture, by an
individual or
(b) sports by charitable entities registered under section
12AA or 12AB of the Income-tax Act.
Agriculture Loading, unloading, packing, storage or warehousing of rice.

related
services Warehousing of minor forest produce.
Services by way of storage/ warehousing of cereals,

pulses, fruits & vegetables.
Artificial insemination of livestock (other than horses).
Carrying out an intermediate production process as job

work in relation to cultivation of plants & rearing of animals
[except horses], for food, fibre, fuel, raw material or other
similar products or agricultural produce.
Services relating to cultivation of plants & rearing of animals

[except horses], for food, fibre, fuel, raw material or other
similar products or agricultural produce by way of –
(a) agricultural operations directly related to production of
any agricultural produce including cultivation,
harvesting, threshing, plant protection or testing;
(b) supply of farm labour;

(c) processes carried out at an agricultural farm

including tending, pruning, etc. and such like operations
which do not alter the essential characteristics of
agricultural produce but make it only marketable for
the primary market;
(d) renting or leasing of agro machinery or vacant land
with/without a structure incidental to its use;
(e) loading, unloading, packing, storage or
warehousing of agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing
Committee or Board or services provided by a commission
agent for sale/purchase of agricultural produce.
Education Services provided BY an educational institution (EI):

services • to its students, faculty and staff;
• by way of conduct of entrance examination against
consideration in form of entrance fee
Services provided TO an These exemptions are only

EI, by way of,- applicable to an institution
(i) transportation of providing services by way of
students, faculty and pre-school education &
staff; education up to higher
(ii) catering, including secondary school or
any mid-day meals equivalent.
scheme sponsored
by the Central
Government (CG),
State Government
(SG) or Union
Territory (UT);
(iii) security/cleaning/
housekeeping
services performed
in such EI;

a 5.113
(iv) services relating to admission to, or conduct of

examination by, such EI;
(v) supply of online educational journals or periodicals.

This exemption is only applicable to an institution
providing services by way of education as part of a
curriculum for obtaining qualification recognised by any
law for time being in force.
Health care • Health care services BY a clinical establishment/

services authorized medical practitioner/ para-medics.
However, nothing in this entry shall apply to the
services provided by a clinical establishment by way
of providing room [other than Intensive Care Unit
(ICU)/Critical Care Unit (CCU)/Intensive Cardiac
Care Unit (ICCU)/Neo natal Intensive Care Unit
(NICU)] having room charges exceeding ` 5000 per
day to a person receiving health care services.
• Transportation of a patient in an ambulance BY any
person other than specified above.
Service BY a veterinary clinic in relation to Health care of

animals/birds
Services Services by Governmental Authority (GA) by way of any

provided by activity in relation to any function entrusted to a
Government Municipality /Panchayat under article 243W/ 243G of
Constitution.
Services by the CG/SG/UT/Local Authority (LA) excluding

‘ specified services’
following services—
(a) to (c) hereinafter
(a) services by Department of Posts;

referred as
(b) services in relation to an aircraft/a vessel,

inside/outside precincts of a port/airport;
(c) transport of goods/passengers; or
(d) any service, other than ‘specified services’
above, provided to business entities.

Services by the Department of Posts by way of post card,

inland letter, book post and ordinary post (envelopes
weighing less than 10 grams).
Services provided by CG/SG/UT/LA to a business entity (BE)

with an aggregate turnover of up to such amount in the
preceding FY as makes it eligible for exemption from
registration under the CGST Act, 2017. This exemption is not
applicable to specified services, and renting of immovable
property service.
Services provided by CG/SG/UT/LA to another CG/SG/UT/LA.

This exemption is not applicable to specified services.
Services provided by CG/SG/UT/LA** where consideration

for such services does not exceed ` 5,000. This exemption
is not applicable to specified services.
**In case of continuous supply of service*, the exemption
shall apply only where the consideration charged for such
service does not exceed ` 5,000 in a FY.
Supply of service by a Government Entity (GE) to

CG/SG/UT/LA/any person specified by CG/SG/UT/LA against
consideration received from CG/SG/UT/LA, in the form of grants.
Services by an old age home run by CG/SG/an entity

registered under section 12AA or 12AB of Income-tax Act to
its residents (aged ≥60 years) against consideration upto
` 25,000 per month per member, provided that the
consideration charged is inclusive of charges for boarding,
lodging and maintenance.
Services supplied by CG/SG/UT to their undertakings or PSUs by

way of guaranteeing the loans taken by such undertakings or
PSUs from the banking companies and financial institutions.
Services provided by CG/SG/UT/LA by way of-

(a) registration required under any law for the time being
in force;
(b) testing, calibration, safety check or certification relating

a 5.115
to protection or safety of workers, consumers or public

at large, including fire license, required under any law
for the time being in force.
Services provided by CG/SG/UT/LA by way of issuance of

passport, visa, driving license, birth certificate or death
certificate.
Services provided by CG/SG/UT/LA by way of tolerating

non-performance of a contract for which consideration in
the form of fines or liquidated damages is payable to
CG/SG/UT/LA under such contract.
Services provided by CG/SG/UT/LA by way of assignment of

right to use natural resources to an individual farmer for
cultivation of plants & rearing of all life forms of animals
[except horses], for food, fibre, fuel, raw material or other similar
products.
Services provided by CG/SG/UT by way of deputing officers

after office hours or on holidays for inspection or
container stuffing or such other duties in relation to import
export cargo on payment of Merchant Overtime charges.
Services supplied by a SG to Excess Royalty Collection

Contractor (ERCC) by way of assigning the right to collect
royalty on behalf of SG on the mineral dispatched by the
mining lease holders subject to specified conditions.
Services provided by rehabilitation professionals recognised

under the RCI Act, 1992 by way of rehabilitation, therapy or
counselling and such other activity as covered by the said Act
at medical establishments, educational institutions,
rehabilitation centers established by CG/SG/UT/an entity
registered under section 12AA or 12AB of the Income-tax Act,
1961.
Constructio Pure labour contracts of construction, erection,

n services commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil structure or
any other original works pertaining to the beneficiary-led

individual house construction or enhancement under the

Housing for All (Urban) Mission/Pradhan Mantri Awas
Yojana.
Services supplied by Electricity Distribution Utilities by way of

construction, erection, commissioning, or installation of
infrastructure for extending electricity distribution network upto
the tube well of the farmer/agriculturalist for agricultural use.
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.
Services of Such services provided by –

transport of (a) air in economy class, embarking from or terminating in
passengers an airport located in the state of Arunachal Pradesh,
(with/ Assam, Manipur, Meghalaya, Mizoram, Nagaland,
without Sikkim, or Tripura or at Bagdogra located in West
accompanie Bengal;
d (b) non-air conditioned contract carriage other than
belongings) radio taxi, for transportation of passengers, excluding
tourism, conducted tour, charter or hire; or
(c) stage carriage other than air- conditioned stage
carriage.
However, nothing contained in items (b) and (c) above
shall apply to services supplied through an ECO, and
notified under section 9(5) of the CGST Act.
Such services provided to CG by air, embarking from or

terminating at a Regional Connectivity Scheme (RCS) airport,
against consideration in the form of viability gap funding. This
exemption shall apply only till expiry of a period of 3 years
from date of commencement of operations of the RCS airport
as notified by the Ministry of Civil Aviation.
Such services provided by—

(a) railways in a class other than first class/an air-
conditioned coach;

a 5.117

(d) public transport, other than predominantly for tourism
purpose, in a vessel between places located in India; and
However, nothing contained in item (e) above shall apply
to services supplied through an ECO, and notified under
section 9(5) of the CGST Act.
Goods Services by way of transportation of goods-

transportati
(a) by road except the services of—
on services
(i) a goods transportation agency (GTA);
(ii) a courier agency;
(b) by inland waterways.
Exempt transportation of goods by rail/ vessel/ by GTA in a

goods carriage
• Agricultural produce
• milk, salt and food grain including flours, pulses and rice
• organic manure
• newspaper or magazines registered with the Registrar of
Newspapers
• Defence/ military equipments
• relief materials meant for victims of natural or man-made
disasters, calamities, accidents or mishap
Services provided by a GTA to an unregistered person,

including an unregistered casual taxable person, except
following recipients, namely: -
(a) a factory registered under Factories Act,
(b) society registered under Societies Act,
(c) Co-operative society,
(d) body corporate and
(e) partnership firm including AOP;
(f) registered casual taxable person.

Services provided by a GTA, by way of transport of goods in

a goods carriage, to, -
(a) a Department or Establishment of the CG/SG/UT; or
(c) Governmental agencies, which has taken registration only
for the purpose of deducting tax under section 51 and not
for making a taxable supply of goods or services.
Banking and Services by way of—

financial (a) 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);
(b) inter se sale or purchase of foreign currency amongst
banks or authorised dealers of foreign exchange or
amongst banks and such dealers.
Services provided by a banking company to Basic Saving

Bank Deposit (BSBD) account holders under Pradhan
Mantri Jan Dhan Yojana (PMJDY).
Services by an acquiring bank, to any person in relation to

settlement of an amount upto ` 2,000 in a single transaction
transacted through credit card, debit card, charge card or
other payment card service.
Services by an intermediary of financial services located in a

multi services SEZ with International Financial Services Centre
(IFSC) status to a customer located outside India for
international financial services in currencies other than Indian
rupees.
Services of Such services by way of annuity under the National Pension

Life System by Pension Fund Regulatory and Development
insurance Authority of India (PFRDAI) under PFRDA Act, 2013.
business
Such services by the Army, Naval and Air Force Group
Insurance Funds to members of the Army, Navy and Air Force,
respectively, under the Group Insurance Schemes of CG.

a 5.119
Services of life insurance provided/agreed to be provided by

the Central Armed Police Forces (under Ministry of Home
Affairs) Group Insurance Funds to their members under the
Group Insurance Schemes of the concerned Central Armed
Police Force.
Such services by the Naval Group Insurance Fund to the

personnel of Coast Guard under the Group Insurance
Schemes of CG.
Such services under following schemes-

(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product** as approved by the
Insurance Regulatory and Development Authority
(IRDA), having maximum amount of cover of
` 2,00,000;
(d) Varishtha Pension BimaYojana; (A)
(e) Pradhan Mantri Jeevan Jyoti BimaYojana;
(f) Pradhan Mantri Jan DhanYogana;
(g) Pradhan Mantri Vaya Vandan Yojana.
General Such services under following schemes –

insurance (a) Hut Insurance Scheme;
business (b) Cattle Insurance under Swarnajaynti Gram Swarozgar
Yojna62;
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident
Policy;
(e) Group Personal Accident Policy for Self-Employed
Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Restructured Weather Based Crop Insurance Scheme
(RWCIS), approved by the Government of India and
62
earlier known as Integrated Rural Development Programme

implemented by the Ministry of Agriculture;

(i) Jan Arogya Bima Policy;
(j) Pradhan Mantri Fasal Bima Yojana (PMFBY);
(k) Pilot Scheme on Seed Crop Insurance; (B)
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha BimaYojna;
(q) Niramaya Health Insurance Scheme implemented by the
Trust constituted under the provisions of the National
Trust for the Welfare of Persons with Autism, Cerebral
Palsy, Mental Retardation and Multiple Disabilities Act,
1999;
(r) Bangla Shasya Bima.
Services provided to CG/SG/UT under any insurance

(C)
scheme for which total premium is paid by CG/SG/UT.
Services by way of reinsurance of the insurance schemes

(A) or (B)
specified in (A) (B) or (C) above.
Services Services by the Employees’ State Insurance (ESI)

provided by Corporation to persons governed under the ESI Act, 1948.
specified
bodies Services provided by the EPFO to the persons governed under
the Employees Provident Funds (EPF) & Miscellaneous
Provisions Act, 1952.
Services by CMPFO to persons governed by Coal Mines

Provident Fund and Miscellaneous Provisions Act, 1948.
Services by NPS Trust to its members against consideration

in the form of administrative fee.

a 5.121
Pension Services by way of collection of contribution under:

schemes • Atal Pension Yojana
• any pension scheme of SG
Business Services by the following persons in respective capacities –

facilitator/c
(a) business facilitator/business correspondent to a Banking
orresponde
Co. with respect to accounts in its rural area branch;
nt
(b) any person as an intermediary to a business facilitator or
a business correspondent with respect to services
mentioned in entry (a); or
(c) business facilitator/business correspondent to an
insurance company in rural area.
Services Following services provided to the CG/SG/UT/LA by way of

provided to any activity in relation to any function entrusted to a
Government Panchayat/Municipality under articles 243G/243W of the
Constitution:
❑ Pure services
❑ 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.
Service provided by Fair Price Shops to CG/SG/UT by way of

sale of food grains, kerosene, sugar, edible oil, etc. under
Public Distribution System (PDS) against commission/margin.
Services provided to CG/SG/UT under any insurance scheme

for which total premium is paid by CG/SG/UT.
Services provided to CG/SG/UT administration under any

training programme for which 75% or more of the total
expenditure is borne by CG/SG/UT administration.
Leasing Upfront amount payable in respect of service by way of

services granting of long term lease of 30 years, or more of industrial
plots/plots for development of infrastructure for financial
business, provided by the State Government Industrial
Development Corporations or Undertakings or by any other

entity having 20% or more ownership of CGS/SG/UT to the

industrial units/developers in any industrial/financial business
area, subject to specified conditions.
Legal Service provided by To

services
❑ Arbitral tribunal any person other than BE
❑ Partnership firm
BE with an aggregate turnover up to
of advocates or
such amount in the preceding FY as
an individual as
makes it eligible for exemption from
an advocate
registration under the CGST Act
other than a
senior advocate CG/SG/UT/LA/GA/GE
by way of legal
services
❑ Senior advocate
by way of legal
services
Legal services provided by a partnership firm of advocates/

individual as an advocate other than a senior advocate to
another advocate/ partnership firm of advocates providing
legal services
Sponsorship Sponsorship of sporting events organised -

of sports (a) by a national sports federation, or its affiliated
events federations, where the participating teams or
individuals represent any district, State, zone or
Country;
(b) by Association of Indian Universities, Inter-University
Sports Board, School Games Federation of India, All
India Sports Council for the Deaf, Paralympic
Committee of India or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic
Association; or
(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan
Scheme.

a 5.123
Skill Services provided by, _

Developme (a) National Skill Development Corporation (NSDC) set up
nt services by GoI;
(b) Sector Skill Council (SSC) approved by NSDC;
(c) assessment agency approved by SSC/NSDC
(d) a training partner approved by SSC/NSDC
in relation to-
(i) the National Skill Development Programme
implemented by NSDC; or
(ii) a vocational skill development course under the
National Skill Certification and Monetary Reward
Scheme; or
(iii) any other Scheme implemented by NSDC.
Services of assessing bodies empanelled centrally by DGT,

Ministry of Skill Development and Entrepreneurship by way of
assessments under the SDI Scheme.
Services provided by training providers (Project

implementation agencies) under DDUGKY implemented by
Ministry of Rural Development, GoI by way of offering skill or
vocational training courses certified by the National Council
for Vocational Training (NCVT).
Performanc Services by an artist by way of a performance in folk or

e by an classical art forms of music/ dance/ theatre, if the
artist consideration charged for such performance is not more than
` 1,50,000. This exemption shall not apply to service provided
by such artists as a brand ambassador.
Right to Services by way of admission to:

admission (i) museum, national park, wildlife sanctuary, tiger reserve or
to various zoo
events (ii) protected monument declared under the Ancient
Monuments and Archaeological Sites & Remains Act
1958/any of the State Acts, for the time being in force.
(iii) following events/places where the consideration for
right to admission is not more than ` 500 per person:

(a) circus, dance, or theatrical performance including

drama or ballet;
(b) award function, concert, pageant, musical
performance or any sporting event other than a
recognised sporting event;
(c) recognised sporting event;
(d) planetarium.
Services by Services by unincorporated body/ non- profit entity to its
an own members as reimbursement/share of contribution:
unincorpora
ted body or (i) As a trade union (ii) for providing exempt activity
a non- (iii) up to an amount of ` 7,500 per month per member for
profit entity sourcing of goods/services from a third person for the
registered common use of its members in a housing society/residential
under any complex
law for the
time being Services provided by such entity/body engaged in-
in force (i) activities relating to the welfare of
industrial/agricultural labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture,
art, science, literature, culture, sports, education, social
welfare, charitable activities and protection of
environment,
to its own members against membership fee upto ` 1000/-
per member per year.
Other Transfer of a going concern, as a whole or an independent

exempt part thereof.
services
Services by way of renting of residential dwelling for use as
residence except where the residential dwelling is rented to
a registered person.
Explanation — For the purpose of exemption under this
entry, this entry shall cover services by way of renting of
residential dwelling to a registered person where, –
(i) the registered person is proprietor of a
proprietorship concern and rents the residential

a 5.125
dwelling in his personal capacity for use as his own

residence; and
(ii) such renting is on his own account and not that of

the proprietorship concern.
Services by way of giving on hire –

(a) to a state transport undertaking (STU), a motor vehicle
meant to carry more than 12 passengers;
(aa) to a local authority, an Electrically operated vehicle
(EOV) meant to carry more than 12 passengers; or
(b) to a GTA, a means of transportation of goods.
(c) 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.
Service by way of access to a road or a bridge on payment of

toll charges.
Transmission/distribution of electricity by an electricity

transmission/ distribution utility.
Services provided by an incubatee up to a total turnover of

` 50 lakh in a FY provided:-
(a) total turnover had not exceeded ` 50 lakh during the
preceding FY; and
(b) a period of 3 years has not elapsed from the date of
entering into an agreement as an incubate.
Taxable services, provided or to be provided, by a Technology

Business Incubator/ Science and Technology
Entrepreneurship Par (TBI/STEP) recognised by NSTEDB or
bio- incubators recognised by BIRAC.
Services by way of collecting or providing news by an

independent journalist, PTI or United News of India.

Services of public libraries by way of lending of books,

publications or any other knowledge-enhancing content or
material.
Services by an organiser to any person in respect of a

business exhibition held outside India.
Services by way of pre-conditioning, pre-cooling, ripening,

waxing, retail packing, labelling of fruits and vegetables
which do not change or alter the essential characteristics of
the said fruits or vegetables.
Services provided by the National Centre for Cold Chain

Development under the Ministry of Agriculture, Cooperation and
Farmer’s Welfare by way of cold chain knowledge dissemination.
Services by a foreign diplomatic mission located in India.
Services by way of granting National Permit to a goods

carriage to operate through-out India/ contiguous States
Services by way of providing information under the RTI Act.
Services provided to a recognised sports body (RSB) by-

(a) an individual as a player, referee, umpire, coach or team
manager for participation in a sporting event organised
by a RSB;
(b) another RSB.
Services by way of public conveniences such as provision of

facilities of bathroom, washrooms, lavatories, urinal or toilets.
TEST YOUR KNOWLEDGE
1. Exempt supply means supply of any goods or services or both which attracts nil
rate of tax and which may be wholly exempt from tax, but excludes non-taxable
supply. Discuss the validity of the statement.

a 5.127
2. Services provided by an entity registered under section 12AB of the Income-tax

Act, 1961 are exempt from GST if such services are provided by way of
charitable activities. Elaborate the term ‘charitable activities’.
3. Examine which of the following independent services are exempt from GST:
(a) Food supplied by the canteen run by a hospital to the in-patients as
advised by the doctors.
(b) An RWA in a housing society, registered under GST, collects the
maintenance charges of ` 6,500 per month per member.
4. An individual acts as a referee in a football match organized by Sports Authority
of India. He has also acted as a referee in another charity football match
organized by a local sports club, in lieu of a lump sum payment. Discuss
whether any GST is payable on the activities undertaken by him.
5. RXL Pvt. Ltd. manufactures a beauty soap with the brand name ‘Forever Young’.
RXL Pvt. Ltd. has organized a concert to promote its brand. Ms. Ahana Kapoor,
its brand ambassador, who is a leading film actress, has given a classical dance
performance in the said concert as a part of her services as a brand ambassador
of the company. The proceeds of the concert worth ` 1,20,000 will be donated
to a charitable organization by Ms. Ahana.
Examine whether Ms. Ahana Kapoor will be required to pay any GST for
classical dance performance given in the said concert.
6. Examine whether GST is exempted on the following independent supplies of
services:
(i) Service provided by a private transport operator to Scholar Boys Higher
Secondary School by way of transportation of students to and from the
school.
(ii) Services provided by way of vehicle parking to general public in a
shopping mall.
7. A State Transport Undertaking has hired motor vehicles meant to carry 8 - 10
passengers from Fast Cab Renting, a motor vehicle renting company. Give your
comments as to whether any GST is payable in this case.
8. Indiana Engineering College, an educational institution, has conducted an
entrance test examination for various courses run by it (for obtaining
qualification(s) recognised by law for the time being in force) and charged

entrance fees from the applicants. Determine whether Indiana Engineering

College is liable to pay GST on the same.
9. Babloo Transporters, a Goods Transport Agency, transported relief materials in
a goods carriage meant for victims of Kerala floods, a natural disaster, by road
from Delhi to Ernakulam, for a company. Babloo Transporters is of the view
that it is not liable to pay GST on the said services provided as said services are
exempt. You are required to advice it on the said issue.
10. Keyan Enterprises, an event organizer, provided services to Breathing Wall Ltd.
by way of organizing business exhibition in New Delhi as part of Make in India
initiative. Keyan Enterprises claims that it is not required to pay GST as the
services provided by way of organizing business exhibition are exempt from
GST. Examine the technical veracity of the claim of Keyan Enterprises, in the
given case.
11. ST Ltd. has given on hire 5 trucks to Titu Transporters of Delhi (a goods
transport agency) for transporting goods in Central and West Delhi. The hiring
charges for the trucks are ` 7,500 per truck per day. Examine whether GST is
payable in the given case.
ANSWERS/HINTS
1. The statement is not fully valid in law. Exempt supply has been defined as
supply of any goods or services or both which attracts nil rate of tax or which
may be wholly exempt from tax and includes non-taxable supply [Section
2(47)].
2. The term ‘charitable activities’ mean activities relating to-
(i) public health by way of-
(A) care or counseling of

(I) terminally ill persons or persons with severe physical or
mental disability;
(II) persons afflicted with HIV or AIDS;

(III) persons addicted to a dependence-forming substance such
as narcotics drugs or alcohol; or

a 5.129
(B) public awareness of preventive health, family planning or

prevention of HIV infection;
(ii) advancement of religion, spirituality or yoga;
(iii) advancement of educational programmes/skill development relating
to,-
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) preservation of environment including watershed, forests & wildlife.
3. (a) Services by way of health care services by a clinical establishment, an
authorised medical practitioner or para-medics are exempt from GST.
Food supplied to the in-patients by a canteen run by the hospital, as
advised by the doctor/nutritionists, is a part of composite supply of
healthcare and not separately taxable. Thus, said services are exempt
from GST.
(b) Supply of service by a RWA (unincorporated body or a non-profit entity

registered under any law) to its own members by way of reimbursement
of charges or share of contribution up to an amount of ` 7500 per
month per member for providing services and goods for the common
use of its members in a housing society/a residential complex are
exempt from GST. Hence, in the given case, services provided by the
RWA are exempt from GST since the maintenance charges collected per
month per member do not exceed ` 7500.
4. Services provided to a recognized sports body by an individual, inter alia, as
a referee in a sporting event organized by a recognized sports body is exempt
from GST.
Since in the first case, the football match is organized by Sports Authority of
India, which is a recognized sports body, services provided by the individual
as a referee in such football match will be exempt.

However, when he acts as a referee in a charity football match organized by

a local sports club, he would not be entitled to afore-mentioned exemption
as a local sports club is not a recognized sports body and thus, GST will be
payable in this case.
5. Services by an artist by way of a performance in folk or classical art forms of

(i) music, or (ii) dance, or (iii) theatre, are exempt from GST, if the
consideration charged for such performance is not more than ` 1,50,000.
However, such exemption is not available in respect of service provided by
such artist as a brand ambassador.
Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap
manufactured by RXL Pvt. Ltd., the services rendered by her by way of a
classical dance performance in the concert organized by RXL Pvt. Ltd. to
promote its brand will not be eligible for the above-mentioned exemption
and thus, be liable to GST. The fact that the proceeds of the concert will be
donated to a charitable organization by Ms. Ahana will not have any bearing
on the eligibility or otherwise to the above-mentioned exemption.
6. (i) Yes. Services provided TO an educational institution by way of
transportation of students are exempted from GST.
(ii) No. Services provided by way of vehicle parking to general public are
not exempted from GST. Therefore, GST is payable on the same.
7. Services by way of giving on hire, inter alia, to a State Transport Undertaking,
a motor vehicle meant to carry more than 12 passengers is exempt from GST.
Since the motor vehicles given on hire by Fast Cab Renting to the State
Transport Undertaking are meant to carry 8-10 passengers, the same would
not be eligible for exemption and would thus, be liable to GST.
8. Services provided by an educational institution by way of conduct of entrance
examination against consideration in the form of entrance fee are exempt
from GST.
Since in the given case, services provided by Indiana Engineering College -an
educational institution - are by way of conduct of entrance examination
against entrance fee, the same is exempt and thus, GST is not payable in this
case.

a 5.131
9. Services provided by a goods transport agency, by way of transport in a

goods carriage of relief materials meant for victims of, inter alia, natural or
man-made disasters, calamities, are exempt from GST. Therefore, services
provided by Babloo Transporters will be exempt from GST.
10. No, the claim made by Keyan Enterprises that it is not required to pay GST is
not correct. Services provided by an organiser to any person in respect of a
business exhibition are exempt from GST only when such business exhibition
is held outside India. However, since in the given case, the exhibition is being
organized in India, the services of organization of event by Keyan Enterprises
will not be exempt from GST.
11. GST is not payable in case of hiring of trucks to Titu Transporters since
services by way of giving on hire, inter alia, to a goods transport agency, a
means of transportation of goods are exempt.

CROSSWORD PUZZLE
4 5
7 8
10 11 12
13
14

a 5.133
ACROSS
2. Services by business facilitator to an insurance company in a __________area is

exempt from GST.
4. Services by way of pure labour construction contracts of original works
pertaining to a __________ residential unit otherwise than as a part of a
residential complex are exempt from GST.
6. Explanation inserted within ____ year, for the purpose of clarifying the scope
or applicability of any notification/order, to have retrospective effect.
7. Any ___________ collected by bank over and above interest on loan, advance
or deposit are not exempt from GST.
10. Services of a _________agency by way of transportation of goods by is liable
to GST.
12. Services by the Department of ______ by way of post card, inland letter, book
post and ordinary post are exempt from GST.
13. Rent of the rooms with room charges upto _______thousand rupees per day
to a person receiving health care services in hospitals is exempt from GST.
14. Services by way of giving on hire to a local authority, an _______ meant to carry
more than 12 passengers is exempt from GST. (acronym)
DOWNWARDS
1. Transport of passengers by railways in _______ class is liable to GST.

2. Services by a person by way of conduct of any __________ ceremony are
exempt from GST.
3. Services by way of transfer of a _______ concern is exempt from GST.

5. Transport of passengers by air, in _________ class, from Assam to Manipur is
liable to GST.
7. Services by an entity registered under section 12AA or 12AB of the Income-

tax Act, 1961 by way of ________ activities are exempt from GST.

8. Services by way of admission to a __________ is exempt from GST.
9. ________ is a recognized systems of medicines in India.

11. Supply of _______ educational journals or periodicals to a to higher secondary
school is not exempt from GST.
Scan the code



a
CHAPTER a
6
TIME OF SUPPLY
LEARNING OUTCOMES
CHAPTER 6
After studying this Chapter, you will be able to identify the
point in time when the liability to pay GST arises -
❑ on supply of goods or services where GST is payable under
forward charge
❑ on supply of goods or services where GST is payable under
reverse charge
❑ on supply of vouchers exchangeable for goods and services
❑ on supply of goods and services in residual cases
❑ in case of enhancement of value of supply on account of
interest, late fee/penalty paid for delay in payment of
consideration
❑ apply the concepts relating to time of supply of goods and/or
services in problem solving

CHAPTER OVERVIEW
Time of supply under forward
charge
Time of supply under reverse

charge
Time of supply of goods
Time of supply of vouchers
exchangeable for goods
Time of Supply
Time of supply in residual cases
Time of supply under forward

charge
Time of supply under reverse

charge
Time of supply of services
Time of supply of vouchers
exchangeable for services
Time of supply in residual cases
1. INTRODUCTION
GST is payable on supply of goods or services. A
supply consists of elements that can be separated in
time, like purchase order / agreement, dispatch (of
goods), delivery (of goods) or provision or
performance of service, entry in the records,
payment, and entry of the payment in the records or
deposit in the bank.
So, the question that arises is - at what point of time
in the aforesaid transaction, the GST becomes payable? Does it become payable when
an agreement to supply goods or services is made, or when the goods are shipped or
the services are provided, or when the invoice is issued or when payment is made?

TIME OF SUPPLY a 6.3 a

6.3
What if the goods are shipped over a period of time? What if the service is provided
over a period of time? Provisions relating to ‘time of supply’ provide answers to all
such and other questions that arise with respect to the time when the liability to pay
CGST and SGST/UTGST (intra-State supply) or IGST (inter-State supply) arises. In other
words, time of supply indicates the point in time when the liability to pay tax arises. It
is important to note here that though the liability to pay tax arises at the time of supply,
the same can be paid to the Government by the due dates prescribed with reference
to the said ‘time of supply’. For instance, if time of supply of a given supply is 25 th
May, the tax leviable thereon would be payable latest by 20th June, which is the due
date prescribed in the CGST Act for suppliers filing GST return on monthly basis.1
The CGST Act provides separate provisions for time of supply for goods and services
vide sections 12 and 13 respectively. Section 14 provides for the method of
determining the time of supply in case there is a change in the rate of tax on supply of
goods or services.2 Sections 12 and 13 employ the provisions of section 31 relating to
issue of tax invoice as a reference point. Therefore, it will be useful to read this Chapter
in conjunction with the provisions relating to tax invoice discussed in detail in Chapter
10: Tax Invoice, Credit and Debit Notes in Module 2 of this Study Material.
Events like issue of invoices, receipt of payment, provision of service, receipt of services
as recorded in books of account need to be analysed to determine the time of supply
when the tax on supply is payable under forward charge. When the tax on supply is
payable under reverse charge, events like date of receipt of goods or services, date of
making payment, date of issue of invoice etc. need to be analysed to determine the
time of supply. The provisions relating to time of supply essentially fix the tax
collection event to the earliest possible time.
In the subsequent pages of this Chapter, sections 12 and 13 are extracted, followed by
their analysis, to understand how to determine the time of supply of goods and
services respectively. When studying the statutory provisions, the definitions
(extracted first) must also be referred to simultaneously, so as to understand the
precise meaning of the terms used.
1
Provisions relating to due date for payment of tax have been discussed in Chapter 13: Payment
of Tax in Module 2 of this Study Material.
2
Provisions of section 14 relating to determination of time of supply in case of change in rate of
tax in respect of supply of goods or services will be discussed at the Final level.

Provisions of time of supply under CGST Act have also been made
❑ Associated enterprises shall have the same meaning as assigned to it in
section 92A of the Income-tax Act, 1961 [Section 2(12)].
Broadly, an associated enterprise in relation to another enterprise, means
an enterprise which participates, directly or indirectly, or through one or
more intermediaries, in the management or control or capital of the other
enterprise.
❑ Document includes written or printed record of any sort and electronic
record as defined in clause (t) of section 2 of the Information Technology
Act, 2000 [Section 2(41)].
❑ Invoice or tax invoice means the tax invoice referred to in section 31
[Section 2(66)].
❑ Goods means every kind of movable property other than money and
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply [Section 2(52)].
GOODS
MEANS
All kind of movable property EXCLUDES Money & Securities
INCLUDES
Actionable claim, Growing Crops, Grass & Things

forming part of land agreed to be severed before
supply or under a contract of supply


6.5
❑ Prescribed means prescribed by rules made under this Act on the
recommendations of the Council [Section 2(87)].
❑ Reverse charge means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services
or both under sub-section (3) or sub-section (4) of section 9, or under sub-
section (3) or sub- section (4) of section 5 of the Integrated Goods and
Services Tax Act [Section 2(98)].
❑ Services means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash or
by any other mode, from one form, currency or denomination, to another
form, currency or denomination for which a separate consideration is
charged.
Explanation.––For the removal of doubts, it is hereby clarified that the
expression “services” includes facilitating or arranging transactions in
securities [Section 2(102)].
SERVICES
MEANS
Activities
relating to use
of money or its
Anything INCLUDING conversion for a
consideration
Activities
EXCLUDING facilitating or
arranging
transactions in
securities
Goods Money Securities


(b) where no consideration is payable for the supply of goods, the person
and any reference to a person to whom a supply is made shall be construed

as a reference to the recipient of the supply and shall include an agent
acting as such on behalf of the recipient in relation to the goods or services
or both supplied [Section 2(93)].
Recipient
If consideration is
Person liable to pay the
payable for supply of
consideration
goods and/or services
Person to whom goods are

If no consideration is delivered/made available or to
payable for supply of whom possession/use of the
goods goods is given/ made available
If no consideration is Person to whom the service is

payable for the supply of rendered
services
Recipient includes an agent acting on behalf of the recipient in relation to

the goods and/or services supplied
supplying the said goods or services or both and shall include an agent
acting as such on behalf of such supplier in relation to the goods or services


6.7
and includes an
agent acting on
means the behalf of such
person supplying supplier in
Supplier in the said goods relation to the
relation to any and/or services goods and/or
services
❑ Voucher means an instrument where there is an obligation to accept it as

consideration or part consideration for a supply of goods or services or both
and where the goods or services or both to be supplied or the identities of
their potential suppliers are either indicated on the instrument itself or in
related documentation, including the terms and conditions of use of such
instrument [Section 2(118)].
3. TIME OF SUPPLY OF GOODS [SECTION 12]
Section 12 Time of supply of goods

(1) The liability to pay tax on goods shall arise at the time of supply as
determined in terms of the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following
dates, namely:-
(a) the date of issue of invoice by the supplier or the last date
on which he is required, under section 31, to issue the
invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with

respect to the supply 3:

Provided that where the supplier of taxable goods receives an
amount up to one thousand rupees in excess of the amount
indicated in the tax invoice, the time of supply to the extent of such
excess shall, at the option of the said supplier, be the date of i ssue
of invoice in respect of such excess amount.
Explanation 1. For the purposes of clauses (a) and (b), the “supply”
shall be deemed to have been made to the extent it is covered by
the invoice or, as the case may be, the payment.
Explanation 2. For the purpose of clause (b), “the date on which the
supplier receives the payment” shall be the date on which the
payment is entered in his books of account or the date on which
the payment is credited to his bank account, whichever is earlier.
(3) In case of supplies in respect of which tax is paid or liable to be paid
on reverse charge basis, the time of supply shall be the earliest of the
following dates, namely:
(a) the date of the receipt of the goods, or
(b) the date of payment as entered in the books of account
of the recipient or the date on which the payment is
debited in his bank account, whichever is earlier, or
(c) the date immediately following thirty days from the date
of issue of invoice or any other document, by whatever
name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of
supply under clause (a), (b), or (c), the time of supply shall be the
date of entry in the books of account of the recipient of supply.
(4) In case of supply of vouchers by a supplier, the time of supply shall be
(a) the date of issue of voucher, if the supply is identifiable at
that point; or
3
Practically, in case of goods, the date of receipt of payment by the supplier is no longer
a criterion for determination of time of supply for payment of tax. Refer the ‘Analysis’ of
section 12 given in the ensuing pages for detailed discussion in this regard.


6.9
(b) the date of redemption of voucher, in all other cases.

(5) Where it is not possible to determine the time of supply under the
provisions of sub-section (2) or sub-section (3) or sub-section (4),
the time of supply shall––
(a) in a case where a periodical return has to be filed, be the
date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the
value of supply by way of interest, late fee or penalty for delayed
payment of any consideration shall be the date on which the
supplier receives such addition in value.
Section 31 Tax invoice (to the extent relevant to the time of supply of goods)
(Relevant
Extract)
(1) A registered person supplying taxable goods shall, before or at the
time of,—
(a) removal of goods for supply to the recipient, where the
supply involves movement of goods; or
(b) delivery of goods or making available thereof to the
recipient, in any other case,
issue a tax invoice showing the description, quantity and value of
goods, the tax charged thereon and such other particulars as may
be prescribed:
Provided that the Government may, on the recommendations of
the Council, by notification, specify the categories of goods or
supplies in respect of which a tax invoice shall be issued, within
such time and in such manner as may be prescribed.
(4) In case of continuous supply of goods, where successive statements
of accounts or successive payments are involved, the invoice shall
be issued before or at the time each such statement is issued or, as
the case may be, each such payment is received.
(7) Notwithstanding anything contained in sub-section (1), where the

goods being sent or taken on approval for sale or return are

removed before the supply takes place, the invoice shall be issued
before or at the time of supply or six months from the date of
removal, whichever is earlier.
✪ Section 12 must be read with section 31, which prescribes in detail the
date on which tax invoice for a supply of goods must be issued in various
situations.
ANALYSIS
Section 12 provides for the determination of time of supply in the following situations:
➔ Supply of goods under forward charge;
➔ Supply of goods under reverse charge;
➔ Supply of vouchers that can be used to pay for goods;
➔ Residual cases;
➔ Addition to value of supply of goods by way of interest or late fee or penalty

for delayed payment.
We consider below how the time of supply is determined in each of these situations.
(i) Time of supply of goods under forward charge [Section 12(2) read
with section 31]
As per section 12(2), the time of supply of goods that are taxable under
forward charge, is the earlier of the following two dates:
➢ Date of issue of invoice by the supplier or the last date on which the
invoice ought to have been issued in terms of section 31, to the extent
the invoice covers the supply of goods; or
➢ Date of receipt of payment by the supplier, to the extent the payment

covers the supply of goods.


6.11
11
Tax not payable at the time of receipt of advance for supply of goods –
Special procedure for payment of tax in case of supply of goods
Notification No. 66/2017 CT dated 15.11.2017 4 specifies that a registered
person (excluding composition supplier) should pay GST on the outward
supply of goods at the time of supply as specified in section 12(2)(a), i.e. date
of issue of invoice or the last date on which invoice ought to have been issued
in terms of section 31.
In simple words, all taxpayers under forward charge (except composition
suppliers) are not required to pay GST at the time of receipt of advance in
relation to supply of goods. The entire GST shall become payable only when
the invoice for the supply of such goods is issued or ought to have been
issued. Thus, time of supply of goods for the purpose of payment of
tax is the date of issue of invoice or the last date when the invoice
ought to have been issued under section 31.
(1) A Ltd. enters into an agreement with B Ltd. to supply 100 kg of
raw material. However, A Ltd. supplies only 80 kg of raw material
and issues the invoice for the same. Here, the supply would be
deemed to have been made in respect of 80 kg of raw material, i.e. to the
extent covered by the invoice. Therefore, the provisions relating to time of
supply will only be applicable to supply of 80 kg of raw material and not for
entire 100 kg of raw material.
✪ The relief of not paying GST at the time of receipt of

advance is available only in case of supply of goods and not
for supply of services.
4
Notification No. 66/2017 CT dated 15.11.2017 has been issued by the Central Government, on
the recommendation of the GST Council in exercise of the powers conferred by section 148.
Section 148 provides that the Government may, on the recommendations of the Council, and
subject to such conditions and safeguards as may be prescribed, notify certain classes of registered
persons, and the special procedures to be followed by such persons including those with regard
to registration, furnishing of return, payment of tax and administration of such persons.
Provisions of section 148 will be discussed at the Final level.

Meaning of “Date of receipt of payment”

“Date of receipt of payment” in the above situation refers to the date on
which the payment is recorded in the books of account of the entity
(supplier of goods) that receives the payment, or the date on which the
payment is credited to the entity’s bank account, whichever is earlier.
Significance of “to the extent the invoice or payment covers the
supply of goods”
Suppose a part of the consideration is paid in advance or invoice is issued
for part payment, in such cases the time of supply will not cover the full
supply. The supply shall be deemed to have been made only to the extent
it is covered by the invoice or the part advance payment.
However, it may be noted that in case of goods (except for composition
supplier), tax is payable only on the basis of issuance of invoice/last date for
the purpose of issuance of invoice even if any advance or part payment has
been received before the issuance of invoice/last date for the purpose of
issuance of invoice.
Time limit for issuance of invoice for supply of goods under
section 31
Section 12(2) refers to the last date on which a supplier is required to issue
the invoice under section 31. Following are the relevant provisions of
section 31 in this regard.
➢ As per section 31(1), the invoice needs to be issued either before or at
the time of removal of goods (where supply involves movement of
goods) or delivery of goods/ making goods available to recipient (in
any other case).
➢ In case of continuous supply of goods, the invoice should be issued
before or at the time of issuance of periodical statement/receipt of
periodical payment [Section 31(4)].
Continuous supply of goods is a supply of goods provided or agreed to
be provided continuously or on recurring basis, under a contract, and
for which the supplier issues an invoices to the recipient on a regular or
periodic basis and includes supply of such goods as the Government may,
subject to such conditions, as it may, by notification, specify [Section
2(32)]. The said term has been discussed in Chapter 10: Tax Invoice;
Credit and Debit Notes in Module 2 of this Study Material.


6.13
13
➢ In case of goods sent or taken on approval for sale or return, invoice
should be issued before or at the time of supply or 6 months from the
date of removal, whichever is earlier [Section 31(7)].
(2) Sphinx Pvt. Ltd. enters into a contract for supply of 100 office
chairs @ ` 15,000 with Joy Sales on 21 st August. Chairs are removed
from the warehouse of Sphinx Pvt. Ltd. on 5 th September along with
the invoice issued on same date. Joy Sales has paid 30% of the total contract
value on 21st August; balance 70% is paid after delivery of chairs on 10 th
September. Since the invoice is issued on the date of removal of goods, it is
issued within the prescribed time limit and hence, time of supply for payment
of tax on entire contract value of ` 15,00,000 is the date of issue of invoice,
i.e. 5th September. No GST will be payable at the time of receipt of advance
of ` 4,50,000 received on 21 st August.
The provisions relating to time of supply of goods as contained in section
12 in case of forward charge read with Notification No. 66/2017 CT dated
15.11.2017, have been depicted by way of a diagram given below:
TIME OF SUPPLY OF GOODS UNDER FORWARD CHARGE AS

PER SECTION 12
Date of issue of invoice /

Last date of issue of invoice
under section 31
Whichever is earlier
Date on which the payment

is recorded in the books of
account of the supplier –
presently irrelevant for the
purpose of payment of tax
Date on which the payment

BANK is credited to the supplier’s
bank account - presently
irrelevant for purpose of
payment of tax

SPECIAL PROCEDURE5 FOR PAYMENT OF TAX

IN CASE OF GOODS
GST to be paid at the
As specified in section 12(2)(a)
time of supply
Date of issue of invoice

/ Last date of issue of
invoice under section
31
Effectively, in case of goods, no GST is payable at the time of

receipt of advance for supply of goods.
ILLUSTRATION 1
A machine has to be supplied at site. It is done by sourcing various components

from vendors and assembling the machine at site. The details of the various
events are:
17th September Purchase order with advance of ` 50,000 is received for

machine worth ` 12 lakh and entry duly made in the seller’s
books of account
20th October The machine is assembled, tested at site, and accepted by

buyer
23rd October Invoice raised
4th November Balance payment of ` 11,50,000 received
Determine the time of supply(ies) in the above scenario for the purpose of
payment of tax.
5
under section148 of the CGST Act


6.15
15
ANSWER
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.
Therefore, the time of supply for the purpose of payment of tax for the
entire amount of ` 12,00,000 is 20th October which is the date on which the
goods were made available to the recipient as per section 31(1)(b), and the
invoice should have been issued by this date [Section 12(2)(a)].
ILLUSTRATION 2
Gas is supplied by a pipeline to the recipient. The supply is to be made for a

period of one year. Monthly payments are to be made by the recipient as per
the contract. The details of the payment made are:
July 5, August 5, September 5 Payments of ` 2 lakh made in each month
Determine the time of supply for the purpose of payment of tax.
ANSWER
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 July 5, August 5 and
September 5, when monthly payments of ` 2 lakh are received.
Thus, assuming that the invoice is issued on July 5, August 5 and September
5, the time of supply for the purpose of payment of tax will be July 5, August
5 and September 5 respectively for goods valued at ` 2 lakh each.

Quiz
Quiz
time!
Time!
Bajrang Pvt. Ltd. agreed to supply goods to Bhagirathi
Pvt. Ltd. for ` 1,50,000 on 23rd June. Next day, it
1 removed the goods from its factory and issued the
invoice on 25th June. Payment for the goods is made by
Bhagirathi Pvt. Ltd. on 15th July.
The time of supply of goods is _____.
(a) 23rd June (b) 24th June (c) 25th June (d) 15th July
Quiz
Quiz Hanuman Pvt. Ltd. agreed to supply toys to Ganga Pvt.
time!
Time! Ltd. for ` 1,50,000 on 23rd June and received an
advance of ` 1,00,000 on the same day. Next day, it
removed the toys from its factory and issued the
2 invoice on 25th June. Balance payment of ` 50,000
was made by Ganga Pvt. Ltd. on 15th July.
The time of supply of the advance of ` 1,00,000 and balance payment of
` 50,000 shall be_________ and ____________.
(a) 23rd June; 15th (b) 24th June ; (c) 25th June; 25th (d) 15th July; (d)
July 24th June June 15th July
Excess payment upto ` 1000: Option of taking invoice date as time

of supply
In terms of the proviso to sub-section (2) of section 12, for a payment of up

to ` 1,000 received in excess of the value of the goods invoiced, the supplier
can choose to take the date of invoice issued with respect to such excess
amount as the time of supply of goods for such excess value.
Since, GST on supply of goods is payable only on the basis of issuance of


6.17
17
invoice6, this provision is practically irrelevant for supply of goods.
If neither the date of invoice nor the date of payment is available, the
time of supply is determined in terms of the residual provisions under sub-
section (5) of section 12 [discussed under point (iv)].
(ii) Time of supply of goods under reverse charge [Section 12(3)]
The time of supply of goods on which GST is payable on reverse charge

basis under sub-sections (3) and (4) of section 9 of CGST Act is determined
in terms of section 12(3)(a), (b) and (c), as follows:
The time of supply for such goods will be the earliest of the following dates:
➢ Date on which the goods are received, or
➢ Date on which payment is recorded in the books of account of the

recipient, or the date on which the same is debited in his bank account,
whichever is earlier, or
➢ Date immediately following 30 days from the date of issue of invoice

(or document by some other name 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 goods in the
books of account of the recipient of supply.
✪ The relief of not paying GST at the time of receipt of

advance in case of supply of goods, is available only when
the tax 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).
The provisions relating to time of supply of goods in case of reverse charge

are depicted by way of a diagram given at next page.
6
as per Notification No. 66/2017 CT dated 15.11.2017

Date on which goods

are received
Date on which the

payment is recorded in
the books of account of
the recipient of goods
Date on which the

BANK payment is debited in
the bank account of the
recipient of goods
31st day from the issue

st DAY of invoice by the
supplier
If it is not possible to determine the time of supply through above

parameters,
THEN
TIME OF SUPPLY WILL BE
Date on which goods are recorded in

the books of account of the recipient
of supply


6.19
19
ILLUSTRATION 3
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Bridge &
Co. (30 days from the date of issuance of invoice elapse on June 3)
May 12 Bridge & Co receives the goods
May 30 Bridge & Co makes the payment
ANSWER
Here, May 12 will be the time of supply, being the earliest of the three stipulated
dates namely, receipt of goods, date of payment and date immediately following
30 days of issuance of invoice [Section 12(3)]. (Here, date of invoice is relevant
only for calculating thirty days from that date.)
ILLUSTRATION 4
May 4 Supplier invoices goods taxable on reverse charge basis to Pillar &
Co. (30 days from the date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
July 3 Payment made for the goods
ANSWER
Here, June 4, 31 st day from the date of supplier’s invoice, will be the time of
supply, being the earliest of the three stipulated dates namely, receipt of
goods, date of payment and date immediately following 30 days of issuance
of invoice [Section 12(3)].

Quiz
Quiz
time!
Time! Determine the time of supply of goods with the
help of the information provided below:
May 11 Supplier – Dhriti Enterprises – issues invoice for the goods
3 taxable on reverse charge basis to Parminder
Constructions Ltd.
May 12 Parminder Constructions Ltd. receives the goods
May 30 Parminder Constructions Ltd. issues a cheque and records
payment in its books of accounts
May 31 Payment is debited from the bank account of Parminder
Constructions Ltd.
June 1 Payment is credited in bank account of Dhriti Enterprises
June 2 Payment is recorded in the books of Dhriti Enterprises
(a) May 12 (b) May 30 (c) June 11 (d) June 1
(iii) Time of supply of vouchers exchangeable for goods [Section 12(4)]

As commonly understood, vouchers are instruments that can be exchanged
as payment for goods or services of the designated value. As per the
definition, vouchers are instruments, that certain persons (potential
suppliers) are obliged to accept as consideration, part or full, against supply
of goods and/or services. The instrument or its related documentation sets
out the terms and conditions of use, the goods and/or services covered, and
the identity of the potential suppliers of such goods and/or services.
As per section 12(4), the time of supply of vouchers exchangeable for goods
is-
➢ Date of issue of the voucher, if the supply that it covers is identifiable
at that point, or
➢ Date of redemption of the voucher in other cases.


6.21
21
The provisions relating to time of supply of vouchers exchangeable for goods are
depicted by way of diagram given below.
(3) Acme sales Limited sells food coupons to a company. The company
gives these coupons to its employees as part of the agreed perquisites.
The coupons can be redeemed for purchase of any item of food
/provisions in the outlets that are part of the program.
As the supply against which the coupon will be redeemed is not known on the date
of the sale of the coupon, the time of supply of the coupon will be the date on which
the employee redeems it against food / provision items of his choice.
(4) With each purchase of a large pizza during the Christmas week from
Perfect Pizza, one can buy a voucher for ` 20 which will be redeemable
till 5th Jan for a small pizza. As the supply against which the voucher will
be redeemed is known on the date of issue of the vouchers, the time of supply is
the date of issue of the voucher.
TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS
Supply is
not Time of
Any food supply is
identifia
item can be
ble at the DATE OF
purchased
time of REDEMPT-
from the
issue of ION OF
food pass
the VOUCHER
voucher
Only a shirt Supply is Time of

can be identifia supply is
purchased ble at the
from the time of DATE OF
shirt issue of ISSUE OF
coupon voucher VOUCHER
(iv) Time of supply of goods in residual cases [Section 12(5)]

If the situation is not covered by any of the provisions discussed above, the time
of supply is fixed under sub-section (5) of section 12, in the following manner:

➢ Due date for filing of the periodical return, or
➢ In any other case, date on which GST is paid.

The provisions relating to time of supply of goods in residual cases are depicted
by way of diagram given at next page.
TIME OF SUPPLY OF GOODS IN RESIDUAL CASES

Where a periodical
return is to be filed
DATE ON WHICH RETURN IS

REQUIRED TO BE FILED
DATE ON WHICH GST IS PAID
(v) Time of supply in case of enhancement in value on account of

interest/late fee etc. for delayed payment of consideration
[Section 12(6)]
Commercially, most of the contracts of supplies stipulate payment of interest/late
fee/penalty etc. in case of payment of consideration beyond the agreed time
period. Such interest/late fee/penalty etc. is includible in value of taxable supply
[This concept has been discussed in detail in Chapter 7 - Value of Supply in this
Module of the Study Material]. So, the point to consider here is that when the
liability to pay GST would arise in such cases of addition in value.
Section 12(6) prescribes that time of supply in case of addition in value on
account of interest/ late fee/penalty for delayed payment of consideration
for goods is the date on which the supplier receives such addition in value.
(5) Radha Traders sold goods to Shyam Sales on 6 th June with a
condition that interest @ 2% per month will be charged if Shyam
Sales failed to make payment within 15 days of the delivery of the
goods. Goods were delivered alongwith the invoice, on 6 th June. Shyam Sales
paid the consideration for the goods on 6th July along with applicable interest.


6.23
23
Time of supply for the goods sold is the date of issue of invoice i.e., 6 th June
and the time of supply for addition in value by way of interest is the date
when such addition in value is received by Radha Traders i.e., 6 th July.
The provisions relating to time of supply of goods as contained in section 12

are summarised in the diagram given below:
Time of supply of Time of supply of

goods under forward goods under reverse Time of supply of vouchers
charge charge exchangeable for goods
Date of issue/ due date of Date of issue of voucher, if

issue of tax invoice under Date of receipt of goods the supply is identifiable at
section 31 that point
Date of recording the Date of recording the

payment in the books of Date of redemption of
payment in the books of voucher in other cases
accounts of the supplier accounts of the recipient of
goods
Date on which payment is Date on which payment is

credited in the bank debited from the bank
account of the supplier account of the recipient of
goods
whichever is earlier 31st day from the issue of

invoice by supplier
whichever is earlier
No GST payable at the time

of receipt of advance for
supply of goods: GST to be
paid on date of issue/due
date of issue of tax invoice If the above events are
under section 31 UNASCERTAINABLE
Time of supply = Date of entry of
goods in books of account of
recipient of supply

Where a periodical return is to be

Residual case (If all of filed, due date of such return
the above do not work Time of OR
for a situation) supply In any other case, the date on
which tax is paid
Addition in value by way

of interest, late fee/penalty
for delayed payment of Time of Date on which the supplier
consideration for goods supply receives such addition in value
4. TIME OF SUPPLY OF SERVICES [SECTION 13]
Section 13 Time of supply of services
(1) The liability to pay tax on services shall arise at the time of supply,
as determined in terms of the provisions of this section.
(2) The time of supply of services shall be the earliest of the following
dates, namely:-
(a) the date of issue of invoice by the supplier, if the invoice is

issued within the period prescribed under section 31 or the
date of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued

within the period prescribed under section 31 or the date of
receipt of payment, whichever is earlier; or


6.25
25
(c) the date on which the recipient shows the receipt of services
in his books of account, in a case where the provisions of
clause (a) or clause (b) do not apply:
Provided that where the supplier of taxable service receives an

amount up to one thousand rupees in excess of the amount indicated
in the tax invoice, the time of supply to the extent of such excess
amount shall, at the option of the said supplier, be the date of issue
of invoice relating to such excess amount.
Explanation - For the purposes of clauses (a) and (b) -
(i) the supply shall be deemed to have been made to the extent
it is covered by the invoice or, as the case may be, the
payment.
(ii) “the date of receipt of payment” shall be 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.
(3) In case of supplies in respect of which tax is paid or liable to be paid

on reverse charge basis, the time of supply shall be the earlier of the
following dates, namely-
(a) the date of payment as entered in the books of account of

the recipient or the date on which the payment is debited
in his bank account, whichever is earlier; or
(b) the date immediately following sixty days from the date of
issue of invoice or any other document, by whatever name
called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply

under clause (a) or clause (b), the time of supply shall be the date of
entry in the books of account of the recipient of supply:
Provided further that in case of supply by associated enterprises,

where the supplier of service is located outside India, the time of
supply shall be the date of entry in the books of account of the

recipient of supply or the date of payment, whichever is earlier.
(4) In case of supply of vouchers by a supplier, the time of supply shall

be-
(a) the date of issue of voucher, if the supply is identifiable at

that point; or
(b) the date of redemption of voucher, in all other cases;
(5) Where it is not possible to determine the time of supply of services

under the provisions of sub-section (2) or sub-section (3) or sub-
section (4), the time of supply shall-
(a) in a case where a periodical return has to be filed, be the

date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value
of supply by way of interest, late fee or penalty for delayed payment
of any consideration shall be the date on which the supplier receives
such addition in value.
Section 31 Tax invoice (to the extent relevant to time of supply of services)
(2) A registered person supplying taxable services shall, before or after

the provision of service but within a prescribed period, issue a tax
invoice, showing the description, value, tax charged thereon and
such other particulars as may be prescribed:
Provided that the Government may, on the recommendations of the

Council, by notification,—
(a) specify the categories of services or supplies in respect of

which a tax invoice shall be issued, within such time and in
such manner as may be prescribed;
(b) subject to the condition mentioned therein, specify the

categories of services in respect of which—
(i) any other document issued in relation to the supply shall be

deemed to be a tax invoice; or


6.27
27
(ii) tax invoice may not be issued.
(5) Subject to the provisions of clause (d) of sub-section (3), in case of

continuous supply of services,––
(a) where the due date of payment is ascertainable from the

contract, the invoice shall be issued on or before the due
date of payment;
(b) 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;
(c) where the payment is linked to the completion of an event,

the invoice shall be issued on or before the date of
completion of that event.
(6) In a case where the supply of services ceases under a contract before
the completion of the supply, the invoice shall be issued at the time
when the supply ceases and such invoice shall be issued to the extent
of the supply made before such cessation.
Chapter VI: Tax Invoice, Credit and Debit Notes of CGST Rules
Rule 47 Time limit for issuing tax invoice
The invoice referred to in rule 46, in case of taxable supply of services,

shall be issued within a period of thirty days from the date of supply
of service:
Provided that where the supplier of services is an insurer or a banking

company or a financial institution, including a non-banking financial
company, the period within which the invoice or any document in
lieu thereof is to be issued shall be forty five days from the date of
supply of service:
Provided further that an insurer or a banking company or a financial

institution, including a non-banking financial company, or a telecom
operator, or any other class of supplier of services as may be notified
by the Government on the recommendations of the Council, making
taxable supplies of services between distinct persons as specified in
section 25, may issue the invoice before or at the time such supplier

records the same in his books of account or before the expiry of the
quarter during which the supply was made.
Section 13 must be read with section 31 and rule 47 of CGST Rules,

which prescribe in detail the date on which tax invoice for a supply
of service must be issued in various situations.
ANALYSIS
Section 13 provides for the determination of the time of supply in the following
situations:
➔ Supply of service taxable under forward charge,
➔ Supply of service taxable under reverse charge,
➔ Supply of vouchers that can be used to pay for services,
➔ Residual cases,
➔ Addition to value of supply of services by way of interest or late fee or penalty
for delayed payment.
Below, we shall consider these in detail:
(i) Time of supply of service under forward charge [Section 13(2) read
with section 31 and rule 47 of CGST Rules]
For supply of service on which the supplier is liable to pay tax, the time of supply
will be the earlier of the dates arrived at by methods (A) and (B), as follows:
(A) Date of issue 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,
If the above two methods [(A) and (B)] are not applicable, the time of supply will
be the date on which the recipient of service shows receipt of the service in his
books of account.


6.29
29
Meaning of “date of receipt of payment”
“Date of receipt of payment” in the above situation refers to the date on
which the payment is recorded in the books of account of the supplier that
receives the payment, or the date on which the payment is credited to the
supplier’s bank account, whichever is earlier.
Significance of “to the extent the invoice or payment covers the
supply of services”
Suppose a part of the consideration is paid in advance or invoice is issued
for part payment, the time of supply will not cover the full supply. The
supply shall be deemed to have been made to the extent it is covered by
the invoice or the part payment and time of supply shall be determined
accordingly.
The provisions relating to time of supply of services in case of forward
charge can be depicted by way of a diagram given earlier in this chapter.
Time limit for issuance of invoice for supply of services under
section 31
The criteria to determine the time of supply of services depend upon whether
the invoice is issued within the time prescribed under section 31. Following
are the relevant provisions in this regard:
➢ As per section 31(2) read with rule 47 of CGST Rules, the tax invoice
needs to be issued either before the provision of service or within 30
days (45 days in case of insurance companies/ banking companies/
financial institutions including NBFCs) from the date of supply of
service.
➢ In case of insurance companies/ banking companies/ financial

institutions including NBFCs/ telecom companies/ notified supplier of
services making taxable supplies between distinct persons as specified
in section 257, invoice may be issued before or at the time of recording
such supply in the books of account or before the expiry of the quarter
7
Concept of distinct persons has been discussed in Chapter 2: Supply under GST in this Module
of the Study Material

during which the supply was made [Second proviso to rule 47].
➢ In case of continuous supply of services, the invoice should be issued

either:
(i) on/ before the due date of payment - where the due date of
payment is ascertainable from the contract or
(ii) before/ at the time when the supplier of service receives the
payment - where the due date of payment is not known
(iii) on/ before the date of completion of the milestone event - where
the payment is linked to completion of an event [Section 31(5)].
Continuous supply of services are provided, or agreed to be provided,

continuously or on recurrent basis, under a contract, for a period
exceeding 3 months with periodic payment obligations and includes
supply of such services as the Government may notify [Section 2(33)].
The said term has been discussed in Chapter 10: Tax Invoice; Credit and
Debit Notes in Module 2 of this Study Material.
➢ In case of cessation of supply of services before completion of supply,
the invoice should be issued at the time when the supply ceases to the
extent of the supply made before such cessation. [Section 31(6)].
(6) Mohit Khanna & Sons is a firm of management consultants. The
firm enters into a contract with Spark Pvt. Ltd. on 1 st September for
providing consultancy services. Provision of service gets completed
on 15 September. Invoice for the service is issued on 20th September and
th
payment is received on 10 th October. Since invoice is issued within 30 days

from the date of supply of service, time of supply is the date of issue of
invoice, i.e. 20 th September being earlier than the date of receipt of payment.
(7) If in the above example, invoice is issued on 25th October, the
time of supply will be the date of provision of service, i.e. 15 th
September being earlier than the date of receipt of payment. This
would be so as the invoice is not issued within 30 days from the date of supply
of service.


6.31
31
ILLUSTRATION 5
Determine the time of supply from the following particulars:
6th May Booking of convention hall, sum agreed ` 15000, advance of

` 3000 received
15th September Function held in convention hall
27th October Tax invoice issued for ` 15000, indicating balance of ` 12000
payable
3rd November Balance payment of ` 12000 received
ANSWER
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice is to be
issued within 30 days of supply of service. In the given case, the invoice is
not issued within the prescribed time limit. As per section 13(2)(b), in a case
where the invoice is not issued within the prescribed time, the time of supply
of service is the date of provision of service or receipt of payment, whichever
is earlier.
Therefore, the time of supply of service to the extent of ` 3,000 is 6 th May

as the date of payment of ` 3000 is earlier than the date of provision of
service. The time of supply of service to the extent of the balance ` 12,000
is 15th September which is the date of provision of service.
ILLUSTRATION 6
Investigation shows that ABC & Co carried out service of cleaning and repairs
of tanks in an apartment complex, for which the Apartment Owners’
Association showed a payment in cash on 4 th April to them against work of this
description. The dates of the work are not clear from the records of ABC & Co.
ABC & Co have not issued invoice or entered the payment in its books of
account.
ANSWER
The time of supply cannot be determined vide the provisions of clauses (a)

and (b) of section 13(2) as neither the invoice has been issued nor the date
of provision of service is available as also the date of receipt of payment in
the books of the supplier is also not available.
Therefore, the time of supply will be determined vide clause (c) of section
13(2) i.e., the date on which the recipient of service shows receipt of the
service in his books of account.
Thus, time of supply will be 4 th April, the date on which the Apartment
Owners’ Association records the receipt of service in its books of account.
Quiz
Quiz Determine time of supply of services and date of
time!
Time! receipt of payment with the help of the information
provided below:
4 May 4 Supplier – Dhriti Enterprises – provides services

taxable under forward charge to Parminder
Constructions Ltd.
May 12 Parminder Constructions Ltd. issues invoice for the
service
May 30 Parminder Constructions Ltd. issues a cheque and
records payment in its books of accounts
May 31 Payment is debited from bank account of Parminder
Constructions Ltd.
June 1 Payment is credited in the bank account of Dhriti
Enterprises
June 2 Payment is recorded in the books of Dhriti Enterprises
(a) May 12; (b) May 30; (d) May 31;

(c) May 4; June 2
June 1 May 30 June 2


6.33
33
TIME OF SUPPLY OF SERVICES UNDER FORWARD CHARGE
Is invoice YES
issued within Time of Date of issue of
the time Supply invoice
specified u/s
31?
Date on which the
NO payment is
recorded in the
Time of books of account
Supply of the supplier
BANK
Date on which the
payment is
credited to the
supplier’s bank
account
Date of Date on which the Date on

provision of payment is which the
service recorded in the payment is
books of account credited to
of the supplier the
supplier’s
bank
account
If time of supply
cannot be
Date of receipt of services in
determined by
the books of account of the
both the above
recipient
methods, then
Excess payment upto ` 1000: Option of taking invoice date as time of

supply
In terms of the proviso to sub-section (2) of section 13, for a payment of up

to ` 1,000 received in excess of the invoice value, the supplier can choose to
take the date of invoice issued with respect to such excess amount as the
time of supply of services in relation to this excess value.

This provision facilitates the supplier to defer payment of tax on small

amounts typically received by him in excess of the invoice amount.
(8) A telephone company receives ` 5000 against an invoice of

` 4800. The excess amount of ` 200 can be adjusted against next
invoice. The company has the option to take date of next invoice
as the time of supply of service in relation to the amount of ` 200 received in
excess against earlier invoice of ` 4800.
(ii) Time of supply of services under reverse charge [Section 13(3)]
The time of supply of service on which GST is payable on reverse charge basis
(except on services received from associated enterprises located outside
India) under sub-sections (3) and (4) of section 9 is determined in terms of
section 13(3)(a) and (b) as follows:
The time of supply for such service will be the earlier of the following:
➢ Date of payment, or
➢ Date immediately following 60 days from date of 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.
Meaning of “Date of payment”
“Date of payment” in the above situation refers to the date on which the
payment is recorded in the books of account of the recipient of service, or
the date on which the payment is debited from the recipient’s bank account,
whichever is earlier.
Import of services between associated enterprises
In the case of service received from an associated enterprise located outside

India, the time of supply will be the date of payment for the service, or the
date of entry of the service in the books of account of the recipient,
The provisions relating to time of supply of services in case of reverse charge

can be depicted by way of a diagram given on next page:


6.35
35
TIME OF SUPPLY OF SERVICES UNDER REVERSE CHARGE
Date on which the

payment is recorded in
the books of account of
the recipient of services
Date on which the

payment is debited
from the bank account
of the recipient of
services
st DAY 61st day from issue of

invoice by the supplier
If it is not possible to determine the time of supply through above

parameters, THEN TIME OF SUPPLY WILL BE
Date of entry of service in the books

of account of the recipient of supply
TIME OF SUPPLY IN CASE OF IMPORT OF SERVICES FROM ASSOCIATED

ENTERPRISES
Supply of services
from AE located
outside India
Date of payment for the
service
Date of
entry of
Associated Enterprises (AE) service in
books of
account of
recipient

ILLUSTRATION 7
Determine the time of supply from the given information. (Assume that service
being supplied is taxable under reverse charge)
May 4 The supplier of service issues invoice for service provided.

There is a dispute about amount payable, and payment is
delayed.
August 21 Payment made to the supplier of service
ANSWER
Here, July 4 will be the time of supply, being the earlier of the two stipulated
dates namely, date of payment and the date immediately following 60 days
from the date of issue of invoice.
ILLUSTRATION 8
May 4 A German company issues email informing its associated enterprise,

ABC Ltd. of the cost of technical services provided to it, which was
recorded in ABC Ltd.’s books on May 1
July 2 ABC Ltd transfers the amount to the account of the German company
ANSWER
Here, May 1 will be the time of supply, being the earlier of the two stipulated
dates namely, date of entry in the books of account of the recipient of
supply or the date of payment, in terms of second proviso to section 13(3).
(iii) Time of supply of vouchers exchangeable for services [Section
13(4)]
The term voucher has already been explained under the Heading “Time of
Supply of Goods”. The time of supply of vouchers that are exchangeable
for services is stipulated as:-
➢ the date of issue of the voucher - if the supply is identifiable at that point,
or
➢ the date of redemption of the voucher - in other cases.


6.37
37
(9) Best Hospitality Services enters into agreement with Drive
Marketing Ltd by which Drive Marketing Ltd. markets Best
Hospitality Services’ hotel rooms and sells coupons / vouchers
redeemable for a discount against stay in the hotel.
As the supply against which the voucher will be redeemed is identifiable, the
time of supply of the voucher will be its date of issue.
Quiz
Quiz Style Saloon Ltd. provides vouchers worth ` 1,000
time!
Time! valid for a period of 6 months to the customers who
availed the services exceeding ` 10,000 in any
month. The customers can redeem such vouchers
5
for the hair styling services taken from Style Saloon
Ltd. Mr. Dwarka availed services worth ` 12,000 on
3rd June from the saloon and is issued a voucher of
` 1,000 on 5 th June. He redeems the voucher on 4th
September for hair styling services from Style Saloon Ltd. The time of
supply of voucher issued to Mr. Dwarka is ______.
(a) 3rd June (b) 5th June (c) 4th September (d) 5th December
(iv) Residual case [Section 13(5)]

If the situation is not covered by any of the provisions discussed above, the
time of supply is fixed under sub-section (5) of section 13, in the following
manner:
➢ Date on which periodical return for the period is required to be filed, or

➢ In any other case, date on which GST is paid.
(v) Enhancement of value on account of interest/late fee etc. for delayed
payment of consideration [Section 13(6)]
The provisions for time of supply in case of addition in value by way of
interest, late fee/penalty for delayed payment of consideration are the same
for goods and services.
Section 13(6) prescribes that time of supply in case of addition in value by
way of interest/ late fee/penalty for delayed payment of consideration for a

service is the date on which the supplier receives such addition in value.
The provisions relating to time of supply of services as contained in

section 13 are summarised in the diagram given on the next page
Time of supply of services Time of supply of services

Time of supply of Time of supply of
under forward charge when under forward charge when
services under vouchers exchangeable for
the invoice is issued within the invoice is not issued
reverse charge services
the time specified u/s 31 within the time specified u/s
31
Date of recording the
payment in the books of Date of issue of voucher,
Date of issue of tax Date of provision of if the supply is
service accounts of the recipient of
invoice services identifiable at that point
Date of recording the Date on which payment is

Date of recording the
payment in the books of debited from the bank Date of redemption of
payment in the books of
accounts of the supplier account of the recipient of voucher in other cases
accounts of the supplier
services
Date on which payment is Date on which payment is 61st day from issue of
credited in the bank credited in the bank invoice by supplier
account of the supplier account of the supplier
whichever is earlier whichever is earlier whichever is earlier
If the above events are UNASCERTAINABLE If the above events are

Time of Supply = Date of receipt of services in the UNASCERTAINABLE
books of account of the recipient of supply Time of supply = Date of entry of
services in books of account of the
recipient of supply
Residual case (If all the

above do not work for a Where a periodical return is to be filed,
situation) due date of such return
Time of supply
OR
In any other case, the date on which the
tax is paid
Addition in value by way of

Date on which the supplier receives
interest, late fee/penalty for
such addition in value
Time of supply
delayed payment of
consideration for services


6.39
39
LET US RECAPITULATE
The provisions relating to time of supply of goods and services can be better
understood if the same are studied simultaneously appreciating the similarities and
differences between the two. Therefore, such provisions have been summarised by
way of a comparison table to help students remember and retain the provisions in a
better and effective manner:
TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER FORWARD CHARGE
Time of supply of goods [Section Time of supply of services [Section

12(2)] 13(2)]
Earliest of the following: (a) Invoice issued within the time

(a) Date of issue of invoice by the period prescribed under section
supplier or the last date on 31
which he is required under Earliest of the following:
section 31, to issue the invoice → Date of issue of invoice by
with respect to the supply the supplier
(b) Date on which the supplier → Date of receipt of payment
receives the payment (entering (entering the payment in
the payment in books of account books of account or
or crediting of payment in bank crediting of payment in
account, whichever is earlier) bank account, whichever is
with respect to the supply earlier)
No GST at the time of receipt of (b) Invoice not issued within the
advance for supply of goods: In case time period prescribed under
of supply of goods by a registered section 31
person under forward charge
Earliest of the following:
(excluding composition supplier), GST
→ Date of provision of service
is to be paid on the outward supply of
goods on the date of issue of invoice → Date of receipt of payment
or the last date on which invoice ought (entering the payment in
to have been issued in terms of books of account or
section 31 [Notification No. 66/2017 crediting of payment in
CT dated 15.11.2017]. bank account, whichever is
earlier)

(c) When the above events are

unascertainable
→ Date on which the recipient
shows the receipt of
services in his books of
account
TIME LIMIT FOR RAISING INVOICES
Supply of goods [Section 31(1)] Supply of services [Section 31(2)]
Before or at the time of,- Before or after the provision of service

but within 30 days [45 days in case of
(a) removal of goods for supply to
insurance companies/banking and
the recipient, where the supply
financial institutions including NBFCs]
involves movement of goods, or
from the date of supply of services
(b) delivery of goods or making
available thereof to the recipient,
in any other case.
TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER REVERSE CHARGE
Time of supply of goods [Section Time of supply of services [Section

12(3)] 13(3)]
Earliest of the following: Earliest of the following:

(a) Date of receipt of goods, or (a) Date of payment as entered in the
(b) Date of payment as entered in the books of account of the recipient or
books of account of the recipient or the date on which the payment is
the date on which the payment is debited from his bank account,
debited from his bank account, whichever is earlier, or
whichever is earlier, or (b) 61st day from the date of issue of
(c) 31st day from the date of issue of invoice by the supplier
invoice by the supplier


6.41
41
Where the above events are not ascertainable, the time of supply shall be the
date of entry in the books of account of the recipient of supply
- Import of service from associated

enterprise Date of entry in the books of
account of the recipient or the date of
payment, whichever is earlier
TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS AND SERVICES
Supply of vouchers exchangeable for goods and services [Sections 12(4) and
13(4)]
(a) Supply of goods or services is identifiable at the time of issue of voucher
→ Date of issue of the voucher
(b) Other cases
→ Date of redemption of the voucher
TIME OF SUPPLY OF GOODS AND SERVICES IN RESIDUAL CASES
Supply of goods and services in residual cases [Sections 12(5) and 13(5)] i.e
where it is not possible to determine the time of supply under the other
provisions
(a) Where a periodical return is required to be filed

→ Due date of filing such return
(b) Other cases
→ Date of payment of tax

TIME OF SUPPLY FOR ADDITION IN VALUE BY WAY OF INTEREST/ LATE

FEE/PENALTY FOR DELAYED PAYMENT OF CONSIDERATION
Addition in value by way of interest, late fee/penalty for delayed payment of

consideration
Time of Supply →Date on which the supplier receives such addition in value
The provisions relating to time of supply of vouchers that are

exchangeable for goods are same as that of the vouchers that are
exchangeable for services. Similarly, the provisions relating to time
of supply of goods falling in the residual category are same as that of the time of
supply of services falling in the residual category. Also, the provisions relating
to time of supply for addition in value by way of interest, late fee/penalty for
delayed payment of consideration are same for goods and services.
Furthermore, concepts like option of taking invoice date as time of supply in
case of receipt of excess payment upto ` 1000, meaning of “Date of receipt of
payment”, significance of words “to the extent the invoice or payment covers
the supply” are also same for goods and services.
Students may make a note of the above points as it will help them in
understanding and remembering the provisions in a better manner.
TEST YOUR KNOWLEDGE
1. Explain the significance of time of supply under GST law.

2. GST is payable on advance received for supply of goods and services taxable
under forward charge.
Do you agree with the statement? Support your answer with legal provisons.
3. Determine the time of supply in the following cases assuming that GST is
payable under reverse charge:


6.43
43
S. Date of Date of payment by the Date of issue of

No. receipt of recipient of goods* invoice by the
goods supplier of goods
(i) July 1 August 10 June 29
(ii) July 1 June 25 June 29
(iii) July 1 Part payment made on June June 29

30 and balance amount paid
on July 20
(iv) July 5 Payment is entered in the June 1

books of account on June 28
and debited in recipient’s
bank account on June 30
(v) July 1 Payment is entered in the June 29

books of account on June 30
and debited in recipient’s
bank account on June 26
(vi) August 1 August 10 June 29
4. Determine the time of supply in the following cases assuming that GST is
payable under reverse charge:
S. Date of payment by the recipient for Date of issue of invoice by

No. supply of services the supplier of services
(i) August 10 June 29
(ii) August 10 June 1
(iii) Part payment made on June 30 and June 29

balance amount paid on September 1
(iv) Payment is entered in the books of June 1

account on June 28 and debited in

recipient’s bank account on June 30
(v) Payment is entered in the books of June 29

account on June 30 and debited in
recipient’s bank account on June 26
5. Kabira Industries Ltd engaged the services of a transporter for road transport
of a consignment on 17 th June and made advance payment for the transport
on the same date, i.e. 17th June. However, the consignment could not be sent
immediately on account of a strike in the factory, and instead was sent on
20th July. Invoice was received from the transporter on 22 nd July.
What is the time of supply of the transporter’s service?
6. Raju Pvt Ltd. receives the order and advance payment on 5 th January for
carrying out an architectural design job. It delivers the designs on 23 rd April.
By oversight, no invoice is issued at that time, and it is issued much later, after
the expiry of prescribed period for issue of invoice.
When is the time of supply of service?
7. Investigation shows that 150 cartons of ceramic capacitors were dispatched
on 2 nd August but no invoice was raised and the transaction (dispatch of
cartons) were not entered in the accounts. There was no evidence of receipt
of payment.
What is the time of supply of 150 cartons for the purpose of payment of tax?
8. An order is placed on Ram & Co. on 18 th August for supply of a consignment
of customized shoes. Ram & Co. gets the consignment ready and informs the
customer and issues the invoice on 2 nd December. The customer collects the
consignment from the premises of Ram & Co. on 7 th December and
electronically transfers the payment on the same date, which is entered in the
accounts on the next day, 8 th December.
What is the time of supply of the shoes for the purpose of payment of tax?
9. Meal coupons are sold to a company on 9 th August for being distributed to
the employees of the said company. The coupons are valid for six months and
can be used against purchase of food items. The employees use them in


6.45
45
various stores for purchases of various edible items on different dates
throughout the six months.
What is the date of supply of the coupons?
10. A firm of advocates issues invoice for services to ABC Ltd. on 17th Feb. The payment
is contested by ABC Ltd. on the ground that on account of negligence of the firm,
the company’s case was dismissed by the Court for non-appearance, which
necessitated further appearance for which the firm is billing the company. The
dispute drags on and finally payment is made on 3rd November.
Identify the time of supply of the legal services.
11. Modern Security Co. provides service of testing of electronic devices. In one
case, it tested a batch of devices on 4 th and 5 th September but could not raise
invoice till 19 th November because of some dispute about the condition of the
devices on return. The payment was made in December.
What is the method to fix the time of supply of the service?
12. XYZ & Co., a firm of Chartered Accountants, issued invoice for services rendered
to Mr. A on 7 th September. Determine the time of supply in the following
independent cases:
(1) The provision of service was completed on 1 st August and payment was
received on 28 th September.
(2) The provision of service was completed on 14 th August and payment was
received on 28 th September.
(3) Mr. A made the payment on 3 rd August. However, provision of service
was remaining to be completed at that time.
(4) Mr. A made the payment on 15 th September. However, provision of
service was remaining to be completed at that time.
13. M/s Pranav Associates, a partnership firm, provided recovery agent services to
Newtron Credits Ltd., a non-banking financial company and a registered
supplier, on 15th January. Invoice for the same was issued on 7 th February and
the payment was made on 18 th April by Newtron Credits Ltd. Bank account of
the company was debited on 20 th April.
Determine the following:

(i) Person liable to pay GST
(ii) Time of supply of service

14. Mr. X supplied goods for ` 50,000 to its customer Miss Diyana on 1st January
on the condition that payment for the same will be made within a week.
However, Miss Diyana made payment for the said goods on 2 nd February and
thus, paid interest amounting to ` 2,000.
What is the time of supply with regard to addition in the value by way of
interest in lieu of delayed payment of consideration?
15. Mansh & Vansh Trading Company, a registered supplier, is liable to pay GST
under forward charge. It has furnished the following information:
(i) Goods were supplied on 3 rd October
(ii) Invoice was issued on 5 th October
(iii) Payment received on 9 th October
Determine the time of supply of goods for the purpose of payment of tax .
ANSWERS/HINTS
1. GST is payable on supply of goods or services. Time of supply indicates the

point in time when the liability to pay tax arises. However, it is important
to note that though the liability to pay tax arises at the time of supply, the
same has to be paid to the Government by the due date prescribed with
reference to the said ‘time of supply’. The CGST Act provides separate
provisions for time of supply for goods and services vide sections 12 and 13.
2. The statement is not correct. While GST is payable on advance received for
supply of services taxable under forward charge, the same is not payable in
case of advance received for supply of goods taxable under forward charge.
As per section 13, the time of supply of services taxable under forward
charge is –
➢ Date of issue of invoice or date of receipt of payment, whichever is


6.47
47
earlier, if the same is issued within 30 days from the date of supply of
service;
OR
➢ Date of provision of service or date of receipt of payment, whichever
is earlier, if the invoice is not issued within 30 days from the date of
supply of service.
Thus, in case of services, if the supplier receives any payment before the
provision of service or before the issuance of invoice for such service, the
time of supply gets fixed at that point in time and the liability to pay tax on
such payment arises. However, the tax can be paid by the due date
prescribed with reference to such time of supply.
As regards time of supply of goods taxable under forward charge is
concerned, Notification No. 66/2017 CT dated 15.11.2017 provides that a
registered person (excluding composition supplier) should 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. Therefore, in case of goods, tax
is not payable on receipt of advance payment.
3.
S. Date of Date of Date of Date Time of

No. receipt payment by issue of immediate supply of
of the recipient invoice ly goods
goods of goods by the following [Earlier of (1),
supplier 30 days (2) & (4)]
of from the
goods date of
invoice
(1) (2) (3) (4) (5)
(i) July 1 August 10 June 29 July 30 July 1
(ii) July 1 June 25 June 29 July 30 June 25
(iii) July 1 Part payment June 29 July 30 June 30 for part

made on June payment made

30 and and July 1 for
balance balance
amount paid amount
on July 20
(iv) July 5 Payment is June 1 July 2 June 28 (i.e.,

entered in the when payment
books of is entered in the
account on books of
June 28 and account of the
debited in recipient)
recipient’s
bank account
on June 30
(v) July 1 Payment is June 29 July 30 June 26 (i.e.,

entered in the when payment
books of is debited in the
account on recipient’s bank
June 30 and account)
debited in
recipient’s
bank account
on June 26
(vi) August August 10 June 29 July 30 July 30 (i.e., 31st

1 day from
issuance of
invoice)
4.
S. Date of payment by Date of Date Time of

No. the recipient for issue of immediately supply of
supply of services invoice by following 60 goods
the days from [Earlier of
supplier of invoice (1) & (3)]
services


6.49
49
(1) (2) (3)
(i) August 10 June 29 August 29 August 10
(ii) August 10 June 1 August 1 August 1
(iii) Part payment made June 29 August 29 June 30 for

on June 30 and part
balance amount paid payment
on September 1 and August
29 for
balance
amount
(iv) Payment is entered in June 1 August 1 June 28 (i.e.

the books of account when
on June 28 and payment is
debited in recipient’s entered in
bank account on June the books of
30 account of
the
recipient)
(v) Payment is entered in June 29 August 29 June 26 (i.e.

the books of account when
on June 30 and payment is
debited in recipient’s debited in
bank account on June the
26 recipient’s
bank
account)
5. Time of supply of service taxable under reverse charge is the earlier of the
following two dates in terms of section 13(3):
• Date of payment
• 61st day from the date of issue of invoice
In this case, the date of payment precedes 61 st day from the date of issue
of invoice by the supplier of service. Hence, the date of payment, i.e. 17th

June, will be treated as the time of supply of service [Section 13(3)(a)].
6. Since the invoice has not been issued within the prescribed time period,
time of supply of service will be the earlier of the following two dates in
terms of section 13(2)(b):
• Date of provision of service
• Date of receipt of payment
The payment was received on 5 th January and the service was provided on
23 rd April. Therefore, the date of payment, i.e. 5th January is the time of
supply of the service in this case.
7. As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
terms of section 31.
In this case since the invoice has not been issued, the time of supply for the
purpose of payment of tax will be the last date on which the invoice is
required to be issued.
The invoice for supply of goods in the present case must be issued on or
before the dispatch of goods, i.e. on 2 nd August. Therefore, the time of
supply for the purpose of payment of tax for the goods will be 2 nd August,
the date when the invoice should have been issued.
In this case, the invoice is issued before the removal of the goods and is
thus, within the time limit prescribed under section 31(1). Therefore, the
time of supply for the purpose of payment of tax is the date of issue of
invoice, which is 2 nd December.
9. As the coupons can be used for a variety of food items, which are taxed at
different rates, the supply cannot be identified at the time of purchase of
the coupons. Therefore, the time of supply of the coupons is the date of
their redemption in terms of section 12(4).


6.51
51
10. Tax on services supply by a firm of advocates by way of legal services to any
business entity is payable under reverse charge by such firm of advocates.
Time of supply of services that are taxable under reverse charge is earliest
of the following two dates in terms of section 13(3):
• Date of payment [3rd November]
• 61st day from the date of issue of invoice [19th April]
The date of payment comes subsequent to the 61st day from the issue of
invoice by the supplier of service. Therefore, the 61st day from the date of
supplier’s invoice has to be taken as the time of supply. This fixes 19 th April
as the time of supply.
11. The time of supply of services, if the invoice is not issued in time, is the date
of payment or the date of provision of service, whichever is earlier [Section
13(2)(b)]. In this case, the service is provided on 5 th September but not
invoiced within the prescribed time limit. Therefore, 5th September, the date
of provision of service, being earlier than the date of payment, will be the
time of supply.
12. The time of supply of services is the date of issue of invoice if the same is
issued within 30 days from the date of supply of service OR the date of
receipt of payment, whichever is earlier [Section 13(2)(a)].
In case the invoice is not issued within 30 days from the date of supply of
service, time of supply is the date of provision of service OR the date of
receipt of payment, whichever is earlier [Section 13(2)(b)].
In accordance with the aforesaid provisions, the time of supply in the four
independent cases will be:
(1) 1st August since the invoice is not issued within 30 days of supply of
service.
(2) 7th September since the invoice is issued within 30 days of supply of
service and the payment is received after the issuance of invoice.
(3) 3 rd August viz., earlier of date of issuance of invoice (7th September)
or date of receipt of payment (3 rd August)
(4) 7th September viz., earlier of date of issuance of invoice (7th
September) or date of receipt of payment (15th September)
13. (i) Tax on services supplied by a recovery agent to, inter alia, a non-
banking financial company (NBFC) is payable under reverse charge by

such non-banking financial company.

Therefore, in the given case, person liable to pay GST is the NBFC -
Newton Credits Ltd.
(ii) As per section 13(3), the time of supply of service on which GST is
payable under reverse charge is earlier of the following:-
• Date of payment as entered in the books of account of the
recipient (18 th April) or the date on which the payment is debited
in his bank account (20 th April), whichever is earlier;
• Date immediately following 60 days since issue of invoice by the
supplier, i.e. 9 th April.
Thus, time of supply of service is 9 th April.
14. As per section 12(6), the time of supply with regard to an addition in value
on account of interest, late fee or penalty or delayed payment of
consideration is the date on which the supplier received such additional
consideration.
Thus, time of supply in respect of interest would be the date on which the
supplier has received such additional consideration, i.e. 2 nd February.
Further, a registered person is required to issue a tax invoice before or at
the time of removal of goods for supply to the recipient. Thus, in the given
case, the invoice for supply of goods should have been issued on or before
the removal of goods i.e., on 3 rd October.
However, since the invoice has not been issued within the prescribed time,
the time of supply for the purpose of payment of tax will be the last date
on which the invoice is required to be issued i.e., 3 rd October.


6.53
53
CROSSWORD PUZZLE
3 4
8 9
ACROSS
2. The time of supply for service taxable under reverse charge is earlier of the date
of payment, or date immediately following _____ days from date of issue of
invoice by the supplier.
3. No GST is payable at the time of receipt of _________ for supply of goods.
6. Time of supply of vouchers exchangeable for any food item(s) from a grocery
store is date of ___________ of the voucher.

8. The time of supply of services is the date of issue of invoice if the same is issued
within 30 days from the date of __________ of service or the date of receipt of
payment, whichever is earlier.
9. Time of supply indicates the point in time when the liability to _____tax arises.
DOWNWARDS
1. Time of supply of vouchers exchangeable for a pizza at a pizza outlet is date of
______ of the voucher.
4. Time of supply of _________ exchangeable for services is date of redemption of
the voucher if supply is not identifiable at the time of issue of voucher.
5. Time of supply of vouchers exchangeable for services is date of issue of the
voucher if supply is ___________at the time of issue of voucher.
6. The time of supply of interest on delayed payment of consideration is the date
of _______of such addition in value by the supplier.
7. Time of supply of goods supplied under reverse charge in residual cases is the
date on which goods are recorded in the ______ of account of the recipient of
supply.
Scan the code



a
7
a
CHAPTER a
VALUE OF SUPPLY
LEARNING OUTCOMES
After studying this Chapter, you will be able to-
❑ comprehend what constitutes the value of a taxable supply
of goods / services when the supply is made to an unrelated
person and price is the sole consideration for the supply
❑ identify the various inclusions in/exclusions from the value of
supply
❑ pinpoint the situations when discount will be included /not
included in the value of supply
❑ ascertain who are related persons
❑ compute the value of taxable supply when price is the sole
consideration for the supply and the supplier and recipient
are not related

CHAPTER OVERVIEW
VALUE OF SUPPLY
Value of supply made

Inclusions
to unrelated person
in/exclusions from Discount
with price as the sole
value of supply
consideration
1. INTRODUCTION
GST is payable (i) on supply of goods or services
or both for a consideration in the course of or
furtherance of business; (ii) on certain supplies
made without a consideration as specified in
Schedule I to the CGST Act.
As GST is an ad valorem levy, i.e. it is levied as a
percentage of the value of supply of goods or services or both, it becomes important
to know how to arrive at the value on which tax is to be paid. Provisions relating to
‘value of supply’ set out the mechanism to compute such value basis on which CGST
and SGST/UTGST (intra-State supply), or IGST (inter-State supply) should be paid.
Section 15 of the CGST Act supplemented with CGST rules given under Chapter IV of
the CGST Rules: Determination of Value1 prescribes the provisions for determining the
value of supply of goods and services. There are common provisions for determining
the value of the supply of goods and services.
Sub-section (1) of section 15 provides the mechanism for determining the value of a
supply which is made between unrelated persons and when price and only the price
is the sole consideration for the supply. When value cannot be determined under
section 15(1) as also in certain specific cases, the same is determined using Chapter IV:
Determination of Value of Supply of CGST Rules.
1
Chapter IV: Determination of Value of Supply of the CGST Rules will be discussed at the Final
level.

a 7.3
VALUE OF SUPPLY a
Provisions of value of supply under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.
Agent: means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or services
or both on behalf of another [Section 2(5)].
Factor Who
carries on
Broker business
of supply
of goods
Commission agent and/or
AGENT services
Arhatia
Del Credre agent
On behalf
Auctioneer of
another
Mercantile agent
Cess: shall have the same meaning as assigned to it in the Goods and Services
Tax (Compensation to States) Act [Section 2(22)].
Consideration: in relation to the supply of goods or services or both includes –

(a) any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of
Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in

response to, or for the inducement of, the supply of goods or services
or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State
Government;
Provided that a deposit given in respect of the supply of goods or services
or both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply [Section
2(31)].
CONSIDERATION
Payment in money Monetary value of

or otherwise for the any act or
supply forbearance for the
supply
By recipient or
any other
Deposit to be person
considered as payment
ONLY Excluding subsidy given

by Central/ a State
Government
When the supplier
applies such deposit as
consideration for the
said supply
Person includes-
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;

a 7.5
VALUE OF SUPPLY a
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether

incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in section 2(45)
of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country

outside India;
(i) a co-operative society registered under any law relating to

cooperative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above
[Section 2(84)].
Money: means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance or any other instrument
recognised by the Reserve Bank of India when used as a consideration to
settle an obligation or exchange with Indian legal tender of another
denomination but shall not include any currency that is held for its
numismatic value [Section 2(75)].

Indian legal tender
Foreign Currency
Cheque
Promissory note
When used as
Bill of Exchange
a
consideration
Letter of Credit to settle an
obligation or Currency
exchange held for its
EXCLUDING
Draft with Indian numismatic
Mone
legal tender value
y
of another
Pay Order denomination
Traveller Cheque
Money Order
Postal or electronic
remittance
Any other
instrument
recognised by RBI
Recipient of supply of goods or services or both, means—

a 7.7
VALUE OF SUPPLY a

Recipient
If consideration is payable
Person liable to pay the
for supply of goods or
consideration
services or both
Person to whom goods are

If no consideration is delivered/made available or to
payable for supply of goods whom possession/use of the
goods is given/ made available
If no consideration is Person to whom the service is

payable for the supply of rendered
services
Recipient includes an agent acting on behalf of the recipient in relation to

the goods or services or both supplied
Supplier in relation to any goods or services or both, shall mean the person

3. VALUE OF SUPPLY [SECTION 15]
Section 15 Value of taxable supply
(1) The value of a supply of goods or services or both shall be the

transaction value, which is the price actually paid or payable for the
said supply of goods or services or both where the supplier and the
recipient of the supply are not related and the price is the sole
consideration for the supply.
(2) The value of supply shall include-
(a) any taxes, duties, cesses, fees and charges levied under any law
for the time being in force other than this Act, the State Goods
and Services Tax Act, the Union Territory Goods and Services
Tax Act and the Goods and Services Tax (Compensation to
States) Act, if charged separately by the supplier;
(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;
(c) incidental expenses, including commission and packing,

charged by the supplier to the recipient of a supply and any
amount charged for anything done by the supplier in respect
of the supply of goods or services or both at the time of, or
before delivery of goods or supply of services;
(d) interest or late fee or penalty for delayed payment of any

consideration for any supply; and
(e) subsidies directly linked to the price excluding subsidies provided

by the Central Government and State Governments.

a 7.9
VALUE OF SUPPLY a
Explanation. ––For the purposes of this sub-section, the amount of

subsidy shall be included in the value of supply of the supplier who
receives the subsidy.
(3) The value of the supply shall not include any discount which is given
(a) before or at the time of the supply if such discount has been
duly recorded in the invoice issued in respect of such supply; and
(b) after the supply has been effected, 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.
(4) Where the value of the supply of goods or services or both cannot be
determined under sub-section (1), the same shall be determined in such
manner as may be prescribed.
(5) Notwithstanding anything contained in sub-section (1) or sub-section

(4), the value of such supplies as may be notified by the Government
on the recommendations of the Council shall be determined in such
Explanation—For the purposes of this Act,––
(a) persons shall be deemed to be “related persons” if––
(i) such persons are officers or directors of one another’s

businesses;
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds

twenty-five per cent or more of the outstanding voting
stock or shares of both of them;

(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third

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

or
(viii) they are members of the same family;
(b) the term “person” also includes legal persons;
(c) persons who are associated in the business of one another in that one is
the sole agent or sole distributor or sole concessionaire, howsoever
described, of the other, shall be deemed to be related
ANALYSIS
The CGST law has different provisions for determining the value of a supply of
goods or services or both in the following situations:
➔ Supplies made solely for a price in money (monetary consideration), to

unrelated persons → Sub-section (1) of section 15;
➔ Supplies made solely for non-monetary consideration, or for part monetary

consideration and part non-monetary consideration, or involving additional
consideration, or to related persons, or for specific classes of supply → Sub-
sections (4) and (5) of section 15 read with the Chapter IV: Determination of
Value of Supply of CGST Rules.
The definition of ‘related person’ under the explanation to section 15 covers

various situations of control, including sole agent, sole distributor and sole
concessionaire. The concept of related person has been presented in a diagram
given on next page.

a 7.11
VALUE OF SUPPLY a
Related persons [Explanation to section 15]
Persons IF Such persons are officers/

DEEMED AS
including Legal RELATED directors of one another’s
Persons PERSONS business
Such persons are legally

recognised partners in business
Such persons are employer &

employee
A third person controls

(directly/indirectly) or own/
holds ≥ 25% voting
stock/shares of both of them
One of them controls

(directly/indirectly) the other
A third person controls

(directly/indirectly) both of
them
Such persons together control

(directly/indirectly) a third
person
Such persons are members of

the same family
One of them is the sole

agent/sole distributor/sole
concessionaire of the other

A. Supplies to unrelated persons where price is the sole

consideration
(i) Transaction value [Section 15(1)]
When a transaction of supply of goods or services or both is made
➢ between two persons (see definition of “person”) who are not related
to each other (see definition of “related person” in ‘Explanation’ to
section 15), and
➢ price is the sole consideration (see definition of consideration) for the
supply,
the value of supply is the “transaction value”.
Price is Value of
Supply is
the sole supply will
between
considerati be
unrelated Transaction
-on for the
persons value
supply
Under section 15(1), the transaction value which is applicable between

unrelated persons where price is the sole consideration for the supply is -
the price actually paid or payable for the said supply of goods or services
or both.
This is the price for the specific supply that is being valued. It includes the
amount already paid at the time the supply is being valued for tax, as well as
the amount payable and not yet paid at that time. The word ‘payable’ refers
to price that is agreed to be paid for the goods / services.
(1) Wholesale price for 1 MT of cement sold by X Ltd. in the

ordinary course of business: ` 7,000. Price of 1 MT of cement sold
by X Ltd. to unrelated customer Y: ` 6,700.
Value of supply made by X Ltd. to Y is ` 6,700 which is the price actually paid
or payable and not the wholesale price.

a 7.13
VALUE OF SUPPLY a
✪ The value of taxable supply of goods and services shall

ordinarily be the ‘transaction value’ which is the price paid
or payable, when the parties are not related and price is the
sole consideration. Section 15 further elaborates various
inclusions and exclusions from the ambit of transaction value. For
example, the transaction value shall not include discount allowed
subject to certain conditions.
(ii) Inclusions in value [Section 15(2)]

The value of supply includes certain elements which are enumerated and
discussed below.
❑ Taxes, duties, cesses, fees and charges other than CGST, SGST, UTGST,
GST Compensation Cess, if charged separately
❑ Payments to third parties → Any amount that the supplier is liable to
pay in relation to supply but which has been incurred by the recipient
of the supply and not already included in the price.
❑ Incidental expenses, such as, commission and packing, charged by the
supplier to the recipient of a supply
❑ Any amount charged for anything done by the supplier in respect of

the supply of goods and/or services at the time of, or before delivery
of goods /supply of services.
❑ Interest or late fee or penalty for delayed payment of consideration
❑ Subsidies, directly linked to the price, other than subsidies given by
the Central Government or State Governments
The above elements are discussed below.
Taxes other than GST & GST Compensation Cess [Section 15(2)(a)]
Any taxes, duties, cesses, fees and charges levied under any law for the time
being in force except the CGST Act, the SGST Act, the UTGST Act and the GST
(Compensation to States) Act, if charged separately by the supplier, are
includible in the value of supply. In the case of inter-State supply liable to
IGST, the value of supply will include taxes other than IGST and the GST
Compensation Cess in terms of third proviso to section 20 of IGST Act. In

effect, all the taxes, duties etc. which are not subsumed in GST form part
of the taxable value for the purpose of levying GST.
For instance, if a supplier of goods pays municipal tax in relation to the goods
being supplied and charges the same separately, such tax will form part of
the value of supply.
TCS under Income-Tax Act, 1961 not includible in the taxable value for
the purpose of GST: The 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.
Payments made to third parties by the recipient on behalf of the
supplier in relation to the supply [Section 15(2)(b)]
A supplier may need to incur various expenses to make a particular supply of
goods/services. In the normal course, he would pay these amounts and they
would form part of the price that he charges from the customer (recipient of
supply). However, even if the customer makes direct payment of some of such
liabilities (of the supplier) to the third parties, and the supplier does not include
this amount in his bill, it will still form part of the value of the supply.
A point to note here is that amount paid by the recipient to third parties will be
added to the value under this clause only when the supplier is under
contractual liability to make payment to such third parties and the said
payment is in relation to such supply.
(2) Grand Biz contracts with ABC Co. to conduct a dealers’ meet.
In furtherance of this, Grand Biz contracts with vendors to deliver
goods / services, like water, soft drinks, audio system, projector,
catering, flowers etc. at the venue on the stipulated dates at the stipulated
prices. Grand Biz is liable to make these payments as contracted.
The soft drinks supplier wants payment upon delivery; ABC Co. agrees to pay
the bill raised by the soft drinks vendor on Grand Biz, on receiving the crates
of soft drinks. This amount is not billed by Grand Biz to ABC Co. However, it
would be added to the value of supply provided by Grand Biz to ABC Co. for
payment of GST.

a 7.15
VALUE OF SUPPLY a
Quiz
Quiz
time!
Time! Yogrishi rents out a commercial building owned by
him in Sanskriti Society, Noida, U.P. to Bhaarat for a
monthly rent of ` 1,00,000. He pays municipal taxof
` 20,000 which he has not recovered from Bhaarat.
1
Yogrishi also pays the maintenance charges of
` 5,000 (reimbursed to him by Bhaarat) for the
month as charged by the Society. The value of
supply for the month of January is ___________. All
the amounts given hereunder are exclusive of GST.
(a) ` 1,00,000 (b) ` 1,20,000 (c) ` 1,25,000 (d) ` 1,05,000
Incidental expenses [Section 15(2)(c)]

Incidental expenses, such as commission and packing charged by the supplier
or anything else done by the supplier in relation to the supply at the time of
or before delivery of goods or supply of services must be added to value.
(3) Commission: This may be paid to an agent and recovered
from the buyer of the goods / services; this is part of the value of
the supply.
(4) Packing, if charged by the supplier to the recipient, is similarly part of
the value of the supply.
(5) Inspection or certification charges is another element that will be

added to the value, if incurred before/at the time of supply and billed to the
recipient of supply.
(6) Installation and testing charges at the recipient’s site will also be
added, being an amount charged for something done by the supplier in
respect of the supply, at the time of making the supply.
(7) Weighment charges, loading charges, designing charges etc.

incurred before/at the time of supply will be added to the value, if billed
to the recipient of supply.

Quiz
Quiz Sapiant Ltd., registered under GST, supplies machinery
time!
Time! used for making bottle caps to Chandra Ltd. at a price
of ` 42,00,000 (excluding all taxes and other expenses).
Apart from the price of the machinery, Sapiant Ltd.
charges from the customer the associated handling and
2 loading charges of ` 10,000 and installation and
commissioning charges of ` 1,00,000. The value of
supply of machinery is ______________.
(a) ` 42,00,000 (b) ` 43,10,000 (c) ` 43,00,000 (d) ` 42,10,000
Outward freight, transit insurance

Where the supplier agrees to deliver the goods at the buyer’s premises and
arranges for transport and insurance, the contract of supply becomes a
composite supply; the principal supply being the supply of goods.
Therefore, outward freight and transit insurance become part of the value of
the composite supply and GST is payable thereon at the same rate as
applicable for the relevant goods. However, if the contract for supply is on
ex-factory basis where buyer pays the outward freight and insurance, the
same will not be included in the value of supply of goods.
Interest, late fee or penalty for delayed payment [Section 15(2)(d)]

The value for a supply will include not only the base price but also the charges
for delay in payment.
(8) A supply priced at ` 2,000 is made, with a credit period of 1
month for payment. Thereafter, interest @ 12% p.a. is chargeable.
The payment is received after the lapse of two months from the
date of supply. The amount of interest @ 12% p.a. (i.e. 1% per month) on
` 2,000 for one month after the free credit period of one month, is ` 20. Such
interest will be added to the value and thus, the value of supply will work out
to be ` 2,020, assuming the interest to be exclusive of GST.

a 7.17
VALUE OF SUPPLY a
✪ Time of supply for such interest/ late fee/ penalty is

the date when such amount is received by the supplier.
Further, since such charges are an addition in the value
of supply, same rate of tax as applicable on the main supply of goods
/ service are applicable on such charges as well.
Quiz
Quiz
time!
Time! Bhoora Ltd., a registered supplier in Surat, Gujarat
sold goods to Kaala Ltd. of Delhi on 6th April for
` 5,00,000 (excluding GST) with a condition that if
Kaala Ltd. failed to make payment within 30 days of
3 the delivery of the goods, interest @ 2% per month
on said price of ` 5,00,000 will be charged for the
period of delay. Goods were delivered and the invoice was issued, on 5th
April. Kaala Ltd. paid the consideration for the goods on 20th May along with
applicable interest. Kaala Ltd. refused to pay any tax payable on the interest
amount. Applicable rate of GST in this case is 18%.
The value of supply, in the given case, is _________.
(a) ` 5,00,000 (b) ` 5,05,000 (c) ` 5,04,237 (d) ` 5,95,900
Subsidies linked with price [Section 15(2)(e)]

Subsidy is a sum of money given to keep the price of a service or commodity
low. The subsidy is added to the value of supply of the supplier who receives
the subsidy. It must be noted that only subsidies directly linked to the price
of goods/services are added to the value. Blanket subsidy/donation received
are not includible in the value. Note that if the subsidy is given by the State
or Central Government, it is not to be added to the value of supply.
(9) The selling price of a notebook is ` 50. For notebooks sold to
students in Government schools, a company uses its CSR funds to
pay the seller ` 30, so that the students pay only ` 20 per notebook.
The value of the notebook will be ` 50, as this is a non-government subsidy.
If the same subsidy is given/granted by the Central Government or State
Government, the value of the notebook would be ` 20.

Quiz
Quiz Dhara Private Ltd. is engaged in supply of taxable
time!
Time! goods. In the current month, it supplied 1,000 units
of such goods to Jal & Co. at a unit price of ` 250 &
5,000 units to Vayu & Co. at a unit price of ` 230. It
has received a subsidy of ` 1,00,000 from a NGO,
4
Urja, for the current month for the energy conserved
by during the month. The value of supply of goods
to Jal & Co. and Vayu & Co. is
_________and_________ respectively.
(a) ` 2,50,000; (b) ` 2,50,000; (c) ` 3,50,000; (d) ` 3,00,000;

` 11,50,000 ` 12,50,000 ` 11,50,000 ` 12,00,000
(iii) Exclusion of discounts from value [Section 15(3)]

Discounts are a common phenomenon for businesses. Numerous kinds of
discounts are given by the suppliers to their customers, namely, trade
discounts, cash discounts, quantity/volume/performance discounts etc.
Such discounts are reduced from the sale price of the supply. Since the
value of a taxable supply is the transaction value, GST is leviable on the value
after deducting the discounts.
However, not all discounts offered by the supplier to their customers are
allowed as a deduction from the value. Only such discounts which satisfy
the conditions prescribed in section 15(3), are allowed as deduction from
the value. The essence of the conditions prescribed in section 15(3) is that
the price as established at the time of supply should form the basis of value.
The discounts which do not fulfill the conditions specified in section 15(3)
are not deductible from the value, i.e. GST in such a case is levied on the
gross value of the supply without considering the discount.
Discounts that are allowed as deduction from the value are as follows:
(a) Discounts given before or at the time of supply and shown in the
tax invoice– Example for such discount can be discounts that are
offered for making the payment at the time of supply itself. Such
discounts are thus, recorded in the invoice and thus, GST is charged on
the gross value less discount duly recorded in the invoice.

a 7.19
VALUE OF SUPPLY a
(b) Post supply discounts- It is not always commercially feasible to

determine all discounts before or at the time of supply or record them
in the invoice. For instance, cash discount given for making the
payment within a stipulated time. Even though the discount is
established before/at the time of supply, the supplier cannot record
such discount in the invoice as he does not know if the buyer will make
the payment within the stipulated time.
Likewise, in case of quantity/volume/performance discount also, the
supplier is not aware before/at the time of supply as to whether the
buyer would purchase the requisite quantity within the stipulated time.
Therefore, in this case also, the discount cannot be recorded in the
invoice.
In such cases, initially the GST is paid on the gross value indicated in
the invoice without considering the discount. The supplier, however,
passes the discount to the buyers subsequently by issuing credit notes.
Post supply discounts, i.e. the discounts that are given after supply is
made, are allowed as a deduction from the value of supply if the
following two conditions are satisfied:
✓ Discount is in terms of an agreement that existed at the time of
supply and can be worked out invoice-wise; and
✓ Proportionate input tax credit is reversed by the recipient - The
buyer would have availed input tax credit (ITC) of GST payable on
the gross value specified in the invoice. Thus, when a credit note 2
is issued to him by the supplier for the discount, the buyer will
reverse the proportionate credit; consequent to which, the
supplier’s output tax liability will be reduced by the same amount.
If any of the above conditions are not satisfied, the GST liability of
supplier cannot be reduced. The supplier, however, can issue a
commercial credit note 3 for the value of discount. In such a scenario,
the buyer will not be required to reverse any input tax credit.
The provisions relating to allowability of discount as a deduction from the value
have been depicted by way of a diagram given below.
2
Credit notes governed under GST law are issued under section 34. Provisions of section 34 are
discussed in Chapter 10: Tax Invoice; Credit & Debit Notes in Module 2 of this Study Material.
3
A commercial credit note is not governed under GST law and is issued only for the value of
discount/reduction in value of the supply, without any GST.

+ Yes
At the time of supply
Shown in the
No
Discounts given Before the supply
+ invoice
Discounts
deducted
In terms of an
After the supply

+ agreement that
existed at/before
from the
value of
the time of supply supply
+
Can be linked to Discounts
relevant invoices not to be
deducted
+ from the
value of
Proportionate supply
ITC reversed by
recipient
No
Yes
Allowability of certain specific types of discounts offered by the suppliers

as clarified vide Circular No. 92/11/2019 GST dated 07.03.2019
(i) Staggered discounts (‘Buy more, Save more’ offers): In case of
staggered discounts, rate of discount increases with increase in
purchase volume. For example – One may get 10 % discount for
purchases above ` 5,000/-, 20% discount for purchases above
` 10,000/- and 30% discount for purchases above ` 20,000/-. Such
discounts are shown on the invoice itself.
Such discounts are excluded to determine the value of supply.
(ii) Periodic/year ending discounts/volume discounts: These discounts

are offered by the suppliers to their stockists, etc. For example- Get
additional discount of 1% if you purchase 10,000 pieces in a year, get
additional discount of 2% if you purchase 15,000 pieces in a year. Such
discounts are established in terms of an agreement entered into at or
before the time of supply though not shown on the invoice as the actual

a 7.21
VALUE OF SUPPLY a
quantum of such discounts gets determined after the supply has been
effected and generally at the year end. In commercial parlance, such
discounts are colloquially referred to as “volume discounts”. Such
discounts are passed on by the supplier through credit notes.
Such discounts are excluded 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 attributable to the
discount on the basis of document(s) issued by the supplier.
(iii) Secondary discounts: These are the discounts which are not known at
the time of supply or are offered after the supply is already over. For
example, M/s A supplies 10,000 packets of biscuits to M/s B at
` 10/- per packet. Afterwards, M/s A re-values it at ` 9/- per packet.
Subsequently, M/s A issues credit note to M/s B for ` 1/- per packet.
Such secondary discounts shall not be excluded while determining the

value of supply as such discounts are not known at the time of supply
and the conditions laid down in section 15(3)(b) are not satisfied.
It may be noted that financial / commercial credit note(s) can be issued

by the supplier even if the conditions mentioned in section 15(3)(b) are
not satisfied. Such credit notes do not include GST, and do not have
any impact on value of supply for the purposes of GST.
Examples of discount deductible from value of supply
(10) Royal Biscuit Co. gives a discount of 30% on the list price to
its distributors. Thus, for a carton of Spice biscuit, in the tax invoice
the list price is mentioned as ` 200, on which a discount of 30% is given to
arrive at the final price of ` 140. The value is ` 140, as the discount is allowed
at the time of supply and shown in the invoice.
Post supply discounts
(11) The agreement of Raju Electrical Appliances with its dealers is
that purchase of rice cookers over 1000 pieces in the Diwali month
will entitle them to discount of 5% per cooker. Therefore, the quantum of
discount can be determined only at the end of Diwali month. However, since
the agreement relating to discount was in existence at the time of supply, and
the discount can be worked out for each invoice, such post supply discount

shall be allowed as a deduction from the value of supply of rice cookers.

Raju Electrical Appliances can issue credit note for discount of 5% of the value
of goods along with GST and claim adjustment of excess tax paid. The
dealer must reverse the proportionate input tax credit on the relevant
stock to bring it in line with the reduced tax.
(12) Pink and Blue Pvt. Ltd. (PBPL) sold goods to Orange Pvt. Ltd. (OPL) on
15th January at ` 50,000 (exclusive of taxes and discounts) and charged ` 9,000
as IGST @ 18%. The terms of supply stipulated that discount @ 2% will be
given to OPL if it makes the payment within one month of the supply. OPL
avails the input tax credit of ` 9,000 in the month of January and makes the
payment for the goods on 10th February. PBPL issues credit note for ` 1180
[` 1,000 for value of discount and ` 180 for proportionate IGST leviable
thereon] to OPL on 11 th February. After receiving credit note, OPL reverses
the input tax credit of ` 180 attributable to the discount given by the PBPL.
PBPL can reduce its GST liability of the month of February by
` 180. OPL would have paid ` 57,820 ( ` 50,000 + ` 9,000 - ` 1,000 - ` 180) to
PBPL on 10th February.
Examples of discount not deductible from value of supply

(13) In the above example, if the terms of supply did not provide
for discount @ 2% for payment within one month but PBPL offers
such discount to OPL at the time of payment after negotiation, the discount
will not be allowed as a deduction from the value. PBPL will issue a
commercial credit note for only the value of discount, i.e. for ` 1,000.
OPL will not reverse any input tax credit and PBPL will also not be able to
reduce its GST liability for the month of February. In this case, OPL would pay
` 58,000 ( ` 50,000 + ` 9,000 - ` 1,000) to PBPL on 10 th February.
(14) A company announces turnover discounts after reviewing dealer

performance during the year. The discounts are based on performance slabs
and are given as cash-back. As these discounts were not known at the time
of supply of the goods, they will not be deducted from value of those goods.
Hence, the company will not be able to adjust excess tax paid from its tax
liability.

a 7.23
VALUE OF SUPPLY a
No Claim Bonus permissible as deduction under section 15(3)(a) for the

purpose of calculation of value of supply of the insurance services
provided by insurance company to insured
The issue which arose for clarification was whether ‘No Claim Bonus’
(NCB) provided by the insurance company to the insured can be
considered as an admissible discount for the purpose of determination
of value of supply of insurance service provided by the insurance
company to the insured.
The insurance companies make the disclosure of the fact of availability

of discount in form of NCB, subject to certain conditions, to the insured
in the insurance policy document itself and also provide the details of
the NCB in the invoices also. The pre-disclosure of NCB amount in the
policy documents and specific mention of the discount in form of NCB
in the invoice is in consonance with the conditions laid down for
deduction of discount from the value of supply under section 15(3)(a).
Since as per section 15(3)(a), value of supply shall not include any
discount which is given before or at the time of supply if such discount
has been duly recorded in the invoice issued in respect of such supply,
it is, therefore, clarified that NCB is a permissible deduction under said
section for the purpose of calculation of value of supply of the insurance
services provided by the insurance company to the insured.
Accordingly, where the deduction on account of NCB is provided in the

invoice issued by the insurer to the insured, GST shall be leviable on
actual insurance premium amount, payable by the policy holders to the
insurer, after deduction of NCB mentioned on the invoice 4.
4

Quiz
Quiz Sapiant Ltd., registered under GST, supplies machinery
time!
Time! used for making bottle caps to Chandra Ltd. at a price of
` 40,00,000 (excluding all taxes and other expenses). A
cash discount of 2% on the above price of the
5 machinery is offered at the time of supply since Chandra
Ltd. agrees to make the payment within 15 days of the
receipt of the machinery at its premises. Sapiant Ltd.
receives a price linked subsidy of ` 2,00,000 from its holding company
Diligent Ltd. The value of supply of machinery is ______________.
(a) ` 39,20,000 (b) ` 42,00,000 (c) ` 41,60,000 (d) ` 41,20,000
B. Supplies where value cannot be determined u/s 15(1) and notified

supplies [Sub-sections (4) and (5) of section 15]
Section 15(4) lays down that where sub-section (1) is not applicable, that is,
if the transaction is with a related party, and/or price is not the sole
consideration for the supply of goods / services, then the value will be
determined in the manner as prescribed, which means as stipulated in the
rules for valuation [See the definition of ‘prescribed’]. Further, section 15(5)
lays down that in respect of certain notified supplies also, the value will be
determined in the manner as stipulated in the rules for valuation. As stated
earlier, these rules will be discussed at the Final level.
ILLUSTRATION 1
Black and White Pvt. Ltd. has provided the following particulars relating to goods
sold by it to Colourful Pvt. Ltd.
Particulars `
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 5,000
Packing charges (not included in price above) 1,000
Black and White Pvt. Ltd. received ` 2,000 as a subsidy from a NGO on sale of such
goods. The price of ` 50,000 of the goods is after considering such subsidy. Black
and White Ltd. offers 2% discount on the list price of the goods which is recorded
in the invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd.

a 7.25
VALUE OF SUPPLY a
ANSWER
Computation of value of taxable supply
Particulars `
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 5,000
[Includible in the value as per section 15(2)(a)]
Packing charges [Includible in the value as per section 15(2)(c)] 1,000
Subsidy received from a non-Government body [Since subsidy is 2,000
received from a non-Government body, the same is included in the
value in terms of section 15(2)(e)]
Total 58,000
Less: Discount @ 2% on ` 50,000 [Since discount is known at the 1,000
time of supply and recorded in invoice, it is deductible from the
value in terms of section 15(3)(a)]
Value of taxable supply 57,000
ILLUSTRATION 2
Samriddhi Advertisers onceptualised and designed the advertising campaign for a
new product launched by New Moon Pvt Ltd. for a consideration of ` 5,00,000.
Samriddhi Advertisers owed ` 20,000 to one of its vendors in relation to the
advertising service provided by it to New Moon Pvt Ltd. Such liability of Samriddhi
Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed the
payment of consideration and thus, paid ` 15,000 as interest. Assume the rate of GST
to be 18%.
Determine the value of taxable supply made by Samriddhi Advertisers.
ANSWER
Computation of value of taxable supply
Particulars `
Service charges 5,00,000
Payment made by New Moon Pvt. Ltd to vendor of Samriddhi 20,000
Advertisers [Liability of the supplier being discharged by the
recipient, is includible in the value in terms of section 15(2)(b)]

Interest for delay in payment of consideration [Includible in the 12,712

value in terms of section 15(2)(d) [Refer note below]
[`15,000 × (100/118)] (rounded off)
Value of taxable supply 5,32,712
Note: The interest for delay in payment of consideration will be includible in the
value of supply but the time of supply of such interest will be the date when such
interest is received in terms of section 13(6). Such interest has been assumed to be
inclusive of GST and thus, the value has been computed by making back calculations
 Interest  . It is also possible to assume the interest to be exclusive
100 + tax rate 100
 
of GST. In that case, the value of supply will work out to be ` 5,35,000.
The scheme of valuation as provided under section 15 is depicted by way of a
diagram given below:
Value of taxable supply under

section 15
Supply to be valued as per

Whether price is the sole No Chapter IV of the CGST
consideration for supply? Rules, 2017-
Determination of Value of
Yes Supply
Whether supplier and the Yes

recipient are related?
No
Yes
Whether the supply is a
notified supply u/s 15(5)?
No
Value of supply = Transaction

value u/s 15(1) + elements as
specified u/s 15(2) and 15(3)

a 7.27
VALUE OF SUPPLY a
LET US RECAPITULATE
VALUE OF TAXABLE
SUPPLY
Supply made to
Supply where price Supply is a
unrelated person Supply made to
is not the sole notified supply
where price is the related person
consideration u/s 15(5)
sole consideration
Value of supply
=
Transaction value u/s 15(1) +
elements as specified u/s Value to be determined under Chapter IV of the
15(2) and 15(3) CGST Rules, 2017: Determination of Value of
Supply
Inclusions in value u/s 15(2)

 Taxes other than GST, charged separately
 Third party payments made by recipient in relation to supply, which supplier was
liable to pay and were not included in the price
 Incidental expenses including anything done by the supplier in respect of the
supply till delivery of goods/ supply of services, if charged to recipient
 Subsidies directly linked to price of supply other than the ones given by
Central/State Government
 Interest/late fee/penalty for delay in payment of consideration
Exclusions from value u/s 15(2)

 Discounts given before or at the time of supply and recorded in the invoice
 Post supply discount/incentive, if known till supply & linked to invoices and
proportionate ITC reversed by the recipient on basis of document by supplier

TEST YOUR KNOWLEDGE
1. Are post-supply discounts eligible for deduction from the value of supplies in
all situations? Explain.
2. ‘Consideration under GST law includes both monetary and non-monetary

considerations.’
Discuss the correctness or otherwise of the statement with reference to the
definition of term ‘consideration’ provided under the CGST Act.
3. Sharp Minds Institute provides coaching for engineering entrance
examinations. The monthly fee charged by the Institute from a student is
` 10,000. The Institute is known for its commitment to provide education to
underprivileged children. It trains 10 students every year for entrance
examinations free of cost.
The Institute has received ` 3,00,000 as coaching fees during a month. Nav
Jeevan, an NGO working in the area of education for underprivileged children,
has given a subsidy of ` 10,000 (in lumpsum) during the month to the Institute
as it is serving the cause of underprivileged children.
Determine the value of supply of education services made by Sharp Minds
Institute during the month.
4. Furniture Wala is a chain of retail showrooms selling both modern and classic
furniture. In order to build strong customer association, the showroom
provides free delivery of the furniture at the premises of the customers if the
distance between the showroom and the customer’s premises is upto 20 kms.
Where the distance is more than 20 kms, the showroom charges a
concessional freight of ` 10 for every additional km.
Ms. Leena Kapoor purchases a double bed, a dressing table and a centre table
for ` 2,00,000 from Furniture Wala. Ms. Leena gets free delivery of the
furniture as her residence is located at a distance of 18 km from the
showroom. The showroom incurs an expenditure of ` 1000 for delivering the
furniture at Ms. Leena’s residence.
Determine the value of taxable supply made by Furniture Wala. Will your
answer change if residence of Ms. Leena is 50 km away from the showroom?

a 7.29
VALUE OF SUPPLY a
5. AKJ Foods Pvt. Ltd. gets an order for supply of processed food from a customer.
The customer wants the consignment tested for gluten and specified chemical
residues. AKJ Foods Pvt. Ltd. does the testing before the supply and charges
a testing fee for the same from the customer. AKJ Foods Pvt. Ltd. argues that
such testing fess should not form part of the consideration for the supply as
it is a separate activity.
Is the company’s argument correct in the light of section 15?
6. A philanthropic association makes a substantial donation each year to a
reputed private management institution to subsidize the education of low-
income group students who have gained admission there. The fee for these
individuals is reduced thereby coming to ` 3 lakh a year compared to ` 5 lakh
a year for other students.
What would be the value of the service of coaching and instruction provided
by the institution to the low-income group students?
7. Mezda Banners, an advertising firm, gives its customers an interest-free credit
period of 30 days for payment. Its customer ABC paid for the supply 32 days
after the supply of service. Mezda Banners waived the interest payable for a
delay of two days.
The Department wants to add interest for two days to the value of supply.
Should notional interest be included in the value?
8. Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to
whom it charges the list price minus standard discount and pays GST
accordingly. When goods remain unsold with the dealers, it offered additional
discounts on the stock as an incentive to push the sales, without any prior
agreement between them for offering such additional discount.
Can this additional discount be reduced from the price at which the goods
were sold, and concomitant tax adjustments made?
9. Red Pepper Ltd., Delhi, a registered supplier, manufactures taxable goods. It
provides the following details of taxable inter-State supply made by it during
the month of March.

S. No. Particulars Amount (` )
(i) List price of taxable goods supplied inter-State 15,00,000

(exclusive of taxes)
(ii) Subsidy received from the Central Government 2,10,000

for supply of taxable goods to Government
School (exclusively related to supply of goods
included at S. No. 1)
(iii) Subsidy received from an NGO for supply of 50,000

taxable goods to an old age home (exclusively
related to supply of goods included at S. No. 1)
(iv) Tax levied by Municipal Authority 20,000
(v) Packing charges 15,000
(vi) Late fee paid by the recipient of supply for 6,000

delayed payment of consideration (Recipient
has agreed to pay ` 6,000 in lump sum and no
additional amount is payable by him over and
above such amount)
The list price of the goods is net of the two subsidies received. However, the
other charges/taxes/fee are charged to the customers over and above the list
price.
Calculate the total value of taxable supplies made by Red Pepper Ltd. during
the month of March. Rate of IGST is 18%.
10. M/s. Flow Pro, a registered supplier, sold a machine to BP Ltd. It provides the
following information in this regard: -
S. No. Particulars Amount (` )
(i) Price of the machine [excluding taxes and 25,000

other charges mentioned at S. Nos. (ii) and (iii)]
(ii) Third party inspection charges 5,000

a 7.31
VALUE OF SUPPLY a
[Such charges were payable by M/s Flow Pro

but the same have been directly paid by BP Ltd.
to the inspection agency. These charges were
not recorded in the invoice issued by M/s Flo
Pro.]
(iii) Freight charges for delivery of the machine 2,000

[M/s Flow Pro has agreed to deliver the goods
at BP Ltd.’s premises]
(iv) Subsidy received from the State Government 5,000

on sale of machine under Skill Development
Programme
[Subsidy is directly linked to the price]
(v) Discount of 2% is offered to BP Ltd. on the price

mentioned at S. No. (i) above and recorded in the
invoice
Note: Price of the machine is net of the subsidy received.

Determine the value of taxable supply made by M/s Flow Pro to BP Ltd.
11. Shri Krishna Pvt. Ltd., a registered supplier, furnishes the following
information relating to goods sold by it to Shri Balram Pvt. Ltd.-
S. No. Particulars Amount

(` )
(i) Price of the goods [excluding taxes and other 1,00,000

charges mentioned at S. Nos. (iii), (v) and (vi)]
(ii) Municipal tax 2,000
(iii) Inspection charges 15,000
(iv) Subsidy received from Shri Ram Trust 50,000

[Subsidy is directly linked to the goods supplied]
(v) Late fees for delayed payment inclusive of GST 1,000

[Shri Balram Pvt. Ltd. paid the late fees. However,

these charges were ultimately waived by Shri
Krishna Pvt. Ltd. and the amount was refunded to
Shri Balram Pvt. Ltd. during the same month]
(vi) Weighment charges 2,000

[Such charges were paid by Shri Balram Pvt. Ltd. to
Radhe Pvt. Ltd. on behalf of Shri Krishna Pvt. Ltd.]
Note: Price of the goods is net of the subsidy received.

Determine the value of taxable supply made by Shri Krishna Pvt. Ltd. to Shri
Balram Pvt. Ltd.
12. Koli Ltd., a registered supplier, has supplied machinery to Ghisa Ltd. (a
supplier registered in the same State). It provides following particulars
regarding the same:
S. No. Particulars Amount (`)
(i) Price of machinery (exclusive of taxes and 5,50,000

discounts)
(ii) Part fitted in the machinery at the premises of 20,000

Ghisa Ltd.
[Amount has been paid by Ghisa Ltd. directly to
the supplier. However, it was Koli Ltd.’s liability
to pay the said amount. The said amount has not
been recorded in the invoice issued by Koli Ltd.]
(iii) Installation and testing charges for machinery, 25,000

not included in price
(iv) Discount @ 2% on price of the machinery

mentioned at S. No. (i) above (recorded in the
invoice)
(v) Koli Ltd. provides additional discount @ 1% at

year end, based on additional purchase of other
machinery for which adjustment is made at the

a 7.33
VALUE OF SUPPLY a
end of the financial year without any change in

individual transactions.
Determine the value of taxable supply made by Koli Ltd. to Ghisa Ltd.
ANSWERS/HINTS
1. No, the post-supply discounts are not eligible for deduction from the value
of supplies in all situations. Such discounts are allowed as a deduction from
the value of supply only in the situations where the following two conditions
are satisfied cumulatively:
(i) The discount is in terms of an agreement that existed at or before the
time of supply and can be worked out invoice-wise; and
(ii) Proportionate input tax credit (ITC) is reversed by the recipient - The
buyer would have availed ITC of GST payable on the gross value
specified in the invoice. Thus, when a credit note is issued to him by
the supplier for the discount, the buyer will reverse the proportionate
credit; consequent to which, the supplier’s output tax liability will be
reduced by the same amount.
If any of the above conditions are not satisfied, post-supply discount is not
allowed as a deduction from the value of supply and consequently, GST
liability of the supplier does not get reduced.
2. The statement is correct. As per the definition of the term ‘consideration’
provided under the CGST Act, consideration under the GST law includes
both payment in money or otherwise made by the recipient or any other
person and also takes within its sweep the monetary value of any act or
forbearance, by the recipient or any other person for the supply. Further, it
includes within its ambit any deposit which is applied as a consideration for
the supply but excludes the subsidies provided by the State or Central
Government.
The term ‘money’ has also been defined under the CGST Act and it not only
includes cash (Indian as well as foreign currency) but also cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveler’s

cheque, money order, postal/electronic remittance or any such similar

instrument recognized by RBI when used as a consideration to settle an
obligation or exchange with Indian legal tender of another denomination
but shall not include any currency that is held for its numismatic value. Non-
monetary consideration essentially means consideration in kind.
3. As per section 15(2)(e), the value of a supply includes subsidies directly
linked to the price, excluding subsidies provided by the State Governments
and the Central Government.
In the given case, though the subsidy is given by a non-Government body,
the same is not includible in the value as it is given in lumpsum and not
directly linked to the price of the supply being valued. Therefore, the
value of supply made by Sharp Minds during the month is ` 3,00,000.
4. In the given case, the showroom is not charging any amount towards freight
from Ms. Leena but incurring the same out of its own pocket. Therefore,
the same should not be added to the value. Hence, the value of supply will
be ` 2,00,000.
However, the answer will change in the second case when the showroom
will charge ` 300 for freight [(50km – 20 km) x ` 10] from Ms. Leena. In this
case, the supply will be a composite supply (principal supply being the
supply of furniture) and value thereof will be ` 2,00,300.
5. Section 15(2) mandates addition of certain elements in the value of supply.
Clause (c) of section 15(2) specifies that the amount charged for anything
done by the supplier in respect of the supply at the time of or before
delivery of goods or supply of services shall be included in the value of
supply.
Since AKJ Foods Pvt. Ltd. does the testing before the delivery of goods, the
charges therefor will be included in the value of the supply. Therefore, AKJ
Foods Pvt. Ltd.’s argument is not correct. The testing fee should be included
in the price to arrive at value of supply.
6. As per section 15(2)(e), the value of a supply includes subsidies directly
linked to the price, excluding State Government and Central Government
subsidies. In this case, the subsidy is not received from the Government but
from a philanthropic association. Therefore, the subsidy is to be added back

a 7.35
VALUE OF SUPPLY a
to the price to arrive at the value, which comes to ` 5 lakh [` 3 Lakh + ` 2

Lakh] a year.
7. This is a supply that is valued as per transaction value under section 15(1)
as price is the sole consideration for the supply and the supply is made to
unrelated person. The value of a supply includes interest for delayed
payment of any consideration for any supply. However, the time of supply
to the extent it relates to an addition in the value of supply by way of interest
for delayed payment of any consideration is the date on which the supplier
receives such addition in value. In the given case, the supplier has waived
the interest for delayed payment. Consequently, the supplier has not
received the interest. Therefore, notional interest for 2 days shall not be
included in the value of the supply.
8. The discounts were not known or agreed for at the time of supply of goods
to the dealers. Therefore, in terms of section 15(3), such discounts cannot
be reduced from the price on which tax had been paid.
9. Computation of total value of taxable supplies made by Red Pepper
Ltd. during the month of March
Particulars Amount (`)
List price of the goods 15,00,000
Subsidy amounting to ` 2,10,000 received from the NIL

Central Government
[Since the subsidy is received from the Government,
the same is not includible in the value in terms of
section 15(2)(e)]
Subsidy received from NGO 50,000

[Since the subsidy is received from a non-Government
body and directly linked to the supply, the same is
includible in the value in terms of section 15(2)(e)]
Tax levied by the Municipal Authority 20,000


Packing charges 15,000

[Being incidental expenses, the same are includible in
the value as per section 15(2)(c)]
Late fees paid by recipient of supply for delayed 5,085

payment
[Includible in the value as per section 15(2)(d) - As the
amount of interest received is a lump sum amount, the
same has to be taken as inclusive of GST] [` 6,000 x
100/118] rounded off
Total value of taxable supplies 15,90,085
10. Computation of value of taxable supply made by M/s. Flo Pro to BP Ltd.
Price of the machine 25,000

[Since the subsidy is received from the State
Government, the same is not includible in the value of
supply in terms of section 15(2)(e)]
Third party inspection charges 5,000

[Any amount that the supplier is liable to pay in
relation to the supply but has been incurred by the
recipient and not included in the price actually paid or
payable for the goods, is includible in the value of
supply in terms of section 15(2)(b)]
Freight charges for delivery of the machine 2,000

[Since arranging freight is the liability of supplier, it is
a case of composite supply and thus, freight charges
are added in the value of principal supply.]
Total 32,000
Less: Discount @ 2% on ` 25,000 being price charged 500

to BP Ltd.

a 7.37
VALUE OF SUPPLY a
[Discount given before or at the time of supply if duly

recorded in the invoice is deductible from the value of
supply in terms of section 15(3)(a)]
Value of taxable supply 31,500
11. Computation of value of taxable supply made by Shri Krishna Pvt. Ltd.
to Shri Balram Pvt. Ltd.
Price of the goods 1,00,000
Municipal tax 2,000

Inspection charges 15,000

[Any amount charged for anything done by the
supplier in respect of the supply of goods at the time
of/before delivery of goods is includible in the value
as per section 15(2)(c)]
Subsidy received from Shri Ram Trust 50,000

[Since the subsidy is received from a non-Government
body and directly linked to the supply, the same is
includible in the value in terms of section 15(2)(e)]
Late fees for delayed payment Nil

[Not includible since the same is waived off]
Weighment charges paid to Radhe Pvt. Ltd. on behalf 2,000

of Shri Krishna Pvt. Ltd.
relation to the supply but has been incurred by the
recipient and not included in the price actually paid or
payable for the goods, is includible in the value of
supply in terms of section 15(2)(b)]

12. Computation of value of taxable supply made by Koli Ltd. to Ghisa Ltd.
Price of machinery (exclusive of taxes and discounts) 5,50,000
Amount paid by Ghisa Ltd. directly to the supplier for 20,000

the part fitted in the machinery
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 is
includible in the value of supply in terms of section
15(2)(b).]
Installation and testing charges 25,000

[Any amount charged for anything done by the
supplier in respect of the supply of goods at the time
of/before delivery of goods is includible in the value
of supply in terms of section 15(2)(c).]
Less: Discount @ 2% on the price of machinery 11,000

[` 5,50,000 x 2%]
[Since discount is given at the time of supply of
machinery and recorded in the invoice, the same is
deductible from the value of the supply in terms of
section 15(3)(a).]
Less: Additional 1% discount at year end Nil

[Though the additional discount is established
before/at the time of supply, it is not deductible from
the value of supply in terms of section 15(3)(b) as the
same is not linked to any specific transaction and
is adjusted by the parties at the end of the financial
year.]

a 7.39
VALUE OF SUPPLY a
CROSSWORD PUZZLE
1 2
4 5
10
11
12
13
ACROSS
1. Agent includes a factor, _________, commission agent, arhatia, del credere agent.
4. Persons shall be deemed to be related if such persons are employer and
_____________.
6. The value of supply includes, __________ directly linked to the price, other
than that given by the Central Government and State Governments.

7. Persons shall be deemed to be related if one of them, directly or indirectly,

__________the other.
9. Persons shall be deemed to be related if a__________, directly or indirectly,
controls both of them.
10. The value of supply includes ___________ for delayed payment of
consideration.
11. Persons shall be deemed to be related if one of them is the _____________of the other.
12. Persons shall be deemed to be related if such persons are ____________ in
one another’s business.
13. The value of supply includes any amount that the _________ is liable to pay
in relation to supply but which has been incurred by the recipient of the
supply and not already included in the price.
DOWNWARDS
2. The value of supply _________ CGST, SGST, UTGST, GST Compensation Cess, if
charged separately.
3. The transaction value is the value of supply when supply is undertaken between
_________ persons and when price is the sole consideration for the supply.
5. The value of supply excludes, _________ given before or at the time of supply
and shown in the tax invoice.
8. The value of supply includes ___________ expenses, such as, commission and
packing, charged by the supplier to the recipient of a supply.
Scan the code



CHAPTER 8
INPUT TAX CREDIT

The section numbers referred to in the Chapter pertain to CGST Act and rule
numbers referred to in the Chapter pertain to CGST Rules, unless otherwise
specified. For the sake of brevity, input tax credit has been referred to as ITC in this
Chapter. Examples/Illustrations/Questions and Answers given in the Chapter are
based on the position of GST law existing as on 30.04.2023.
LEARNING OUTCOMES
After studying this Chapter, you will be able to:

 describe what are inputs, input services, capital goods and other
relevant terms in relation to ITC.
 explain the various conditions, timelines, restrictions and processes
for taking ITC on goods and services in general and special
circumstances.
 identify the items on which ITC is available as also the blocked
items on which ITC is not available.
 comprehend and apply the above provisions as also the provisions
relating to utilization of ITC to compute the GST liability of a
registered person.

8.2
2 GOODS AND SERVICES TAX
CHAPTER OVERVIEW
Input Tax credit Relevant definitions
Eligibility and conditions

for taking ITC
Blocked cedits
Availability of credit in
special circumstances
How ITC is utilised
1. INTRODUCTION
In earlier indirect tax regime, the
credit mechanism for indirect taxes
levied by the Union Government, (central excise duty and service tax) was
governed by the CENVAT Credit Rules, 2004; and the credit mechanism for state-
level VAT on sale of goods was governed by the States under their respective VAT
laws. The VAT legislations allowed ITC of VAT on inputs and capital goods in
transactions within the State, but not on inputs and capital goods coming in the
State from outside the State, on which central sales tax was paid. CENVAT Credit
Rules, 2004 allowed availing and utilizing credit of duty/tax paid on both goods
(capital goods and inputs) and services by the manufacturers and the service
providers across the country.

INPUT TAX CREDIT 8.3
The credit across goods and services was integrated vide the CENVAT Credit
Rules, 2004 in the year 2004 to mitigate the cascading effects of central levies
namely, central excise duty and service tax. However, the credit chain remained
fragmented on account of State-Level VAT as the credit of central taxes could not
be set off against a State levy and vice versa. The chain further got distorted as
ITC was not available on inter-State purchases. This resulted in cascading of taxes
leading to increase in costs of goods and services.
The GST regime promises seamless credit on goods and services across the entire
supply chain with some exceptions like supplies charged to tax under
composition scheme, blocked credits and supply of exempted goods and/or
services. ITC is considered to be the lifeline of the GST regime. In fact, it is the
provisions of ITC, which essentially make GST - a value added tax i.e., collection of
tax at all points of supply chain after allowing credit of tax paid at earlier points.
Chapter V of the CGST Act [Sections 16 to 21] & Chapter V: Input Tax Credit of
the CGST Rules [Rules 36-45] prescribe the provisions relating to ITC. Further,
section 41 contains provisions for availment of ITC, sections 49(5), 49A, 49B and
rule 88A which together prescribe the sequence of utilisation of ITC and rules 86A
and 86B stipulate the conditions of use of amount available in electronic credit
ledger and restrictions on use of amount available in electronic credit ledger.
State GST laws also prescribe identical provisions in relation to ITC. In this
Chapter, provisions of sections 16, 17, 18 and 41 have been discussed; 1 first the
statutory provisions of these sections together with the relevant rules have been
extracted followed by their analysis.
Provisions of ITC under the CGST Act have also been made applicable to
the IGST Act vide section 20 of the IGST Act.
1
Provisions of ITC relating to job work and input service distributor (ISD) [Sections 19, 20
and 21] and provisions relating to ITC claim by banking companies, distribution of ITC by
ISD, determination of ITC on inputs, input services and capital goods and reversal thereof
[Rules 38, 39, 42 and 43] will be discussed at the Final level.

8.4
Scheme of ITC - At a Glance

Given below are the salient features of the scheme of ITC as contained in the
provisions of sections 16, 17 and 18 read with the relevant rules. The scheme has
been discussed in detail in the ensuing pages of this Chapter.
 The scheme is designed to avoid cascading effect of taxes and make GST - a
destination-based tax.
 Broadly, ITC is available on all inputs, input services and capital goods used
for purposes of business by a taxable person. The exception is ‘blocked
credit’, where ITC is not available even when these goods or services are
used for the purposes of business.
 ITC is used for payment of tax on taxable output supply to avoid cascading
effect of taxes.
 GST law does not require ‘one to one’ co-relation between inputs/input
services and final products/services. Any eligible ITC can be used for
payment of tax on any taxable output supply.
 IGST is another core aspect of GST. It is a transitory tax to enable transfer of
ITC when goods or services move from one State to another. This is a
unique feature of Indian GST.
 Since ITC can be availed & utilized for payment of tax on taxable output
supply, as a natural corollary, ITC cannot be availed in respect of exempt
output supply on which tax is not payable.
 The exception to the above principle is ‘zero rated supply’ 2, i.e. exports or
supplies to a special economic zone (SEZ) developer/unit, where ITC is
available even if no tax is payable on output supply as zero-rated supplies
are not exempt supplies. Such ITC can be utilized either for making supplies
by paying tax or refund of the unutilized ITC can be obtained. This simple
mechanism is used to make exports and supplies to SEZ completely tax free.
 If a taxable person is making both taxable and exempt supply, he is entitled to
avail full credit of ITC in respect of inputs, input services and capital goods
exclusively used for taxable supply and no credit at all can be availed for inputs,
input services and capital goods exclusively used for exempt supply.
2
The concept of zero- rated supply and the refund of ITC will be dealt in detail at the Final level.

 If common inputs, input services and capital goods are used for taxable as
well as exempt supply, only proportionate ITC attributable to the taxable
supply is available. The common ITC is apportioned in the ratio of value of
taxable supply and exempt supply. Elaborate provisions have been made in
the GST law to prescribe the manner of calculation of proportionate ITC.
Before proceeding to understand the provisions of sections 16, 17, 18, 41 and the
relevant rules let us first go through few relevant definitions.
 Agent means a person, including a factor, broker, commission agent,
arhatia, del credere agent, an auctioneer or any other mercantile agent, by
whatever name called, who carries on the business of supply or receipt of
goods or services or both on behalf of another [Section 2(5)].
 Business includes
(a) any trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a pecuniary
benefit;
(b) any activity or transaction in connection with or incidental or ancillary
to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or
not there is volume, frequency, continuity or regularity of such
transaction;
(d) supply or acquisition of goods including capital goods and services in
connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a

subscription or any other consideration) of the facilities or benefits to
its members;
(f) admission, for a consideration, of persons to any premises;

(g) services supplied by a person as the holder of an office which has
been accepted by him in the course or furtherance of his trade,
profession or vocation;

8.6
(h) activities of a race club including by way of totalisator or a licence to

book maker or activities of a licenced book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a

State Government or any local authority in which they are engaged as
public authorities [Section 2(17)].
 Capital goods means goods, the value of which is capitalized in the books
of account of the person claiming the ITC and which are used or intended to
be used in the course or furtherance of business [Section 2(19)].
 Conveyance includes a vessel, an aircraft and a vehicle [Section 2(34)].
 Exempt supply means supply of any goods or services or both which
attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the IGST Act, and includes non-taxable
 Input means any goods other than capital goods used or intended to be
used by a supplier in the course or furtherance of business [Section 2(59)].
 Input service means any service used or intended to be used by a supplier
in the course or furtherance of business [Section 2(60)].
 Input tax in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or
services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of
section 9;
(c) the tax payable under the provisions of sub-section (3) and (4) of
section 5 of the IGST Act;
(d) the tax payable under the provisions of sub-section (3) and sub-
section (4) of section 9 of the respective State Goods and Services Tax
Act; or
(e) the tax payable under the provisions of sub-section (3) and sub-
section (4) of section 7 of the Union Territory Goods and Services Tax
Act,

but does not include the tax paid under the composition levy
[Section 2(62)].
 Input tax credit means the credit of input tax [Section 2(63)].
 Invoice or tax invoice means means the tax invoice referred to in Section
31 [Section 2(66)].
 Inward supply in relation to a person, shall mean receipt of goods or
services or both whether by purchase, acquisition or any other means with
or without consideration [Section 2(67)].
 Motor vehicle shall have the same meaning as assigned to it in clause (28)
of section 2 of the Motor Vehicles Act, 1988 [Section 2(76)].
Motor vehicle or vehicle under the Motor Vehicles Act, 1988 means any
mechanically propelled vehicle adapted for use upon roads whether the
power of propulsion is transmitted thereto from an external or internal
source and includes a chassis to which a body has not been attached and a
trailer; but does not include a vehicle running upon fixed rails or a vehicle of
a special type adapted for use only in a factory or in any other enclosed
premises or a vehicle having less than four wheels fitted with engine
capacity of not exceeding twenty five cubic centimetres. [Section 2(28) of
Motor Vehicles Act, 1988].
 Non-resident taxable person means any person who occasionally
undertakes transactions involving supply of goods or services or both,
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India [Section 2(77)].
 Principal means a person on whose behalf an agent carries on the business
of supply or receipt of goods or services or both [Section 2(88)].
 Quarter shall mean a period comprising three consecutive calendar months,
ending on the last day of March, June, September and December of a
calendar year [Section 2(92)].
 Recipient of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration;

8.8
 Registered person means a person who is registered under section 25 of
CGST Act but does not include a person having a Unique Identity Number
[Section 2(94)].
 Supplier in relation to any goods or services or both, shall mean the person
 Taxable supply means a supply of goods or services or both which is
leviable to tax under CGST Act [Section 2(108)].
 Works contract means a contract for building, construction, fabrication,
completion, erection, installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any immovable
property wherein transfer of property in goods (whether as goods or in some
other form) is involved in the execution of such contract [Section 2(119)].
 Zero-rated supply means any of the following supplies of goods or services
or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both 3 to a Special Economic Zone developer

or a Special Economic Zone unit [Section 16(1) of the IGST Act].
3
The definition of zero-rated supply is proposed to be amended by the Finance Act, 2021.
However, the said amendment has not yet been effective. As per the proposed amendment,
clause (b) should be “supply of goods or services or both for authorised operations to a
Special Economic Zone developer or a Special Economic Zone unit.”

3. ELIGIBILITY AND CONDITIONS FOR TAKING

INPUT TAX CREDIT [SECTION 16]
Section 16 Eligibility and conditions for taking input tax credit
(1) Every registered person shall, subject to such conditions and

restrictions as may be prescribed and in the manner specified in
section 49, be entitled to 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 and
the said amount shall be credited to the electronic credit ledger of
such person.
(2) Notwithstanding anything contained in this section, no registered

person shall be entitled to the credit of any input tax in respect of
any supply of goods or services or both to him unless,–
(a) he is in possession of a tax invoice or debit note issued

by a supplier registered under this Act, or such other tax
paying documents as may be prescribed;
(aa) the details of the invoice or debit note referred to in

clause (a) has been furnished by the supplier in the
statement of outward supplies and such details
have been communicated to the recipient of such
invoice or debit note in the manner specified under
section 37;
(b) he has received the goods or services or both.
Explanation.—For the purposes of this clause, it shall be

deemed that the registered person has received the
goods or, as the case may be, services–
(i) where the goods are delivered by the supplier to a

8.10
recipient or any other person on the direction of

such registered person, whether acting as an agent
or otherwise, before or during movement of goods,
either by way of transfer of documents of title to
goods or otherwise;
(ii) where the services are provided by the supplier to

any person on the direction of and on account of
such registered person.
(ba) the details of input tax credit in respect of the said

supply communicated to such registered person
under section 38 has not been restricted;
(c) subject to the provisions of section 41, the tax charged in

respect of such supply has been actually paid to the
Government, either in cash or through utilisation of input
tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in

lots or instalments, the registered person shall be entitled to take
credit upon receipt of the last lot or instalment:
Provided further that where a recipient fails to pay to the supplier

of goods or services or both, other than the supplies on which tax
is payable on reverse charge basis, the amount towards the value
of supply along with tax payable thereon within a period of one
hundred and eighty days from the date of issue of invoice by the
supplier, an amount equal to the input tax credit availed by the
recipient shall be added to his output tax liability, along with
interest thereon, in such manner as may be prescribed:
Provided also that the recipient shall be entitled to avail of the credit
of input tax on payment made by him of the amount towards the
value of supply of goods or services or both along with tax payable
thereon.
(3) Where the registered person has claimed depreciation on the tax
component of the cost of capital goods and plant and machinery

under the provisions of the Income-tax Act, 1961, the input tax
credit on the said tax component shall not be allowed.
(4) A registered person shall not be entitled to take input tax credit in
respect of any invoice or debit note for supply of goods or services
or both after the thirtieth day of November following the end of
financial year to which such invoice or debit note pertains or
furnishing of the relevant annual return, whichever is earlier.
Section 41 Availment of input tax credit
(1) Every registered person shall, subject to such conditions and

restrictions as may be prescribed, be entitled to avail the
credit of eligible input tax, as self-assessed, in his return and
such amount shall be credited to his electronic credit ledger.
(2) The credit of input tax availed by a registered person under

sub-section (1) in respect of such supplies of goods or services
or both, the tax payable whereon has not been paid by the
supplier, shall be reversed along with applicable interest, by
the said person in such manner as may be prescribed.
Provided that where the said supplier makes payment of the
tax payable in respect of the aforesaid supplies, the said
registered person may re-avail the amount of credit reversed
by him in such manner as may be prescribed.
Chapter V: Input Tax Credit of the CGST Rules
Rule 36 Documentary requirements and conditions for claiming input

tax credit
(1) The input tax credit shall be availed by a registered person,

including the Input Service Distributor, on the basis of any of the
following documents, namely:-
(a) an invoice issued by the supplier of goods or services or

both in accordance with the provisions of section 31;
(b) an invoice issued in accordance with the provisions of

clause (f) of sub-section (3) of section 31, subject to the
payment of tax;

8.12
(c) a debit note issued by a supplier in accordance with the

provisions of section 34;
(d) a bill of entry or any similar document prescribed under

the Customs Act, 1962 or rules made thereunder for the
assessment of integrated tax on imports;
(e) an input service distributor invoice or input service

distributor credit note or any document issued by an
input service distributor in accordance with the
provisions of sub-rule (1) of rule 54.
(2) Input tax credit shall be availed by a registered person only if all the
applicable particulars as specified in the provisions of Chapter VI are
contained in the said document.
Provided that if the said document does not contain all the
specified particulars but contains the details of the amount of tax
charged, description of goods or services, total value of supply of
goods or services or both, GSTIN of the supplier and recipient and
place of supply in case of inter-State supply, input tax credit may
be availed by such registered person.
(3) No input tax credit shall be availed by a registered person in

respect of any tax that has been paid in pursuance of any order
where any demand has been confirmed on account of any fraud,
willful misstatement or suppression of facts.
(4) No input tax credit shall be availed by a registered person in

respect of invoices or debit notes the details of which are
required to be furnished under subsection (1) of section 37
unless,-
(a) the details of such invoices or debit notes have been

furnished by the supplier in the statement of outward supplies
in FORM GSTR-1 or using the invoice furnishing facility; and
(b) the details of input tax credit in respect of such invoices or

debit notes have been communicated to the registered person
in FORM GSTR-2B under sub-rule (7) of rule 60.

Rule 37 Reversal of input tax credit in the case of non-payment of

consideration
(1) A registered person, who has availed of input tax credit on

any inward supply of goods or services or both, other than
the supplies on which tax is payable on reverse charge basis,
but fails to pay to the supplier thereof, the amount towards
the value of such supply whether wholly or partly, along with
the tax payable thereon, within the time limit specified in
the second proviso to sub-section (2) of section 16, shall pay
or reverse an amount equal to the input tax credit availed in
respect of such supply, 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 one
hundred and eighty days from the date of the issue of the
invoice.
Provided that the value of supplies made without

consideration as specified in Schedule I of the said Act shall
be deemed to have been paid for the purposes of the second
proviso to sub-section (2) of section 16.
Provided further that the value of supplies on account of any

amount added in accordance with the provisions of clause
(b) of sub-section (2) of section 15 shall be deemed to have
been paid for the purposes of the second proviso to sub-
section (2) of section 16.
(2) Where the said registered person subsequently makes the

payment of the amount towards the value of such supply
along with tax payable thereon to the supplier thereof, he
shall be entitled to re-avail the input tax credit referred to in
sub-rule (1).
(4) The time limit specified in sub-section (4) of section 16 shall not
apply to a claim for re-availing of any credit, in accordance with
the provisions of the Act or the provisions of this Chapter, that had
been reversed earlier.

8.14
Rule 37A Reversal of input tax credit in the case of non-payment of

tax by the supplier and re-availment thereof
Where input tax credit has been availed by a registered

person in the return in FORM GSTR-3B for a tax period in
respect of such invoice or debit note, the details of which
have been furnished by the supplier in the statement of
outward supplies in FORM GSTR-1 or using the invoice
furnishing facility, but the return in FORM GSTR-3B for the
tax period corresponding to the said statement of outward
supplies has not been furnished by such supplier till the 30th
day of September, following the end of the financial year in
which the input tax credit in respect of such invoice or debit
note has been availed, the said amount of input tax credit
shall be reversed by the said registered person, while
furnishing a return in FORM GSTR-3B on or before the 30th
day of November following the end of the financial year
Provided that where the said amount of input tax credit is not
reversed by the registered person in a return in FORM GSTR-3B
on or before the 30th day of November following the end of
such financial year during which such input tax credit has been
availed, such amount shall be payable by the said registered
person along with interest thereon under section 50.
Provided further that where the said supplier subsequently

furnishes the return in FORM GSTR-3B for the said tax
period, the said registered person may re-avail the amount
of such credit in the return in FORM GSTR-3B for a tax period
thereafter.
ANALYSIS
(i) Eligibility for taking ITC [Section 16(1)]
(a) Registration under GST
Every registered person shall be entitled to ITC of GST charged on
inward supply of goods and / or services. This is subject to the

provisions relating to use of ITC under section 49 and the conditions

and restrictions in the rules. [Section 49 prescribes provisions relating
to payment of tax, interest, penalty & other amounts. The same has
been discussed in detail in Chapter 13: Payment of Tax in this Module of
the Study Material.]
(b) Goods/services to be used for business purposes
ITC of GST will be available on goods and/or services which are used
or intended to be used in the course or furtherance of the business
[See definition of business]. The “intention to use” the goods and/or
services in the course or furtherance of business would also suffice for
availing ITC on such goods and/or services. Thus, tax paid on goods
and or/services which are used or intended to be used for non-
business purposes cannot be availed as credit. ITC will be credited to
electronic credit ledger.
(ii) Conditions for taking ITC [Section 16(2)]

This sub-section starts with a non-obstante clause and hence all the
conditions specified therein must be fulfilled irrespective of fulfillment of
any other conditions given under any other sub-section of section 16 for the
purpose of taking of input tax credit. The registered person will be entitled
to ITC on an inward supply only if ALL the following six conditions are
fulfilled:
(a) Possession of tax paying document [Section 16(2)(a) read with
rule 36]
ITC can be availed on the basis of any of the following documents:
(i) Invoice or revised invoice 4 issued by the supplier of goods
and/or services
(ii) Invoice issued by the recipient receiving goods and/or services
from unregistered supplier in case of reverse charge, subject to
payment of tax
4
Provisions relating to revised invoice have been discussed in detailed in Chapter 10: Tax
Invoice: Credit and Debit Notes in this Module of the Study Material.

8.16
(iii) Debit note issued by the supplier

(iv) Bill of entry or similar document prescribed under the Customs
Act 5
(v) Document issued by input service distributor 6
The documents on the basis of which ITC is being taken should
contain at least the following details:
(i) Amount of tax charged
(ii) Description of goods or services
(iii) Total value of supply of goods and/or services
(iv) GSTIN of the supplier and recipient
(v) Place of supply in case of inter-State supply
No ITC of tax paid towards demands involving fraud [Rule
36(3)]: 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.
(b) Details of invoices/debit notes uploaded by the supplier in his
GSTR-1 or using IFF and details communicated in Form GSTR-2B
[Section 16(2)(aa) read with rule 36(4)]
ITC in respect of any supply of goods or services or both can be
taken by a registered person only if the details of the
invoice/debit note in respect of said supply have been furnished
by the supplier in the statement of outward supplies (Form GSTR-1
or using IFF) and such details have been communicated to the
recipient of such invoice/debit note in Form GSTR-2B.
5
Provisions relating to the Customs Act, 1962 will be dealt with at the Final level.
6
Concept of Input Service Distributor (ISD) will be dealt with at the Final level.

GSTR-1 is a monthly/quarterly statement containing details of outward

supplies made by a registered supplier. In case where GSTR-1 is
furnished quarterly under QRMP (Quarterly Return Monthly Payment)
scheme, supplier can furnish such details for 1st two months of the
quarter using invoice furnishing facility (IFF). This facility is provided
to the taxpayer, to pass on the credit to their recipients.
Such details of outward supplies furnished by the supplier are
communicated and made available electronically (auto populated) to
the respective recipient(s) in GSTR- 2B. GSTR-2B is an auto-generated
ITC statement for every registered person based on details furnished
in GSTR-1/using IFF by the supplier 7.
Thus, in respect of invoices/debit notes the details of which are

not furnished by the suppliers in their GSTR-1s or using IFF (and
thus they are not visible in GSTR-2B of the recipient), ITC cannot
be availed by such recipient.
ITC on such invoices/debit notes, not reflected in GSTR-2B of the
current month, may be claimed by the taxpayer in any of the
succeeding months when the details of said invoices/debit notes
are furnished by the suppliers.
The above concept has been illustrated as follows:

ITC on invoices/debit FULL ITC can be
notes which have claimed on such
been furnished by the invoices/debit notes, if
suppliers in their all other conditions of
GSTR-1s/using IFF availing ITC are
and reflected in fulfilled
GSTR-2B of recipient.
7
The provisions relating to QRMP, filing of GSTR-1/IFF and GSTR-2B have been discussed in
detail in Chapter 15: Returns in this Module of the Study Material.

8.18
ITC on invoice/debit NO ITC can be claimed

note which have not in respect of such
been furnished by invoices/debit notes.
suppliers in their
GSTR-1s/using IFF
and thus, not
reflected in GSTR-2B
of recipient.
✪ Invoices on which ITC is not available under any

of the provisions e.g., under section 17(5), are not
to be considered for claiming ITC even though
furnished by the suppliers.
✪ On the other hand, full ITC can be availed in respect of
IGST paid on imports, documents issued under reverse charge,
credit received from ISD etc., which are outside the ambit of
section 37(1).
ILLUSTRATION 1
Vijay Sales, a registered supplier, receives 100 invoices (for inward
supply of goods/ services) involving GST of ` 10 lakh, from various
suppliers during the month of October.
Out of 100 invoices, details of 80 invoices involving GST of ` 6 lakh
have been furnished by the suppliers in their respective GSTR-1s filed on
the prescribed due date therefor and are reflected in GSTR-2B of Vijay
Sales.
Compute the ITC that can be claimed by Vijay Sales in its GSTR-3B for
the month of October to be filed by 20th November assuming that GST
of ` 10 lakh is otherwise eligible for ITC.
ANSWER
ITC to be claimed by Vijay Sales in its GSTR-3B for the month of
October to be filed by 20th November will be computed as under-

Invoices Amount of ITC Amount of ITC

involved in the that can be
invoices (`) availed (`)
80 invoices furnished in 6 lakh 6 lakh

GSTR-1 [Refer Note 1]
20 invoices not furnished in 4 lakh Nil

GSTR-1 [Refer Note 2]
Total 10 lakh 6 lakh
Notes:
(1) 100% ITC can be availed on invoices furnished by the suppliers
in their GSTR-1s and reflected in GSTR-2B of Vijay Sales.
(2) As per rule 36(4), the ITC in respect of invoices not furnished by
the suppliers in their GSTR-1s and thus, not being reflected in
GSTR-2B of recipient, cannot be claimed. Thus, in respect of 20
invoices which are not furnished in GSTR-1s of suppliers and are
not reflected in GSTR-2B of Vijay Sales, no ITC can be availed 8.
(c) Receipt of the goods and / or services [Section 16(2)(b)]
The registered person taking the ITC must have received the goods
and / or services.
“Bill to Ship to” Model: Under this model, the goods are delivered
to a third party - ‘C’ on the direction of the customer (registered
person) – ‘B’ who purchases the goods from the vendor (supplier) –
‘A’. In other words, ‘A’ bills to ‘B’ but ships the goods to ‘C’ on
direction of ‘B’. In effect, two supplies take place in this scenario viz.,
from ‘A’ to ‘B’ and from ‘B’ to ‘C’. Thus, under this model, the
customer (registered person) who receives such goods does not
actually receive the said goods.
8
Let us suppose, subsequently, the suppliers of these 20 invoices furnish the details of said
invoices in their GSTR-1s for the month of November, the details shall be reflected in GSTR-
2B of Vijay Sales of November month and Vijay Sales can take credit of such invoices in its
GSTR-3B for the month of November.

8.20
For such cases, by virtue of explanation to section 16(2)(b), it is deemed

that the registered person (customer) has received the goods. In other
words, goods delivered to another person on the direction of the
registered person by way of transfer of documents of title or otherwise,
either before or during the movement, are deemed to have been
received by such registered person. So, ITC will be available to the
registered person, on whose order the goods are delivered to a third
person.
Similarly, services may also be provided to a third party by the service
provider (supplier) on the direction of the service recipient (registered
person). In this case also, though the service recipient (registered
person) does not receive the service, by virtue of explanation to section
16(2)(b) it is deemed that the registered person (service recipient) has
received the service. In other words, service provided to any person on
the direction of and on account of the registered person, is deemed to
have been received by such registered person. So, ITC will be available to
the registered person, on whose direction the services are provided to a
third person.
Supply by A to B B entitled to avail

A bills to B ITC on the basis
A B of invoice issued
by A as
goods/services
deemed to be
Supply by B to C
received by B
B bills to C
Goods/Services
Goods shipped/Services being received, C
provided by A to C on entitled to avail ITC
directions of B C on the basis of the
invoice issued by B
(1) Badri is a trader who places an order on Aatmaram for a

consignment of soda ash. Badri receives a buying order
from Champak for the same quantity of soda ash. Badri
instructs Aatmaram to deliver the goods to Champak, and in turn
Aatmaram raises an invoice on Badri as Badri is the actual buyer of the
goods who have instructed Aatmaram to deliver the goods to

Champak. Though the goods are not physically received at the

premises of Badri, section 16(2)(b) allows ITC of such goods to Badri.
(2) The registered head office (New Delhi) of ABC Pvt. Ltd.
enters into a contract with DEF Pvt. Ltd. of New Delhi for
repair and maintenance of computers systems installed at
its registered branch office in Bengaluru, Karnataka. DEF
Pvt. Ltd. issues an invoice on ABC Pvt. Ltd., New Delhi for the services
provided by it. Though the actual services are received by the branch
office and not by the head office, section 16(2)(b) allows ITC of such
repair and maintenance services to head office.
(d) Details of ITC in respect of the said supply communicated to the
registered person under section 38 not restricted [Section
16(2)(ba)]
Section 38 stipulates that the details of outward supplies
furnished by the registered suppliers in GSTR-1/using IFF and an
auto-generated statement containing the details of ITC is made
available to the recipients of such supplies every month. This
auto-generated statement is GSTR-2B.
GSTR-2B contains the details of inward supplies (i) on which ITC is
available to the recipient as well as (ii) on which ITC cannot be
availed, whether wholly or partly, by the recipient. Section 38
stipulates that ITC cannot be availed in case where the details of
the outward supplies in GSTR-1/using IFF have been furnished by
specified registered persons.
Accordingly, ITC will not be available in respect of inward
supplies details of which have been furnished by a registered
supplier:
 who is a new registrant. (Specified period from taking
registration will be prescribed for this purpose.)
 who has defaulted in payment of tax for a prescribed period.
 whose output tax payable as per GSTR-1/IFF exceeds the
output tax paid in GSTR-3B for a particular tax period by
prescribed limit.

8.22
 who has availed ITC of an amount that exceeds the credit

that can be availed by him as per GSTR-2B during prescribed
period and by prescribed limit.
 who has defaulted in discharging his tax liability in
accordance with the provisions of section 49(12) read with
rule 86B, i.e. who has discharged more tax liability from
electronic credit ledger than prescribed under rule 86B 9.
 other specified classes of persons.
(e) Tax leviable on supply actually paid to Government [Section
16(2)(c)]
The supplier should have actually paid the tax charged on the goods
and/or services, for which ITC is being taken, either in cash or by
utilizing ITC, subject to the provisions of section 41.
Availment of self-assessed ITC [Section 41]
A registered person can avail the credit of eligible ITC as self-
assessed in his return. Such amount shall be credited to his
Reversal of ITC in the case of non-payment of tax by the supplier
and re-availment thereof [Section 41 read with rule 37A]
(I) Reversal of ITC: If the tax payable corresponding to such ITC
availed is not paid by the supplier to the Government, ITC so
availed shall be reversed by the said person along with
applicable interest.
A registered person (recipient) can avail ITC in GSTR-3B for a
tax period in respect of such invoice/debit note, the details
of which have been furnished by its supplier in the statement
of outward supplies (in GSTR-1/using IFF).
9
Rule 86B provides that the registered person shall not utilise the amount available in
electronic credit ledger to discharge his liability towards output tax in excess of 99% of such
tax liability, in cases where the value of taxable supply other than exempt supply and zero-
rated supply, in a month exceeds ` 50 lakh subject to specified exceptions. It has been
discussed subsequently in this chapter.

However, if supplier does not furnish return in Form GSTR-3B

for the tax period corresponding to the said statement of
outward supplies till 30th September following the end of FY
in which the ITC in respect of such invoice/ debit note has
been availed; the said amount of ITC shall be reversed by the
said recipient, while furnishing a return in GSTR-3B on or
before 30th November following the end of such FY during
which such ITC has been availed.
However, where the said amount of ITC is not so reversed by
recipient, such amount shall be payable by the said person
along with interest thereon under section 50.
(II) Re-availment of reversed ITC: Where the said supplier makes
payment of the tax payable in respect of the aforesaid
supplies, the said registered person may re-avail the amount
of credit reversed by him.
Thus, where the said supplier subsequently furnishes the
return in GSTR-3B for the said tax period, the said registered
person may re-avail the amount of such credit in the return
in GSTR-3B for a tax period thereafter.
(2A) Jhamku, a registered supplier, supplies goods to
Chamku valuing ` 10,000 on which he charged CGST and
SGST of ` 900 each in the invoice raised in March, 2023.
Jhamku uploaded the details of the said invoice in his GSTR-1 for the
said month filed before the due date based on which Chamku availed
the said ITC of ` 900 each towards CGST and SGST while filing his
GSTR-3B for March, 2023 as the said ITC was also reflected in his
GSTR-2B. However, Jhamku failed to furnish the corresponding
GSTR-3B (for the month of March, 2023) up to September, 2023.
Accordingly, while filing GSTR-3B for the month of October, 2023 on
20th November, 2023, Chamku reversed an amount of ITC earlier
availed by him. Subsequently, suppose if Jhamku files GSTR-3B on
20th December, 2023 and pays the said amount of ` 900 each towards
CGST and SGST, Jhamku can now re-avail the said input tax credit of
` 900 towards CGST and SGST which he has reversed earlier.

8.24
(f) Filing of return [Section 16(2)(d)]

The registered person taking the ITC must have filed his return in
GSTR-3B under section 39. Thus, a taxpayer should file GSTR-3B to
avail ITC on eligible inward supplies.
(iii) Goods received in lots: ITC available only on receipt of last lot
[First proviso to section 16(2)]
In case the goods covered under an invoice are not received in a single
consignment but are received in lots / instalments, ITC can be taken only upon
receipt of the last lot / instalment.
(3) XYZ enters into a contract with ABC for supply of 10 MT of a
chemical for ` 1,18,000 (inclusive of GST of ` 18,000) in the
month of August. The chemical is to be delivered in lots over a
period of three months. ABC raises the invoice for the entire amount in
August and XYZ also makes the payment in the same month but the supply
is completed in November. Though XYZ paid the full tax as early as August,
it can take the ITC of the same only on receipt of the last lot of the chemical
in the month of November.
(iv) Payment for the invoice to be made within 180 days [Second
proviso to section 16(2) read with rule 37]
The registered person must pay to the supplier, the value of the goods
and/or services along with the tax within 180 days from the date of
issue of invoice [Second proviso to section 16(2)].
However, where a registered person, who has availed of ITC on any
inward supply fails to pay to the supplier thereof, the amount towards
the value of such supply, whether wholly or partly, along with the tax
payable thereon, within 180 days from the date of issue of invoice by
supplier, shall pay or reverse an amount equal to the ITC availed in
respect of such supply, 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.

Exceptions
This condition of payment of value of supply plus tax within 180 days
does not apply in the following situations:
(a) Supplies on which tax is payable under reverse charge
(b) Deemed supplies without consideration – Schedule I
(c) Additions made to the value of supplies on account of supplier’s
liability, in relation to such supplies, being incurred by the
recipient of the supply as per section 15(2)(b).
Under situations given in points (b) & (c), the value of supply is deemed
to have been paid.
(4) Due to a quality dispute, PZP Ltd withheld payment on a
machine supplied by a vendor till it could be rectified. Over
180 days went by in this dispute. The credit taken by PZP on
the invoice needs to be paid / reversed along with interest in GSTR-3B
furnished for the month after completion of 180 days. Only after the
vendor rectified the machine and PZP released the payment, could PZP
take the credit again.
(v) If depreciation claimed on tax component, ITC not allowed

[Section 16(3)]
If the person taking the ITC on capital goods and plant and machinery has
claimed depreciation on the tax component of the cost of the said items
under the Income-tax Act 1961, the ITC on the said tax component shall not
be allowed. Thus, in respect of the tax paid on such items, dual benefit
cannot be claimed under Income-tax Act, 1961 and GST law simultaneously.
In other words, either depreciation on the tax component can be claimed
under Income Tax Act or ITC of such tax paid can be availed under GST law.
(vi) Time limit for availing ITC: 30 th November of succeeding
financial year or date of filing of relevant annual return,
whichever is earlier [Section 16(4)]
ITC on invoices pertaining to a financial year or debit notes issued in a
financial year can be availed any time till 30th November of the succeeding
financial year or the date of filing of the relevant annual return, whichever
is earlier.

8.26
Here, in case of debit notes, the date of

issuance of debit note and not the date of
underlying invoice is relevant to determine
the relevant financial year 10.
A debit note dated 07.07.2022 is issued in respect of the original
invoice dated 16.03.2022. As the invoice pertains to F.Y. 2021- 22,
the relevant financial year for availment of ITC in respect of the
said invoice in terms of section 16(4) shall be FY 2021-22. However, as the
debit note has been issued in FY 2022-23, the relevant financial year for
availment of ITC in respect of the said debit note shall be FY 2022-23 in
terms of amended provision of section 16(4).
(5) Hercules Machinery delivered a machine to XYZ, a monthly

return filer under GST, in the month of January under Invoice no.
49 dated 28th January 2023 for ` 4,15,000 plus GST and undertook
trial runs and calibration of the machine as per the requirements of XYZ.
The amount chargeable for the post-delivery activities was covered in a
debit note raised in the month of April 2023 for ` 50,000 plus GST. XYZ did
not file its annual return for FY 2022-23 till the end of November, 2023.
The time-limit to avail ITC in respect of tax paid on supply for Invoice No. 49
would be 30th November, 2023.
Since the debit note is received in the next financial year, the time limit for
taking ITC available on ` 50,000 is 30th November 2024, [earlier of the date
of filing the annual return for the preceding financial year or 30th of
November of the succeeding year.
Exception
The time limit u/s 16(4) does not apply to claim for re-availing of credit that
had been reversed earlier.
10

(vii) Restriction of ITC in proportion of (i) taxable supplies (ii)

business purposes [Sub-sections (1) and (2) of section 17]
ITC is restricted in proportion of the use of the goods and/or services (i) in
the taxable and / or zero-rated supplies (ii) for business purposes. This is
elaborated in heading (4) below.
(viii)ITC not allowed on certain supplies [Section 17(5)]
ITC has been blocked for specified goods and services. This is elaborated in
heading (4) below.
Quiz
Time!
Following amounts are being reflected in GSTR-2B of Sukhiya

1 Associates, registered under GST, for the month of April:
Raw material purchased ` 20,000
Machinery purchased for manufacturing goods ` 1,00,000
Raw material purchased for construction of ` 5,00,000
immovable property
Apart from this, an invoice for purchase of raw materials worth
` 30,000 is not reflected in GSTR-2B of April as the supplier has not furnished his
GSTR-1. Moreover, GST of ` 25,000 is paid on GTA services received from Sindhu
Transporters in April for transport of raw materials.
Compute the amount of ITC that Sukhiya Associates is eligble to avail for the month
of April.
(a) ` 1,45,000 (b) ` 6,20,000 (c) ` 6,45,000 (d) ` 6,75,000

8.28
4. APPORTIONMENT OF CREDIT & BLOCKED

CREDITS [SECTION 17 11]
Section 17 Apportionment of credit and blocked credits
Sub-section Clause Apportionment of credit and blocked credits
(1) Where the goods or services or both are used by the registered
person partly for the purpose of any business and partly for other
purposes, the amount of credit shall be restricted to so much of
the input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered
person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the Integrated Goods and Services
Tax Act and partly for effecting exempt supplies under the said
Acts, the amount of credit shall be restricted to so much of the
input tax as is attributable to the said taxable supplies including
zero-rated supplies.
(3) The value of exempt supply under sub-section (2) shall be such as
may be prescribed, and shall include 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.
Explanation.— For the purposes of this sub-section, the expression

‘‘value of exempt supply’’ shall not include the value of activities
or transactions specified in Schedule III, except those specified in
paragraph 5 of the said Schedule.
11
Provisions relating to determination of ITC in respect of inputs/input services and capital
goods and reversal thereof will be discussed at Final Level.

(5) Notwithstanding anything contained in sub-section (1) of section

16 and sub- section (1) of section 18, input tax credit shall not be
available in respect of the following, namely:—
(a) motor vehicles for transportation of persons having

approved seating capacity of not more than thirteen
persons (including the driver), except when they are used
for making the following taxable supplies, namely:—
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
(aa) vessels and aircraft except when they are used––
(i) for making the following taxable supplies,

namely:—
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such

vessels; or
(D) imparting training on flying such aircraft;
(ii) for transportation of goods;
(ab) services of general insurance, servicing, repair and

maintenance in so far as they relate to motor vehicles,
vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such

services shall be available—

8.30
(i) where the motor vehicles, vessels or aircraft

referred to in clause (a) or clause (aa) are used for
the purposes specified therein;
(ii) where received by a taxable person engaged—
(I) in the manufacture of such motor vehicles,

vessels or aircraft; or
(II) in the supply of general insurance services in

respect of such motor vehicles, vessels or
aircraft insured by him;
(b) the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty

treatment, health services, cosmetic and plastic
surgery, leasing, renting or hiring of motor
vehicles, vessels or aircraft referred to in clause (a)
or clause (aa) except when used for the purposes
specified therein, life insurance and health
insurance:
Provided that the input tax credit 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;
(ii) membership of a club, health and fitness centre;

and
(iii) travel benefits extended to employees on vacation

such as leave or home travel concession:
Provided that the input tax credit in respect of such

goods or services or both shall be available, where it is

obligatory for an employer to provide the same to its
employees under any law for the time being in force 12.
(c) 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;
(d) goods or services or both received by a taxable person for

construction of an immovable property (other than plant
or machinery) on his own account including when such
goods or services or both are used in the course or
Explanation.––For the purposes of clauses (c) and (d), the

expression “construction” includes re-construction,
renovation, additions or alterations or repairs, to the
extent of capitalisation, to the said immovable property
(e) goods or services or both on which tax has been paid

under section 10;
(f) goods or services or both received by a non-resident

taxable person except on goods imported by him;
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by

way of gift or free samples; and
(i) any tax paid in accordance with the provisions of

sections 74, 129 and 130.
12
Circular No. 172/04/2022 GST dated 06.07.2022 clarifies that this proviso is applicable to
the whole of section 17(5)(b).

8.32
(6) The Government may prescribe the manner in which the credit
referred to in sub-sections (1) and (2) may be attributed.
Explanation.–– For the purposes of this Chapter and Chapter VI, the
expression “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 or services or both and
includes such foundation and structural supports but excludes—
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
ANALYSIS
Section 17 requires apportionment and concomitant restriction of ITC in two
situations as also blocking of ITC on specified inward supplies.
A. Apportionment of ITC [Sub-sections (1) and (2) of section 17]
(i) The fundamental principle of credit scheme under value added tax is that
tax paid on inputs, input services and capital goods can be availed as credit
only when the output is taxable. Thus, when tax is not payable on output,
credit cannot be availed.
Accordingly, ITC under GST can be availed and utilised for payment of tax
on output supply. Consequently, ITC cannot be availed when tax is not
payable on output supply, i.e. on exempt supply. The only exception to the
above principle is ‘zero rated supply, where ITC is available even if no tax is
payable on output supply as zero rated supply is not an exempted supply.
If a taxable person is making both taxable and exempt supply, he is entitled
to full credit of ITC in respect of inputs, input services and capital goods
exclusively used for taxable supply and no credit at all can be availed for
inputs, input services and capital goods exclusively used for exempt supply.
If common inputs, input services and capital goods are used for taxable as
well as exempt supply, only proportionate ITC attributable to the taxable

supply is available. The common ITC is apportioned in the ratio of value of

taxable supply and exempt supply.
(ii) Also, in case goods and/or services are used by the taxable person partly for
the business purposes and partly for non-business purposes, he is entitled
to full credit of ITC in respect of inputs, input services and capital goods
exclusively used for business purposes and no credit at all can be availed for
goods and/or services exclusively used for non-business purposes.
If common inputs, input services and capital goods are used partly for
business and partly for non-business purposes, only proportionate ITC
attributable to the business purpose is available.
Elaborate provisions have been made in sub-sections (1) and (2) of section 17
and rules 42 and 43 for calculation of such proportionate ITC. Such
provisions will be discussed in detail at the Final level.
Section 16(2) of the IGST Act specifies that ITC may be availed
on inward supplies for making zero-rated supply. Zero-rated
supply is an expression that covers two kinds of supplies: (i)
exports, and (ii) supplies to a SEZ unit or SEZ developer. Therefore, ITC is
available on goods and / or services used for supplies made in the course
of export or to an SEZ unit or SEZ developer 13.
(6) A registered person is in the business of manufacturing shoes.

He gave 50 pairs of shoes to his friends free of cost. ITC on
inputs and input services attributable to such 50 pair of shoes,
being used for non-business purposes will not be available.
(7) A registered person manufactures a product ‘X’ chargeable to

18% GST, a product ‘Y’ chargeable to NIL rate of tax and a
product ‘Z’ which is exported without payment of tax under
bond. All the three products are manufactured from common inputs and
input services. ITC on inputs and input services attributable to product ‘Y’
being an exempt supply, will not be available.
13
Provisions relating to zero-rated supplies have been discussed at the Final level.

8.34
B. Blocked credits [Section 17(5)]

ITC of tax paid on almost every inputs, input services or capital goods used
for supply of taxable goods and/or services is allowed under GST except a
small list of items provided u/s 17(5). Thus, ITC on such items is not allowed
even though the same may qualify as inputs, input services or capital goods
and are used in the course or furtherance of business.
The blocked list of credit covers mainly items of personal consumption,
inputs and input services use of which results into formation of an
immovable property (except plant and machinery), telecommunication
towers, pipelines laid outside the factory premises, etc. and taxes paid as a
result of detection of evasion of taxes, etc.
The various goods and/or services on which credit is blocked are discussed
hereunder:
(i) Motor vehicles and other conveyances and related services
(insurance, servicing and repair and maintenance)
Motor vehicles and conveyances have been defined in the CGST Act
[See definition under the heading Relevant Definitions].
Motor vehicles exclude –
 vehicle running upon fixed rails
 special purpose vehicles for being used in a factory or any
enclosed premises
 vehicle with less than 4 wheels fitted with engine capacity of
upto 25cc – (Thus, railways, two/three wheelers with engine
capacity of upto 25cc, bicycle etc. do not fall in the definition of
motor vehicle.)
Broadly, ITC is blocked on motor vehicles, vessels and aircrafts with
certain exceptions. Further, ITC is also blocked on certain services
relating to motor vehicles, vessels and aircrafts namely, general
insurance, servicing and repair and maintenance. The basic principle
here is that the motor vehicles, aircrafts and vessels on which ITC is
blocked, the ITC on services of insurance, servicing and repair and
maintenance pertaining to such motor vehicles, vessels and aircrafts is
also blocked. The blocked credits relating to motor vehicles, vessels,

aircrafts and related services are discussed hereunder:
S. Goods and/or Exceptions to goods Remarks

No. services on and/or services
which credit is mentioned in
blocked column (2) on which
credit is allowed
(1) (2) (3) (4)
(i) Motor vehicles Ineligible motor  ITC on ineligible

for vehicles when used motor vehicles
transportation for any of the used for any
of persons with following eligible purpose other
seating purposes - than the eligible
capacity ≤ 13 purposes is not
 making further
persons allowed.
taxable supply of
(including the
such motor  ITC on motor
driver) –
vehicles (e.g vehicles for
Referred to as
traders of motor transportation of
ineligible motor
vehicles); persons with
vehicle in this
seating capacity >
table  making taxable
13 persons
supply of
(including the
transportation of
driver) used for
passengers (e.g
any purpose is
travel operator
allowed.
offering
transportation  ITC on motor
services); vehicles other
than ineligible
 Making taxable motor vehicles
supply of
(e.g. motor
imparting training
vehicle used for
on driving such
transportation of
motor vehicles
goods, dumpers,
(e.g motor driving
tippers etc.) used
schools).
for any purpose is
allowed.

8.36
(ii) Vessels and Vessels and aircraft ITC on vessels and

aircrafts when used for any of aircrafts used for any
the following purpose other than
eligible purposes- the eligible purposes
is not allowed.
 making further
taxable supply of
such vessels or
aircraft;
 making taxable
supply of
transportation of
passengers;
 making taxable
supply of
imparting training
on navigating
such vessels;
 making taxable
supply of
imparting training
on flying such
aircrafts;
 transportation of
goods.
(iii) General  Such services  ITC is not allowed

insurance, relating to on services of
servicing, ineligible motor general insurance,
repair and vehicles, vessels servicing, repair
maintenance or aircraft when and maintenance
relating to: used for eligible relating to motor
purposes vehicles, vessels
 Ineligible
or aircraft, ITC on
motor  Such services
which is not
vehicles when received
allowed.
by-

 Vessels o Manufacturer  ITC is allowed on

of ineligible services of
 Aircraft
motor vehicles, general insurance,
vessels or servicing, repair
aircraft; or and maintenance
relating to motor
o Supplier of
vehicles, vessels
general
or aircraft, ITC on
insurance
which is allowed.
services in
respect of
ineligible
motor vehicles,
vessels or
aircraft insured
by him
(iv) Leasing,  Such services  ITC on leasing,

renting or when used for renting or hiring
hiring of motor making an of motor vehicles,
vehicles, outward taxable vessels or aircraft
vessels or supply of the on which ITC is
aircraft on same category of allowed, is also
which ITC is services or as an allowed**.
not allowed element of a
 ITC on such
taxable
services is allowed
composite or
in the case of
mixed supply
sub-contracting,
 Such services i.e. when such
when provided by services are used
an employer to its by the taxpayer
employees under who is in the
a statutory same line of
obligation business.

8.38
**The term “leasing” referred in above table refers to

leasing of motor vehicles, vessels and aircrafts only and
not to leasing of any other items.
Accordingly, availment of ITC is not barred in case of leasing, other
than leasing of motor vehicles, vessels and aircrafts 14.
(8) ITC on cars purchased by a manufacturing company for

official use of its employees is blocked.
(9) ITC on cars purchased by a car dealer for sale to
customers is allowed.
(10) ITC on cars purchased by a company engaged in renting out cars
for transportation of passengers is allowed.
(11) ITC on cars purchased by a car driving school for imparting
training on driving is allowed.
(12) ITC on buses (seating capacity for 24 persons) purchased by a
company for transportation of its employees from their residence to
office and back, is allowed.
(13) ITC on trucks purchased by a company for transportation of its
finished goods is allowed.
(14) ITC on aircraft purchased by a manufacturing company for
official use of its CEO is blocked.
(15) ITC on aircraft purchased by an Aviation School providing
training on flying aircrafts, is allowed.
(16) ITC on general insurance taken on a car used by employees of a
manufacturing company for official purposes is blocked.
(17) ITC on maintenance & repair services availed by a company for a
truck used for transporting its finished goods, is allowed.
(18) ITC on general insurance services taken on cars manufactured by
a car manufacturing company is allowed.
(19) A business jet purchased for the official travel of the company’s
directors is blocked.
14

(ii) Food & beverages, outdoor catering, health services and other
services
S. Goods and/or Exceptions to Remarks

No. services on goods and/or
which credit is services
blocked mentioned in
column (2) on
which credit is
allowed
(1) (2) (3) (4)
(i)  Food and  Such goods  ITC on such goods

beverages and/or services and/or services is
 Outdoor when used by a allowed in the case
catering registered of sub-contracting,
person for i.e. when such
 Beauty
making an goods and/or
treatment
outward taxable services are used
 Health supply of the by the taxpayer
services
same category who is in the same
 Cosmetic of goods and/or line of business,
and plastic services or as an e.g. outdoor
surgery element of a catering service
 Life taxable availed by another
insurance composite or outdoor caterer.
and health mixed supply  When such goods
insurance  Such goods and/or services are
and/or services provided by the
when provided employer to its
by an employer employees without
to its employees any statutory
under a obligation, ITC
statutory thereon is blocked.
obligation
(ii) Membership of Such services when When such goods

a club, health provided by an and/or services are

8.40
and fitness employer to its provided by the

centre employees under a employer to its
statutory employees without
(iii) Travel benefits obligation any statutory
extended to obligation, ITC
employees on thereon is blocked.
vacation such
as leave or
home travel
concession
(19) A manufacturing company purchases food items for

being served to its customers, free of cost. ITC on such
goods is blocked.
(20) AB & Co., a caterer of Amritsar, has been awarded a contract for
catering in a marriage to be held at Ludhiana.
The firm has given the contract for supply of snacks, to be served in
the marriage, to CD & Sons, a local caterer of Ludhiana. ITC on such
outdoor catering services availed by AB & Co., is allowed.
(21) ITC on outdoor catering services availed by a garment exporter for
a marketing event organised for its prospective customers, is blocked.
(22) Outdoor catering service is availed by a company to run a free
canteen in its factory. The Factories Act, 1948 requires the company
to set up a canteen in its factory. ITC on such outdoor catering is
allowed.
(23) The Managing Director of a company has taken membership of a
club, the fees for which is paid by the company. ITC on such service is
blocked.
(24) A company avails services of a travel agency for organizing a free
vacation for its top performing employees. ITC on such services is
blocked.
(iii) Works contract services for construction of immovable
property [Clause (c) of section 17(5)]
One major input service, ITC on which is blocked is input service
relating to construction activity like construction of office building,

factory building etc. (except in case of persons like builders,

developers and contractors who are undertaking construction for
others). However, ITC is available for routine construction related
services like repairs, maintenance, renovation etc. of office and factory
building. Thus, broadly, ITC of construction services is not available
when the expenses are capitalised in the books of account. Here, it
needs to be noted that capitalisation of an expense does not depend
on whether the taxpayer intends to avail ITC, but on the basis of
Accounting Standards and GAAP.
Works contract has been defined in the CGST Act [See definition under
the heading Relevant Definitions]. Essentially works contract is a
composite supply involving both goods and services. Under the
erstwhile laws, definition of works contract included work in relation
to both movable and immovable properties. However, under GST law,
the ambit of works contract has been confined only to immovable
property.
Meaning of immovable property

Immovable property has not been defined under the GST law.
Therefore, we will have to look for the definition of immovable property
in other laws. Section 3(26) of the General Clauses Act, 1897, defines
the term immovable property to include land, benefits to arise out of
land, and things attached to the earth, or permanently fastened to
anything attached to the earth.
The term “attached to the earth” is defined in section 3 of the Transfer
of Property Act, 1882 to mean:
(a) rooted in the earth, as in the case of trees and shrubs; [However,
the term "immovable property" under the Transfer of Property Act
does not cover standing timber, growing crops or grass.]
(b) embedded in the earth, as in the case of walls or buildings.
(c) attached to what is so embedded for the permanent beneficial
enjoyment of that to which it is attached.
Under GST law, a composite supply of works contract is treated as

supply of services in terms of para 6(a) of Schedule II to the CGST Act.

8.42
ITC on works contract services for construction of an immovable

property is blocked EXCEPT WHEN
 It is an input service for further supply of works contract service
(sub-contracting);
[ITC on works contract services can be availed only by that
taxpayer who is in the same line of business, i.e. only a works
contractor can avail ITC on works contract services received by
him.]
 Immovable property is plant and machinery
[Plant and machinery affixed permanently to the earth constitutes
an immovable property. However, ITC on works contract services
used for construction of such plant and machinery is allowed as
an exception.]
Meaning of construction
“Construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalization, to the said
immovable property.
Thus, if re-construction, renovation, additions or alterations or repairs
are not capitalized, it would not tantamount to construction under
GST law. Consequently, ITC on works contract services availed for
such construction, which is not capitalized, whether for any immovable
property or for any plant and machinery, would be allowed to all the
recipients irrespective of their line of business.
Meaning of plant and machinery
“Plant and machinery” means apparatus, equipment, and machinery
fixed to earth by foundation or structural supports 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, ITC on works contract services availed for construction of

eligible plant and machinery is allowed to the recipient irrespective of
the line of business of such recipient and irrespective of whether
expense is capitalized or not by the recipient.
For instance, ITC on works contract services for construction of
machinery fixed to earth by a foundation, would be allowed. However,
ITC on works contract services for construction of telecommunication
tower(s), would be blocked.
(25) ITC on works contracts services availed by a software

company for construction of its office, is blocked.
(26) CD & Co., a works contractor of Noida, has been

awarded a contract for construction of a commercial complex in
Lucknow. The firm avails services of EF & Co., a local works contractor
of Lucknow, for the construction of complex. ITC on such works
contract services availed by CD & Co., is allowed.
(27) ITC on works contract services availed by an automobile company
for construction of a foundation on which a machinery (to be used in the
production process) is to be mounted permanently, is allowed.
(28) ITC on works contract services availed by a manufacturing company
for construction of pipelines to be laid outside its factory, is blocked.
(29) A consulting firm has availed services of a works contractor for
repair of its office building. The company has booked such
expenditure in its profit and loss account. ITC on such services is
allowed.
(30) A telecommunication company has availed services of a works
contractor for repair of its office building. The company has
capitalized such expenditure. ITC on such services is blocked.

8.44
ITC on works contract services for construction of

immovable property is available only in the
following three situations:
(i) When the works contract service is availed by a works
contractor for being used in providing the works contract
service.
(ii) For construction of eligible plant and machinery. In this
case, ITC is allowed to all recipients irrespective of their line of
business and whether expense capitalized or not.
(iii) When the value of works contract service is not
capitalized. In this case, ITC is allowed to all recipients
irrespective of their line of business.
(iv) Self-construction of immovable property [Clause (d) of

section 17(5)]
So now we know that ITC on works contract services availed by a
taxpayer, other than a works contractor, for construction of
immovable property (other than plant and machinery) is not available.
But what happens if a taxpayer procures goods and services and
constructs an immovable property, for being used in the course or
furtherance of business, without availing services of a works
contractor? Will ITC be allowed in such a case?
The answer is No. ITC is not allowed 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 even
though 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 even if the immovable property being constructed is used
in the course or furtherance of his business.

The discussion on terms, ‘construction’ and ‘plant and machinery’

for works contract services [Elaborated in point (iii) above]
applies to construction on own account also.
ITC on goods and/or services used in construction

of immovable property is available only in the
following three situations:
(i) For construction of eligible plant and machinery
(ii) When the value of goods and/or services is not capitalized
(iii) When the construction is not on own account
(31) A company buys cement, tiles etc. and avails the

services of an architect for construction of its office
building. ITC on such goods and services is blocked.
(32) MN & Constructions procures cement, paint, iron rods and
services of architects and interior designers for construction of a
commercial complex for one of its clients. ITC on such goods and
services is allowed to MN & Co.
(33) A company buys cement, tiles etc. and avails the services of an
architect for renovation of its office building. The company has
booked such expenditure in its profit and loss account. ITC on such
goods and services is allowed.
(34) ITC on goods and/or services used by an automobile company
for construction of a foundation on which a machinery (to be used in
the production process) is to be mounted permanently, is allowed.
(v) Inward supplies charged to tax under composition levy [Clause
(e) of section 17(5)]
A supplier registered under composition scheme cannot collect tax
from its customers. Thus, such supplier issues bill of supply and not a
tax invoice. A composition supplier pays a lumpsum tax at a specified
rate on its quarterly turnover.

8.46
Tax paid on goods and/or services under composition scheme is not

available as ITC for the recipient.
Since a composition supplier cannot collect any tax on its supplies,

from the recipient of its supplies, it is obvious that no ITC can be
availed in respect of such supplies by the recipients. Nevertheless,
section 17(5)(e) specifically blocks the ITC on inward supplies received
by a taxable person from a composition supplier.
(vi) Inward supplies received by a non-resident taxable person
[Clause (f) of section 17(5)]
Non-resident taxable person has been defined in the CGST Act [See
the definition under the heading Relevant Definitions]. Essentially, a
non-resident taxable person has no fixed place of business in India
but he sporadically supplies goods or services in India.
Tax paid on goods and/or services received by such non-resident
taxable person, is not available as ITC. However, tax paid by him on
imported goods is allowed as ITC.
Whereas ITC on goods imported by a non-resident

taxable person is allowed, ITC on services imported
by him is blocked.
(vii) Inward supplies used for personal consumption [Clause (g) of

section 17(5)]
One of the foremost conditions laid down in section 16 for availing
ITC on goods and/or services is that such goods and/or services
should be used in the course or furtherance of business. Further,
where goods and/or services are used partly for the purpose of any
business and partly for other purposes, section 17(1) restricts the
credit to so much of the ITC as is attributable to business purposes.
Furthermore, section 17(5)(g) also specifically blocks the ITC on goods
and/or service used for personal consumption.
The term ‘personal consumption’ has not been defined in the GST law.
Thus, it may be understood in the general sense which would mean
non-business use.

(35) Mr. X owns a grocery store. He procures rice, wheat

and biscuits for being sold in its store. Out of the inventory
so purchased, he gives 10 kgs each of rice and wheat to his
wife for household use. Being used for personal consumption, ITC on
10 kg of rice and 10 kg of wheat is blocked.
(viii) Free samples, gifts, goods lost/stolen etc. [Clause (h) of
section 17(5)]
Goods that are disposed

of by way of gift
Clause (h) of section 17(5)
Goods that are disposed

of by way of free samples
blocks ITC on
Lost goods
Stolen goods
Destroyed goods
Goods that are written off
ITC in respect of goods that are disposed of by way of gift or free

samples is not available. Also, ITC is blocked on lost goods, stolen
goods, destroyed goods and goods that are written off. This is
because principally, ITC is available only for payment of tax on output
supply. If no tax is payable on output supply, ITC on inputs/input
services/capital goods relating to such output supply is not eligible.
Hence, ITC on gifts and free samples is blocked as no tax is payable on
its outward supply. In case of lost/destroyed/stolen written off goods
also, ITC is not available as these goods cannot be said to have been
used for making a taxable supply.

8.48
Meaning of ‘gift’
The term gift has not been defined in the GST law. Therefore, we will
have to look for the definition of gift in other laws. Section 122 of the
Transfer of Property Act, 1882, defines gift as transfer of certain existing
moveable or immoveable property made voluntarily and without
consideration, by one person, called the donor, to another, called the
donee, and accepted by or on behalf of the donee.
In common parlance, gift is made without consideration, is voluntary in
nature and is made occasionally. It cannot be demanded as a matter of
right.
Meaning of ‘sample’
Sample is also not defined in the GST law. The dictionary meaning of
sample is “a small part or quantity intended to show what the whole is
like”. In commercial parlance, samples are given to prospective
customers to enable them to test the quality of the item before making
a decision to buy the same.
ITC in the hands of the supplier in respect of sales promotional

schemes
Circular No. 92/11/2019 GST dated 07.03.2019 has clarified the
entitlement of ITC in the hands of supplier in respect of various sales
promotional schemes as under [Taxability of such schemes has been
discussed at relevant places in Chapter 2: Supply Under GST and
Chapter 7: Value of Supply in Module 1 of the Study Material.]:
A. Samples and free gifts
Samples which are supplied free of cost, without any
consideration, do not qualify as “supply” under GST, except
where the activity falls within the ambit of Schedule I of the
CGST Act.
ITC shall not be available to the supplier on the inputs, input
services and capital goods to the extent they are used in relation
to the gifts or free samples distributed without any
consideration. However, where the activity of distribution of
gifts or free samples falls within the scope of “supply” on

account of the provisions contained in Schedule I of the said Act,

the supplier would be eligible to avail the ITC.
B. Buy one get one free offer

This is not an individual supply of free goods, but a case of two
or more individual supplies where a single price is 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.
C. Discounts including ‘Buy more, save more’ offers
Discounts offered by the suppliers to customers (including

staggered discount under “Buy more, save more” scheme and
post supply / volume discounts established before or at the time
of supply) shall be excluded 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
attributable to the discount on the basis of document (s) issued
by the supplier.
However, the supplier shall be entitled to avail the ITC for such
inputs, input services and capital goods used in relation to the
supply of goods or services or both on such discounts.
D. Secondary discounts
These are the discounts which are not known at the time of
supply or are offered after the supply is already over. Such
discounts shall not be excluded while determining the value of
supply. There is no impact on availability or otherwise of ITC in
the hands of supplier in this case.

8.50
ITC reversal when return of time expired medicines/drugs are

treated as fresh supply
The common trade practice in the pharmaceutical sector is that the
drugs or medicines (hereinafter referred to as “goods”) are sold by the
manufacturer to the wholesaler and by the wholesaler to the retailer
on the basis of an invoice/bill of supply as case may be. Such goods
have a defined life term which is normally referred to as the date of
expiry. Such goods which have crossed their date of expiry are
colloquially referred to as time expired goods and are returned to the
manufacturer, on account of expiry, through the supply chain.
Circular No. 72/46/2018 GST dated 26.10.2018 has clarified that the
retailer/ wholesaler can return the time expired goods, either by
treating the same as fresh supply or by issuing credit notes 15.
Return of time-expired goods by treating the same as fresh
supply
In case the person returning the time expired goods is a registered
person (other than a composition taxpayer), he may, at his option,
return the said goods by treating it is as a fresh supply and thereby
issuing an invoice for the same (hereinafter referred to as the, “return
supply”). The value of the said goods as shown in the invoice on the
basis of which the goods were supplied earlier may be taken as the
value of such return supply. The wholesaler or manufacturer, as the
case may be, who is the recipient of such return supply, shall be
eligible to avail ITC of the tax levied on the said return supply subject
to the fulfillment of the conditions specified in section 16.
In case the person returning the time-expired goods is a composition
taxpayer, he may return the said goods by issuing a bill of supply and
pay tax at the rate applicable to a composition taxpayer. In this
scenario there will not be any availability of ITC to the recipient of
15
The procedure for return of time expired drugs or medicines by issuing credit note is
covered in Chapter 10: Tax Invoice; Credit and Debit Notes in this Module of the Study
Material.

return supply. In case the person returning the time-expired goods is

an unregistered person, he may return the said goods by issuing any
commercial document without charging any tax on the same.
Where the goods returned by the retailer/wholesaler as a fresh supply,
are destroyed by the manufacturer, he/she is required to reverse the
ITC availed on the return supply in terms of section 17(5)(h). It is
pertinent to mention here that the ITC which is required to be
reversed in such scenario is the ITC availed on the return supply and
not the ITC that is attributable to the manufacture of such time
expired goods.
The clarification may also be applicable to return of goods for reasons
other than being time expired.
(36) If a manufacturer has availed ITC of ` 10/- at the time
of manufacture of medicines valued at ` 100/-. At the time
of return of such medicine on the account of expiry, the ITC
available to the manufacturer on the basis of fresh invoice issued by
wholesaler is ` 15/-. So, when the time expired goods are destroyed
by the manufacturer, he would be required to reverse ITC of ` 15/-
and not of ` 10/.
(ix) Tax paid in fraud cases, detention, confiscation etc. [Clause (i)
of section 17(5)]
Tax paid under sections 74, 129 and 130 16 is not available as ITC.
These sections prescribe the provisions relating to tax paid as a result
of evasion of taxes, or upon detention of goods or conveyances in
transit, or towards redemption of confiscated goods/conveyances.
16
These provisions will be discussed at the Final level.

8.52
Cheeku Ltd., a registered person, is engaged in manufacturing of

Quiz taxable goods. It provides following details in relation to GST paid
Time! on inward supplies procured by it during the month of January:
Raw material purchased ` 2,00,000
2 (to be received in the month of February)
Capital goods purchased ` 4,80,000
(Invoice for one of the machines is missing.
GST paid on the same is ` 70,000)
Free samples distributed ` 80,000
Trucks used for transport of minerals ` 1,20,000
Determine the amount of ITC that can be availed by Cheeku Ltd. for the
month of January. Subject to the information given above, all the other
conditions necessary for availing ITC have been fulfilled.
(a) ` 7,30,000 (b) ` 5,30,000 (c) ` 6,80,000 (d) ` 7,60,000
Quiz
Dheeru Ltd., a registered person, is engaged in manufacturing of
Time!
toys. It provides following details in relation to GST paid on
inward
supplies procured by it during the month of October:
3
Particulars GST (`)
Raw material purchased 2,00,000
Construction of pipelines laid outside
the factory premises 3,00,000
Insurance charges paid for trucks used
for transportation of goods 80,000
Determine the amount of ITC that can be availed by Dheeru Ltd. for the month of
October. Subject to the information given above, all the other conditions
necessary for availing ITC have been fulfilled.
(a) ` 5,00,000 (b) ` 2,80,000 (c) ` 3,80,000 (d) ` 5,80,000

5. CREDIT IN SPECIAL CIRCUMSTANCES

[SECTION 18]
Section 18 Availability of credit in special circumstances
(1) Subject to such conditions and restrictions as may be prescribed—
(a) a person who has applied for registration under this Act
within thirty 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;
(b) a person who takes registration under sub-section (3) of

section 25 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 of grant of registration;
(c) 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:
Provided that the credit on capital goods shall be

reduced by such percentage points as may be
prescribed;

8.54
(d) where an exempt supply of goods or services or both by

a registered person becomes a taxable supply, such
person 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 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:
Provided that the credit on capital goods shall be

reduced by such percentage points as may be
prescribed.
(2) A registered person shall not be entitled to take input tax credit
under sub-section (1) in respect of any supply of goods or services
or both to him after the expiry of one year from the date of issue
of tax invoice relating to such supply.
(3) Where there is a change in the constitution of a registered person

on account of sale, merger, demerger, amalgamation, lease or
transfer of the business with the specific provisions for transfer of
liabilities, the said registered person shall be allowed to transfer
the input tax credit which remains unutilised in his electronic
credit ledger to such sold, merged, demerged, amalgamated,
leased or transferred business in such manner as may be
prescribed.
(4) Where any registered person who has availed of input tax credit
opts to pay tax under section 10 or, where the goods or services or
both supplied by him become wholly exempt, he shall pay an
amount, by way of debit in the electronic credit ledger or
electronic cash ledger, equivalent to the credit of input tax in
respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock and on capital goods,
reduced by such percentage points as may be prescribed, on the
day immediately preceding the date of exercising of such option
or, as the case may be, the date of such exemption:

Provided that after payment of such amount, the balance of input

tax credit, if any, lying in his electronic credit ledger shall lapse.
(5) The amount of credit under sub-section (1) and the amount
payable under sub-section (4) shall be calculated in such manner
as may be prescribed.
(6) In case of supply of capital goods or plant and machinery, on

which input tax credit has been taken, the registered person shall
pay an amount equal to the input tax credit taken on the said
capital goods or plant and machinery reduced by such percentage
points as may be prescribed or the tax on the transaction value of
such capital goods or plant and machinery determined under
section 15, whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and
fixtures are supplied as scrap, the taxable person may pay tax on
the transaction value of such goods determined under section 15.
Chapter V: Input Tax Credit of CGST Rules
Rule 40 Manner of claiming credit in special circumstances
(1) The input tax credit claimed in accordance with the provisions of
sub-section (1) of section 18 on the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock, or the
credit claimed on capital goods in accordance with the provisions
of clauses (c) and (d) of the said sub-section, shall be subject to
the following conditions, namely -
(a) the input tax credit on capital goods, in terms of clauses (c)
and (d) of sub-section (1) of section 18, shall be claimed
after reducing the tax paid on such capital goods by five
percentage points per quarter of a year or part thereof from
the date of the invoice or such other documents on which
the capital goods were received by the taxable person.
(b) the registered person shall within a period of thirty days

from the date of becoming eligible to avail the input tax
credit under sub-section (1) of section 18, or within such

8.56
further period as may be extended by the Commissioner

by a notification in this behalf, shall make a declaration,
electronically, on the common portal in FORM GST ITC-
01 to the effect that he is eligible to avail the input tax
credit as aforesaid:
Provided that any extension of the time limit notified by

the Commissioner of State tax or the Commissioner of
Union territory tax shall be deemed to be notified by the
Commissioner.
(c) the declaration under clause (b) shall clearly specify the
details relating to the inputs held in stock or inputs
contained in semi-finished or finished goods held in
stock, or as the case may be, capital goods–
(i) on the day immediately preceding the date from

which he becomes liable to pay tax under the
provisions of the Act, in the case of a claim under
clause (a) of sub- section (1) of section 18;
(ii) on the day immediately preceding the date of the

grant of registration, in the case of a claim under
clause (b) of sub-section (1) of section 18;
(iii) on the day immediately preceding the date from

which he becomes liable to pay tax under section
9, in the case of a claim under clause (c) of sub-
section (1) of section 18;
(iv) on the day immediately preceding the date from

which the supplies made by the registered person
becomes taxable, in the case of a claim under
clause (d) of sub- section (1) of section 18;
(d) the details furnished in the declaration under clause (b)

shall be duly certified by a practicing chartered
accountant or a cost accountant if the aggregate value
of the claim on account of central tax, State tax, Union
territory tax and integrated tax exceeds two lakh rupees;

(e) the input tax credit claimed in accordance with the

provisions of clauses (c) and (d) of sub-section (1) of
section 18 shall be verified with the corresponding details
furnished by the corresponding supplier in FORM GSTR-1
or as the case may be, in FORM GSTR- 4, on the common
portal.
(2) The amount of credit in the case of supply of capital goods or

plant and machinery, for the purposes of sub-section (6) of section
18, shall be calculated by reducing the input tax on the said goods
at the rate of five percentage points for every quarter or part
thereof from the date of the issue of the invoice for such goods.
Rule 41 Transfer of credit on sale, merger, amalgamation, lease or

transfer of a business
(1) A registered person shall, in the event of sale, merger, de-merger,

amalgamation, lease or transfer or change in the ownership of
business for any reason, furnish the details of sale, merger, de-
merger, amalgamation, lease or transfer of business, in FORM
GST ITC-02, electronically on the common portal along with a
request for transfer of unutilized input tax credit lying in his
electronic credit ledger to the transferee:
Provided that in the case of demerger, the input tax credit shall be
apportioned in the ratio of the value of assets of the new units as
specified in the demerger scheme.
Explanation: - For the purpose of this sub-rule, it is hereby

clarified that the “value of assets” means the value of the entire
assets of the business, whether or not input tax credit has been
availed thereon.
(2) The transferor shall also submit a copy of a certificate issued by a

practicing chartered accountant or cost accountant certifying that
the sale, merger, de-merger, amalgamation, lease or transfer of
business has been done with a specific provision for the transfer of
liabilities.

8.58
(3) The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the un-
utilized credit specified in FORM GST ITC-02 shall be credited to
his electronic credit ledger.
(4) The inputs and capital goods so transferred shall be duly

accounted for by the transferee in his books of account.
Rule 41A Transfer of credit on obtaining separate registration for

multiple places of business within a State or Union territory
(1) A registered person who has obtained separate registration for

multiple places of business in accordance with the provisions of
rule 11 and who intends to transfer, either wholly or partly, the
unutilised input tax credit lying in his electronic credit ledger to
any or all of the newly registered place of business, shall furnish
within a period of thirty days from obtaining such separate
registrations, the details in FORM GST ITC-02A electronically on
the common portal, either directly or through a Facilitation Centre
notified in this behalf by the Commissioner:
Provided that the input tax credit shall be transferred to the newly
registered entities in the ratio of the value of assets held by them
at the time of registration.
Explanation.- For the purposes of this sub-rule, it is hereby

clarified that the ‘value of assets’ means the value of the entire
assets of the business whether or not input tax credit has been
availed thereon.
(2) The newly registered person (transferee) shall, on the common

portal, accept the details so furnished by the registered person
(transferor) and, upon such acceptance, the unutilised input tax
credit specified in FORM GST ITC-02A shall be credited to his
Rule 44 Manner of reversal of credit under special circumstances
(1) The amount of input tax credit relating to inputs held in stock,
inputs contained in semi-finished and finished goods held in stock,
and capital goods held in stock shall, for the purposes of sub-

section (4) of section 18 or sub-section (5) of section 29, be

determined in the following manner, namely,-
(a) for inputs held in stock and inputs contained in semi-

finished and finished goods held in stock, the input tax
credit shall be calculated proportionately on the basis of
the corresponding invoices on which credit had been
availed by the registered taxable person on such inputs;
(b) for capital goods held in stock, the input tax credit involved
in the remaining useful life in months shall be computed on
pro-rata basis, taking the useful life as five years.
(2) The amount, as specified in sub-rule (1) shall be determined

separately for input tax credit of central tax, State tax, Union
territory tax and integrated tax.
(3) Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount under
sub-rule (1) based on the prevailing market price of the goods on
the effective date of the occurrence of any of the events specified
in sub-section (4) of section 18 or, as the case may be, sub-section
(5) of section 29.
(4) The amount determined under sub-rule (1) shall form part of the
output tax liability of the registered person and the details of the
amount shall be furnished in FORM GST ITC-03, where such
amount relates to any event specified in sub-section (4) of section
18 and in FORM GSTR-10, where such amount relates to the
cancellation of registration.
(5) The details furnished in accordance with sub-rule (3) shall be duly
certified by a practicing chartered accountant or cost accountant.
(6) The amount of input tax credit for the purposes of sub-section (6)
of section 18 relating to capital goods shall be determined in the
same manner as specified in clause (b) of sub-rule (1) and the
amount shall be determined separately for input tax credit of
central tax, State tax, Union territory tax and integrated tax:

8.60
Provided that where the amount so determined is more than the

tax determined on the transaction value of the capital goods, the
amount determined shall form part of the output tax liability and
the same shall be furnished in FORM GSTR-1.
ANALYSIS
Section 18 provides for
(1) entitlement of ITC on inputs in stock and inputs contained in finished goods
or work-in-progress, and in last two cases in respect of capital goods as well
(i) at the time of registration/voluntary registration, (ii) on coming into
regular tax-paying status by exiting composition levy, (iii) on coming into
tax-paying status on account of exempt supply becoming taxable supply for
a registered person
(2) reversal of ITC on inputs in stock and inputs contained in finished goods or
work-in-progress and capital goods (i) at the time of exit from regular tax-
paying status by opting for composition levy, (ii) at the time of exit from
tax-paying status on account of taxable supply becoming exempt supply for
a registered person
(3) amount payable on supply of capital goods or plant and machinery on
which ITC has been taken
(4) transfer of ITC on account of change in constitution of the registered person
(i) Entitlement of ITC at the time of registration/voluntary registration or
switching to regular tax paying status or coming into tax-paying
status [Sub-sections (1) and (2) of section 18 read with rule 40]
The credit on inputs held in stock and contained in semi-finished goods or
finished goods held in stock and capital goods at the time of
registration/voluntary registration or coming into regular tax/tax-paying
status is available in the following manner:

S. Persons Goods entitled to ITC Restriction/conditi

No eligible to ons
take credit Inputs held in As on
stock/capital
goods
(1) (2) (3) (4) (5)
1. Person who Inputs held in The day  ITC to be availed

has applied stock and immediately within 1 year
for inputs preceding from the date of
registration contained in the date the issue of the
within 30 semi-finished from which tax invoice by the
days from or finished he becomes supplier.
the date on goods held in liable to pay
which he stock tax
becomes
liable to
registration
and has
been
granted such
registration
2. Person who Inputs held in The day

is not stock and immediately
required to inputs preceding
register, but contained in the date of
obtains semi-finished registration
voluntary or finished
registration goods held in
stock
3. Registered Inputs held in The day  ITC on capital

person who stock and immediately goods will be
ceases to inputs preceding reduced by 5%
pay contained in the date per quarter of a
compositio semi-finished from which year or part of
n tax and or finished he becomes the year from the

8.62
switches to goods held in liable to pay date of invoice.

regular stock and tax under  ITC claimed shall
scheme capital goods regular be verified with
scheme the
corresponding
4. Registered Inputs held in The day
details furnished
person stock and immediately
by the
whose inputs preceding
corresponding
exempt contained in the date
supplier.
supplies semi-finished from which
become or finished such supply  ITC to be availed
taxable goods held in becomes within 1 year
supplies stock relatable taxable from the date of
to such the issue of the
exempt supply tax invoice by the
and capital supplier.
goods
exclusively
used for such
exempt
supply
In all the above cases, the registered person has to make an electronic
declaration in the prescribed form 17 on the common portal, clearly
specifying the details relating to the inputs held in stock, inputs contained
in semi-finished or finished goods held in stock and capital goods on the
days mentioned in column (4) of table above. The declaration is to be filed
within 30 days (extendable by Commissioner/Commissioner of State
GST/Commissioner of UTGST) from the date when the registered person
becomes eligible to avail ITC. If the claim of ITC pertaining to CGST,
SGST/UTGST, IGST put together exceeds ` 2,00,000, the declaration needs to
be certified by a practicing Chartered Accountant/Cost Accountant.
17
Declaration is to be filed in Form GST ITC-01 where a registered person ceases to pay
composition tax and switches to regular scheme or his exempt supplies become taxable
supplies.

(37) ‘Z’ becomes liable to pay tax on 1st August and has obtained
registration on 15th August w.e.f. 1st August. ‘Z’ is eligible for ITC
on inputs held in stock and as part of semi-finished goods or
finished goods held in stock as on 31st July. ‘Z’ cannot take ITC on capital
goods.
(38) ‘A’ applies for voluntary registration on 5th June and obtains
registration w.e.f. 22nd June. ‘A’ is eligible for ITC on inputs held
in stock and as part of semi-finished goods or finished goods
held in stock as on 21st June. ‘A’ cannot take ITC on capital goods.
(39) ‘B’, a registered taxable person, was paying tax under

composition scheme up to 30th July. However, w.e.f. 31st July, ‘B’
becomes liable to pay tax under regular scheme. ‘B’ will be
eligible for ITC on inputs held in stock and inputs contained in semi-finished
or finished goods held in stock and capital goods as on 30th July. ITC on
capital goods will be reduced by 5% per quarter or part thereof from the
date of the invoice.
(ii) Reversal of ITC on switching to composition levy or exit from tax-
paying status [Section 18(4) read with rule 44]
 Section 18(4) requires reversal of ITC when a registered person who
has availed ITC switches to composition levy or when his supplies get
wholly exempted from tax.
 ITC on inputs should be reversed proportionately on the basis of
corresponding invoices on which credit had been availed on such
inputs. If invoices are not available, ITC can be reversed on the basis
of the prevailing market price of such goods on the date of switch
over/exemption. The details furnished on the basis of prevailing
market value need to be duly certified by a practicing Chartered
Accountant/ Cost Accountant.
 ITC involved in the remaining useful life (in months) of the capital
goods should be reversed on pro-rata basis, taking the useful life as 5
years.

8.64
(40) Capital goods have been in use for 4 years, 6 month

and 15 days. The useful remaining life in months = 5
months ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life that should be reversed
= C x 5/60
 The registered person has to debit the electronic credit or cash ledger
by the reversal amount in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock and capital
goods on the day immediately preceding the date of switch over/ date
of exemption.
 Balance of ITC, if any, lying in the electronic credit ledger lapses.
 Cancellation of registration also requires reversal of ITC on inputs held

in stock/ contained in semi-finished goods or finished goods held in
stock, capital goods or plant and machinery on the day immediately
preceding the cancellation date. The amount to be reversed on inputs
and capital goods is computed in the manner as applicable for sub-
sections (4) of section 18 (discussed above).
 ITC to be reversed on inputs and capital goods is calculated separately

for ITC of CGST, SGST/UTGST and IGST.
 The reversal amount is added to the output tax liability of the

registered person.
(iii) Amount payable on supply of capital goods or plant and machinery

on which ITC has been taken [Section 18(6) read with rule 40(2) &
rule 44(6)]
 If capital goods or plant and machinery on which ITC has been taken
are supplied outward by the registered person, he must pay an
amount that is the higher of the following:

 ITC taken on such goods reduced by 5% per quarter of a year or

part thereof from the date of issue of invoice for such goods
(i.e., ITC pertaining to remaining useful life of the capital goods),
or
 tax on transaction value of such capital goods/plant &

machinery
 ITC pertaining to remaining useful life of the capital goods should be

computed separately for ITC of CGST, SGST/UTGST and IGST.
 Where the amount of ITC remaining so determined exceeds the tax

payable on the transaction value of the capital goods, such amount
need to be paid and thus, should be added to the output tax liability.
 If refractory bricks, moulds and dies, jigs and fixtures are supplied as
scrap, the taxable person may pay tax on the transaction value.
*Note: Under rule 44(6), ITC involved in the remaining useful life (in
months) of the capital goods is reversed on pro rata basis, taking the useful
life as 5 years.
(iv) Transfer of ITC on account of change in constitution of registered

person [Section 18(3) read with rule 41]
In case of sale, merger, demerger, amalgamation, lease, transfer or change

in ownership of business etc., the ITC that remains unutilized in the
electronic credit ledger of the registered person can be transferred to the
new entity, provided there is a specific provision for transfer of liabilities in
such change of constitution. Circular No. 96/15/2019 GST dated 28.03.2019
has clarified that transfer or change in the ownership of business includes
transfer or change in the ownership due to death of the sole proprietor.
The above provisions have been explained with the help of the diagram on
next page:

8.66
3 ITC remaining unutilized in the

electronic credit ledger is transferred to
the newly constituted entity
2 Provision for transfer

of liabilities
1 •Sale
Change in constitution of •Merger
registered person •Demerger
•Amalgamtion
•Lease
•Transfer or change in ownership of
business
In the case of demerger, ITC will be apportioned in the ratio of the value of
assets of the new units as specified in the demerger scheme. Here, “value
of assets” means the value of the entire assets of the business irrespective
of whether ITC has been availed thereon or not.
The registered person should furnish the details of change in constitution

on the common portal and submit a certificate from practicing Chartered
Account/Cost Accountant certifying that the change in constitution has
been done with a specific provision for transfer of liabilities. Upon
acceptance of such details by the transferee on the common portal, the
unutilized ITC gets credited to his electronic credit ledger. The transferee
should duly record the inputs and capital goods so transferred in his books
of account.
(v) Transfer of ITC on obtaining separate registrations for multiple

places of business within a State/ Union Territory [Rule 41A]
Section 25 enables a taxpayer to obtain separate registrations for multiple

places of business within a State/ Union territory [Provisions of section 25
are discussed under Chapter 9: Registration in this Module of the Study
Material]. The registered person (transferor), having separate registrations
for multiple places of business within a State/Union Territory, can transfer

INPUT TAX CREDIT a 8.67 a
the unutilised ITC (wholly or partly) lying in his electronic credit ledger to
any or all of the newly registered place(s) of business in the ratio of the
value of assets held by them at the time of registration. Here, the ‘value of
assets’ means the value of the entire assets of the business irrespective of
whether ITC has been availed thereon or not.
The registered person should furnish the prescribed details on the common
portal within a period of 30 days from obtaining such separate registrations.
Upon acceptance of such details by the newly registered person (transferee)
on the common portal, the unutilised ITC gets credited to his electronic
credit ledger.
Quiz
Time! Vrinda Enterprises is a trader of electronic items in Haryana. It
opted for the composition scheme on 1st April of current
financial year. However, with effect from 1st July, it switched to
4 regular scheme of paying the tax since its aggregate turnover
crossed ` 150 lakh. The stock of goods (purchased during last 6
months) and machinery (purchased on 3rd May) on 30th June is
` 16,00,000 and ` 6,20,000 respectively. Compute the amount of
ITC that can be availed by Vrinda Enterprises assuming the
applicable rate of GST to be 18%.
(a) Nil (b) ` 3,94,020 (c) ` 3,96,000 (d) ` 2,88,000
6. HOW ITC IS UTILISED
Section 49 Payment of tax, interest, penalty and other amounts

(Relevant extract)
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(a) integrated tax shall first be utilised towards payment of

8.68
integrated tax and the amount remaining, if any, may be

utilised towards the payment of central tax and State tax,
or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment

of central tax and the amount remaining, if any, may
be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of

State tax and the amount remaining, if any, may be
utilised towards payment of integrated tax;
Provided that the input tax credit on account of State

tax shall be utilised towards payment of integrated tax
only where the balance of the input tax credit on
account of central tax is not available for payment of
integrated tax;
(d) the Union territory tax shall first be utilised towards

payment of Union territory tax and the amount
remaining, if any, may be utilised towards payment of
integrated tax;
Provided that the input tax credit on account of Union

territory tax shall be utilised towards payment of
integrated tax only where the balance of the input tax
credit on account of central tax is not available for
payment of integrated tax;
(e) the central tax shall not be utilised towards payment

of State tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised
towards payment of central tax.
Section 49A Utilisation of input tax credit subject to certain conditions
Notwithstanding anything contained in section 49, the input tax

credit on account of central tax, State tax or Union territory tax shall
be utilised towards payment of integrated tax, central tax, State tax
or Union territory tax, as the case may be, only after the input tax

credit available on account of integrated tax has first been utilised

fully towards such payment.
Section 49B Order of utilisation of input tax credit
Notwithstanding anything contained in this Chapter and subject

to the provisions of clause (e) and clause (f) of sub-section (5) of
section 49, the Government may, on the recommendations of the
Council, prescribe the order and manner of utilisation of the input
tax credit on account of integrated tax, central tax, State tax or
Union territory tax, as the case may be, towards payment of any
such tax.
Chapter IX: Payment of Tax of the CGST Rules
Rule 86A Conditions of use of amount available in electronic credit

ledger
(1) (a) the credit of input tax has been availed on the strength
of tax invoices or debit notes or any other document
prescribed under rule 36-
i. issued by a registered person who has been

found non-existent or not to be conducting any
business from any place for which registration
has been obtained; or
ii. without receipt of goods or services or both; or
(b) the credit of input tax has been availed on the strength
of tax invoices or debit notes or any other document
prescribed under rule 36 in respect of any supply, the
tax charged in respect of which has not been paid to
the Government; or
(c) the registered person availing the credit of input tax

has been found non-existent or not to be conducting
any business from any place for which registration has
been obtained; or
(d) he registered person availing any credit of input tax is

8.70
not in possession of a tax invoice or debit note or any

other document prescribed under rule 36,
may, for reasons to be recorded in writing, not allow debit of an

amount equivalent to such credit in electronic credit ledger for
discharge of any liability under section 49 or for claim of any
refund of any unutilised amount.
(2) The Commissioner, or the officer authorised by him under sub-

rule (1) may, upon being satisfied that conditions for disallowing
debit of electronic credit ledger as above, no longer exist, allow
such debit.
(3) Such restriction shall cease to have effect after the expiry of a
period of one year from the date of imposing such restriction.
Rule 86B Restrictions on use of amount available in electronic credit

ledger
Notwithstanding anything contained in these rules, the registered

person shall not use the amount available in electronic credit
ledger to discharge his liability towards output tax in excess of
ninety-nine per cent. of such tax liability, in cases where the value
of taxable supply other than exempt supply and zero-rated
supply, in a month exceeds fifty lakh rupees:
Provided that the said restriction shall not apply where -
(a) the said person or the proprietor or karta or the managing

director or any of its two partners, whole-time Directors,
Members of Managing Committee of Associations or Board
of Trustees, as the case may be, have paid more than one
lakh rupees as income tax under the Income-tax Act,
1961(43 of 1961) in each of the last two financial years for
which the time limit to file return of income under
subsection (1) of section 139 of the said Act has expired; or
(b) the registered person has received a refund amount of

more than one lakh rupees in the preceding financial year
on account of unutilised input tax credit under clause (i) of
first proviso of sub-section (3) of section 54; or

(c) the registered person has received a refund amount of

more than one lakh rupees in the preceding financial year
on account of unutilised input tax credit under clause (ii)
of first proviso of sub-section (3) of section 54; or
(d) the registered person has discharged his liability towards

output tax through the electronic cash ledger for an
amount which is in excess of 1% of the total output tax
liability, applied cumulatively, upto the said month in the
current financial year; or
(e) the registered person is -
(i) Government Department; or
(ii) a Public Sector Undertaking; or
(iii) a local authority; or
(iv) a statutory body:
Provided further that the Commissioner or an officer authorised

by him in this behalf may remove the said restriction after such
verifications and such safeguards as he may deem fit
Rule 88A Order of utilization of input tax credit
Input tax credit on account of integrated tax shall first be utilised

towards payment of integrated tax, and the amount remaining, if
any, may be utilised towards the payment of central tax and State
tax or Union territory tax, as the case may be, in any order.
Provided that the input tax credit on account of central tax, State
tax or Union territory tax shall be utilised towards payment of
integrated tax, central tax, State tax or Union territory tax, as the
case may be, only after the input tax credit available on account
of integrated tax has first been utilised fully.

8.72
ANALYSIS
ITC is credited to a registered person’s electronic credit ledger. A taxable person
is entitled for ITC of CGST, SGST/UTGST and IGST depending upon the nature of
supplies received by him.
To illustrate, a supplier making purchases intra-State, inter-State and via import
(of goods) is eligible for ITC as under:
Intra-State purchases Inter-State purchases Import of goods
Taxes paid Taxes paid Taxes paid
CGST BCD
IGST
SGST IGST
ITC ITC ITC

CGST
IGST IGST
SGST
The person may use the ITC to pay his output tax liability. As we know that Indian
GST is a dual GST wherein two taxes viz, CGST and SGST/UTGST are levied
concurrently on a supply transaction. While the CGST revenue accrues to Central
Government, SGST and UTGST revenue accrue to respective State Government
and Union Territory, respectively. Hence, ITC of CGST and SGST/UTGST is not
inter-changeable and thus, cross utilisation of CGST and SGST/UTGST is not
permissible.
IGST is a transitory tax. IGST paid by taxpayer initially goes to the Central
Clearing Authority. ITC of IGST can be utilised for payment of CGST or
SGST/UTGST (or vice versa). Thus, cross utilization of IGST and CGST,
SGST/UTGST is permissible. Flexibility has been provided to the taxpayer to
utilise ITC of IGST for first payment of IGST and then towards payment of CGST
and/or SGST/UTGST in any proportion and in any order subject to the condition
that the entire input tax credit on account of Integrated tax is completely
exhausted before the input tax credit on account of Central Tax or State/Union

territory tax can be utilized. If ITC of IGST is used for payment of SGST/UTGST (or
vice versa), corresponding debit/credit is made to respective State
Government/Union Territory.
Sections 49(5), 49A, 49B, rule 88A and Circular No. 98/17/2019 GST dated
23.04.2019 together prescribe the sequence of utilisation of ITC. A combined
reading of such provisions shows that the order of utilization of ITC is as per the
order (of numerals) given below:
ITC of Output IGST Output CGST Output SGST/ UTGST

liability liability liability
IGST (I) (II) – In any order and in any proportion
(III) ITC of IGST to be completely exhausted mandatorily
CGST (V) (IV) Not permitted
SGST/UTGST (VII) Not permitted (VI)

Only after ITC
of CGST has
been utilized
fully
The numerals given above can be further explained in the following manner:
(I) IGST credit should first be utilized towards payment of IGST.
(II) Remaining IGST credit, if any, can be utilized towards payment of

CGST and SGST/UTGST in any order and in any proportion, i.e.
remaining ITC of IGST can be utilized –
• first towards payment of CGST and then towards payment of
SGST; or
• first towards payment of SGST and then towards payment of
CGST; or
• towards payment of CGST and SGST simultaneously in any
proportion e.g. 50: 50, 30: 70, 40: 60 and so on.
(III) Entire ITC of IGST should be fully utilized before utilizing the ITC
of CGST or SGST/UTGST.

8.74
(IV) & (V) ITC of CGST should be utilized for payment of CGST and IGST in
that order. ITC of CGST cannot be utilized for payment of
SGST/UTGST
(VI) & (VII) ITC of SGST /UTGST should be utilized for payment of
SGST/UTGST and IGST in that order. However, ITC of
SGST/UTGST should be utilized for payment of IGST, only after
ITC of CGST has been utilized fully. ITC of SGST/UTGST cannot
be utilized for payment of CGST.
• Cross-utilization of credit is available only between CGST - IGST and,

SGST/UTGST - IGST.
• CGST credit cannot be utilized for payment of SGST/UTGST and
SGST/UTGST credit cannot be utilized for payment of CGST.
• ITC of IGST need to be exhausted fully before proceeding to utilize the
ITC of CGST, SGST/UTGST.
(41) Amount of ITC available and output tax liability under different tax
heads
Head Output tax liability ITC (`)
(`)
IGST 1000 1300
CGST 300 200
SGST/UTGST 300 200
Total 1600 1700
Option 1
ITC of Discharge of Discharge of Discharge of output Balance
output IGST output CGST SGST/UTGST of ITC
liability (`) liability (`) liability (`) (`)
IGST 1000 200 100 0
ITC of IGST has been completely exhausted
CGST 0 100 - 100
SGST/UTGST 0 - 200 0
Total 1000 300 300 100

Option 2
ITC of Discharge of Discharge Discharge of Balance
output IGST of output output of
liability (`) CGST SGST/UTGST ITC (`)
liability (`) liability (`)
IGST 1000 100 200 0
CGST 0 200 - 0
Total 1000 300 300 100
Option 3
ITC of Discharge of Discharge Discharge of Balance
output IGST of output output of
liability (`) CGST SGST/UTGST ITC (`)
liability (`) liability (`)
IGST 1000 150 150 0
CGST 0 150 - 50
Total 1000 300 300 100
There can be other options also for utilization of ITC of IGST against CGST and
SGST liabilities. In this example, three options for utilizing ITC of IGST against
CGST and SGST liabilities are shown.
Restrictions on utilisation of ITC [Rule 86A]

The Commissioner/ an officer (not below the rank of an Assistant Commissioner)
authorised by him is empowered to impose restrictions on utilization of ITC
available in the electronic credit ledger if he has reasons to believe that such ITC
has been fraudulently availed or is ineligible.
The restrictions can be imposed in the following circumstances:
(i) ITC has been availed by the registered person on the basis of tax
invoices/debit notes/prescribed documents -

8.76
● issued by a non-existent registered person (supplier) or by a supplier

not conducting any business from the place declared in registration;
or
● without actual receipt of goods or services or both; or
● in respect of any supply the tax in respect of which has not been paid
to the Government
(ii) the registered person availing ITC has been found non-existent or not to be
conducting any business from the registered place of business; or
(iii) the registered person availing ITC is not in possession of tax invoice/ debit
note or any other prescribed valid document for it.
If the ITC is so availed, the restrictions can be imposed by not allowing such ITC
to be used for discharging any liability under section 49 or not allowing refund of
any unutilised amount of such ITC. Such restrictions can be imposed for a period
up to 1 year from the date of imposing such restrictions. However, the
Commissioner/officer authorised by him, can withdraw such restriction if he is
satisfied that conditions for imposing the restrictions no longer exist.
Restrictions on the use of amount available in electronic credit ledger [Rule
86B]
Rule 86B restricts the use of ITC available in the electronic credit ledger for
discharging output tax liability. The aforesaid rule starts with a non-obstante
clause and thus, has an over-riding effect on any other provisions of the CGST
Rules.
❑ Applicability of rule 86B
❖ Rule 86B is applicable to the registered person having value of taxable

supply (other than exempt supply and zero-rated supply) in a month
exceeding ` 50 lakh.
❖ Therefore, in cases wherein value of taxable supply in a month is upto
` 50 lakh, then this restriction would not be applicable.

❑ Nature of restriction imposed

The registered person to whom the said rule is
applicable cannot use ITC to discharge the
Minimum 1% of
output tax liability in excess of 99% of such tax
the output tax
liability. In other words, amount available in
liability be
electronic credit ledger shall be utilized only to
discharged using
the extent of 99% of the output tax liability
electronic cash
while discharging such tax liability. Balance 1%
ledger
of the output tax liability needs to be
discharged from electronic cash ledger.
The above restriction can be explained with the help of numerical example:
(42) The total value of inter-State supply of Raman & Sons for the
month of February is of ` 100 lakh. Said supply is taxable @ 18%
IGST. Thus, total output tax liability of Raman & Sons is ` 18 lakh.
Amount available in electronic credit ledger is ` 20 lakh (IGST).
In terms of restriction imposed by rule 86B, Raman & Sons can discharge
99% of its output tax liability, i.e. ` 17,82,000 (99% of ` 18,00,000) from the
amount available in electronic credit ledger. However, it has to mandatorily
discharge the balance 1% of the output tax liability i.e. ` 18,000 (1% of
` 18,00,000) through electronic cash ledger only.
❑ Exceptions to rule 86B
In order to strike a balance between restricting potential misuse of ITC and

providing relief to compliant taxpayers, few exceptions to rule 86B have
been carved out. They take into account different circumstances and ensure
that taxpayers who have fulfilled certain criteria are not unduly burdened by
the restrictions imposed by rule 86B.
➢ Payment of income tax of more than ` 1 lakh
Restriction under rule 86B is not applicable in cases where the below
mentioned person(s) have paid a sum of more than ` 1 lakh as income
tax (under the Income -tax Act, 1961) in each of the last 2 FYs for
which the time limit to file return of income under section 139(1) of
the Income-tax Act has expired:

8.78
❖ Registered person/Karta/proprietor/managing director/ any of

its two partners
❖ Whole-time directors,
❖ Members of Managing Committee of Associations
❖ Board of Trustees
➢ Receipt of refund of input tax credit of more than ` 1 lakh
Rule 86B is not applicable where the registered person has received a
refund amount of more than ` 1 lakh on account of unutilized ITC
under:
❖ zero-rated supplies made without payment of tax
❖ inverted duty structure
It is pertinent to note that refund should have been received in
preceding FY.
➢ Payment of output tax liability through electronic cash ledger in
excess of 1% of total output tax liability in current FY
If the registered person has discharged his output tax liability through
the electronic cash ledger for an amount in excess of 1% of the total
output tax liability, applied cumulatively, upto the said month in the
current financial year, the restrictions under rule 86B shall not apply.
This exception provides relief to registered persons who have
consistently made substantial cash payments towards their GST
liabilities. The total cash payment of GST made by the registered
person is considered cumulatively for all preceding months of the
current FY. The cumulative approach ensures that the registered
person is given credit for its consistent cash payments throughout the
year, rather than assessing each month in isolation.
(43) Assuming a scenario wherein in the current FY upto
August month, the total output tax liability payable is ` 30
lakh and such registered person has deposited ` 1 lakh
through electronic cash ledger and balance through electronic credit
ledger. Rule 86B would not be applicable in the September month
even if the taxable turnover during this month exceeds ` 50 lakh, since

cumulative payment of tax made in cash is more than 1% of total

output tax liability (1% of ` 30 lakh is ` 30,000).
It is pertinent to note that GST liability paid under reverse charge

mechanism should not be taken into account while calculating the
total output liability paid through electronic cash ledger.
➢ Specified registered persons
Rule 86B is not applicable in case of below-mentioned registered
person:
❖ Government Department; or
❖ a Public Sector Undertaking; or
❖ a local authority; or
❖ a statutory body.
However, Commissioner or an officer authorised by him in this behalf

may remove the said restriction after such verifications and such
safeguards as he may deem fit
Quiz
Time!
Dua & Co. made an outward inter-State supply of ` 80 lakh in the month
of March. During the month, it purchased raw material worth ` 70 lakh
and procured cement of ` 5 lakh for making foundation and structural
support to a plant and machinery. Assuming that the opening balance of
5 ITC for IGST for the relevant period is ` 2 lakh and all inward and outward
supplies undertaken in the month of March are inter-State, compute the
amount of net IGST payable in cash, if any, for the month of March. Rate
of GST applicable is 18%. Subject to the information given above, all the
other conditions necessary for availing ITC have been fulfilled.
(a) `14,400 (b) Nil (c) `14.40 lakh (d) `9,000

8.80
ILLUSTRATION 2
ABC Co. Ltd., registered under GST, is engaged in the manufacture of heavy
machinery. It procured the following items during the month of July.
S. No. Items GST (`)

(i) Electrical transformers to be used in the 5,20,000
manufacturing process
(ii) Trucks used for the transport of raw material 1,00,000
(iii) Raw material 2,00,000
(iv) Confectionery items. These items were supplied free 25,000
of cost to the customers in a customer meet
organized by the company
Determine the amount of ITC that can be availed by ABC Co. Ltd., for the month of
July by giving necessary explanations for treatment of various items. Subject to the
information given above, assume that all the other conditions necessary for availing
ITC have been fulfilled.
ANSWER
Computation of ITC that can be availed by with ABC Co. Ltd. for the
month of July
S. No. Items ITC (`)

(i) Electrical transformers 5,20,000
[Being goods used in the course or furtherance of
business, ITC thereon is available in terms of section
16(1)]
(ii) Trucks used for the transport of raw material 1,00,000
[ITC on motor vehicles used for transportation of goods
is not blocked under section 17(5)(a)]
(iii) Raw material 2,00,000
[Being goods used in the course or furtherance of
business, ITC thereon is available in terms of section 16(1)]

(iv) Confectionery items for consumption of customers at Nil

customers meet
[ITC on food or beverages is specifically disallowed
unless the same is used for making outward taxable
supply of the same category or as an element of the
taxable composite or mixed supply-Section 17(5)(b)(i)]
Total ITC 8,20,000
ILLUSTRATION 3
XYZ Ltd., registered under GST, is engaged in manufacture of taxable goods.

Compute the ITC that can be availed by XYZ Ltd. for the month of October from the
following particulars:-
S. No. Inward supplies GST (`) Remarks
(i) Inputs ‘A’ 1,00,000 One invoice on which GST payable

was ` 10,000, is missing
(ii) Inputs ‘B’ 50,000 Inputs are to be received in two lots.

First lot has been received in
October
(iii) Capital goods 1,20,000 XYZ Ltd. has capitalised the capital
goods at full invoice value inclusive
of GST as it will avail depreciation
on the full invoice value.
(iv) Input services 2,25,000 One invoice dated 20 th January on

which GST payable was ` 50,000
was missing and has been found in
October
Note:
(i) Subject to the information given above, assume that all the other conditions
(ii) The annual return for the previous financial year was filed on 15th September.

8.82
ANSWER
Computation of ITC that can be availed by XYZ Ltd. for the month of
October
S. No. Inward supplies ITC (`)
(i) Inputs ‘A’ 90,000

[ITC cannot be taken on missing invoice. The
registered person should have the invoice in its
possession to claim ITC-Section 16(2)(a)]
(ii) Inputs ‘B’ Nil

[When inputs are received in lots, ITC can be availed only
on receipt of last lot-First proviso to section 16(2)]
(iii) Capital goods Nil

[Input tax paid on capital goods cannot be availed as
ITC, if depreciation has been claimed on such tax
component – Section 16(3)]
(iv) Input services 1,75,000

[As per section 16(4), ITC on an invoice cannot be
availed after 30th November following the end of
financial year to which such invoice pertains or the date
of filing annual return, whichever is earlier.
Since the annual return for the previous financial year
has been filed on 15 th September (prior to 30th
November), ITC on the invoice pertaining to previous
financial year cannot be availed after 15 th September.
Total ITC 2,65,000

ILLUSTRATION 4
XT Pvt. Ltd., a supplier of goods, pays GST under regular scheme. It has made the
following outward taxable supplies in a tax period:
Intra-State supply of goods 8,00,000
Inter-State supply of goods 3,00,000
It has also furnished the following information in respect of purchases made by it in

that tax period:
Intra-State purchases of goods 2,00,000
Inter-State purchases of goods 50,000
The company has following opening balance of ITCs for the tax period:
CGST 57,000
SGST Nil
IGST 70,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the minimum GST, payable in cash, by XT Pvt. Ltd. for the tax period.
Make suitable assumptions as required.

8.84
ANSWER
Computation of GST payable on outward supplies
S. Particulars CGST @ SGST @ IGST @ Total (`)

No. 9% (`) 9% (`) 18% (`)
(i) Intra-State supply of goods 72,000 72,000 1,44,000

for ` 8,00,000
(ii) Inter-State supply of goods 54,000 54,000

for ` 3,00,000
Total GST payable 1,98,000
Computation of total ITC
Particulars CGST @ SGST @ IGST @

9% (`) 9% (`) 18% (`)
Opening ITC 57,000 Nil 70,000
Add: ITC on Intra-State purchases of goods 18,000 18,000 Nil

valuing ` 2,00,000
Add: ITC on Inter-State purchases of goods Nil Nil 9,000

valuing ` 50,000
Total ITC 75,000 18,000 79,000
Computation of minimum GST payable from electronic cash ledger
Particulars CGST @ SGST @ IGST @ Total

9% (`) 9% (`) 18% (`) (`)
GST payable 72,000 72,000 54,000 1,98,000
Less: ITC [First ITC of IGST (Nil) (25,000) (54,000) 79,000

should be utilized in full - first IGST IGST IGST

against IGST liability and then
against CGST and SGST
liabilities in a manner to
minimize cash outflow]
ITC of CGST and SGST set off (72,000) (18,000) 90,000

against CGST and SGST CGST SGST
respectively
Minimum GST payable in cash Nil 29,000 Nil 29,000
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) to minimize cash outflow.

8.86
LET US RECAPITULATE
I. Definitions of certain key terms are summarized by way of

diagrams as under:
BUSINESS
includes
Any activity incidental/ancillary
to it
Any trade/commerce, manufacture,
profession, vocation etc. even if
there is no monetary benefit Any activity of same nature even if
no volume/continuity/frequency
Supply/acquisition of goods
in connection with commencement/
including capital goods & services
closure of business
Provision of facilities by
to its members for consideration
club/association/society etc.
for a consideration
Admission to any premises
accepted in course/ furtherance

Services as holder of an office of trade, profession/vocation
Activities of a race club including totalisator or a licence to book

by way of maker or activities of a licensed
book maker in such club
Any activity by Government /local

authority as public authorities Government includes both Central
and State Government

EXEMPT SUPPLY
means includes
Non-taxable
supply
Supply attracting NIL rate of Supply wholly exempt
tax from
CGST IGST
Goods Services
CAPITAL GOODS INPUTS INPUT SERVICES
means means means
goods value of which is capitalized

goods other than services
in the books of account of person
capital goods
claiming ITC
used/intended to be used
in the course/ furtherance
of business

8.88
INPUT TAX
Means Includes Excludes
IGST
Tax payable Tax payable
leviable on
under forward under reverse
import of Composition
charge in respect charge
goods tax
of supplies made
to recipient
CGST SGST UTGST IGST
NON-RESIDENT TAXABLE PERSON
Principal
means
Agent
any person supplying goods and/or as

services occasionally
In any other
capacity
having NO fixed place of

business/residence in India

INWARD SUPPLY
means
receipt of goods and/or services by
purchase acquisition any other means
with/without consideration
ZERO-RATED SUPPLY
Supply of goods and /or services to

Export of goods and/or services
SEZ developer/ SEZ unit

8.90
II. Provisions of section 16 relating to eligibility and

conditions for taking ITC read with relevant rules are
summarized below:
Registered used/ He has valid tax

if these invoice/debit
person to take
SIX
intended to
credit of tax be used in note/prescribed tax
conditions paying document.
paid on inward the course
are
supplies of or
fulfilled:
goods and/or furtherance
services of business
He has
Tax on receive Details of ITC in
Details of such d respect of the said
invoices/debit supply goods supply
notes uploaded by has and/or communicated to the
the supplier in his been services registered person
GSTR-1 or using paid . under section 38 not
IFF and details
restricted
communicated in
Form GSTR-2B
Goods delivered / services

provided to third person on the
direction of the registered person
deemed to be received by the
By registered person  ITC available
He has In OR to registered person [Bill to Ship
cash utilisation
furnished to Model]
of ITC
return u/s 39

Time limit for availing ITC - ITC pertaining

If depreciation Goods received
to a particular FY can be availed by 30 th
claimed on tax in lots ITC
November of next FY or filing of annual
component, ITC allowed upon
return, whichever is earlier.
receipt of last lot
not allowed. Exception: Re-availment of ITC reversed
earlier
• Reverse charge
❖ Proportionate ITC to be supplies
reversed/paid with interest if • Deemed supplies
without consideration
whole/part of value + tax of goods EXCEPTIONS • Additions made to
and /or services is not paid within
value of supplies on
180 days of the issuance of invoice.
account of supplier’s
❖ On payment, the ITC could be re- liability being incurred
availed without any time limit. by the recipient of the
supply
III. Provisions of section 17 relating to apportionment of

credit and blocked credits read with relevant rules are
summarized as under:
A. Apportionment of credit
Attributable to
Used partly for
business purposes
business and partly for
Goods non-business purposes
and/or ITC available
services only as
Used partly for making
taxable (including zero
rated supplies) supplies Attributable to taxable
& partly for exempt supplies including
supplies zero rated supplies
Exempt supplies include reverse charge supplies & transactions in securities and
exclude activities specified in Schedule III except sale of land and sale of building when
entire consideration is received post completion certificate/first occupation, whichever is
earlier.

8.92
BLOCKED CREDITS PART-A
GI, Servicing, R&M Leasing/renting/hiring F&B, Outcat,

Ineligible Ves & AC relating to ineligible of MV, Ves or AC on BT, HS, C&PS,
MV
MV, Ves, AC which ITC is disallowed LI & HI
EXCEPTIONS EXCEPTIONS EXCEPTIONS EXCEPTIONS EXCEPTIONS
When used When used for- (i) When used (i) Where a
(i) When ineligible
for – (i) making MV, Ves or AC are for making an particular category
(i) making further taxable outward taxable of such inward
used for eligible
further supply of such supply of the supplies is used
purposes
taxable Ves or AC same category for making an
(ii) When received
supplies of (ii) passenger (sub- outward taxable
by manufacturer of
such MV trptn service contracting) or supply of the same
ineligible MV, Ves
(ii) trptn of (iii) imparting as an element of category - [Sub-
or AC
passengers training on a taxable contracting] or as
(iii) When received
(iii) imparting navigating/flying composite or an element of a
by a GI service
training on such Ves/AC mixed supply. taxable composite
provider in respect
driving such (iv) trptn of (ii) When or mixed supply
of such ineligible
ineligible MV goods provided by an (ii) When provided
MV, Ves or AC
employer to its by an employer to
insured by it
employees its employees
under statutory under a statutory
obligation obligation
Credit available on the above exceptions
Membership of club & Travel benefits to Inward supplies Tax paid u/s 74 (Tax
health & fitness employees on received by NRTP short / not paid or
Centre vacation (LTC/HT) erroneously refunded
due to fraud etc.,) 129
EXCEPTION (Amount paid for
EXCEPTION EXCEPTION
release of goods and
conveyances in transit
Goods which are detained) and
When provided by an When provided by an
imported 130 (Fine paid in lieu of
employer to its employer to its
by him confiscation)
employees under a employees under a
statutory obligation statutory obligation

BLOCKED CREDITS PART-B
WCS for construction of Inward supplies received by taxable person for

immovable property construction of immovable property on his own
account including when such supplies are used in the
course or furtherance of business
EXCEPTIONS
EXCEPTIONS
Credit available on
such exceptions
(A) WCS for P & M
(B) WCS availed by a works (A) Construction of P & M
contractor for further supply of (B) Construction of
WCS [Sub-contracting] immovable property for
(C) Where value of WCS is not others
capitalized (C) Value of construction
is not capitalised
Inward supplies charged to Goods lost/ stolen/ destroyed/ Inward supplies

composition levy written off or disposed of by used for personal
way of gift or free samples consumption
Ineligible MV-Motor vehicle for transportation (A) Construction includes re-construction/

of persons with seating capacity of  13 persons renovation/ addition/ alterations/ repairs to
(including driver); Ves & AC-Vessel & Aircraft;
the extent of capitalisation to said immovable
GI-General insurance; R&M-Repairs &
maintenance; F&B-Food & beverages; Outdoor
property.
catering; BT-Beauty treatment; HS-Health (B) P & M means apparatus, equipment, &
services; C&PS-Cosmetic & plastic surgery; LI- machinery fixed to earth by foundation or
Life insurance; HI-Health insurance; NRTP- structural supports but excludes land,
Non-resident taxable person; WCS-Works
building/ other civil structures,
contract service; LTC-Leave Travel Concession;
HT-Home town; trptn-transportation; P & M-
telecommunication towers, and pipelines laid
Plant & machinery outside the factory premises.

8.94
III. Provisions of section 18 read with relevant rules are

A. Special circumstances enabling availing of credit
Special circumstances enabling availing of credit
Registered person
switching from Registered person's Person applying for Person obtaining
composition levy to exempt supplies registration within 30 voluntary
regular scheme of becoming taxable days of becoming registration
payment of taxes liable for registration
Credit entitled on Credit entitled on

• Inputs as such held in stock • Inputs as such held in stock
• Inputs contained in semi-finished goods held in • Inputs contained in semi-
stock finished goods held in
• Inputs contained in finished goods held in stock stock
• Capital goods [In case of exempt supply • Inputs contained in
becoming taxable Capital goods used finished goods held in
exclusively for such exempt supply] reduced
by 5% per quarter or part thereof from the
date of invoice
Note: ITC claimed shall be verified with the
corresponding details furnished by the
corresponding supplier.
On the day On the day On the day

On the day
immediately immediately immediately
immediately preceding
preceding the date preceding the preceding the
the date from which
from which he date from which date of
such supply becomes
becomes liable to pay he becomes registration
taxable
tax under regular liable to pay tax
ITC, in all the above cases, is to be availed within 1 year from the date of issue of invoice
by the supplier.

Conditions for availing above credit:

(i) Filing of electronic declaration giving details of inputs held in stock/contained in
semi-finished goods and finished goods held in stock and capital goods on the
days immediately preceding the day on which credit becomes eligible.
(ii) Declaration has to be filed within 30 days from becoming eligible to avail credit.
(iii) Details in (i) above to be certified by a CA/ Cost Accountant if aggregate claim of
CGST, SGST/ IGST credit is more than ` 2,00,000.
B. Special circumstances leading to reversal of credit/payment of amount

Special circumstances leading to reversal
of credit /payment of amount
Registered person (who has Supplies of registered Cancellation of Supply of capital goods
availed ITC) switching from person getting wholly registration (CG)/ plant and machinery
regular scheme of payment exempted from tax (P& M) on which ITC has
of tax to composition levy been taken
Amount to be paid is
Amount to be reversed is equivalent to ITC on: equivalent to higher of
• Inputs held in stock/ inputs contained in semi-finished or finished the following:
goods held in stock (i) ITC on CG or P&M
• Capital goods less 5% per quarter or
on the day immediately preceding the date of switch over/ date of part thereof from the
exemption/date of cancellation of registration date of invoice
(ii) Tax on transaction
value of such CG or P &
M
• If amount at (i)
Manner of reversal of credit on inputs and capital goods & other exceeds (ii), then
conditions reversal amount will
(i) Inputs  Proportionate reversal based on corresponding invoices. If such be added to output
invoices not available, prevailing market price on the effective date of switch tax liability.
over/ exemption/cancellation of registration should be used with due • Separate ITC reversal
certification by a practicing CA/ Cost Accountant is to be done for
(ii) Capital goods  Reversal on pro rata basis pertaining to remaining CGST, SGST/UTGST
useful life (in months), taking useful life as 5 years. and IGST
(iii) ITC to be reversed will be calculated separately for ITC of CGST, • Tax to be paid on
SGST/UTGST and IGST. transaction value
(iv) Reversal amount will be added to output tax liability of the registered when refractory
person. bricks, moulds, dies,
(v) Electronic credit/cash ledger will be debited with such amount. Balance jigs & fixtures are
ITC, if any, will lapse. supplied as scrap.

8.96
Transfer of unutilised ITC on account of change in

In case of sale, merger, amalgamation, lease or transfer of business,
unutilised ITC can be transferred to the new entity if there is a specific
provision for transfer of liabilities to the new entity. The inputs and
capital goods so transferred should be duly accounted for by the
transferee in his books of accounts.
In case of demerger, ITC is apportioned in the ratio of value of entire

constitution of registered person
assets (including assets on which ITC has not been taken) of the new
units as per the demerger scheme.
Details of change in constitution are to be furnished on common

portal along with request to transfer unutilised ITC. CA/Cost
Accountant certificate is to be submitted certifying that change in
constitution has been done with specific provision for transfer of
liabilities.
Upon acceptance of such details by the transferee on the common

portal, the unutilized ITC is credited to his Electronic Credit Ledger.
registrations for multiple places of business
Transfer of unutilised ITC on obtaining separate
Registered person having separate registrations for multiple places of

business can transfer the unutilised ITC to any or all of the newly
registered place(s) of business in the ratio of the value of assets held
by them at the time of registration.
Value of assets means the value of the entire assets of the business
irrespective of whether ITC has been availed thereon or not.
The resgistered person should furnish the prescribed details on the

common portal within a period of 30 days from obtaining such
separate registrations.
within a State/UT
Upon acceptance of such details by the newly registered person

(transferee) on the common portal, the unutilised ITC is credited to
his electronic credit ledger.

IV. Provisions relating to utilization of ITC are

I. II.
III.
ITC of ITC of
IGST ITC of
CGST
IGST CGST SGST
SGST
CGST/SGST in
any order & in IGST
IGST, only
any proportion when ITC of
CGST = NIL
ITC of IGST =
NIL
ITC of ITC of
CGST SGST/
SGST/ UTGST
CGST
UTGST
TEST YOUR KNOWLEDGE
1. What is input tax?

2. What are the conditions necessary for availing ITC?
3. Can a person take ITC without payment of consideration for the supply along
with tax?
4. What is the time limit for taking ITC and reasons therefor?
5. What is the ITC entitlement of a newly registered person?

8.98
6. What is the tax implication of supply of capital goods by a registered person

who had taken ITC on such capital goods?
7. A registered person transfers its business to another person.
Is such registered person allowed to transfer the unutilized ITC lying in its
electronic credit ledger to such transferred business? Discuss.
8. Swastik Pvt. Ltd. is a manufacturer of taxable goods. It purchased a
machinery for ` 8,00,000 on which IGST of ` 14,400 is paid. The company
has claimed depreciation under the Income-tax Act, 1961 on the full value of
the machine, i.e. including the IGST component as also availed ITC of
` 14,400 paid by it as IGST.
Examine if the stand taken by the company is correct in law.
9. Sigma Consultants, an LLP of finance professionals, provides financial
consultancy services. It made an advance part payment of ` 1,18,000
(inclusive of IGST @ 18%) in the month of October to Azuro Computer
Services for developing a software. The software would be used by the LLP to
enhance the precision of the financial advice given by it to various clients.
The balance payment is to be made after the successful test run of the
software in the month of December. Sigma Consultants has availed ITC of
IGST of ` 18,000 in the return filed for the month of October.
Do you think Sigma Consultants can avail such ITC? Examine the scenario
with reference to the relevant legal provisions.
10. A taxable person is in the business of information technology. He buys a car
(maximum seating capacity – 5 persons) for use of his Executive Directors.
Can he avail the ITC in respect of GST paid on purchase of such car?
11. A technical testing agency tests and certifies each batch of machine tools
before dispatch by BMT Ltd. Some of these tools are dispatched to a unit in a
SEZ without payment of GST as these supplies are not taxable.
The finance personnel of BMT Ltd. want to know whether they need to carry
out reversal of ITC on the testing agency’s services to the extent attributable
to the SEZ supplies. Give your comments.

12. ‘AB’, a registered person, was paying tax under composition scheme up to
30th July. However, w.e.f. 31 st July, ‘AB’ becomes liable to pay tax under
regular scheme.
Is ‘AB’ eligible for any ITC?
13. Babla Enterprises is exclusively engaged in making exempt supply of goods
and is thus, not registered under GST. On 1 st October, the exemption
available on its goods gets withdrawn. On that day, the turnover of Babla
Enterprises was ` 45 lakh.
Examine the eligibility of Babla Enterprises for availing ITC, if any.
14. Mamta Trade Links trades in exempt goods and provides taxable services. It is
registered under GST. On 1 st October, the exemption available on its goods
gets withdrawn.
Analyze the scenario and determine the eligibility of Mamta Trade Links for
availing ITC, if any, on inputs and/or capital goods used in the supply of
exempt goods.
15. Harshgeet Pvt. Ltd., a registered supplier, is engaged in the manufacture of
taxable goods. The company provides the following information pertaining to
purchases made/services availed by it during the month of July:
S. No Particulars GST (`)
(1) Raw material (to be received in the month of 2,50,000

September)
(2) Membership of a club availed for employees working 1,45,000

in the factory (not obligatory to be provided under any
law)
(3) Inputs to be received in 5 lots, out of which 3 rd lot was 80,000

received during the month
(4) Trucks used for transport of raw material 40,000
(5) Capital goods (out of 3 items, invoice for 2 items is 1,50,000

missing and GST paid on those items is ` 80,000)
Determine the amount of ITC that can be availed by Harshgeet Pvt. Ltd. for
the month of July by giving the necessary explanation for treatment of

8.100
various items. Subject to the information given above, all the other conditions
16. Jamku Ltd., a registered person, is engaged in the business of spices. It
provides following details in relation to GST paid on inward supplies procured
by it during the month of October.
S. No. Particulars GST (`)

(1) Raw spices purchase
- Raw spices sold to customers 50,000
- Raw spices used for personal use of directors 20,000
(2) Electric machinery purchased for being used in the 25,000
(3) Motor vehicle used for transportation of the employee 55,000
(4) Payment made to contractor for construction of staff 1,25,000
quarter
Determine the amount of ITC that can be availed by Jamku Ltd. for the month
of October by giving the necessary explanation for treatment of various items.
Subject to the information given above, all the other conditions necessary for
availing ITC have been fulfilled.
17. Dina Ltd., a registered supplier from Maharashtra, is engaged in the
manufacture of passenger autos. The company provides the following details
of purchases made/services availed by it during the month of March:
S. No. Particulars GST (`)
(1) Purchase of iron which is used as a raw material 2,50,000

[Goods were received in two lots - first in March
and the second in April]
(2) Purchase of accessories which were delivered 90,000

directly to the dealers of the company on the
direction of Dina Ltd.
[Only invoice was received by Dina Ltd.]

(3) Purchase of bus (seating capacity 15) for the 1,97,000

transportation of employees from their residence
to company and back
(4) General insurance taken on a car (seating 5,200

capacity 5) used by executives of the company for
official purposes
You are required to determine the ITC that can be availed by Dina Ltd. for the
month of March, by giving brief explanations for treatment of various items.
Subject to the information given above, all the other conditions necessary for
availing ITC have been fulfilled.
18. Comfortable (P) Ltd. is registered under GST in the State of Odisha. It is
engaged in the business of manufacturing of iron and steel products. It has
received IT engineering services from High-Fi Infotech (P) Ltd. for
` 11,00,000/- (excluding GST @ 18%) on 28 th October. Invoice for service
rendered was issued on 5 th November.
Comfortable (P) Ltd. made part payment of ` 4,20,000/- on 30th November.
Being unhappy with service provided by High-fi Infotech (P) Ltd., it did not
make the balance payment. Deficiency in service rendered was made good by
High-Fi Infotech (P) Ltd. by 15 th April of next year. Comfortable (P) Ltd. made
the balance payment on 6th July of next year.
Examine the availability of ITC with Comfortable (P) Ltd. in respect of IT
engineering services received by it from High-Fi Infotech (P) Ltd.
19. M/s. Diwan & Sons of New Delhi, has placed an order for 250 kg of plastic
granules @ ` 50 per kg (exclusive of GST) on M/s. Karim & Bros. of Noida,
U.P. M/s. Karim & Bros. has agreed to deliver the goods at the warehouse of
M/s. Diwan & Sons at New Delhi.
While the order was getting packed at the factory of M/s. Karim & Bros., M/ s.
Diwan & Sons got an order from Shubhkamna Sales of Hapur, U.P., for 250 kg
of plastic granules @ ` 60 per kg (exclusive of GST). In order to save on
transportation cost, M/s. Diwan & Sons asks M/s. Karim & Bros. to directly
deliver the plastic granules to Shubhkamna Sales at its godown located in
Hapur. Accordingly, M/s. Karim & Bros. has delivered the plastic granules at
the godown of Shubhkamna Sales at Hapur.

8.102
Examine the availability of ITC with M/s. Diwan & Sons & M/s. Karim & Bros.
Note: All the parties are registered under GST and rate of GST is 18%.
20. Paritosh & Co., a supplier of goods, pays GST under regular scheme. It has made
the following outward taxable supplies in a tax period:
Intra-State supply of goods 10,00,000
Inter-State supply of goods 8,00,000
It has also furnished the following information in respect of purchases made

by it in that tax period:
Intra-State purchases of goods 3,00,000
Inter-State purchases of goods 2,50,000
Paritosh & Co. has following opening balance of ITCs for the tax period:
CGST 57,000
SGST 60,000
IGST 1,40,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever
applicable.
(iii) All the conditions necessary for availing ITC have been fulfilled.
Compute the minimum GST, payable in cash, by Paritosh & Co. for the tax
period and the ITC to be carried forward to the next month. Make suitable
assumptions as required.

ANSWERS/HINTS
1. Input tax means the central tax (CGST), State tax (SGST), integrated tax
(IGST) or Union territory tax (UTGST) charged on supply of goods or services
or both made to a registered person. It also includes tax paid on reverse
charge basis and integrated goods and services tax charged on import of
goods. It does not include tax paid under composition levy.
2. Following conditions are to be satisfied by the registered taxable person for
obtaining ITC:
(a) he is in possession of tax invoice or debit note or such other tax
paying documents as may be prescribed;
(aa) the details of the invoice or debit note referred above has been
furnished by the supplier in the statement of outward supplies and
such details have been communicated to the recipient of such invoice
or debit note in the manner specified under section 37;
(b) he has received the goods or services or both;
(ba) the details of input tax credit in respect of the said supply
communicated to such registered person under section 38 has not
been restricted
(c) subject to section 41, the supplier has actually paid the tax charged in
respect of the supply to the Government; and
(d) he has furnished the return under section 39.
3. Yes, the recipient can take ITC. However, he is required to pay the amount
towards value of supply along with tax within 180 days from the date of
issue of invoice. This condition is not applicable where tax is payable on
reverse charge basis.
4. Refer point (vi) “Time limit for availing ITC: 30th November of succeeding
financial year to which such invoice or debit note pertains or date of filing
of relevant annual return, whichever is earlier” under Heading No. 3
“Eligibility and Conditions for Taking Input Tax Credit [Section 16]”.
5. (i) A person who has applied for registration within 30 days from the date
on which he became liable to registration, can take ITC of inputs held in
stock and inputs contained in semi-finished or finished goods held in stock

8.104
on the day immediately preceding the date on which he became liable to

pay tax can be taken.
(ii) In case of voluntary registration, ITC of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock on the day
immediately preceding the date of registration can be taken.
6. In case of supply of capital goods or plant and machinery on which ITC has
been taken, the registered person shall pay an amount equal to the ITC
taken on the said capital goods or plant and machinery reduced by 5% per
quarter or part thereof from the date of invoice or the tax on the
transaction value of such capital goods or plant and machinery, whichever is
higher.
However, in case of refractory bricks, moulds and dies, jigs and fixtures
when these are supplied as scrap, the person can pay tax on the transaction
value.
7. As per section 18(3), in case of sale, merger, demerger, amalgamation,
transfer or change in ownership of business etc., the ITC that remains
unutilized in the electronic credit ledger of the registered person can be
transferred to the new entity, provided there is a specific provision for
transfer of liabilities to the new entity.
The registered person should furnish the details of change in constitution
on the common portal and submit a certificate from practicing Chartered
Account/Cost Accountant certifying that the change in constitution has
been done with a specific provision for transfer of liabilities. Upon
acceptance of such details by the transferee on the common portal, the
unutilized ITC gets credited to his electronic credit ledger. The transferee
should duly account for the inputs and capital goods so transferred in his
books of account.
8. As per section 16(3), if the person taking the ITC on capital goods and plant
and machinery has claimed depreciation on the tax component of the cost
of the said items under the Income-tax Act 1961, the ITC on the said tax
component shall not be allowed.
Since in the given case, Swastik Pvt. Ltd. has claimed depreciation on the tax
component of the cost of the machine, it cannot claim ITC of IGST of `
14,400 paid by it on the machine. It can either claim depreciation on the tax
component or avail ITC of such tax but cannot avail both the benefits
simultaneously.

9. As per section 16(2)(b), tax paid on supply of goods and/or services can be
availed as ITC only if such goods and/or services are received by the
registered person.
In the given case, Sigma Consultants has paid IGST of ` 18,000, in the
month of October, on advance for IT services intended to be used in the
course or furtherance of business. However, it cannot avail ITC of such tax
in the month of October as the services in relation to which the advance
payment has been made have not been received in that month.
10. No. ITC on motor vehicles for transportation of persons with approved
seating capacity of up to 13 persons (including driver), can be availed only if
the taxable person is in the business of transport of passengers or is
providing the services of imparting training on driving such motor vehicles
or is in the business of further supply of such motor vehicles. Also, ITC can
be availed on motor vehicles used for transportation of goods.
11. ITC is disallowed only to the extent it pertains to supplies used for non-
business purposes or supplies other than taxable and zero-rated supplies.
Supplies to SEZ units are zero rated supplies in terms of section 16(1) of the
IGST Act. Thus, full ITC is allowed on inward supplies of BMT Ltd. used for
effecting supplies to the unit in the SEZ.
12. ‘AB’ is eligible for ITC on inputs held in stock and inputs contained in semi-
finished or finished goods held in stock and capital goods as on 30 th July.
ITC on capital goods will be reduced by 5% per quarter or part thereof from
the date of invoice.
13. Since the exemption available on goods being supplied by Babla
Enterprises, an unregistered person, gets withdrawn, it becomes liable to
registration as its turnover had crossed the threshold limit on the day when
the exemption is withdrawn.
Assuming that Babla Enterprises applies for registration within 30 days of
1st October and it obtains such registration, it will 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 it becomes liable to pay tax, i.e. 30th September [Section
18(1)(a)]. Input tax paid on capital goods will not be available as ITC in this
case.
14. If the exempt supply made by a registered person becomes a taxable
supply, provisions of section 18(1)(d) become applicable. In the given case,

8.106
since Mamta Trade Links is a registered person, section 18(1)(d) will be

applicable.
As per section 18(1)(d), Mamta Trade Links will 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 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,
i.e. 30 th September. ITC on capital goods will be reduced by 5% per quarter
or part thereof from the date of invoice.
15. Computation of ITC that can be availed by Harshgeet Pvt. Ltd. for the
month of July:
Particulars ITC (`)
Raw Material Nil

[ITC not available as raw material is not received in July]
Membership of a club availed for employees working in the Nil

factory (not obligatory to be provided under any law)
[Blocked credit in terms of section 17(5)]
Inputs to be received in 5 lots, out of which 3 rd lot was received Nil

during the month
[In case of goods received in lots, ITC can be taken only upon
receipt of the last lot]
Trucks used for transport of raw material 40,000

[ITC of GST paid on motor vehicles used for transportation of
goods is allowed unconditionally]
Capital goods 70,000

[ITC can be availed only on the basis of a valid document
(invoice). Thus, GST paid on items for which invoice is missing,
i.e. ` 80,000, is not available.]
Total ITC 1,10,000

16. Computation of ITC that can be availed by Jamku Ltd. for the month of
October
Particulars ITC (`)
Purchase of raw spices which are sold to customers 50,000

[Every registered person is entitled to take credit of input tax
charged on any supply of goods to him which are used or
intended to be used in the course or furtherance of his
business.]
Purchase of raw spices for personal use of directors Nil

[ITC is not available on goods used for personal consumption.]
Electric machinery purchased for being used in the 25,000

[Every registered person is entitled to take credit of input tax
charged on any supply of goods to him which are used or
intended to be used in the course or furtherance of his business.]
Motor vehicle used for transportation of employee Nil

[ITC on motor vehicles for transportation of persons with
seating capacity ≤ 13 persons (including the driver) is blocked
except when the same are used for (i) making further taxable
supply of such motor vehicles (ii) making taxable supply of
transportation of passengers (iii) making taxable supply of
imparting training on driving such motor vehicles.
In the given case, since the supplier is in the business of spices,
ITC on motor vehicle used for transportation of the employee
is blocked credit. ]
Payment made to contractor for construction of staff quarter Nil

[ITC is not available for 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]
Total ITC 75,000

8.108
17. Computation of ITC that can be availed by Dina Ltd. for the month of
March:
Particulars ITC (`)

Purchase of iron used as a raw material Nil
[When inputs are received in lots, ITC can be availed only on
the receipt of last lot. Hence, since last lot is received in April,
ITC cannot be availed in March.]
Purchase of accessories delivered directly to the dealers of the 90,000
company
[Goods delivered to another person on the direction of the
registered person by way of transfer of documents of title or
otherwise, either before or during the movement, are deemed
to have been received by such registered person. Thus, ITC is
available to the registered person, on whose order/direction
the goods are delivered to a third person.]
Bus for the transportation of employees 1,97,000
seating capacity > 13 persons (including the driver) used for
any purpose is allowed.
General insurance taken on car (seating capacity 5) used by Nil
executives of the company for official purpose
seating capacity ≤ 13 persons (including the driver) is blocked
except when the same are used for (i) making further taxable
supply of such motor vehicles (ii) making taxable supply of
transportation of passengers (iii) making taxable supply of
imparting training on driving such motor vehicles. Further, ITC
is not allowed on services of general insurance relating to such
ineligible motor vehicles.
Since, the car is not used for any of the eligible purposes, ITC
thereon is blocked and thus, ITC on general insurance taken on
such car is also blocked.]
Total ITC 2,87,000

18. Every registered person is entitled to take credit of input tax charged on any
supply of goods and/or services which are used or intended to be used in
the course or furtherance of his business if, inter alia, he is in possession of
a tax invoice issued by a supplier and he has received the goods and/or
services.
The registered person must pay to the supplier, the value of the goods
and/or services along with the tax within 180 days from the date of issue of
invoice. In the event of failure to do so, the corresponding credits availed
by the registered person would be required to be reversed or paid by such
person alongwith interest. However, once the recipient makes the payment
of value of goods and/or services along with tax, he will be entitled to avail
the credit again without any time limit. In case part-payment has been
made, proportionate credit would be allowed.
In the given case, High-fi Infotech (P) Ltd. provides the service in the month
of October and Comfortable (P) Ltd. receives the invoice in the month of
November. Therefore, in view of the above provisions and assuming all
other conditions required for availing ITC having been fulfilled, ITC of `
1,98,000 (` 11,00,000 x 18%) will be availed by Comfortable (P) Ltd. for the
month of November when it receives the invoice issued by High-fi Infotech
(P) Ltd.
However, proportionate ITC amounting to ` 1,33,932  [(` 12,98,000 -
` 4,20,000)/118] x 18] will be reversed in GSTR-3B of Comfortable (P) Ltd. for
May month, along with interest thereon, as full payment has not been made
within 180 days of issuance of the invoice, i.e. by 4th May of next year. ITC
of ` 1,33,932 can, however, be availed again by Comfortable (P) Ltd. for the
month of July next year when it makes the balance payment.
19. One of the conditions for availing ITC is that the registered person taking the
ITC must have received the goods and / or services. However, goods delivered
to a third person on the direction of the registered person by way of transfer of
documents of title or otherwise, either before or during the movement, are
deemed to have been received by such registered person. So, ITC is available
to the registered person, on whose direction the goods are delivered to a third
person even though the registered person does not receive the goods by itself.
In the given case, goods have been delivered by M/s. Karim & Bros.
(supplier) to Shubhkamna Sales (third person) on the direction of M/s.

8.110
Diwan & Sons (registered person). Therefore, in view of the above

provisions, ITC of ` 2,250 (` 50 x 250 x 18%) will be available to M/s. Diwan
& Sons (registered person) on the purchase of 250 kg of plastic granules @
50 per kg.
Further, in this case there is another supply between Diwan & Sons
(supplier) and Shubhkamna Sales (recipient). Therefore, Shubhkamna Sales
can avail ITC of ` 2,700 (` 60 x 250 x 18%) on the purchase of 250 kg of
plastic granules @ 60 per kg.
20. Computation of GST payable on outward supplies
S.No. Particulars CGST @ SGST @ IGST @ Total (`)

9% (`) 9% (`) 18% (`)
(i) Intra-State supply 90,000 90,000 1,80,000

of goods for
` 10,00,000
(ii) Inter-State supply 1,44,000 1,44,000

of goods for
` 8,00,000
Total GST payable 3,24,000
Computation of total ITC
Particulars CGST @ SGST @ IGST @

9% (`) 9% (`) 18% (`)
Opening ITC 57,000 60,000 1,40,000
Add: ITC on Intra-State purchases of 27,000 27,000 Nil

goods valuing ` 3,00,000
Add: ITC on Inter-State purchases of Nil Nil 45,000

goods valuing ` 2,50,000
Total ITC 84,000 87,000 1,85,000

Computation of minimum GST payable from electronic cash ledger
Particulars CGST @ SGST @ IGST @ Total

9% (`) 9% (`) 18% (`) (`)
GST payable 90,000 90,000 1,44,000 3,24,000
Less: ITC [First ITC of IGST (22,000) (19,000) (1,44,000) 1,85,000

should be utilized in full - IGST IGST IGST
first against IGST liability
and then against CGST or
SGST liabilities in any order
to minimize cash outflow]
CGST and SGST ITC utilized (68,000) (71,000) 1,39,000

against CGST and SGST CGST SGST
output Tax liability
respectively
Minimum GST payable in Nil Nil Nil Nil

cash
ITC balance to be carried 16,000 16,000 Nil 32,000

forward next month
Note : The above computation is one of the many ways to set off the ITC of
IGST (` 41,000-after set off against IGST liability) against CGST and SGST
liability to compute minimum GST payable in cash and carry forward both
CGST and SGST ITC equally. To illustrate, IGST of ` 10,000 can be set off
against SGST payable and IGST of ` 31,000 can be set off against CGST
payable. In this situation also, the net GST payable will be nil but the ITC of
CGST and SGST to be carried forward will be ` 25,000 and ` 7,000 (totaling
to ` 32,000), respectively. However, if the entire ITC of ` 41,000 is set off
against CGST payable, then SGST of ` 3,000 will be payable in cash thus,
increasing the cash outflow. Therefore, such a set-off would not be
advisable for computing the minimum GST payable.

8.112
CROSSWORD PUZZLE
ACROSS
3. Plant and machinery _____pipelines laid outside the factory premises.

6. ITC on capital goods is reduced by ____% per quarter of a year or part of the
year from the date of invoice in case a registered person who ceases to pay
composition tax and switches to regular scheme.
7. A registered person is not entitled to take ITC in respect of any invoice after
30th ___ following the end of financial year to which such invoice pertains or
furnishing of the relevant annual return, whichever is earlier.
10. ITC on _____supplies received by a taxable person from a composition
supplier is blocked.
11. ITC on cars purchased by a car dealer for sale to customers is _____.
13. Where the goods against an invoice are received in lots, the registered
person is entitled to take credit upon receipt of the __lot.

DOWNWARDS
1. For availment of credit by registered person, services should have been

actually ______.
2. ______ percent ITC can be claimed on invoices furnished by the suppliers in
their GSTR-1s and reflected in GSTR-2B of recipient.
4. Motor vehicles exclude ___ purpose vehicles for being used in a factory.
5. ITC on works contract services availed by a manufacturing company for
construction of pipelines to be laid outside its factory, is _______.
8. Where the value of taxable supply of a registered person exceeds ` _________
lakh in a month, he shall have to pay atleast 1% of his output tax liability in
cash.
9. ITC is not available in case of ____ goods.
12. Either depreciation on the ____component can be claimed under Income Tax
Act or ITC can be availed under GST law.
Scan the following QR code for accessing the answers to MCQs in Quiz Time
Scan the code

8.114
Most of the amendments made in the CGST Act and the IGST Act 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
30.04.2023. 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 18 of second and third proviso to
section 16(2), explanation to section 17(3) and section 17(5)(fa) of the CGST 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 No. Existing provisions Provisions as Remarks

amended by the
Finance Act, 2023
Second Provided further that Provided further that Second and third
proviso to where a recipient where a recipient provisos to sub-
section fails to pay to the fails to pay to the section (2) of
16(2) supplier of goods or supplier of goods or section 16 to be
services or both, services or both, amended to align
other than the other than the the said sub-
supplies on which supplies on which section with the
tax is payable on tax is payable on return filing
reverse charge basis, reverse charge basis, system provided
the amount towards the amount towards in the CGST Act.
the value of supply the value of supply
along with tax along with tax
payable thereon payable thereon
within a period of within a period of
18
Provisions existing as on 30.04.2023.

one hundred and one hundred and

eighty days from the eighty days from the
date of issue of date of issue of
invoice by the invoice by the
supplier, an amount supplier, an amount
equal to the input equal to the input
tax credit availed by tax credit availed by
the recipient shall be the recipient shall be
added to his output paid by him along
tax liability, along with interest
with interest payable under
thereon, in such Section 50.
manner as may
be prescribed.
Third Provided also that Provided also that

proviso to the recipient shall be the recipient shall be
section entitled to avail of entitled to avail of
16(2) the credit of input the credit of input
tax on payment tax on payment
made by him of the made by him to the
amount towards the supplier of the
value of supply of amount towards the
goods or services or value of supply of
both along with tax goods or services or
payable thereon. both along with tax
payable thereon.
Explanation For the purposes of For the purposes of Explanation to

to section this sub-section, the this sub-section, the sub-section (3) of
17(3) expression "value of expression "value of section 17 of the
exempt supply" shall exempt supply" shall CGST Act is being
not include the value not include the value amended so as to
of activities or of activities or restrict availment
transactions transactions of input tax credit
specified in Schedule specified in Schedule in respect of
III, except those III, except certain

8.116
specified in (i) the value of transactions

paragraph 5 of the activities or specified in para
said Schedule;] transactions 8(a) of Schedule III
specified in of the CGST Act,
paragraph 5 of the as may be
said Schedule; and prescribed, by
including the
(ii) the value of
value of such
such activities or
transactions in the
transactions as
value of exempt
may be prescribed
supply.
in respect of clause
(a) of paragraph 8
of the said
Schedule.
17(5)(fa) -- (fa) goods or Section 17(5) to

services or both be amended so as
received by a to provide that
taxable person, ITC shall not be
which are used or available in
intended to be used respect of goods
for activities or services or both
relating to his received by a
obligations under taxable person,
corporate social which are used or
responsibility intended to be
referred to in used for activities
section 135 of the relating to his
Companies Act, obligations under
2013; corporate social
responsibility
referred to in
section 135 of the
Companies Act,
2013.



CHAPTER a 9
REGISTRATION
The section numbers referred to in the Chapter pertain to CGST Act, 2017, unless
otherwise specified. Examples/Illustrations/Questions and Answers given in the
LEARNING OUTCOMES
This Chapter will equip you to –
❑ understand the concept of the taxable person.
❑ explain when a person becomes liable to get registered under
GST.
❑ identify the scenarios where registration is compulsory.
❑ identify the persons who are not liable for registration.
❑ describe the procedure for obtaining registration under GST.
❑ explain the procedure for amendment of registration.
❑ describe the cancellation of registration and revocation of
cancellation of registration in specified circumstances.

CHAPTER OVERVIEW
Persons liable for registration
Compulsory registration in certain cases
Persons not liable for registration

Registration
Procedure for registration
Amendment of registration
Cancellation of registration
Revocation of cancellation of registration
1. INTRODUCTION
Under any taxation law, registration is the most
fundamental requirement for identification of tax payers
ensuring tax compliance in the economy. It is the first
step towards becoming GST complaint. Under indirect tax
regime, without registration, a person can neither collect
tax from his customers nor claim any credit of tax paid by
him.
Registration legally recognizes a person as supplier of goods
or services or both and legally authorizes him to collect taxes
from his customers and pass on the credit of the taxes paid
on the goods or services supplied to the
purchasers/recipients. He can claim the input tax credit of taxes
paid and can utilize the same for payment of taxes due on PAN based
supply of goods or services. Registration ensures the seamless registration

REGISTRATION a 9.3 a
flow of input tax credit from suppliers to recipients at the national level.
Under GST law, a supplier is required to obtain State-wise registration. There is no

concept of a centralized registration under GST like the erstwhile service tax regime.
A supplier has to obtain registration in every State/UT from where he makes a
taxable supply provided his aggregate turnover exceeds a specified threshold limit.
Thus, he is not required to obtain registration from a State/UT from where he makes
a non-taxable supply.
Since registration in GST is PAN based, once a supplier is liable to register, he has
to obtain registration in each of the States/UTs in which he operates under the
same PAN. Further, he is normally required to obtain single registration in a
State/UT. However, where he has multiple places of business in a State/UT, he has
the option either to get a single registration for said State/UT [wherein it can
declare one place as principal place of business (PPoB) and other branches as
additional place(s) of business (APoB)] or to get separate registrations for each
place of business in such State/UT.
Registration under GST is not tax specific, which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and GST compensation
cess.
Chapter VI - Registration [Sections 22 to 30] of the CGST Act and Chapter III –
Registration [Rules 8 to 26] of the CGST Rules contain the provisions relating to
registration. State GST laws also prescribe identical provisions in relation to
Registration.
Provisions of registration under CGST Act have also been made applicable to
IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the registration provisions, let us first go

through few relevant definitions.

❑ Agent: means a person, including a factor, broker, commission agent,
arhatia, del credere agent, an auctioneer or any other mercantile agent,
by whatever name called, who carries on the business of supply or receipt
of goods or services or both on behalf of another [Section 2(5)].
❑ Common portal: means the common goods and services tax electronic
portal referred to in section 146 [Section 2(26)].

❑ Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109)].
❑ Place of business: includes [Section 2(85)]:
a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores his
goods, supplies or receives goods or services or both; or
a place where a taxable person maintains his books of account; or
a place where a taxable person is engaged in business through an agent,

by whatever name called.
❑ Appellate Authority: means an authority appointed or authorised to hear

appeals as referred to in section 107 1 [Section 2(8)].
❑ Fixed establishment: means a place (other than the registered place of
business) which is characterised by a sufficient degree of permanence and
suitable structure in terms of human and technical resources to supply
services, or to receive and use services for its own needs [Section 2(50)].
❑ Principal place of business: means the place of business specified as the

principal place of business in the certificate of registration [Section 2(89)].
1
Section 107 contains the provisions relating to ‘Appeals to Appellate Authority’. The same shall
be discussed in detail at final level.

❑ Proper officer: in relation to any function to be performed under this Act,

means the Commissioner or the officer of the central tax who is assigned
that function by the Commissioner in the Board [Section 2(91)].
❑ Registered person: means a person who is registered under section 25,
but does not include a person having a Unique Identity Number [Section
2(94)].
❑ Tax period: means the period for which the return is required to be
furnished [Section 2(106)].
❑ Business: includes [Section 2(17)]–
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or

any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to (a)

above;
(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital assets and services in

connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription
or any other consideration) of the facilities or benefits to its members, as the
case may be;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book

maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public
authorities.

3. CONCEPT OF TAXABLE PERSON [SECTION

2(107)]
Under GST law, the concept of taxable
person is significant since tax on supplies
of goods and/or services, is to be paid by
a taxable person. So, let us understand the concept of taxable
person. As per section 2(107), taxable person means a person who is registered or
liable to be registered under section 22 or section 24 [These sections have been
discussed in detail subsequently in this Chapter].
Thus, even an unregistered person who is liable to be registered is a taxable person.
Similarly, a person not liable to be registered, but has taken voluntary registration
and got himself registered is also a taxable person.
In the subsequent paras, we will see when does a person becomes liable to get
registered, what is the procedure for getting registered under GST and how to get
the registration application amended, when can registration be cancelled and when
the cancellation of the registration by the Department or by the registered person
be revoked.
Following sections of Chapter VI – Registration of the CGST Act shall be discussed
in this chapter to understand the registration provisions:
Section 22 Persons liable for registration.
Section 23 Persons not liable for registration
Section 24 Compulsory registration in certain cases

Section 25 Procedure for registration.
Section 26 Deemed registration
Section 27 Special provisions relating to casual taxable person and
non-resident taxable person
Section 28 Amendment of registration
Section 29 Cancellation or suspension of registration
Section 30 Revocation of cancellation of registration

4. PERSONS LIABLE FOR REGISTRATION

[SECTION 22]
Section 22 Persons liable for registration

(Relevant
Extract)
(1) Every supplier shall be 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 twenty lakh rupees.
Provided that where such person makes taxable supplies of goods
or services or both from any of the special category States, he shall
be liable to be registered if his aggregate turnover in a financial
year exceeds ten lakh rupees.
Provided further that the Government may, at the request of a
special category State and on the recommendations of the Council,
enhance the aggregate turnover referred to in the first proviso from
ten lakh rupees to such amount, not exceeding twenty lakh rupees
and subject to such conditions and limitations, as may be so
notified.
Provided also that the Government may, at the request of a State
and on the recommendations of the Council, enhance the
aggregate turnover from twenty lakh rupees to such amount not
exceeding forty lakh rupees in case of supplier who is engaged
exclusively in the supply of goods, subject to such conditions and
limitations, as may be notified.
Explanation––For the purposes of this sub-section, a person shall
be considered to be engaged exclusively in the supply of goods even
if he is engaged in 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.

(2) Every person who, on the day immediately preceding the

appointed day, is registered or holds a license under an existing
law, shall be liable to be registered under this Act with effect
from the appointed day.
(3) Where a business carried on by a taxable person registered
under this Act is transferred, whether on account of succession
or otherwise, to another person as a going concern, the
transferee or the successor, as the case may be, shall be liable to
be registered with effect from the date of such transfer or
succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3),
in a case of transfer pursuant to sanction of a scheme or an
arrangement for amalgamation or, as the case may be, de-
merger of two or more companies pursuant to an order of a High
Court, Tribunal or otherwise, the transferee shall be liable to be
registered, with effect from the date on which the Registrar of
Companies issues a certificate of incorporation giving effect to
such order of the High Court or Tribunal.
Explanation 2––For the purposes of this section, ––
(i) the expression “aggregate turnover” shall include all
supplies made by the taxable person, whether on his
own account or made on behalf of all his principals
(iii) the expression “special category States” shall mean
the States as specified in sub-clause (g) of clause (4)
of article 279A of the Constitution except the State of
Jammu and Kashmir and States of Arunachal Pradesh,
Assam, Himachal Pradesh, Meghalaya, Sikkim and
Uttarakhand.
2
Serial no. (ii) to Explanation relates to ‘Job work’. The same shall be discussed in detail at final
level.

ANALYSIS
(i) Threshold limit for registration
▪ Every supplier of goods or services or both is required to obtain

registration
▪ in the State or the Union territory from where he makes the taxable
supply
▪ if his aggregate turnover exceeds specified threshold limit in a FY.
Aggregate Turnover
Before, we study what is the applicable threshold
limit for various States/ UTs, let us first
understand the concept of aggregate turnover.
Aggregate turnover is a crucial parameter for
deciding the eligibility of a supplier to avail the
benefit of threshold exemption from registration,
eligibility for composition scheme [Discussed in
Chapter 3 – Charge of GST].
‘Turnover’ in common parlance is the total
volume of business. The term ‘aggregate turnover’ as defined under section
2(6) has been presented in the diagrammatic form as follows:
Aggregate turnover
Includes Excludes
Value of all outward supplies
--Taxable supplies --CGST/ SGST/ UTGST/ IGST/
--Exempt supplies Cess
--Exports --Value of inward supplies on
--Inter-State supplies which tax is payable under
of persons having the same PAN to reverse charge.
be computed on all India basis.

Section 2(6) [definition of ‘aggregate turnover’ as given above] read with

explanation (i) to section 22 has been analysed as follows:
(A) Aggregate turnover to exclude inward supplies on which tax is
payable under reverse charge: It may be noted that the inward
supplies on which recipient is required to pay tax under Reverse Charge
Mechanism (RCM) do not form part of the ‘aggregate turnover’. The
law stipulates certain supplies like, Goods Transport Agency services,
legal services, sponsorship services, to name a few, where the recipient
of service is made to pay the tax – Discussed in detail in Chapter 3 –
Charge of tax. The value of such supplies would not form part of the
‘aggregate turnover’ of recipient of such supplies.
Outward Supplies taxable

under reverse charge would
continue to be part of the
‘aggregate turnover’ of the
supplier of such supplies
(1) Raghubir Private Ltd. pays GST on sitting fees paid to its
directors for the services rendered by them, taxable under
reverse charge. Value of services provided by the directors to
Raghubir Private Ltd. will form part of the aggregate turnover of the
directors and not of Raghubir Private Ltd.
(B) Aggregate turnover excludes the element of CGST, SGST, UTGST,
and IGST and compensation cess.
(C) Aggregate turnover to include total turnover of all branches (i.e.
all GST registrations) under same PAN
Aggregate turnover is calculated by taking together the value in respect
of the activities carried out on all-India basis.
(2) A dealer ‘X’ has two offices – one in Delhi and another in
Haryana. In order to determine whether ‘X’ is liable for
registration, turnover of both the offices would be taken into
account and only if the same exceeds the applicable threshold limit, X is
liable for registration subject to provisions of section 24.

(D) Value of exported goods/services, exempted goods/services, inter-

State supplies between distinct persons having same PAN, to be
included in aggregate turnover.
(3) Madhur Oils, Punjab, is engaged in supplying machine
oil as well as petrol. Supply of petrol is not leviable to GST,
but supply of machine oil is taxable. In order to determine
whether Madhur Oils is liable for registration, turnover of both non-
taxable3 as well as taxable supplies would be taken into account and if
the same exceeds the applicable threshold limit, Madhur Oils is liable
for registration.
(E) Aggregate turnover to include all supplies made by the taxable
person, whether on his own account or made on behalf of all his
principals.
(4) Mohini Enterprises has appointed M/s Bestfords &
Associates as its agent. M/s Bestfords & Associates makes
supply of goods on its own account and, on behalf of Mohini
Enterprises where invoices are issued in name of M/s Bestfords &
Associates only.
All the supplies of goods made by M/s Bestfords & Associates as agent
of Mohini Enterprises as well as on its own account will be included in
the aggregate turnover of M/s Bestfords & Associates.
(F) ‘Aggregate turnover’ Vs. ‘Turnover in a State’: The aggregate
turnover is different from turnover in a State. The former is used for
determining the threshold limit for registration and eligibility for
composition scheme [Discussed in Chapter 3 – Charge of GST].
However, once a person is eligible for composition levy, the GST
payable under composition levy would be calculated as a specified %
of ‘turnover in the State/UT’.
Applicable threshold limit
The threshold limit prescribed under section 22(1) is ` 20 lakh in a FY, i.e.
every supplier, whose aggregate turnover in a financial year exceeds ` 20 lakh,
is liable to be registered under GST in the State/ Union territory from where
he makes the taxable supply of goods and/or services.
3
Exempt supply includes non-taxable supply as per section 2(47).

However, the limit of ` 20 lakh will be reduced to ` 10 lakh if the person is

carrying out business in Special Category States. As per Article 279A(4)(g)
of the Constitution, there are 11 Special Category States, namely, States of
Arunachal Pradesh, Assam, Jammu and Kashmir 4, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
However, as per the explanation (iii) to section 22, for the purposes of
registration, only Mizoram, Tripura, Manipur and Nagaland are Special
Category States. Therefore, the threshold limit ` 10 lakh is applicable for
Mizoram, Tripura, Manipur and Nagaland.
If a person with places of business in

different States across India has one
branch in a Special Category State
from which it makes a taxable supply,
the threshold limit for GST registration
will be reduced to ` 10 lakh.
Government is empowered to enhance the threshold limit of ` 20 lakh upto

` 40 lakh for a supplier engaged exclusively in the supply of goods, at the
request of a State and on the recommendations of the Council. This shall be
subject to such conditions and limitations, as may be notified.
For the purposes of section 22(1), a person shall be considered to be engaged
exclusively in the supply of goods even if he is engaged in 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.
Further, Notification No. 10/2019 CT dated 07.03.2019 exempts any
person who is engaged in exclusive supply of goods and whose
aggregate turnover in the financial year does not exceed ` 40 lakh, from
registration requirement.
Exceptions to this exemption are as follows:
(a) Persons required to take compulsory registration under section 24.
4
The erstwhile State of Jammu and Kashmir has been reorganised into the Union territory of
Jammu and Kashmir (with Legislature) and Union territory of Ladakh vide the Jammu and
Kashmir Reorganisation Act, 2019.

(b) Persons engaged in making supplies of

(i) ice cream and other edible ice, whether or not containing cocoa
[2105 00 00],
(ii) pan masala [2106 90 20],
(iii) all goods of Chapter 24, i.e. Tobacco and manufactured tobacco
substitutes,
(iv) fly ash bricks; fly ash aggregates; fly ash blocks [6815],
(v) bricks of fossil meals or similar siliceous earths [6901 00 10],
(vi) building bricks [6904 10 00],
(vii) earthen or roofing tiles [6905 10 00].
(c) Persons engaged in making intra-State supplies in the States of
Arunachal Pradesh, Uttarakhand, Meghalaya, Sikkim, Telangana,
Puducherry and Special Category States as per section 22 [Nagaland,
Mizoram, Manipur, Tripura]. Inter-State supplies of goods are
nevertheless liable to compulsory registration and are already covered
in exception (a) above.
(d) Person who has opted for voluntary registration or such registered
persons who intend to continue with their registration under the CGST Act.
In view the above discussion, the registration requirements under GST can be
summarised as follows:
Threshold limit for persons

engaged
exclusively in exclusively in
supply of supply of
goods services/ both
goods &
services
States/UTs other than Puducherry ` 20 lakh ` 20 Lakh
Special Category
Telangana ` 20 lakh ` 20 Lakh
States
Others ` 40 lakh ` 20 Lakh
Manipur ` 10 lakh ` 10 Lakh

Special Special Mizoram ` 10 lakh ` 10 Lakh

Category Category
Nagaland ` 10 lakh ` 10 Lakh
States/ States as
UTs as per Tripura ` 10 lakh ` 10 Lakh
per section 22
Constitu
Other Jammu and ` 40 lakh ` 20 Lakh
tion
States/UTs Kashmir
Assam ` 40 lakh ` 20 Lakh
Himachal ` 40 lakh ` 20 Lakh
Pradesh
Arunachal ` 20 Lakh ` 20 Lakh
Pradesh
Meghalaya ` 20 Lakh ` 20 Lakh
Sikkim ` 20 Lakh ` 20 Lakh
Uttarakhand ` 20 Lakh ` 20 Lakh
States with States/UTs with States/UTs with threshold

threshold limit of threshold limit of limit of ` 20 lakh for
supplier of services/ both
` 10 lakh for ` 20 lakh for
goods and services and ` 40
supplier of goods supplier of goods lakh for supplier of goods
and/or services and/or services (Intra-State)
Arunachal
Jammu and
Manipur Pradesh
Kashmir
Meghalaya
Mizoram Assam
Sikkim
Uttarakhand Himachal
Nagaland
Pradesh
Puducherry
Tripura All other States
Telangana

(5) Prithiviraj of Assam is exclusively engaged in intra-State supply

of shoes. His aggregate turnover in the current financial year is
` 22 lakh. In view of the discussion in the above paras, the applicable
threshold limit for registration for Prithviraj in the given case is ` 40 lakh. Thus,
he is not liable to get registered under GST.
If in above example, all other things remaining the same, Prithiviraj is exclusively
engaged in supply of pan masala instead of shoes, he will not be eligible for
higher threshold limit of ` 40 lakh and the applicable threshold limit for
registration in that given case will be ` 20 lakh. Thus, Prithiviraj will be liable to
get registered under GST.
If instead of pan masala, Prithiviraj is exclusively engaged in supply of taxable
services, the applicable threshold limit for registration will still be ` 20 lakh. Thus,
Prithiviraj will be liable to get registered under GST.
Further, if Prithiviraj is engaged in supply of both taxable goods and services, the
applicable threshold limit for registration will be ` 20 lakh only. Thus, Prithiviraj
will be liable to get registered under GST.
(6) Shivaji of Telangana is exclusively engaged in intra-State supply

of toys. Its aggregate turnover in the current financial year is ` 22
lakh. Since Shivaji is making taxable supplies from Telangana, he will
not be eligible for higher threshold limit available in case of exclusive supply of
goods. The applicable threshold limit for registration for Shivaji in the given case
is ` 20 lakh. Thus, he is liable to get registered under GST.
If in above example, all other things remaining the same, Shivaji is exclusively
engaged in supply of taxable services instead of toys, the applicable threshold
limit for registration will still be ` 20 lakh. Thus, Shivaji will be liable to get
registered under GST.
Further, if Shivaji is engaged in supply of both taxable goods and services, the
applicable threshold limit for registration will be ` 20 lakh only. Thus, Shivaji will
be liable to get registered under GST.
(7) Ashoka of Manipur is exclusively engaged in intra-State supply of
paper. Its aggregate turnover in the current financial year is
` 12 lakh. Since Ashoka is making taxable supplies from Manipur
which is a Special Category State, the applicable threshold limit for registration

for Ashoka in the given case is ` 10 lakh. Thus, he is liable to get registered
under GST.
If in above example, all other things remaining the same, Ashoka is exclusively
engaged in supply of taxable services instead of paper, the applicable threshold
limit for registration will still be ` 10 lakh. Thus, Ashoka will be liable to get
Further, if Ashoka is engaged in supply of both taxable goods and services, the
applicable threshold limit for registration in that given case will be ` 10 lakh only.
Thus, Ashoka will be liable to get registered under GST.
(8) Raghav of Assam is exclusively engaged in intra-State supply of
readymade garments. Its turnover in the current FY from Assam
showroom is ` 28 lakh. It has another showroom in Tripura with a
turnover of ` 11 lakh in the current FY. Since Raghav is engaged in supplying
garments from a Special Category State as per section 22, the applicable
threshold limit for him gets reduced to ` 10 lakh. Further, Raghav is liable to get
registered under GST in both Assam and Tripura on his aggregate turnover
crossing the threshold limit of ` 10 lakh.
(ii) Registration required only for a place of business from where taxable
supply takes place
A supplier is required to obtain registration with respect to his each place of
business in India from where a taxable supply has been made. However, a
supplier is not liable to obtain registration in a State/UT from where he makes
an exempt/non-taxable supply.
It is pertinent to note here that a supplier is required to obtain registration
only in the State(s) “from where taxable supply is made” and not “where
taxable supply is made”. It may be noted that if goods and/or services are
supplied in different States, GST registration is not required in each such
State(s).
Further, registration is required to be obtained only in the State(s) where the
supplier has a “fixed establishment”. This aspect is more relevant in respect
of supply of services like repair & maintenance, transportation, security,
erection & commissioning services and construction contracts etc.

Thus, if a person has only liaison office or marketing office in a State and if
there is no taxable supply from that State, he is not required to obtain
registration in that State, even if he is registered in other State/s. Thus, in that
State where liaison office or marketing office is located, he will be treated as
‘unregistered’.
For instance, Mr. X having registered office in Delhi, imports goods which are
landed in Mumbai sea port. Mr. X enters into a sales agreement with Mr. Y
located in Mumbai to directly sale the goods from Mumbai port. In this case,
Mr. X is not required to obtain registration in Mumbai as he has no fixed
establishment in Mumbai.
Further, the threshold limit of a person having places of business in more than
one State/UT in India gets reduced to ` 10 lakh only when such person makes
taxable supplies of goods or services or both from any of the Special
Category States as per section 22. However, in case he makes exempt/non-
taxable supply from a Special Category State and taxable supplies from a
State other than Special Category State, the threshold limit shall not be so
reduced.
(9) Uday Enterprises is engaged in supply of taxable goods in
Maharashtra. It also supplies alcoholic liquor for human
consumption from Nagaland. Its turnover in the current financial
year is ` 34 lakh in Maharashtra and ` 11 lakh in Nagaland.
Since Uday Enterprises is exclusively engaged in making taxable supplies of
goods from Maharashtra, the applicable threshold limit for obtaining
registration is ` 40 lakh. However, the threshold limit will not be reduced to
` 10 lakh in this case, as supply of alcoholic liquor for human consumption
from Nagaland (one of the Special Category States) are non-taxable supplies5.
In the given case, since the aggregate turnover of Uday Enterprises exceeds
the applicable threshold limit of ` 40 lakh, it is liable to obtain registration. It
will obtain registration in Maharashtra, but is not required to obtain
registration in Nagaland as he is not making any taxable supplies from said
State.
5
in terms of section 9(1)

(iii) Person liable for registration in case of transfer of business

Where a business is transferred, whether on account of
succession/any other reason [including transfer/change in
the ownership of business due to death of the sole
proprietor6], to another person as a going concern, the
transferee/successor, is to be registered with effect from the date of such
transfer/succession. Where the business is transferred, pursuant to sanction
of a scheme/ arrangement for amalgamation/ de-merger of two or more
companies, pursuant to an order of a High Court/Tribunal, the transferee is
to be registered with effect from the date on which the Registrar of
Companies issues a certificate of incorporation giving effect to such order.
5. COMPULSORY REGISTRATION IN CERTAIN

CASES [SECTION 24]
As we have seen above that a supplier is liable to be registered under GST in the
State/ Union territory from where he makes the taxable supply of goods and/or
services only if his aggregate turnover in a financial year exceeds the applicable
threshold limit. However, there are certain cases wherein a supplier is mandatorily
required to obtain registration irrespective of the quantum of his aggregate
turnover. In other words, these are the cases wherein a supplier is compulsorily
required to obtain registration even though his aggregate turnover does not
exceed the applicable threshold limit.
However, certain exemptions from registration have also been provided under
section 23. These exceptions have been incorporated briefly at the relevant places
in the discussion under this heading in order to provide a holistic picture. The
exceptions have also been explained in detail in the next heading 6. Persons not
liable for registration.
The category of persons requiring compulsory registration under GST have been
enlisted below:
(1) Persons making any inter-State taxable supply. However, threshold limit
of ` 20 lakh (` 10 lakh in case of Special Category States of Mizoram, Tripura,
6
clarified vide Circular No. 96/15/2019 GST dated 28.03.2019

Manipur and Nagaland) is available in case of inter-State supply of taxable

services and of notified handicraft goods.
(2) Casual taxable persons (CTP) making taxable supply. However, threshold
limit of ` 20 lakh (` 10 lakh in case of Special Category States of Mizoram,
Tripura, Manipur and Nagaland) is available in case of CTP who is making
inter-State taxable supplies of notified handicraft goods and availing the
benefit of exemption from registration as mentioned in point (i) above.
(3) Persons who are required to pay tax under reverse charge on inward
supplies received. However, persons engaged exclusively in making
outward supplies, tax on which is liable to be paid on reverse charge basis are
exempt from registration.
(4) Non-resident taxable persons (NRTP) making taxable supply.
(5) E-commerce:
(i) Every ECO (Electronic Commerce Operator) who is required to collect
tax at source under section 52, ECO means any person who owns,
operates or manages digital or electronic facility or platform for
electronic commerce.
(ii) Persons who supply goods and/or services, other than supplies
specified under section 9(5), through such ECO who is required to
collect tax at source under section 52. However, threshold limit of ` 20
lakh (` 10 lakh in case of Special Category States of Mizoram, Tripura,
Manipur and Nagaland) is available in case of suppliers supplying
services through ECO.
(6) Persons who are required to deduct tax under section 51, whether or not
separately registered under this Act.
(7) Persons who make taxable supply of goods or services or both on behalf of
other taxable persons whether as an agent or otherwise.
(8) Persons who are required to pay tax under section 9(5) i.e. E-commerce
operator who is required to pay tax on specified services; and
(9) Input Service Distributor, whether or not separately registered under this Act.

(10) Every person supplying online information and data base access or retrieval
(OIDAR) services from a place outside India to a person in India, other than a
registered person7.
(11) such other person or class of persons as may be notified by the Government
on the recommendations of the Council.
Note: Concept of CTP and NRTP is explained subsequently in this chapter.
6. PERSONS NOT LIABLE FOR REGISTRATION

[SECTION 23]
(i) Persons not liable to registration
Section 23 lists the persons who are not liable to registration. Thus, the persons
so listed will not be the ‘taxable persons’.
(A) Person engaged exclusively in the business of supplying goods and
/or services not liable to tax/wholly exempt from tax: As per
section 23, any person engaged exclusively in the business of supplying
goods or services or both that are not liable to tax or wholly exempt from
tax under CGST Act/IGST Act shall not be liable to registration. This
provision can be understood with the help of following examples:
(10) Madhur Oils, Punjab, is exclusively engaged in supplying
petrol. Supply of petrol is not leviable to GST. Thus, Madhur Oils
is not liable for registration as it is engaged exclusively in supplying
goods not leviable to tax.
(11) Bhavyajyoti Foundation, a charitable trust registered under
section 12AA of the Income-tax Act, 1961, is exclusively engaged
in supply of services by way of charitable activities. Services by an
entity registered under section 12AA of the Income-tax Act, 1961 by way of
charitable activities are exempt from GST. Thus, Bhavyajyoti Foundation is
not liable for registration as it is exclusively engaged in supplying services
exempt from tax.
7The provisions relating to Input Service Distributor and OIDAR services will be discussed in
detail at the Final Level. Hence, text shaded in blue here is only for the purpose of knowledge
of the students.

(B) An agriculturist, to the extent of supply of produce out of cultivation

of land: An agriculturist to the extent of supply of
produce out of cultivation of land is also not liable to
registration. The term agriculturist has been defined
under section 2(7) as an individual/Hindu Undivided
Family (HUF) who undertakes cultivation of land—
(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or by
hired labour under personal supervision or the
personal supervision of any member of the family.
From the above definition, it is clear that the benefit of not being liable to
registration is only restricted to the agriculturists who are individuals or
HUFs. Further, if an agriculturist is also engaged in making any supply
other than supply of produce out of cultivation of land, he shall be liable
to registration based on applicable threshold limit.
(12) Deshbandhu is an agriculturist engaged in cultivation of
wheat in his field in the State of Punjab. He was exclusively
engaged in supply of wheat cultivated in his field in the previous
year. Thus, he was not liable to registration as he was exclusively engaged in
supply of produce out of cultivation of land.
In the current year, he decides to start trading in pre-packaged and labelled
puffed rice apart from supplying his wheat produce. His turnover in the
current year is ` 32 lakh from supply of wheat produced and ` 9 lakh from
trading of pre-packaged and labelled puffed rice .
Since he is engaged in trading of pre-packaged and labelled puffed rice also,
he is not covered under section 23 above. The threshold limit for registration
applicable to a person exclusively engaged in supply of goods in the State of
Punjab is ` 40 lakh. The aggregate turnover of Deshbandhu in the current
year is ` 41 lakh [` 32 lakh + ` 9 lakh] which exceeds the threshold limit. Thus,
he will be liable to registration.

(ii) Specified category of persons notified by the Government exempted

from obtaining registration
Following category of persons have been notified as being exempted from
obtaining registration under GST law:
A. Persons making only reverse charge supplies
Persons who are only engaged in making supplies of taxable goods or
services or both, the total tax on which is liable to be paid on reverse
charge basis by the recipient of such goods or services or both under
section 9(3) have been exempted from obtaining registration
[Notification No. 5/2017 CT dated 19.06.2017 w.e.f. 22.06.2017].
(13) Manikaran Transporters is a Goods Transport Agency
(GTA) engaged exclusively in supplying GTA services liable
to tax under reverse charge [since tax is being paid on GTA
services @ 5% and Manikaran has not exercised the option to pay GST
itself in the given case]. Thus, it is exempt from registration as it is
engaged exclusively in making supplies, tax on which is liable to be paid
on reverse charge basis.
Further, Manikaran Transporters supplies said service to Diwakar
Manufacturing Pvt. Ltd. whose aggregate turnover does not exceed the
applicable threshold limit. However, since Diwakar Manufacturing Pvt.
Ltd. has to pay tax on GTA services [@ 5%] under reverse charge, it is
required to obtain registration mandatorily irrespective of its aggregate
turnover.
B. Persons making inter-State supplies of taxable services up to ` 20
lakh
The persons making inter-State supplies of taxable services and having
an aggregate turnover, to be computed on all India basis, not exceeding
an amount of ` 20 lakh in a financial year have been exempted from
obtaining compulsory registration. However, the aggregate value of
such supplies, computed on all India basis, should not exceed an
amount of ` 10 lakh in case of Special Category States of Mizoram,
Tripura, Manipur and Nagaland [Notification No. 10/2017 IT dated
13.10.2017 as amended by Notification No. 3/2019 IT dated
29.01.2019].

(14) Dhola & Co., located in Delhi, is engaged in supply of

taxable goods8 in the neighbouring States of Punjab and
Haryana. Its aggregate turnover in current FY is ` 10 lakh.
Since it is engaged in making inter-State taxable supply of goods, it is
required to register mandatorily under GST irrespective of its aggregate
turnover.
However, if in the above case, Dhola & Co. is engaged in inter- State
supply of taxable services instead of goods, it will be eligible for
exemption from registration till its aggregate turnover does not exceed
` 20 lakh.
C. Persons making inter-State taxable supplies of notified handicraft
goods up to ` 20,00,000
As we have seen earlier that as per section 24 read
with Notification No. 10/2017 IT, a person making
inter-State supplies of goods is liable to be
registered compulsorily under GST irrespective of
the threshold limit.
However, in the following cases, persons making inter-State supplies of
goods have been exempted from obtaining registration:
(a) Persons making inter-State taxable supplies of notified9
handicraft goods.
(b) Persons making inter-State taxable supplies of notified
8
other than notified handicraft goods
9
Handicraft goods referred herein are goods as defined and notified in Notification No. 21/2018 CT (R)
dated 26.07.2018. This notification notifies the handicraft items which are eligible for concessional rate
of tax, for instance, handcrafted candles, articles made of paper mache, coir articles, handbags including
pouches and purses; jewellery box, hand embroidered articles, art ware of iron/aluminium, etc. These
examples are only for the purpose of knowledge and are not relevant for examination purposes.
Handicraft goods are defined under said notification as goods predominantly made by hand even though
some tools or machinery may also have been used in the process; such goods are graced with visual
appeal in the nature of ornamentation or in-lay work or some similar work of a substantial nature;
possess distinctive features, which can be aesthetic, artistic, ethnic or culturally attached and are amply
different from mechanically produced goods of similar utility.

products10 , when made by craftsmen predominantly by hand even

though some machinery may also be used in the process.
Conditions to be fulfilled:
1. The aggregate value of such supplies, to be computed on all India
basis, does not exceed an amount of ` 20 lakh [` 10 lakh in case of
Special Category States of Mizoram, Tripura, Manipur and
Nagaland] in a FY.
2. Such persons have obtained a PAN and have generated an
e-way bill11 [Notification No. 3/2018 IT dated 22.10.2018].
(15) Ariza Pvt. Ltd., located in Madhya Pradesh, is a supplier
of taxable and notified handicraft goods. It supplies these
goods in the neighbouring States of Uttar Pradesh and Orissa. Its
aggregate turnover in the month of April is ` 15 lakh. Although Ariza
Pvt. Ltd. is engaged in making inter-State supplies of taxable goods, it
is not liable to obtain registration till its aggregate turnover does not
exceed ` 20 lakh as it has availed the exemption from registration under
Notification No. 03/2018 IT 12.
D. Casual Taxable Persons making inter-State taxable supplies of
notified handicraft goods up to ` 20 lakh
As we have seen earlier that as per section 24, a CTP is liable to be
registered compulsorily under GST irrespective of the threshold limit.
However, following categories of CTPs have been exempted from
obtaining registration:
(a) CTPs making inter-State taxable supplies of notified handicraft
goods, [as referred in Point C. above] or
(b) CTPs making inter-State taxable supplies of notified products [as
referred in Point C. above], when made by the craftsmen
predominantly by hand even though some machinery may also be
10
Some of the notified products are leather articles, carved wood products, wood turning and
lacquer ware, bamboo products, textiles hand printing, theatre costumes, musical instruments, dolls
and toys, etc. These examples are only for the purpose of knowledge and are not relevant for
examination purpose.
11
The provisions relating to e-way bill have been discussed in detail in Chapter 12 in this Module
12
subject to fulfilment of other conditions prescribed under said notification.

used in the process.

Conditions to be fulfilled:
1. CTPs are availing benefit of Notification No. 03/2018 IT dated
22.10.2018 [discussed above].
2. The aggregate value of such supplies, to be computed on all India

basis, does not exceed an amount of ` 20 lakh [` 10 lakh in case
of Special Category States of Mizoram, Tripura, Manipur and
Nagaland] in a FY.
3. Such persons have obtained a PAN and have generated an
e-way bill [Notification No. 56/2018 CT dated 23.10.2018].
Liability to register in respect of services provided by the commission agent
as per APMC Act for sale/ purchase of agricultural produce
CBIC13 has clarified the issue as to whether the services provided by the commission
agent as per APMC Act for sale/ purchase of agricultural produce qualify as supply
under GST with the help of the following example. It further examines and clarifies
the registration requirements of such commission agents.
Mr. A sells agricultural produce by utilizing the services of Mr. B who is a

commission agent as per the Agricultural Produce Marketing Committee Act (APMC
Act) of the State14. Mr. B identifies the buyers and sells the agricultural produce on
behalf of Mr. A for which he charges a commission from Mr. A.
In cases where the invoice is issued directly by Mr. A to the buyer, the commission
agent (Mr. B) doesn’t fall under the category of agent covered under Schedule I.
However, in cases where the invoice is issued by Mr. B to the buyer, Mr. B is an
agent as covered under Para 3 of Schedule I to the CGST Act. Hence, in such cases,
the services supplied by commission agent Mr. B on behalf of the principal without
consideration shall be deemed to be a supply – Concept of Deemed Supply under
Schedule-I has been discussed in detail in Chapter 2 – Supply under GST.
13
14
As per the APMC Act, the commission agent is a person who buys or sells the agricultural
produce on behalf of his principal, or facilitates buying and selling of agricultural produce on
behalf of his principal and receives, by way of remuneration, a commission or percentage upon
the amount involved in such transaction.

The registration requirements of the commission agents in such cases have been
examined and clarified as follows:
(i) As we have already seen, as per section 24, a person is liable for mandatory
registration if he makes taxable supply of goods or services or both on behalf
of other taxable persons.
Accordingly, a commission agent will be liable to get mandatorily registered
under this provision only when both the following conditions are satisfied:
(a) the principal should be a taxable person; and
(b) the supplies made by the commission agent should be taxable.
However, generally, a commission agent under APMC Act makes supplies on
behalf of an agriculturist who is not a taxable person if he supplies produce
out of cultivation of land 15 [as seen above].
Thus, a commission agent, who is making supplies on behalf of non-
taxable person [viz. agriculturist], is not liable for compulsory
registration under this provision.
(ii) Further, since the services provided by the commission agent for sale/
purchase of agricultural produce are exempt from GST 16, such commission
agents are not liable to be registered in accordance with provisions of
section 23(1)(a) [as discussed above].
(iii) However, where a commission agent is liable to pay tax under reverse charge,
such an agent will be required to get registered compulsorily (We have
already seen under previous heading that persons liable to pay tax under
reverse charge are required to obtain registration mandatorily).
The provisions of section 23 can be summarized in the following diagram:
Person engaged exclusively in the Person engaged exclusively in the

business of supplying goods/ services/ business of supplying goods/ services/
both not liable to tax both wholly exempt from tax
Persons not liable for
registration
Specified category of persons notified
Agriculturist to the extent of supply of
by the Government on GST Council
produce out of cultivation of land
recommendation
15
in terms of section 23(1)(a)
16
Notification No. 12/2017 CT (R) dated 28.06.2017 [Discussed in Chapter 5 – Exemptions
from GST in Module-1 of the Study material.]

ILLUSTRATION 1
Examine, with reason, whether registration is required, under CGST Act, in the
following independent cases:
(i) Aadhav Computers of Gujarat is providing computer maintenance service.
Aggregate turnover of Aadhav Computers is ` 15 lakh which comprises both
inter-State and intra-State supply.
(ii) Soft Wings of West Bengal, exclusively trading in garments, supplies its taxable
goods in various States of India from its outlet in West Bengal. Aggregate
turnover of Soft Wings is ` 35 lakh.
ANSWER
(i) Registration is compulsory for suppliers engaged in inter-State supply.
However, as per Notification No. 10/2017 IT dated 13.10.2017, threshold
exemption of ` 20 lakh [` 10 lakh in case of Special Category States of
Mizoram, Tripura, Manipur and Nagaland] is available in case of inter-State
supply of taxable services.
Therefore, Aadhav Computers (aggregate turnover ` 15 lakh) is not required
to obtain registration even though it is engaged in inter-State supply of
taxable services.
(ii) The threshold limit for registration in the State of West Bengal for the persons
engaged exclusively in supply of goods, is ` 40 lakh. However, registration is
compulsory if the supplier is engaged inter-State supply of goods irrespective
of the quantum of aggregate turnover. The threshold exemption is not
available in case of inter-State supply of taxable goods. Thus, Soft Wings is
required to obtain registration.
ILLUSTRATION 2
Examine whether the liability to register compulsorily under section 24 arises in each
of the independent cases mentioned below:
(1) Meenu, a supplier in Maharashtra, is exclusively engaged in supply of potatoes
produced out of cultivation of her own land, within Maharashtra and also
outside Maharashtra.
(2) Jinu Oils, Gujarat, is engaged in supplying machine oil as well as petrol. Further,
it provides intra-state services of refining of oil to customers. Total turnover of

supply of machine oil is ` 10 lakh, supply of petrol is ` 5 lakh and supply of

services is ` 6 lakh.
(3) Tilu is working as an agent, he is supplying taxable goods as an agent of Tiku
(who is registered taxable person) and its aggregate turnover does not exceed
the applicable threshold limit during the financial year. Invoices to customers
are issued in name of Tilu.
ANSWER
(1) Section 24 provides that persons making any inter-State taxable supply of
goods are required to obtain registration compulsorily under GST laws
irrespective of the quantum of aggregate turnover.
However, as per section 23, an agriculturist, to the extent of supply of produce
out of cultivation of land, is not liable to registration.
Meenu is exclusively engaged in cultivation and supply of potatoes. Thus,
she is not liable to registration irrespective of the fact that she is engaged in
making inter-State supply of goods. Further, Meenu will not be liable to
registration, in the given case, even if her turnover exceeds the threshold
limit.
(2) Section 24 specifies the categories of persons who are required to be

mandatorily registered under GST irrespective of the quantum of their
aggregate turnover.
In the given case, Jinu Oils does not fall in any of the specified categories.
Therefore, it is not required to obtain registration compulsorily under GST.
However, 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 supply of both goods and services is
` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland and
` 20 lakh for the rest of India. Thus, the applicable threshold limit for the State
of Gujarat is ` 20 lakh for supply of both goods and services. Further,
aggregate turnover includes exempted turnover of goods or services.

Accordingly, Jinu Oils is liable obtain registration since its aggregate turnover
[` 21 lakh (including turnover of exempt supply of petrol)] exceeds the
threshold limit of ` 20 lakh.
(3) Section 24 provides that persons who make taxable supply of goods and/or
services on behalf of other taxable persons whether as an agent or otherwise
are required to obtain registration compulsorily under GST laws irrespective
of the quantum of aggregate turnover.
Therefore, Tilu will be mandatorily required to obtain registration.
7. PROCEDURE FOR REGISTRATION [SECTIONS

25, 26 & 27]
Section 25 Procedure for registration

(1) Every person who is liable to be registered under section 22 or
section 24 shall apply for registration in every such State or Union
territory in which he is so liable within thirty days from the date
on which he becomes liable to registration, in such manner and
subject to such conditions as may be prescribed.
Provided that a casual taxable person or a non-resident taxable
person shall apply for registration at least five days prior to the
commencement of business.
Provided further that a person having a unit, as defined in the
Special Economic Zones Act, 2005, in a Special Economic Zone or
being a Special Economic Zone developer shall have to apply for
a separate registration, as distinct from his place of business
located outside the Special Economic Zone in the same State or
Union territory.
Explanation—Every person who makes a supply from the
territorial waters of India shall obtain registration in the coastal
State or Union territory where the nearest point of the appropriate
baseline is located.

(2) A person seeking registration under this Act shall be granted a

single registration in a State or Union territory.
Provided that a person having multiple places of business in a
State or Union territory may be granted a separate registration for
each such place of business, subject to such conditions as may be
prescribed.
(3) A person, though not liable to be registered under section 22 or
section 24 may get himself registered voluntarily, and all
provisions of this Act, as are applicable to a registered person,
shall apply to such person.
(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
(5) Where a person who has obtained or is required to obtain
registration in a State or Union territory in respect of an
establishment, has an establishment in another State or Union
territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of this Act.
(6) Every person shall have a Permanent Account Number issued
under the Income- tax Act, 1961 in order to be eligible for grant
of registration.
Provided that a person required to deduct tax under section 51
may have, in lieu of a Permanent Account Number, a Tax
Deduction and Collection Account Number issued under the said
Act in order to be eligible for grant of registration.
(6A) Every registered person shall undergo authentication, or furnish
proof of possession of Aadhaar number, in such form and manner
and within such time as may be prescribed.
Provided that if an Aadhaar number is not assigned to the
registered person, such person shall be offered alternate and
viable means of identification in such manner as Government
may, on the recommendations of the Council, prescribe.
Provided further that in case of failure to undergo authentication
or furnish proof of possession of Aadhaar number or furnish

alternate and viable means of identification, registration allotted

to such person shall be deemed to be invalid and the other
provisions of this Act shall apply as if such person does not have
a registration.
(6B) On and from the date of notification, every individual shall, in
order to be eligible for grant of registration, undergo
authentication, or furnish proof of possession of Aadhaar number,
in such manner as the Government may, on the recommendations
of the Council, specify in the said notification.
Provided that if an Aadhaar number is not assigned to an
individual, such individual shall be offered alternate and viable
means of identification in such manner as the Government may,
on the recommendations of the Council, specify in the said
notification.
(6C) On and from the date of notification, every person, other than an
individual, shall, in order to be eligible for grant of registration,
undergo authentication, or furnish proof of possession of Aadhaar
number of the Karta, Managing Director, whole time Director,
such number of partners, Members of Managing Committee of
Association, Board of Trustees, authorised representative,
authorised signatory and such other class of persons, in such
manner, as the Government may, on the recommendation of the
Council, specify in the said notification.
Provided that where such person or class of persons have not been
assigned the Aadhaar Number, such person or class of persons
shall be offered alternate and viable means of identification in
such manner as the Government may, on the recommendations
of the Council, specify in the said notification.
(6D) The provisions of sub-section (6A) or sub-section (6B) or sub-
section (6C) shall not apply to such person or class of persons or
any State or Union territory or part thereof, as the Government
may, on the recommendations of the Council, specify by
notification.
Explanation—For the purposes of this section, the expression
“Aadhaar number” shall have the same meaning as assigned to it
in clause (a) of section 2 of the Aadhaar (Targeted Delivery of
Financial and Other Subsidies, Benefits and Services) Act, 2016

(7) Notwithstanding anything contained in sub-section (6), a non-

resident taxable person may be granted registration under sub-
section (1) on the basis of such other documents as may be
prescribed
(8) Where a person who is liable to be registered under this Act fails
to obtain registration, the proper officer may, without prejudice to
any action which may be taken under this Act or under any other
law for the time being in force, proceed to register such person in
such manner as may be prescribed
(9) Notwithstanding anything contained in sub-section (1),––
(a) any specialised agency of the United Nations Organisation
or any Multilateral Financial Institution and Organisation
notified under the United Nations (Privileges and
Immunities) Act, 1947, Consulate or Embassy of foreign
countries ; and
(b) any other person or class of persons, as may be notified by
the Commissioner,
shall be granted a Unique Identity Number in such manner and
for such purposes, including refund of taxes on the notified
supplies of goods or services or both received by them, as may be
prescribed.
(10) The registration or the Unique Identity Number shall be granted
or rejected after due verification in such manner and within such
period as may be prescribed.
(11) A certificate of registration shall be issued in such form and with
effect from such date as may be prescribed.
(12) A registration or a Unique Identity Number shall be deemed to
have been granted after the expiry of the period prescribed under
sub-section (10), if no deficiency has been communicated to the
applicant within that period.
Section 26 Deemed registration
(1) The grant of registration or the Unique Identity Number under the
State Goods and Services Tax Act or the Union Territory Goods and
Services Tax Act shall be deemed to be a grant of registration or

the Unique Identity Number under this Act subject to the condition
that the application for registration or the Unique Identity
Number has not been rejected under this Act within the time
specified in sub-section (10) of section 25.
(2) Notwithstanding anything contained in sub-section (10) of section
25, any rejection of application for registration or the Unique
Identity Number under the State Goods and Services Tax Act or
the Union Territory Goods and Services Tax Act shall be deemed
to be a rejection of application for registration under this Act.
Section 27 Special provisions relating to casual taxable person and
(1) The certificate of registration issued to a casual taxable person or
a non- resident taxable person shall be valid for the period
specified in the application for registration or ninety days from the
effective date of registration, whichever is earlier and such person
shall make taxable supplies only after the issuance of the
certificate of registration.
Provided that the proper officer may, on sufficient cause being
shown by the said taxable person, extend the said period of ninety
days by a further period not exceeding ninety days.
(2) A casual taxable person or a non-resident taxable person shall, at
the time of submission of application for registration under sub-
section (1) of section 25, make an advance deposit of tax in an
amount equivalent to the estimated tax liability of such person for
the period for which the registration is sought.
Provided that where any extension of time is sought under
sub-section (1), such taxable person shall deposit an additional
amount of tax equivalent to the estimated tax liability of such
person for the period for which the extension is sought.
(3) The amount deposited under sub-section (2) shall be credited to
the electronic cash ledger of such person and shall be utilised in
the manner provided under section 49.

ANALYSIS
Procedure for registration is governed by section 25 read with relevant CGST Rules.
Relevant provisions of CGST Rules have been incorporated at the relevant places.
Further, special provisions have been provided for registration of casual taxable
person and non-resident taxable person under section 27. Concept of deemed
registration has been elaborated under section 26. Under GST, the application for
registration has to be submitted electronically at the GST Common Portal –
www.gst.gov.in, duly signed or verified.
A large number of forms/formats relating to registration have been prescribed in
the CGST Rules. For every process in the registration chain such as application for
registration, acknowledgment, query, rejection, registration certificate, show cause
notice for cancellation, reply, cancellation, amendment, field visit report etc., there
are separate standard formats17. This makes the process uniform all over the
country. The decision-making process has also been expedited. Strict time-lines
have been stipulated for completion of different stages of registration process.
(i) Where and by when to apply for registration? [Section 25(1)]
Particulars Where When
Person who is liable to be in every such within 30 days from the date
registered under section 22 State/UT in on which he becomes liable
or section 24 which he is so to registration
liable
A casual taxable person or a at least 5 days prior to
non-resident taxable person commencement of business
(16) Sugam Services Ltd. is engaged in taxable supply of services

in Delhi. The turnover of Sugam Services Ltd. exceeded ` 20 lakh
on 1st November. It is liable to apply for registration by 1st
December in Delhi.
17
Students are advised to go through various forms/formats relating to registration at
http://www.gst.gov.in. for knowledge purposes.

(ii) State-wise registration [Section 25(2) read with rule 11]

(A) One registration per State
❑ Registration needs to be taken State-wise, i.e. there is no

centralized registration under GST. A business entity having its
branches in multiple States will have to take separate State-wise
registration for its branches in different States.
❑ Further, within a State, an entity with different branches shall be
granted single registration wherein it can declare one place as
principal place of business (PPoB) and other branches as
additional places of business (APoB).
(B) Separate registration for different places of business within a
State/UT may be granted
❑ Although a taxpayer having multiple places of business in one
State is not mandatorily required to obtain separate registration
for each such place of business in the State, he has an option to
obtain independent registrations with respect to each such
separate place of business.
❑ However, separate registration for each place of business shall be

granted provided all separately registered places of business of
such person pay tax on supply of goods/services/both made to
another registered place of business, of such person and issue a
tax invoice/bill of supply, for such supply. Separate registration
application needs to be filed for each place of business.
❑ A registered person opting to obtain separate registration for a
place of business shall submit a separate application in
Form GST REG 01 in respect of such place of business.
❑ The provisions of rules 9 and 10 [Discussed in subsequent paras]

relating to verification and grant of registration shall mutatis
mutandis apply to an application submitted under this rule.
(17) Meethalal & Sons - a supplier in Maharshtra - has three
branches in Mumbai, Pune and Mahabaleshwar. Mumbai and
Pune branches are engaged in supply of garments and
Mahabaleshwar branch engaged in supply of shoes. Either it can obtain

single registration for Mahrashtra declaring one of the branches as

PPoB (let’s say Mumbai) and other two branches (Pune and
Mahabaleshwar) as APoB or it can obtain separate GST registration for
each of the three branches in Mumbai, Pune and Mahabaleshwar as
separate places of business.
In case Meethalal & Sons opts to have separate registrations for its all
three branches and Mumbai branch sends some garments [subject to
GST] for sale to Pune branch, Mumbai branch must raise a tax invoice
and pay tax on such transfer of garments to Pune branch.
(C) Composition levy in case of separate registration for multiple
places of business within a State/UT
❑ If a person is paying tax for one of his places of business under
normal scheme, he cannot opt to pay tax under composition levy
for any other place of business.
❑ If one of the places of business [separately registered] of a
registered person becomes ineligible to pay tax under
composition levy, all other registered places of business of said
person would also become ineligible to pay tax under
composition levy.
❑ The provisions of rules 9 and 10 [Discussed in subsequent paras]
relating to verification and grant of registration shall mutatis
mutandis apply to an application submitted under this rule.
(iii) Voluntary registration [Section 25(3)]

A person who is not liable to be registered under section 22 or section 24
may get himself registered voluntarily. In case of voluntary registration, all
provisions of this Act, as are applicable to a registered person, shall apply to
voluntarily registered person. However, once a person obtains voluntary
registration, he has to pay tax even though his aggregate turnover does not
exceed ` 40 lakh/` 20 lakh/` 10 lakh, as the case may be.
Voluntary registration is usually obtained by the business for ensuring
seamless flow of credit to their customers.

(iv) Distinct Persons/ establishments of distinct persons [Section 25(4) & (5)]
A person who has obtained/ is required to obtain more than one registration,
whether in one State/ Union territory or more than one State/Union territory
shall, in respect of each such registration, be treated as distinct persons.
Further, where a person who has obtained or is required to obtain registration
in a State or Union territory in respect of an establishment, has an
establishment in another State or Union territory, then such establishments
shall be treated as establishments of distinct persons. These concepts have
already been discussed in detail in Chapter 2– Supply under GST.
(v) PAN must for obtaining registration [Section 25(6) & (7)]
Permanent Account Number is mandatory to be eligible for grant of

registration.
🌟 A Non-Resident Taxable Person (NRTP) may be granted registration on the

basis of other prescribed documents [Elaborated in subsequent paras].
(vi) Unique Identity Number (UIN) [Section 25(9) & (10) read with rule 17]
Any specialized agency of the United Nations Organization or any

Multilateral Financial institution and organization as notified
under the United Nations (Privileges and Immunities) Act, 1947,
consulate or embassy of foreign countries and any other person notified by
the Commissioner, is required to obtain a UIN from the GSTN portal.
This UIN is needed for claiming refund of taxes paid on notified
supplies of goods and/or services received by them, and for
such other purpose as may be notified. UIN granted is a
centralized UIN i.e. it shall be applicable to the territory of India.
A person having UIN is not registered person and thus, is not a taxable
person.
The proper officer may, upon submission of an application in prescribed form
or after filling up the said form or after receiving a recommendation from the
Ministry of External Affairs, Government of India, assign a UIN to the said
person and issue a certificate in Form GST REG 06 within 3 working days
from the date of submission of application.

(vii) Suo-motu registration by the proper officer [Section 25(8) read with rule 16]
Where, pursuant to any survey, enquiry, inspection,
search or any other proceedings under the Act, the Temporary
registration
proper officer finds that a person liable to registration
under the Act** has failed to apply for such registration,
such officer may register the said person on a temporary basis and issue an
order in prescribed form.
**Such person shall either:
(i) submit an application for registration in prescribed form within 90 days
from the date of grant of temporary registration, or
(ii) file an appeal against such temporary registration.
In case (ii), if the Appellate Authority upholds the liability to registration,
application for registration shall be submitted within 30 days from the date
of issuance of such order of the Appellate Authority.
Provisions relating to verification and issue of registration certificate [as
contained in rules 9 and 10] [discussed in subsequent paras] shall, mutatis
mutandis, apply to such application submitted by the person granted
temporary registration. GSTIN thereafter granted shall be effective from the
date of order of proper officer granting temporary registration.
(viii) Procedure for registration [Section 25 read with rules 8, 9 & 10]
Provisions relating to procedure for application for registration, verification
of the application and approval & issue of registration certificate are
contained in the rules 8, 9 and 10 respectively. The same have to be read in
conjunction with section 25 provisions. The procedure for registration
prescribed under rules 8, 9 and 10 are also applicable to a person paying tax
under composition levy, every person seeking voluntary registration as well
as a casual taxable person.
However, procedure so laid down will not apply to:
• Non-resident taxable person (NRTP)
• A person required to deduct tax at source under section 51
• A person required to collect tax at source under section 52

• A person supplying OIDAR services from a place outside India to a non-

taxable online recipient referred to in section 14 of IGST Act.
Separate registration forms and procedure have been prescribed for each of
the aforesaid persons. Procedure relating to NRTP, TDS and TCS has been
discussed subsequently, but procedure for OIDAR services has been covered
at the Final level.
Such persons shall apply for registration in Form GST REG 01. The application
for registration in GST Form REG 01 is divided into two parts – Part A and Part
B.
In order to cater to the needs of tax payers who are not IT savvy, Facilitation
centres have been established which help the taxpayer in submitting the
application for registration, amending the registration certificate, submitting
application for cancellation of registration, revocation of cancellation of
registration, etc. Facilitation Centre shall be responsible for the digitization
and/or uploading of the forms and documents.
Application for registration by Special Economic Zone (SEZ) [Second
proviso to section 25(1): A person
having unit in SEZ/an SEZ developer will SEZ is a geographically bound
have to make a separate application for zone where the economic laws
registration as distinct from his place of relating to export and import are
more liberal as compared to
business located outside SEZ in the
other parts of the country. SEZ is
same State/UT. Thus, there may be a considered to be a place outside
case where two units of a tax payer are India for all tax purposes.
located in same State/UT - one in SEZ
and another outside SEZ. In that case, separate registrations have to be
obtained for each of the two units as separate places of business.
(18) Suvarna Industries is engaged in manufacturing activities in
Uttar Pradesh. It has two manufacturing units in UP - one in SEZ
and another outside SEZ. Under GST, one registration per State is
required. However, since in this case, one of the two units of Suvarna
Industries is located in SEZ, SEZ unit will have to compulsorily make a separate
application for registration as a place of business distinct from unit located
outside SEZ in the same State.

Procedure for registration has been depicted by way of a diagram below:
Part I
Every person liable to get registered and person seeking voluntary registration shall,
before applying for registration, declare his Permanent Account Number (PAN) and
State/UT in Part A of FORM GST REG-01 on GST Common Portal.
PAN is validated online by Common Portal from CBDT database and is also be
verified through separate OTPs sent to the PAN linked mobile number and e-
mail address.
Temporary Reference Number (TRN) is generated and communicated to the applicant

on the validated mobile number and e-mail address.
Using TRN, applicant shall electronically submit application in Part B of

application form, along with specified documents at the Common Portal.
Part B of application contains the details, such as, constitution of
business, jurisdiction, option for composition, date of commencement
of business, reason to obtain registration, address of PPoB and nature
of activity carried out therein, details of APoB, details of bank account(s),
details of authorized signatory, aadhaar authentication, etc.
On receipt of such application, an acknowledgement in the prescribed form

shall be issued to the applicant electronically. A Casual Taxable Person
(CTP) applying for registration gets a TRN for making an advance deposit
of tax in his electronic cash ledger and an acknowledgement is issued only
after said deposit.*
Application shall be forwarded to the Proper Officer.
The procedure after receipt of application by the Proper Officer is depicted in

Part II.
* Discussed in detail in subsequent paras.

Part-II
Proper Officer examines the application and where a person fails to undergo
accompanying documents. Aadhaar authentication/does not
opt for Aadhaar authentication
Proper Officer within 30 days where PO deems it fit to carry out

If same are issues notice from application site verification
found in No submission date
thereby where a person, who has
Yes order? seeking undergone Aadhaar
clarification**, authentication, is identified on
Yes
information or common portal, based on data
Registration within 7
Registration is documents analysis & risk parameters, to
granted within working days
granted within 30 from the carry out site verification
from application
7 working days of application applicant submission date
days from the after verification of electronically Other cases
date of site & prescribed No
submission of documents If applicant has furnished the clarification**,

application information or documents within 7 working
without site where where
days’ time from receipt of notice?
verification applicant where a person, who has
PO (C)
fails to undergone Aadhaar Yes
deem
if applicant undergo authentication, is
REGISTRATION
s it fit If proper officer is satisfied with it? No

successfully Aadhaar identified on common
to
validates his authenticat portal, based on data
carry
aadhaar ion/ does analysis & risk Yes
out Proper officer
parameters, to carry out Proper officer will grant registration
a
authentication, not opt for site

site verification may reject the
Aadhaar verific
within 7 working days from the date
(A) application for
authentication ation of receipt of information/
(B) reasons to be
clarification/ documents
9.41
(B) (B) recorded in

writing.
**Clarification includes modification/correction of particulars declared in the application for
registration other than PAN, State Mobile No. & E-mail address.
✮ Deemed Approval of Application

If the proper officer fails to take any action in the following cases within the
stipulated time, the application for grant of registration shall be deemed to
have been approved-
•within a period of 30 days from the date of

in cases where a person is submission of the application
covered in above
(B)
•within a period of 7 working days from the

in case of a person covered date of submission of the application
in (A) above
•within 7 working days from the date

of receipt of clarification, information
in cases covered in (C) above or documents furnished by the
applicant
Thus, in case of successful authentication of Aadhaar and no SCN being

issued, registration will be deemed to be approved within 7 working days.
However, if Aadhar authentication is not opted for/ aadhaar authentication
fails in validation/ PO deems it fit to carry out site verification and no SCN is
issued, registration will be deemed to be approved within 30 days by tax
official.
Tax Officer can issue SCN within 7 working days, for grant of registration, in
cases of successful Aadhar authentication. However, in cases when taxpayer
do not opt to provide Aadhaar/when Aadhar authentication fails/ PO deems
it fit to carry out site verification, he can issue SCN upto 30 days. In both
cases, applicants can submit their reply within 7 working days from issue of
SCN.

REGISTRATION 9.43
Aadhaar authentication
[Section 25(6A), (6B), (6C) & (6D) read with rules 8, 9, 10B and 25]
As seen above, there’s a simplified registration procedure under GST.
However, this easy registration procedure was unduly misused by fly-by-night
operators. Thus, in an endeavor to curb/check such operators and to increase
compliance, aadhaar e-KYC based registration has been introduced under the
GST law. Aadhaar authentication is mandatory for the new applicants
(whether an individual applicant or an applicant other than individual) in
order to be eligible for grant of registration. Aadhaar Authentication process
has been introduced, for the persons applying for GST registration as normal
taxpayer/ composition/ casual taxable person/ Input Service Distributor (ISD)/
SEZ Developer/ SEZ Unit etc, in Form GST REG 01.
Existing registrants (those who are already registered under GST) are also
required to undergo aadhaar authentication.
How aadhaar authentication is done?
New registrants
While filing the application for registration, the applicant gets an option as
to whether he wants to opt for Aadhaar authentication or not. If he opts ‘Yes’
for Aadhaar authentication, GST system sends "authentication link" on the
mobile numbers and email ids (mentioned in the registration application) of
promotor/partner, and primary authorized signatory which are selected by
the applicant18.
On clicking the verification link, a window for Aadhaar authentication opens
where they enter the Aadhaar Number and the OTP received by them on the
mobile number and email id linked with Aadhaar.
Once Aadhaar authentication has been successfully validated, his application
will be deemed to be approved within 7 working days and the registration
application submitted by him will not be marked for mandatory site visit,
unless the tax official raises a show cause notice within stipulated time.
18
While opting for Aadhaar authentication, the applicant needs to select atleast 1 Primary
Authorized Signatory and 1 Promoter/ Partner/Karta/Director/Member for authentication
purposes.

However, in case the applicant does not opt for Aadhaar authentication while
applying for registration or where his Aadhar authentication fails in validation,
registration application will not be deemed approved within 7 working days
and it will be marked for mandatory site visit and approval thereafter, by the
tax official. Registration application will get deemed approved after 30
calendar days, if tax official doesn't take any action.
If tax official raises SCN within 30 calendar days, then applicant has 7 working
days to reply to it. Tax official can take further action on that reply within 7
working days. If tax official doesn't take any action after receipt of applicant’s
reply within next 7 working days, his application will get deemed approved.
Existing registrants
All the regular taxpayers and composition taxpayer are required to get
Aadhaar authenticated for existing GST registration. An existing taxpayer can
get himself Aadhaar authenticated on GST portal using either Aadhaar
authentication link or uploading E-KYC documents19.
A. Persons required to undergo aadhaar authentication
As per section 25(6A), (6B) and (6C), following persons are required to
undergo aadhaar authentication:
(1) New applicant
Every (i) individual applicant or (ii) an applicant, other than an
individual, shall undergo authentication/furnish proof of
possession of Aadhaar number, in the manner prescribed in rule
820. Rule 8(4A) provides that where an applicant opts for
authentication of Aadhaar number, he shall, while submitting an
application for registration, undergo authentication of Aadhaar
number. Said authentication is required to be eligible for grant
of registration.
19
It is not mandatory for every authorized signatory, promoter or partner to get Aadhaar
authenticated for an existing GST registration. The Aadhaar authentication will be needed only
for 1 Primary Authorized Signatory and 1 Promoter/ Partner/ Karta/ Director/ Member.
20
Notification No. 18/2020 CT dated 23.03.2020

REGISTRATION 9.45
Date of submission of the application in such cases shall be earlier

of:
(a) the date of authentication of the Aadhaar number,
or
(b) 15 days from the submission of the application in Part B of
Form GST REG-01.
In case applicant is an individual, he shall undergo authentication
of his own aadhaar number.
In case applicant is other than individual, the authentication will
be of aadhaar number of the Karta, Managing Director, whole
time Director, such number of partners, Members of Managing
Committee of Association, Board of Trustees, authorised
representative, authorised signatory and such other notified class
of persons [authorised signatory of all types, Managing and
Authorised partners of a partnership firm and Karta of a Hindu
Undivided Family, have been so notified 21].
Risk-based biometric-based aadhaar authentication of
registration applicants – Pilot project in Gujarat [Sub-rules
(4A), (4B) and (5) amended]
In order to improve the registration process, biometric based
aadhaar authentication of the high-risk applicants who opt
for authentication of Aadhaar number has been introduced on
a pilot basis in the State of Gujarat.
An applicant who has opted for authentication of Aadhaar
number and is identified on the common portal, based on data
analysis and risk parameters, shall be followed by biometric-
based Aadhaar authentication and taking photograph:
(i) of the applicant where the applicant is an individual or
(ii) of such individuals where the applicant is not an
individual,
21

along with the verification of the original copy of the

documents uploaded with the application in Form GST REG-
01 at one of the notified Facilitation Centres.
The application shall be deemed to be complete only after

completion of the process laid down hereunder.
An acknowledgement shall be issued to the applicant only
after completion of biometric-based authentication.
(2) Persons already registered
Every registered person shall undergo authentication/furnish
proof of possession of Aadhaar number, in prescribed form and
manner and within the prescribed time.
The manner in which aadhaar authentication needs to be done
by a registered person is prescribed as under:-
A registered person, who has been issued a certificate of
registration under GST, shall undergo authentication of the
Aadhaar number of:-
❑ Proprietor, in the case of proprietorship firm,
❑ Any partner, in the case of a partnership firm,
❑ Karta, in the case of a Hindu undivided family,
❑ Managing director or any whole-time director, in the
case of a company,
❑ Any of the Members of the Managing Committee of an
Association of persons or body of individuals or a
Society, or
❑ Trustee in the Board of Trustees, in the case of a Trust;

and of the Authorized Signatory,
in order to be eligible for the following purposes:
✓ for filing of application for revocation of cancellation of
registration [Rule 23]

REGISTRATION 9.47
✓ for filing of refund application in Form RFD-01 [Rule 89]

✓ for refund of the IGST paid on goods exported out of
India [Rule 96]
B. Where Aadhaar number is not assigned
(1) In case of new applicant

If an aadhaar number is not assigned to a new applicant – either
(i) an individual or (ii) person/class of persons (other than
individual), such individual/person/class of persons shall be
offered alternate and viable means of identification in the manner
specified in rule 922.
Proviso to rule 9(1) provides that where
(i) a person fails to undergo authentication of aadhaar number
or does not opt for authentication of Aadhaar number, or
(ii) a person, who has undergone authentication of Aadhaar
number, is identified on the common portal, based on
data analysis and risk parameters (presently in case pilot
project in Gujarat), for carrying out physical verification
of places of business
(iii) the proper officer, with the approval of an officer authorised
by the Commissioner not below the rank of Assistant
Commissioner, deems it fit to carry out physical verification
of places of business
the registration shall be granted within 30 days of submission of

application only after physical verification of the principal place of
business in the presence of the said person, in the prescribed
manner (specified in rule 25 discussed subsequently) and
verification of such documents as the proper officer may deem fit.
Where the application submitted under rule 8 is found to be
deficient, either in terms of any information or any document
22
Provisos to section 25(6B) and 25(6C) read with Notification No.s 18 and 19/2020 CT both
dated 23.03.2020

required to be furnished under the said rule, or where the proper

officer requires any clarification with regard to any information
provided in the application or documents furnished therewith, he
may issue a notice to the applicant electronically in within a period
of 7 working days from the date of submission of the application
and the applicant shall furnish such clarification, information or
documents electronically within a period of 7 working days from
the date of the receipt of such notice [Rule 9(2)].
However, in such cases, i.e. where:
(i) a person fails to undergo Aadhaar authentication/does not opt
for Aadhaar authentication or
(ii) a person, who has undergone authentication of Aadhaar
number, is identified on the common portal, based on data
analysis and risk parameters (presently in case pilot
project in Gujarat), for carrying out physical verification of
places of business; or
(iii) PO deems it fit to carry out site verification,
the notice (in prescribed form) seeking clarifications/ information/
documents from the applicant may be issued by the proper officer
not later than 30 days from the submission of the application for
registration [Proviso to rule 9(2)].
2. In case of an already registered persons [Rule 10B]
If an Aadhaar number is not assigned to an existing registered
person, such person shall be offered alternate and viable means
of identification in the prescribed manner23.
Such manner has been prescribed as follows:
If Aadhaar number has not been assigned to the person
required to undergo authentication of the Aadhaar number,
such person shall furnish the following identification
documents, namely: –
23
First proviso to section 25(6A)

REGISTRATION 9.49
(a) his/ her Aadhaar Enrolment ID slip; and
(b) (i) Bank passbook with photograph; or

(ii) Voter identity card issued by the Election
Commission of India; or
(iii) Passport; or
(iv) Driving license issued by the Licensing Authority
However, once Aadhaar number is allotted to such person, he
shall undergo the authentication of Aadhaar number within a
period of 30 days of the allotment of the Aadhaar number.
In case of failure to undergo aadhaar authentication/furnish proof
of possession of Aadhaar number/furnish alternate and viable
means of identification, registration allotted to such person shall
be deemed to be invalid and the other provisions of this Act shall
apply as if such person does not have a registration 24.
C. Persons/class of persons exempt from aadhaar authentication
Section 25(6D) stipulates that above provisions shall not apply to such
person or class of persons or any State or Union territory or part thereof,
as may be notified.
Following persons have been notified in this regard25:
❑ A person who is not a citizen of India
❑ Department or establishment of State Government or Central
Government
❑ Local authority
❑ Statutory body
❑ Public Sector Undertaking
❑ A person applying for Unique Identity Number under section 25(9)
24
Second proviso to section 25(6A)
25

Furnishing of bank account details [Rule 10A]

As seen in the diagram outlining the procedure for registration, while filing
the application for registration on GST portal, in Part B of the application
form, a person is required to furnish the details of his bank account. Rule 10A
relaxes this requirement to a limited extent. In pursuance to the same, the
registered person is allowed to furnish information with respect to details of
bank account, or any other information, as may be required on the common
portal in order to comply with any other provision, soon after obtaining
certificate of registration and a GSTIN, but not later than 45 days from the
date of grant of registration or the date on which the return required under
section 39 is due to be furnished, whichever is earlier.
In short, a taxpayer has an option to give his bank account details after
obtaining registration, within 45 days from the date of grant of registration
or the due date of furnishing return, whichever is earlier.
However, this relaxation is not available for those who have been granted
registration as TDS deductor/ TCS collector under rule 12 26 or suo-motu
registration under rule 16. They are mandatorily required to furnish the bank
account details at the time of filing the application for registration.
Physical verification of business premises in certain cases [Rule 25]
Where the proper officer is satisfied that the physical verification of the place
of business of a person is required due to failure of Aadhaar authentication
or due to not opting for Aadhaar authentication before the grant of
registration, or due to any other reason after the grant of registration, he may
get such verification of the place of business, in the presence of the said
person, done. The verification report along with the other documents,
including photographs, shall be uploaded in prescribed form on the common
portal within a period of 15 working days following the date of such
verification.
26
The provisions relating to TDS and TCS have been discussed in detail in Chapter 14 in this

REGISTRATION 9.51
Issuance of registration certificate [Rule 10]

Where the application for grant of registration has been approved, a
certificate of registration duly signed or verified through EVC by the proper
officer in Form GST REG-06 showing the PPoB and APoB is made available
to the applicant on the Common Portal and a Goods and Services Tax
Identification Number (hereinafter referred to as “GSTIN”) i.e. the GST
registration no. is communicated to applicant, within 3 days after the grant
of registration.
GSTIN format
State Code PAN Entity Check sum
Code character
Display of registration certificate and GSTIN on the name board [Rule 18]
Every registered person shall display his registration certificate in a prominent
location at his PPoB and at every APoB. Further, his GSTIN also has to be displayed
on the name board exhibited at the entry of his PPoB and at every APoB.
(ix) Effective date of registration [Rule 10]
Where an applicant submits Effective date of registration

application for registration
Within 30 days from the date Date on which person becomes
the person becomes liable to liable to registration
registration
After 30 days from the date the Date of grant of registration
person becomes liable to
registration
(19) Sugam Services Ltd. is engaged in taxable supply of services in

Madhya Pradesh. The turnover of Sugam Services Ltd. exceeded ` 20
lakh on 1st November. It is liable to get registered by 1st December
[30 days] in the State of Madhya Pradesh. It applies for registration on 28th
November and is granted registration certificate on 5th December. The effective
date of registration of Sugam Services Ltd. is 1st November.

(20) In above example, if Sugam Services Ltd. applies for

registration on 3 rd December and is granted registration certificate
on 10th December. The effective date of registration of Sugam
Services Ltd. is 10 th December.
ILLUSTRATION 3
Determine the effective date of registration under CGST Act in respect of the
following cases with proper explanation:
(i) The aggregate turnover of Varun Industries of Mumbai has exceeded

` 40 lakh on 1 stAugust. Varun Industries manufactures LED TVs in
Mumbai and sells them in Pune. It submits the application for
registration on 20 thAugust. Registration certificate granted on
25thAugust.
(ii) Sweta InfoTech Services is the provider of internet services in Pune. Its
aggregate turnover exceeds ` 20 lakh on 25th September. It submits the
application for registration on 27 thOctober. Registration certificate is
granted on 5thNovember.
ANSWER
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:-
(a) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(b) ` 20 lakh for the States of States of Arunachal Pradesh, Meghalaya,

Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India. However, the higher threshold limit of
` 40 lakh is not available to persons engaged in making supplies of ice
cream and other edible ice, whether or not containing cocoa, pan
masala and tobacco and manufactured tobacco substitutes, fly ash
bricks; fly ash aggregates; fly ash blocks, bricks of fossil meals or
similar siliceous earths, building bricks, earthen or roofing tiles.

REGISTRATION 9.53
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-
(a) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(b) ` 20 lakh for the rest of India.
As per rule 10, where a person submits the application for registration within
30 days of becoming liable for registration, the effective date of registration
is the date on which the person becomes liable to registration; otherwise it is
the date of grant of registration.
In the light of the above provisions, in the given cases, the applicable turnover
limit for registration will be ` 40 lakh and ` 20 lakh in case (i) and (ii)
respectively.
(i) Since Varun Industries applied for registration within 30 days of
becoming liable to registration, the effective date of registration is 1 st
August.
(ii) Since Sweta InfoTech Services applied for registration after the expiry
of 30 days from the date of becoming liable to registration, the effective
date of registration is 5 th November.
(x) Special provisions for grant of registration in case of Non -Resident
Taxable Person (NRTP) and Casual Taxable Person (CTP) [Sections 25 &
27 read with rules 13 & 15]
(A) Meaning of casual taxable person and non-resident taxable person
Before going into nuances of the registration provisions of CTP and
NRTP, let us first understand the meaning of casual taxable person and
non-resident taxable person:
Casual Taxable Person
There may be case where a person has a
registered business in some State in India, but
wants to effect supplies from some other State
in which he does not have any fixed place of
business. Such person needs to register in the
State from where he seeks to supply as a ‘casual taxable person’.

CGST Act defines a casual taxable person as a person who occasionally

undertakes transactions involving supply of goods or services or both
in the course or furtherance of business, whether as principal, agent or
in any other capacity, in a State/UT where he has no fixed place of
business [Section 2(20)]. Further, he cannot exercise the option to pay
tax under composition levy.
(21) Krishnadev & Co., engaged in supplying taxable goods,
is registered in Rajasthan. It wishes to participate in a 5 days’
business exhibition being held in Delhi. However, it does not
have a fixed place of business in Delhi. In this case, Krishnadev & Co.
has to obtain registration as a casual taxable person in Delhi.
Non-Resident Taxable Person
A person who is a foreigner and occasionally wants to effect taxable

supplies from any State in India needs
GST registration for the same. Such
person needs to register in the State
from where he seeks to supply as a non-
resident taxable person. CGST Act
defines non-resident taxable person
as any person who occasionally
whether as principal or agent or in any other capacity, but who has no
fixed place of business or residence in India [Section 2(77)]. He
cannot exercise the option to pay tax under composition levy.
Based on the aforesaid definitions, following points merit consideration:

❑ A CTP does not have a fixed place of business in the State/UT
where he undertakes supply though he might be registered with
regard to his fixed place of business in some other State/UT, while
a NRTP does not have fixed place of business/residence in India
at all.
❑ A CTP has to undertake transactions in the course or furtherance
of business whereas the business test is absent in the definition
of NRTP.

REGISTRATION 9.55
(B) Special registration provisions of casual taxable person and

GST law prescribes special procedure for registration, as also for
extension of the operation period of such casual or non-resident
taxable persons. They have to apply for registration at least 5 days in
advance before making any supply. Also, registration is granted to them
or period of operation is extended, only after they make advance
deposit of the estimated tax liability. The special registration
procedure pertaining to CTP and NRTP is as follows:
(A) Both CTP27 and NRTP have to compulsorily get registered under
GST irrespective of the threshold limit, at least 5 days prior to
commencement of business.
(B) As per section 25(6), every person must have a PAN to be eligible
for registration. Since NRTP will generally not have a PAN of India,
he may be granted registration on the basis of other prescribed
documents.
Thus, a NRTP has to submit a self-attested copy of his valid

passport along with the application duly signed or verified
through electronic verification code by his authorized signatory
who is an Indian Resident having valid PAN. However, in case of
a business entity incorporated or established outside India, the
application for registration shall be submitted along with its tax
identification number or unique number on the basis of which the
entity is identified by the Government of that country or its PAN,
if available.
Application will be submitted by NRTP in a different prescribed form

whereas CTP will submit the application for registration in the normal
form for application for registration i.e. Form GST REG 01 and his
registration of CTP will be a PAN based registration.
27
Subject to exemption from registration under Notification No. 56/2018 CT dated 23.10.2018

(C) Period of validity of registration certificate granted to CTP/NRTP

Registration Certificate granted to
CTP/NRTP will be valid for:
(i) Period specified in the registration CTP and NRTP will
application, or make taxable
supplies only after
(ii) 90 days from the effective date of
the issuance of the
registration [can be extended
certificate of
further by a period not exceeding registration.
90 days by making an application
before the end of the validity of
registration granted to him**]
Provisions relating to verification of application and grant of
registration [under rules 9 and 10] will apply mutatis mutandis, to an
application for registration filed by NRTP.
(D) Advance deposit of tax
At the time of submitting the registration application, CTP/NRTP are
required to make an advance deposit of tax in an amount equivalent
to the estimated tax liability of such person for the period for which the
registration is sought.
Further, CTP/NRTP will get a Temporary Reference Number (TRN) for
making an advance deposit of tax which shall be credited to his
electronic cash ledger. An acknowledgement of receipt of application
for registration is issued only after said deposit.
**Where extension of time is sought, CTP/NRTP will deposit an additional
amount of tax equivalent to the estimated tax liability of such person for the
period for which the extension is sought.
(xi) Deemed registration [Section 26]
Registration under GST is not tax specific, which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cess.
Grant of registration/UIN under any SGST Act/ UTGST Act is deemed to be
registration/UIN granted under CGST Act provided application for
registration has not been rejected under CGST Act.

REGISTRATION 9.57
Further, rejection of application for registration/UIN under SGST Act/UTGST

Act is deemed to be rejection of application for registration under CGST Act.
(xii) Special provisions for grant of registration in case of persons required
to deduct tax at source under section 51 or to collect tax at source under
section 52 [Rule 12]
Application for registration has to be submitted by such persons in a different
prescribed form at GST Common Portal. They would be granted registration
within 3 working days from the date of submission of application after due
verification.
Where, on a request made in writing by a person to whom a registration
has been granted under rule 12(2) or upon an enquiry or pursuant to any
other proceeding under the CGST Act, the proper officer is satisfied that a
person to whom a certificate of registration has been issued is no longer liable
to deduct tax at source under section 51 or collect tax at source under section
52, the said officer may cancel the registration issued and such cancellation
shall be communicated to the said person electronically.
8. AMENDMENT OF REGISTRATION [SECTION 28]

A registered person or UIN holder may need to make some changes/ amendments
in the registration application. There are two categories of details in registration
application – core and non-core fields.
Core fields are name of the business, (legal name) if there is no change in PAN,
addition / deletion of stakeholders 28, principal place of business (other than change
in State) or additional place of business (other than change in State).
All other fields are non-core fields like name of day to day functionaries, e-mail
ids, mobile numbers, etc.
In case the change is in core information in the registration application, the
taxable person will apply for amendment within 15 days of the event necessitating
the change. The proper officer, then, will approve the amendment within next 15
days.
28
Refer diagram given on Page No. 9.59

For other changes – non-core information, no approval of the proper officer is

required, and the amendment can be affected by the taxable person on his own on
the common portal.
The provisions relating to amendment of registration are contained in section 28

read with rule 19.
The significant aspects of the same are discussed hereunder:
❑ Where there is any change in the particulars furnished in registration
application/UIN application, registered person shall submit an application
in prescribed manner, either at the time of obtaining registration or
Unique Identity Number or as amended from time to time, within 15 days
of such change, along with documents relating to such change at the
Common Portal.
❑ In case of amendment of core fields of information, the proper officer
may, on the basis of information furnished or as ascertained by him,
approve or reject amendments in the registration particulars in the
prescribed manner. Such amendment shall take effect from the date of
occurrence of event warranting such amendment.
❑ However, where change relates to non-core fields of information,
registration certificate shall stand amended upon submission of the
application for amendment on the Common Portal.
❑ The proper officer shall not reject the application for amendment in the
registration particulars without giving the person an opportunity of being
heard.
❑ Any rejection or approval of amendments under the SGST/UTGST Act shall
be deemed to be a rejection or approval under the CGST Act.
❑ Any particular of the application for registration shall not stand amended
with effect from a date earlier than date of submission of applica tion for
amendment on common portal except with order of Commissioner for
reasons to be recorded in writing and subject to conditions specified by
Commissioner in the said order.
❑ Application for amendment of registration cannot be filed for change in
PAN because GST registration is PAN-based. One needs to make fresh

REGISTRATION 9.59
application for registration in case there is change in PAN. Thus , where a

change in the constitution of any business results in change of PAN of a
registered person, the said person shall apply for fresh registration.
❑ Similarly, application for amendment of registration form cannot be filled
if there is change in place of business from one State to the other because
GST registrations are State-specific. If one wishes to relocate his business
to another State, he must voluntarily cancel his current registration and
apply for a fresh registration in the State he is relocating his business.
Core fields of information
Permission of proper officer required if change

relates to core fields of information
and such change does not warrant cancellation of registration under

section 29
Addition/deletion/retirement of
stakeholders (partners or directors,
Legal name Address of Karta, Managing Committee, Board
of business PPoB/APoB of Trustees, Chief Executive Officer
or equivalent, responsible for day to
day affairs of the business)
Change of these two particulars shall be applicable for all registrations

of a registered person obtained under provisions of this Chapter on same
PAN.
Mobile no./e-mail address of authorised signatory can be amended only after online
verification through GST Portal.

Core areas
Submission of application
within 15 days of change
Registered Person/
UIN holder GST
Common Portal
Non-core areas
Amendment carried out on GST

Common Portal
Proper Officer (PO)
Permission to be
granted within next 15
Registration certificate days No
Is PO of the opinion
amended
that amendment is
unwarranted/
PO will serve a SCN why Yes documents furnished

are incomplete/
application for amendment within 15 working days of incorrect?
should not be rejected? receipt of application
If registered person replies to

No the notice within 7 working
days?
Yes
No
Yes
If reply is
satisfactory?
Application for amendment
shall be rejected.
Within 7 working days of receipt of supply

REGISTRATION 9.61
If the proper officer fails to take any action,-

(a) within a period of 15 working days from the date of submission of the
application, or
(b) within a period of 7 working days from the date of the receipt of the reply to
the show cause notice,
the certificate of registration shall stand amended to the extent applied for and the
amended certificate shall be made available to the registered person on the
common portal.
(22) Varun Enterprises, a sole proprietorship firm, is engaged in supply

of electrical goods in Delhi. The firm is registered under GST. Varun is
the proprietor of the firm. He wishes to expand his business and his
friend – Arun - approaches him to provide additional capital for his business if he
is made a partner in Varun’s business.
Varun agrees and changes the constitution of his business and form a partnership
firm – Varun Arun & Co. Since the change in constitution of business from sole
proprietorship firm to partnership firm results in change in PAN of the registered
person, the partnership firm has to apply for fresh registration. The reason for the
same is that GSTIN is PAN based. Any change in PAN would warrant a new
registration.
9. CANCELLATION OR SUSPENSION OF
REGISTRATION AND REVOCATION OF
CANCELLATION [SECTIONS 29 & 30]
Section 29 Particulars
Sub-section Cancellation or suspension of registration
(1) The proper officer may, either on his own motion or on an application
filed by the registered person or by his legal heirs, in case of death of
such person, cancel the registration, in such manner and within such

period as may be prescribed, having regard to the circumstances

where:
(a) the business has been discontinued, transferred fully for any
reason including death of the proprietor, amalgamated with
other legal entity, demerged or otherwise disposed of
(b) there is any change in the constitution of the business
(c) the taxable person is no longer liable to be registered under

section 22 or section 24 or intends to optout of the registration
voluntarily made under sub-section (3) of section 25.
Provided that during pendency of the proceedings relating to

cancellation of registration filed by the registered person, the
registration may be suspended for such period and in such manner
(2) The proper officer may cancel the registration of a person from such
date, including any retrospective date, as he may deem fit, where,––
(a) a registered person has contravened such provisions of the Act

or the rules made thereunder as may be prescribed
(b) a person paying tax under section 10 has not furnished the
return for a financial year beyond three months from the
due date of furnishing the said return
(c) any registered person, other than a person specified in clause

(b), has not furnished returns for such continuous tax period
as may be prescribed
(d) any person who has taken voluntary registration under sub-
section (3) of section 25 has not commenced business within six
months from the date of registration
(e) registration has been obtained by means of fraud, wilful

misstatement or suppression of facts

REGISTRATION 9.63
Provided that the proper officer shall not cancel the registration
without giving the person an opportunity of being heard.
Provided further that during pendency of the proceedings relating to

cancellation of registration, the proper officer may suspend the
registration for such period and in such manner as may be prescribed.
(3) The cancellation of registration under this section shall not affect the
liability of the person to pay tax and other dues under this Act or to
discharge any obligation under this Act or the rules made thereunder
for any period prior to the date of cancellation whether or not such
tax and other dues are determined before or after the date of
cancellation.
(4) The cancellation of registration under the State Goods and Services
Tax Act or the Union Territory Goods and Services Tax Act, as the case
may be, shall be deemed to be a cancellation of registration under
this Act.
(5) Every registered person whose registration is cancelled shall pay an

amount, by way of debit in the electronic credit ledger or electronic
cash ledger, equivalent to the credit of input tax in respect of inputs
held in stock and inputs contained in semi-finished or finished goods
held in stock or capital goods or plant and machinery on the day
immediately preceding the date of such cancellation or the output
tax payable on such goods, whichever is higher, calculated in such
Provided that in case of capital goods or plant and machinery, the
taxable person shall pay an amount equal to the input tax credit
taken on the said capital goods or plant and machinery, reduced by
such percentage points as may be prescribed or the tax on the
transaction value of such capital goods or plant and machinery under
section 15, whichever is higher.
(6) The amount payable under sub-section (5) shall be calculated in such

Section 30 Revocation of cancellation of registration
(1) Subject to such conditions as may be prescribed, any registered

person, whose registration is cancelled by the proper officer on his
own motion, may apply to such officer for revocation of cancellation
of the registration in the prescribed manner within thirty days from
the date of service of the cancellation order.
Provided that such period may, on sufficient cause being shown, and
for reasons to be recorded in writing, be extended,—
(a) by the Additional Commissioner or the Joint Commissioner, as
the case may be, for a period not exceeding thirty days;
(b) by the Commissioner, for a further period not exceeding thirty
days, beyond the period specified in clause (a).
(2) The proper officer may, in such manner and within such period as
may be prescribed, by order, either revoke cancellation of the
registration or reject the application.
Provided that the application for revocation of cancellation of
registration shall not be rejected unless the applicant has been given
an opportunity of being heard.
(3) The revocation of cancellation of registration under the State Goods

and Services Tax Act or the Union Territory Goods and Services Tax
Act, as the case may be, shall be deemed to be a revocation of
cancellation of registration under this Act.
ANALYSIS
The provisions relating to cancellation of registration and its revocation are
contained in sections 29 & 30 respectively read with rules 20 to 23. The registration
granted under GST can be cancelled for specified reasons. The cancellation can
either be initiated by the Department on their own motion or the registered person
can apply for cancellation of their registration.

REGISTRATION 9.65
Where the For example, in case

Voluntary registered of death of registered
Cancellation of registration
cancellation by person no more person, the legal heirs

registered person requires the can apply for
registration cancellation
Where the For example, when

Proper Officer the registrant is not
considers the doing business from
Suo-motu the registered place
registration of a
cancellation by the of business or if he
person liable for
Department issues tax invoice
cancellation in without making the
view of certain supply of goods or
defaults services.
(i) Circumstances where registration is liable to be cancelled [Section

29(1) & (2)]
A. Circumstances when the registration can be cancelled either suo
motu by proper officer or on an application of the registered
person or his legal heirs (in case death of such person)
Cancellation by the registered person on its own or by the Department
--Business discontinued
--Transferred fully for Taxable person who is
any reason including no longer liable to be
death of the proprietor Change in the registered under
--Amalgamated with constitution of the section 22 or section 24
other legal entity business or who intends to
optout of the voluntary
--Demerged or
registration.
--Otherwise disposed of

B. Circumstances when the proper officer can cancel registration on

his own
In the following cases, registration can be cancelled by the proper
officer from such date, including any retrospective date, as he may
deem fit, after giving an opportuniy of being heard:
A registered person has

contravened the prescribed
provisions (Refer I below)
A registered
Registration was
person has not
obtained by means of
Proper
filed returns for
fraud, wilful
misstatement or officer can
suppression of facts cancel specified period
registration [Refer clauses (h) &
on his own if (i) below]
Voluntarily registered person Composition tax payer

has not commenced the has not furnished return
business within 6 months from for a FY beyond 3 months
the date of registration from due date of
furnishing return
Prescribed contraventions which make a registered person liable to

cancellation of registration [Rule 21]: The registered person-
(a) does not conduct any business from the declared place of
business, or
(b) issues invoice/bill without supply of goods/services in violation of
the provisions of this Act, or the rules made thereunder.

REGISTRATION 9.67
(c) violates the provisions of section 171. Section 171 contains

provisions relating to anti-profeetering measure29.
(d) violates the provision of rule 10A (discussed earlier in this chapter).
(e) avails input tax credit in violation of the provisions of section 16 30
of the CGST Act or the rules made thereunder; or
(f) furnishes the details of outward supplies in Form GSTR-1 under
section 37 for one or more tax periods which is in excess of the
outward supplies declared by him in his valid return under section
39 for the said tax periods; or
(g) violates the provision of rule 86B 31.
(h) required to file return under section 39(1) for each month or
part thereof (i.e. monthly return filer), has not furnished
returns for a continuous period of 6 months.
(i) required to file return under proviso to section 39(1) for each
quarter or part thereof (i.e. quarterly return filer), has not
furnished returns for a continuous period of 2 tax periods.
C. Suspension of registration [First proviso to section 29(1) and

second proviso to section 29(2) read with rule 21A]
Once a registered person has applied for
cancellation of registration or the proper
officer seeks to cancel his registration, the
proper officer may suspend his registration
during pendency of the proceedings relating
to cancellation of registration filed. In this way, a taxpayer is freed from
the routine compliances, including filing returns, under GST law during
the pendency of the proceedings related to cancellation of registration.
29
Anti-profeetering measure shall be discussed at Final Level.
30
Provisions of section 16 have been discussed in detail in Chapter 8 – Input Tax Credit.
31
Provisions of rule 86B have been discussed in detail in Chapter 8 – Input tax credit.

The period and manner of suspension of registration is as follows:

1. Where registered person has applied for cancellation of
registration: Where a registered person has applied for
cancellation of registration, the registration shall be deemed to
be suspended from:
(a) the date of submission of the application
or
(b) the date from which the cancellation is sought,
whichever is later,
pending the completion of proceedings for cancellation of

registration.
2. Where cancellation of the registration has been initiated by
the Department on its own motion: Where the proper officer
has reasons to believe that the registration of a person is liable to
be cancelled, he may suspend the registration of such person with
effect from a date to be determined by him, pending the
completion of the proceedings for cancellation of registration.
Where, a comparison of the returns furnished by a registered
person under section 39 with:
(a) the details of outward supplies furnished in Form GSTR-1;
or
(b) the details of inward supplies derived based on the details
of outward supplies furnished by his suppliers in their Form
GSTR-1,
or such other analysis, as may be carried out on the
recommendations of the Council, show that there are significant
differences or anomalies indicating contravention of the
provisions of the CGST Act or the rules made thereunder, leading
to cancellation of registration of the said person, his registration
shall be suspended.

REGISTRATION 9.69
Said person shall be intimated in prescribed form by sending a

communication to his e-mail address provided at the time of
registration or as amended from time to time.
In this intimation for suspension and notice for cancellation of
registration, the said differences and anomalies are highlighted
and said person is asked to explain, within a period of 30 days, as
to why his registration shall not be cancelled.
In cases where the cancellation is initiated by the Department on

its own and registration of a person has been suspended, such
person shall not be granted any refund under section 54 32, during
the period of suspension of his registration .
3. A registered person, whose registration has been suspended as

above:
❑ shall not make any taxable supply** during the period of
suspension and
❑ shall not be required to furnish any return under section 39.
**The expression “shall not make any taxable supply” shall
mean that the registered person shall not issue a tax invoice and,
accordingly, not charge tax on supplies made by him during the
period of suspension.
4. The suspension of registration shall be deemed to be revoked
upon completion of the cancellation proceedings by the proper
officer. Such revocation shall be effective from the date on which
the suspension had come into effect.
The suspension of registration may be revoked by the proper
officer, anytime during the pendency of the proceedings for
cancellation, if he deems fit.
5. Further, the suspension of registration shall be deemed to be
revoked upon furnishing of pending GST returns, where GST
registration was suspended due to non-filing of GST return for
32
Section 54 contains provisions relating to refund of GST. The same shall be discussed at the
Final level.

a financial year beyond 3 months from the due date of

furnishing the said return by a composition taxpayer or
returns for such continuous tax period as may be prescribed
by registered persons (other than composition taxpayer)
subject to the condition that the registration has not been
cancelled by the proper officer under rule 22.
6. Where any order having the effect of revocation of suspension of
registration has been passed, the provisions of section 31(3)(a)
[revised tax invoices] and section 40 [first return] in respect of the
supplies made during the period of suspension and the procedure
specified therein shall apply.
(ii) Procedure for cancellation of registration [Rules 20 and 22]

(a) Voluntary cancellation by registered person
Application
❑ A registered person seeking cancellation of registration 33 shall
electronically submit the application for cancellation of registration in
prescribed form within 30 days of occurrence of the event warranting
cancellation.
❑ He is required to furnish in the application the details of inputs held in
stock or inputs contained in semi-finished/finished goods held in stock
and of capital goods held in stock on the date from which
cancellation of registration is sought, liability thereon, details of the
payment, if any, made against such liability and may furnish relevant
documents thereof.
Order
❑ Where a person who has submitted an application for cancellation of
his registration is no longer liable to be registered, proper officer shall
issue the order of cancellation of registration within 30 days from the
date of submission of application for cancellation.
33
Section 29(1)

REGISTRATION 9.71
(b) Suo-motu cancellation by the Department

❑ Where the proper officer cancels the registration suo-motu, he shall not
cancel the same without giving a show cause notice and without giving
a reasonable opportunity of being heard, to the registered person. The
reply to such show cause notice (SCN) has to be submitted within 7 days
of service of notice.
❑ If reply to SCN is satisfactory, proper officer shall drop the proceedings
and pass an order in prescribed form. However, where the person
instead of replying to the SCN served for failure to furnish returns for a
continuous period of 6 months or 2 tax periods, as the case may be
(return for a F.Y. beyond 3 months from due date of furnishing the
said return in case of composition scheme supplier)34 furnishes all the
pending returns and makes full payment of the tax dues along with
applicable interest and late fee, the proper officer shall drop the
proceedings and pass an order.
Where registration of a person is liable to be cancelled, proper officer
shall issue the order of cancellation of registration within 30 days from
the date of reply to SCN.
(c) Effective date of cancellation
❑ The cancellation of registration shall be effective from a date to be
determined by the proper officer and mentioned in the cancellation
order. The taxable person will be directed in the said order to pay
arrears of any tax, interest or penalty including the amount liable to be
paid under section 29(5).
(iii) Amount payable on cancellation of registration [Section 29(5) & (6)]

A registered person whose registration is cancelled will have to debit the
electronic credit or cash ledger by an amount equivalent to:
(i) Input tax credit (ITC) in respect of:
34
viz. contravention of the provisions contained in section 29(2)(b)/(c) read with clauses (h) & (i)
of rule 21

➢ stock of inputs and inputs contained in semi-finished/finished

goods’ stock or
➢ capital goods or plant and machinery on the day immediately
preceding the date of cancellation, or
(ii) the output tax payable on such goods
whichever is higher, calculated in such manner as may be prescribed.
However, in case of capital goods or plant and machinery, the taxable
person shall pay an amount equal to the input tax credit taken on the said
capital goods or plant and machinery, reduced by such percentage points as
may be prescribed or the tax on the transaction value of such capital goods
or plant and machinery under section 15, whichever is higher.
The manner of determination of amount of credit to be reversed is prescribed
under rule 44. On conjoint reading of section 29(5) and rule 44, it can be
inferred as follows:
Amount of credit to be reversed in respect of INPUTS:
ITC on inputs computed

ITC in respect of
proportionately on the basis of
inputs calculated in
corresponding invoices** on
accordance with rule
44 of the CGST Rules*
which credit had been availed whichever
on such inputs. is higher
Output tax payable on such goods
* Discussed in detail in Chapter-8: Input Tax Credit

**If tax invoices are not available, the ITC to be reversed will be based on
the prevailing market price (MP) of such goods on the date of cancellation.

REGISTRATION 9.73
❑ Amount of credit to be reversed in respect of CAPITAL GOODS OR

PLANT & MACHINERY:
ITC in respect of ITC involved in the

capital goods or remaining useful life in
months of the capital
plant & machinery
goods computed on
calculated in
accordance with
pro-rata basis, taking whichever is
rule 44
the useful life as higher
5 years
Tax on the transaction value of such capital

goods or plant and machinery under section 15
(23) Capital goods have been in use for 4 years, 6 month and 15
days. The useful remaining life in months = 5 months ignoring a
part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C x 5/60
(iv) Other points about cancellation

❑ A person to whom a UIN has been granted under rule 17 cannot apply
for cancellation of registration [Rule 20]
❑ The cancellation of registration will not affect liability of registered
person to pay tax and other dues under the Act for any period prior to
the date of cancellation 35 [Section 29(3)].
(24) The proper officer cancelled the registration of Naman
Associates on 11 th October. The tax dues of Naman
Associates for July-September quarter (determined by the
proper officer on 16 th December) are ` 50,000. The cancellation of
registration of Naman Associates shall have no effect on his liability of
tax dues of ` 50,000 even though the tax dues are determined after the
cancellation of registration.
35
whether or not such tax and other dues are determined before or after the date of
cancellation.

❑ The cancellation of registration under either SGST Act/UTGST Act shall

be deemed to be a cancellation of registration under CGST Act [Section
29(4)].
❑ Once registration is cancelled by the tax authority, the taxpayer will be
intimated about the same via sms and email. Order for cancellation of
registration will be issued and intimated to the primary authorized
signatory by email and sms.
❑ Taxpayer would not be allowed by the Common portal to file return for
the period after date of cancellation mentioned in the cancellation
order. However, he can submit returns of the earlier period (i.e. for the
period before date of cancellation mentioned in the cancellation order
for which registration was active).
(v) Revocation of cancellation of registration [Section 30 read with rule 23]

(A) Procedure for revocation of cancellation
❑ Where the registration of a person is cancelled suo-motu by the
proper officer, such registered person may apply for revocation of
the cancellation to such proper officer, within 30 days ** from
the date of service of the order of cancellation of registration.
**Said period of 30 days may, on sufficient cause being shown and
for reasons to be recorded in writing, be extended for a period
not exceeding 30 days by Additional/Joint Commissioner and by
further period not exceeding 30 days by Commissioner.
Thus, a registered person, whose registration is cancelled by
the proper officer on his own motion, may subject to
provisions of rule 10B submit an application for revocation of
cancellation of registration, in prescribed form, to such proper
officer, within a period of 30 days from the date of the service
of the order of cancellation of registration or within such time
period as extended by the Additional Commissioner or the
Joint Commissioner or the Commissioner, as the case may be,
in exercise of the powers provided under the proviso to section
30(1), at the common portal, either directly or through a
Facilitation Centre notified by the Commissioner.

REGISTRATION 9.75
❑ If the proper officer is satisfied that there are sufficient grounds

for revocation of cancellation, he may revoke the cancellation of
registration, by an order within 30 days of receipt of application
and communicate the same to applicant.
❑ Otherwise, he may reject the revocation application. However,
before rejecting the application, he has to first issue SCN to the
applicant who shall furnish the clarification within 7 working days
of service of SCN. The proper officer shall dipose the application
(accept/reject the same) within 30 days of receipt of clarification.
(B) Where registration was cancelled for failure of registered person to
furnish returns
Where registration was cancelled for failure of registered person to
furnish returns, before applying for revocation, the person has to make
good the defaults, i.e. the person needs to file such returns and pay any
amount due as tax along with any amount payable towards interest,
penalty and late fee in respect of the said returns. However, the
registration may have been cancelled by the proper officer either from
the date of order of cancellation of registration or from a retrospective
date.
(1) Where the registration has been cancelled with effect from
the date of order of cancellation of registration
As we have already seen that the common portal does not allow
furnishing of returns for the period after the effective date of
cancellation, but returns for the earlier period (i.e. for the period
before date of cancellation mentioned in the cancellation order)
can be furnished after cancellation.
Where the registration is cancelled with effect from the date of
order of cancellation of registration, person applying for
revocation of cancellation has to furnish all returns due till the
date of such cancellation before the application for revocation can
be filed and has to pay any amount due as tax, in terms of such
returns along with any amount payable towards interest, penalties
or late fee payable in respect of the said returns. However, since

the portal does not allow to furnish returns for the period after
the date of cancellation of registration, all returns due for the
period from the date of order of cancellation till the date of order
of revocation of cancellation of registration have to be furnished
within a period of 30 days from the date of the order of revocation.
(25) The registration of Naman Associates was cancelled
by the proper officer by an order dated
1st June for its failure to furnish returns. The registration
was cancelled with effect from 1st June itself. It applied for
revocation of cancellation of registration and the order for
revocation of cancellation of Naman Associates is passed on 31st
July. In this case, Naman Associates shall be required to furnish all
the returns for the period from 1st June to 31st July within a period of
30 days from 31 st July, i.e. by 30 th August.
Returns for this period to be Returns for this period to be filed

filed before applying for within 30 days of the order of
revocation of cancellation revocation of cancellation
revocation of cancellation
Date from which returns
Date of order of
cancellation of
Date of order of
not furnished
of registration
registration
Effective date
of cancellation
of registration

REGISTRATION 9.77
(2) Where the registration has been cancelled with retrospective

effect
Where the registration has been cancelled with retrospective effect,
it is not possible to furnish the returns before filing the application
for revocation of cancellation of registration. In that case, the
application for revocation of cancellation of registration is allowed
to be filed, subject to the condition that all returns relating to the
period from the effective date of cancellation of registration till the
date of order of revocation of cancellation of registration shall be
filed within a period of 30 days from the date of order of such
revocation of cancellation of registration.
(26) The registration of Naman Associates was cancelled
by the proper officer by an order dated 1st June for its
failure to furnish returns. The registration was cancelled
with effect from 1st January itself. It applied for revocation of
cancellation of registration and the order for revocation of
cancellation of Naman Associates is passed on 31st July. In this case,
Naman Associates shall be required to furnish all the returns for the
period from 1st January to 31st July within a period of 30 days from
31st July, i.e. by 30th August.
Returns for this period to be filed within 30 days of the order of
revocation of cancellation
Date from which
Date of order of
Date of order of
cancellation of
returns not
cancellation of
furnished
revocation of
registration
registration
Effective date of
cancellation of
registration

Points to be noted
UIN Holders (i.e. UN Bodies, Embassies and Other Notified Persons),

GST Practitioner cannot apply for revocation of cancelled registration.
In case the registration is cancelled on the request of the taxpayer or

his legal heir, one cannot apply for revocation of cancelled registration.
The revocation of cancellation of registration under the SGST Act/

UTGST Act, as the case may be, shall be deemed to be a revocation of
cancellation of registration under CGST Act
LET US RECAPITULATE
Nature of registration
The registration in GST is PAN based and State specific.
One registration per State/UT.
However, a business entity having separate places of business in a State may

obtain separate registration for each of its places of business .
GST identification number called “GSTIN” - a 15-digit number and a

certificate of registration incorporating therein this GSTIN is made available
to the applicant on the GSTN common portal.
Registration under GST is not tax specific, i.e. single registration for all the
taxes i.e. CGST, SGST/UTGST, IGST and cesses.

REGISTRATION 9.79
Persons liable to registration
•Threshold limit elaborated separately in the

Those who exceed threshold diagram below.
limit
In case of transfer of •Transferee liable to be registered from the date

business on account of of succession of business
succession, etc.
•Transferee liable to be registered from the date

In case of amalgamation/ on which Registrar of Companies issues
demerger by an order of incorporation certificate giving effect to order
High Court etc. of High Court etc.
Taxable Exempt Inter State Aggregate

Exports
Supplies supplies supplies Turnover
Aggregate Turnover will be computed on All-India basis for same PAN
Applicable threshold limit
States with threshold limit •Manipur, Mizoram, Nagaland and

of ` 10 lakh for supplier of Tripura
States/UTs with threshold •Arunachal Pradesh, Meghalaya, Sikkim,

limit of ` 20 lakh for Uttarakhand, Puducherry and
supplier of goods and/or Telangana
services
States/UTs with threshold

limit of ` 20 lakh for •Jammu and Kashmir, Assam,
supplier of services/ both Himachal Pradesh, All other States
goods and services and ` 40
lakh for supplier of goods
(Intra-State)

Compulsory registration in certain cases
Person receiving supplies

on which tax is payable by
Inter-State supplier Casual taxable person
recipient on reverse
charge basis
A person making taxable

Person/class of persons
Non-resident taxable supplies on behalf of some
notified by the
persons other taxable person (i.e. an
agent of some Principal)
Persons not liable for registration
Person engaged exclusively

Agriculturist limited to Persons making only
in supplying goods/
supply of produce out reverse charge
services/both not liable to
of cultivation of land supplies
tax/wholly exempt from tax
Casual Taxable Persons

Persons making inter-
Persons making inter- making inter-State taxable
State taxable supplies of
State supplies of taxable supplies of notified
notified handicraft goods
services up to ` 20 lakh** handicraft goods up to
up to ` 20 lakh**
` 20 lakh**
**` 10 lakh in case of Special Category States of Mizoram, Tripura, Manipur &
Nagaland

REGISTRATION 9.81
Where and by when to apply for registration?
Person who is liable to be registered A casual taxable person or a non-

under section 22 or section 24 resident taxable person
•in every such State/UT in which he is •in every such State/UT in which he is
so liable so liable
•within 30 days from the date on •at least 5 days prior to the
which he becomes liable to commencement of business
registration
Voluntary Registration and UIN
•Person not liable to be registered under

Voluntary Registration sections 22/24 may get himself registered
voluntarily.
•In respect of supplies to some notified

Unique Identification agencies of United Nations organisation,
Number (UIN) multinational financial institutions and
other organisations, a UIN is issued.
Effective date of registration
Application submitted
within 30 days of the •Effective date is the date on which the
applicant becoming liable person becomes liable to registration
to registration
Application submitted
after 30 days of the •Effective date is date of grant of
applicant becoming liable registration
to registration


Procedure for registration has been depicted by way of a diagram below:
Part I
Every person liable to get registered and person seeking voluntary registration shall,
before applying for registration, declare his Permanent Account Number (PAN) and
State/UT in Part A of FORM GST REG-01 on GST Common Portal.
PAN is validated online by Common Portal from CBDT database and is also be
verified through separate OTPs sent to the PAN linked mobile number and e-
mail address.
Temporary Reference Number (TRN) is generated and communicated to the applicant

on the validated mobile number and e-mail address.
Using TRN, applicant shall electronically submit application in Part B of

application form, along with specified documents at the Common Portal.
Part B of application contains the details, such as, constitution of business,
jurisdiction, option for composition, date of commencement of business,
reason to obtain registration, address of PPoB and nature of activity carried
out therein, details of APoB, details of bank account(s), details of authorized
signatory, aadhaar authentication, etc.
On receipt of such application, an acknowledgement in the prescribed form shall

be issued to the applicant electronically. A Casual Taxable Person (CTP) applying
for registration gets a TRN for making an advance deposit of tax in his electronic
cash ledger and an acknowledgement is issued only after said deposit.*
Application shall be forwarded to the Proper Officer.
The procedure after receipt of application by the Proper Officer is depicted in

Part II.
* Discussed in detail in subsequent paras.

Part-II
Proper Officer examines the application and where a person fails to undergo
accompanying documents. Aadhaar authentication/does not
opt for Aadhaar authentication
Proper Officer within 30 days where PO deems it fit to carry out

If same are issues notice from application site verification
found in No submission date
thereby where a person, who has
Yes order? seeking undergone Aadhaar
clarification**, authentication, is identified on
Yes
information or common portal, based on data
Registration within 7
Registration is documents analysis & risk parameters, to
granted within working days
granted within 30 from the carry out site verification
from application
7 working days of application applicant submission date
days from the after verification of electronically Other cases
date of site & prescribed No
submission of documents If applicant has furnished the clarification**,

application information or documents within 7 working
without site where where
days’ time from receipt of notice?
verification applicant where a person, who has
PO (C)
fails to undergone Aadhaar Yes
deem
if applicant undergo authentication, is
s it fit If proper officer is satisfied with it? No
successfully Aadhaar identified on common
to
validates his authenticat portal, based on data
REGISTRATION
carry
aadhaar ion/ does analysis & risk Yes
out Proper officer
authentication, not opt for parameters, to carry out Proper officer will grant registration
site may reject the
Aadhaar site verification within 7 working days from the date
verific application for
(A) authentication of receipt of information/
a
ation (B) reasons to be

(B) clarification/ documents
(B) recorded in
writing.
9.83
**Clarification includes modification/correction of particulars declared in the application for

registration other than PAN, State Mobile No. & E-mail address.
Special procedure for registration of CTP and NRTP
Casual Taxable Person Non-resident Taxable Person
A Casual taxable person is one

who has a registered business in
some State in India, but wants to A Non-Resident taxable
effect supplies from some other person is one who is a
State in which he is not having any foreigner and occasionally
fixed place of business. wants to effect taxable
supplies from any State in
Such person needs to register in India, and for that he needs
the State from where he seeks to GST registration.
supply as a Casual taxable person.
Casual Taxable Person Non-resident taxable person
GST law prescribes special procedure for registration, as also for extension of the
operation period of such Casual or Non-Resident taxable persons.
They have to apply for registration at least 5 days in advance before making any
supply.
Registration is granted to them or period of operation is extended only after

they make advance deposit of the estimated tax liability.
Registration is granted to them for the period specified in the registration

application or 90 days from the effective date of registration.

REGISTRATION 9.85
Amendment of Registration
Except for the changes in some core information in the registration application,
a taxable person shall be able to make amendments without requiring any
specific approval from the tax authority.
In case there is change in core fields of information, the taxable person will
apply for amendment within 15 days of the event necessitating the change.
The Proper Officer, then, will approve the amendment within the next 15 days.
For changes in non-core fields, no approval of the Proper Officer is required,

and the amendment can be affected by the taxable person on his own on the
common portal.
Cancellation or suspension of registration and revocation of cancellation of

registration
A registered person has

Registratio Registratio
n can be --Business contravened the prescribed
n can be
cancelled discontinued/ provisions
cancelled
either by Transferred/
by the
proper Amalgamated with A registered person has not filed
proper
officer or other legal entity/ returns for continuous 6 months
officer on
on an Demerged or or 2 tax periods (return for a
his own
application Otherwise disposed F.Y. beyond 3 months from due
of the of date of furnishing the said
registered return for composition supplier)
person
Change in the Voluntarily registered person has
constitution of the not commenced the business
business within 6 months from the date of
registration
Taxable person no
longer liable to be Registration was obtained by
registered or intends means of fraud, wilful
to opt out of misstatement or suppression of
voluntary registration facts

Once a registered person has applied for cancellation of registration or the proper officer seeks to
cancel his registration, proper officer may suspend his registration during pendency of proceedings
relating to cancellation of registration filed by such registered person.
Procedure for cancellation
Where the registered person Where the proper officer cancels

applies for cancellation the registration
PO shall issue a SCN to the registered person

Registered person seeking cancellation
who has to reply to said notice within 7 days.
shall apply for the same within 30 days of
occurrence of the event warranting
cancellation, in prescribed form, Proceedings shall be Cancellation
furnishing the details of inputs held in dropped order shall
stock or inputs contained in semi- be issued
finished/finished goods held in stock and within 30
of capital goods held in stock on the date If reply to Where instead days of reply
from which cancellation of registration is SCN is of replying to to SCN
sought, liability thereon, payment, if any satisfactory SCN, person where
furnishes all registration
made & relevant documents.
pending is liable to
returns & be cancelled
makes full
Proper officer (PO) shall issue the
payment of tax
order of cancellation within 30 days of
along with
submission of application for the interest & late
same. fee.
Revocation of cancellation
In case where registration is cancelled suo-motu by the proper officer, the taxable person can apply
within 30 days (extendible by 30 days by Additional/Joint Commissioner and by further 30 days by
Commissioner) of service of cancellation order, requesting the officer for revoking the cancellation
ordered by him.
However, before so applying, the person has to make good the defaults (by filing all pending returns,
making payment of all dues and so) for which the registration was cancelled by the officer.
If satisfied, the proper officer will revoke the cancellation earlier ordered by him.
However, if the officer concludes to reject the request for revocation of cancellation, he will first
observe the principle of natural justice by way of issuing notice to the person and hearing him on the
issue.
However, there shall be deemed revocation of cancellation upon furnishing of pending GST
returns subject to the condition that the registration has not been cancelled by the proper
officer under rule 22

REGISTRATION 9.87
TEST YOUR KNOWLEDGE
1. Determine the effective date of registration in following cases:

(a) The aggregate turnover of Dhampur Footwear Industries of Delhi has
exceeded the applicable threshold limit of ` 40 lakh on 1st September. It
submits the application for registration on 20 th September. Registration
certificate is granted to it on 25 th September.
(b) Mehta Teleservices is an architect in Lucknow. Its aggregate turnover
exceeds ` 20 lakh on 25 th October. It submits the application for
registration on 27 th November. Registration certificate is granted to it on
5th December.
2. In order to be eligible for grant of registration, a person must have a Permanent
Account Number issued under the Income- tax Act, 1961. State one exception to it.
3. State which of the following suppliers are liable to be registered:
(a) Agent supplying taxable goods on behalf of some other taxable person
and such agent’s aggregate turnover does not exceed the applicable
threshold limit during the financial year.
Note: Invoices are issued to customers in the name of agent.
(b) An agriculturist who is only engaged in supply of produce out of
cultivation of land and its aggregate turnover exceeds the applicable
threshold limit during the financial year.
4. Pure Oils, Delhi has supplied machine oil and high-speed diesel in the month
of April as per the details given in table below. Pure Oils is not yet registered.
Sl. No. Particulars Amount ( `)*
(i) Supply of machine oil in Delhi 15,00,000
(ii) Supply of high speed diesel in Delhi 10,00,000
(iii) Supply of machine oil made in Punjab by Pure 10,00,000

Oils from its branch located in Punjab
*excluding GST
Determine whether Pure Oils is liable for registration.

5. What will be your answer if in question 4 above, in S.No. (ii), Pure Oils supplies
the high speed diesel in Delhi in the capacity of an agent of Mixed Oils Ltd.,
where invoices to customers are issued in name of Pure Oils?
6. Examine whether the supplier of goods is liable to get registered in the following
independent cases:-
(i) Raghav of Assam is exclusively engaged in intra-State taxable supply of
readymade garments. His turnover in the current financial year (FY) from
Assam showroom is ` 33 lakh. He has another showroom in Tripura with
a turnover of ` 11 lakh in the current FY.
(ii) Pulkit of Panjim, Goa is exclusively engaged in intra-State taxable supply

of shoes. His aggregate turnover in the current financial year is ` 22 lakh.
(iii) Harshit of Himachal Pradesh is exclusively engaged in intra-State supply
of pan masala. His aggregate turnover in the current financial year is
` 24 lakh.
7. Examine whether the supplier is liable to get registered in the following
independent cases:-
(i) Ankit of Assam is exclusively engaged in intra-State supply of taxable
services. His aggregate turnover in the current financial year is
` 25 lakh.
(ii) Sanchit of Assam is engaged in intra-State supply of both taxable goods
and services. His aggregate turnover in the current financial year is
` 30 lakh.
8. What are the advantage of taking registration in GST?
9. Can a person without GST registration collect GST and claim ITC?
10. If a person is making taxable supplies from different States, with the same PAN
number, can he operate with a single registration?
11. Can a person having multiple places of business in a State obtain separate
registrations for each place of business?
12. Is there a provision for a person to get himself voluntarily registered though he
may not be liable to pay GST?

REGISTRATION 9.89
13. Can the Department, through the proper officer, suo-moto proceed to register
a person under GST?
14. Whether the registration granted to any person is permanent?
15. Is it necessary for the UN bodies to get registration under GST?
16. What is the responsibility of the taxable person making supplies to UN bodies?
17 What is the validity period of the registration certificate issued to a casual
taxable person and non-resident taxable person?
18. What happens when the registration is obtained by means of willful mis-
statement, fraud or suppression of facts?
19 Is there an option to take centralized registration for services under GST Law?
20. What could be the liabilities (in so far as registration is concerned) on transfer
of a business?
21. At the time of registration, will the assessee have to declare all his places of
business?
22. Does cancellation of registration impose any tax obligations on the person
whose registration is so cancelled?
ANSWERS/HINTS
1. (a) Every supplier becomes liable to registration if his turnover exceeds the
applicable threshold limit [` 40 lakh in this case] in a finacial year
[Section 22 read with Notification No. 10/2019 CT dated 07.03.2019].
Since in the given case, the turnover of Dhampur Industries exceeded
` 40 lakh on 1 st September, it becomes liable to registration on said
date.
Further, since the application for registration has been submitted within
30 days from such date, the registration shall be effective from the date
on which the person becomes liable to registration [Section 25 read
with rule 10]. Therefore, the effective date of registration is 1 st
September.

(b) Since in the given case, the turnover of Mehta Teleservices exceeds
the applicable threshold limit [` 20 lakh] on 25th October, it becomes
liable to registration on said date.
Further, since the application for registration has been submitted after
30 days from the date such person becomes liable to registration, the
registration shall be effective from the date of grant of registration.
Therefore, the effective date of registration is 5 th December.
2. A Permanent Account Number is mandatory to be eligible for grant of
registration. One exception to this is a non-resident taxable person. A non-
resident taxable person may be granted registration on the basis of other
prescribed documents instead of PAN. He has to submit a self-attested copy
of his valid passport along with the application duly signed or verified
through electronic verification code by his authorized signatory who is an
Indian Resident having valid PAN and application will be submitted in a
different prescribed form [Section 25(6) & (7)].
3. (a) Section 22 stipulates that every supplier becomes liable to registration
if his turnover exceeds the applicable threshold limit in a financial year.
However, as per section 24, a person making taxable supply of
goods/services or both on behalf of other taxable persons whether as
an agent or not is liable to be compulsorily registered even if its
aggregate turnover does not exceed the applicable threshold limit
during the financial year.
(b) As per section 23, an agriculturist who is only engaged in supply of
produce out of cultivation of land is not required to obtain registration
even if his turnover exceeded the applicable threshold limit for
registration.
4. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a
(a) ` 10 lakh for the Special Category States of Mizoram, Tripura, Manipur
and Nagaland.

REGISTRATION 9.91
(b) ` 20 lakh for the States, namely, States of Arunachal Pradesh,

Meghalaya, Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India except persons engaged in making supplies
of ice cream and other edible ice, whether or not containing cocoa, pan
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-
and Nagaland.

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 aggregate turnover 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’.
Section 9(2) provides that CGST is not leviable on five petroleum products i.e.
petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel. As per section 2(47), exempt supply includes non-
taxable supply. Thus, supply of high speed diesel in Delhi, being a non-
taxable supply, is an exempt supply and is, therefore, includible while
computing the aggregate turnover.
In the backdrop of the above-mentioned discussion, the aggregate turnover
of Pure Oils for the month of April is computed as under:

S. No. Particulars Amount (in `)
(i) Supply of machine oils in Delhi 15,00,000
(ii) Add: Supply of high speed diesel in Delhi 10,00,000
(iii) Add: Supply of machine oil made by Pure Oils 10,00,000

from its branch located in Punjab
Aggregate Turnover 35,00,000
Pure Oils is making exclusive supply of goods and hence the threshold limit
for registration would be ` 40,00,000. Since the aggregate turnover does not
exceed ` 40,00,000, Pure Oils is not liable to be registered till April. However,
if in remaining months of the financial year, its turnover exceeds the said limit,
then it would be liable to be registered.
5. In case Pure Oils makes the supply in capacity of an agent of Mixed Oils Ltd.:
Section 24 provides that an agent who is engaged in making taxable
supplying of goods on behalf of other taxable persons, shall be liable to
obtain registration irrespective of the threshold turnover limit. However, in
the present case, if Pure Oils supply high speed diesel on behalf of Mixed Oil
Ltd. in Delhi as its agent where invoices to customers are issued in name of
Pure Oils, it shall still not be liable to obtain registration in Delhi since section
24 comes into play only when agent is making taxable supply of goods on
behalf of principal whereas in the given case, Pure Oils is supplying non-
taxable goods on behalf of Mixed Oils Ltd.
and Nagaland.
(b) ` 20 lakh for the States, namely, States of Arunachal Pradesh,

Meghalaya, Puducherry, Sikkim, Telangana and Uttarakhand.

REGISTRATION 9.93
(c) ` 40 lakh for rest of India except persons engaged in making supplies
of ice cream and other edible ice, whether or not containing cocoa, pan
In the light of the afore-mentioned provisions, the answer to the independent
cases is as under:-
(i) Raghav is eligible for higher threshold limit of turnover for registration,
i.e. ` 40 lakh as he is exclusively engaged in intra-State supply of goods.
However, since Raghav is engaged in supplying readymade garments
from a Special Category State i.e. Tripura, the threshold limit gets
reduced to ` 10 lakh. Thus, Raghav is liable to get registered under GST
as his turnover has exceeded limit of `10 lakh. Further, he is required
to obtain registration in both Assam and Tripura as he is making taxable
supplies from both the States.
(ii) The applicable threshold limit for registration for Pulkit in the given case
is ` 40 lakh as he is exclusively engaged in intra-State taxable supply of
goods in Goa. Thus, he is not liable to get registered under GST as his
turnover is less than the threshold limit.
(iii) Harshit being exclusively engaged in supply of pan masala is not eligible
for higher threshold limit of `40 lakh. The applicable threshold limit for
registration in this case is `20 lakh. Thus, Harshit is liable to get
making exclusive taxable supply of services or supply of both goods and
services is as under:-
and Nagaland.

(i) Though Ankit is dealing in Assam, he is not entitled for higher

threshold limit for registration as the same is applicable only in

case of exclusively supply of goods and he is exclusively engaged
in providing services. Thus, the applicable threshold limit for
registration in this case is ` 20 lakh and hence, Ankit is liable to
get registered under GST.
(ii) Since Sanchit is engaged in supply of both taxable goods and
services, the applicable threshold limit for registration in his case
is ` 20 lakh. Thus, Sanchit is liable to get registered under GST as
his turnover is more than the threshold limit.
8. Registration will confer following advantages to the business:
❑ Legally recognized as supplier of goods or services.
❑ Proper accounting of taxes paid on the input goods or services which
can be utilized for payment of GST due on supply of goods or services
or both by the business.
❑ Legally authorized to collect tax from his purchasers and pass on the
credit of the taxes paid on the goods or services supplied to purchasers
or recipients.
❑ Become eligible to avail various other benefits and privileges rendered
under the GST laws.
9. No, a person without GST registration can neither collect GST from his
customers nor can claim any input tax credit of GST paid by him.
10. No. Every person who is liable to take a registration will have to get registered
separately for each of the States from where he makes taxable supply(ies)
provided his aggregate turnover exceeds applicable threshold limit in a
financial year.
11. Yes. In terms of the proviso to sub-section (2) of section 25, a person having
multiple places of buiness in a State may obtain a separate registration for
each place of business, subject to such conditions as may be prescribed.
12. Yes. In terms of sub-section (3) of section 25, a person, though not liable to
be registered under sections 22 or 24 may get himself registered voluntarily,
and all provisions of the GST law, as are applicable to a registered person,
shall apply to such person.

REGISTRATION 9.95
13. Yes. In terms of sub-section (8) of section 25, where a person who is liable to
be registered under GST law fails to obtain registration, the proper officer
may, without prejudice to any action which may be taken under CGST Act, or
under any other law for the time being in force, proceed to register such
person in the manner as is prescribed in the CGST Rules.
14. Yes, the registration certificate once granted is permanent unless
surrendered, cancelled or suspended.
15. In terms of section 25(9), all notified UN bodies, Consulate or Embassy of
foreign countries and any other class of persons so notified would be required
to obtain a unique identification number (UIN) from the GST portal.
The structure of the said ID would be uniform across the States in conformity
with GSTIN structure and the same will be common for the Centre and the
States. This UIN will be needed for claiming refund of taxes paid on notified
supplies of goods and services received by them, and for any other purpose
as may be notified.
16. The taxable supplier making supplies to UN bodies is expected to mention
the UIN on the invoices and treat such supplies as supplies to another
registered person (B2B).
17. In terms of section 27(1) read with proviso thereto, the certificate of
registration issued to a “casual taxable person” or a “non-resident taxable
person” shall be valid for a period specified in the application for registration
or 90 days from the effective date of registration, whichever is earlier.
However, the proper officer, at the request of the said taxable person, may
extend the validity of the aforesaid period of 90 days by a further period not
exceeding 90 days.
18. In such cases, the registration may be cancelled from such date, including any
retrospective date, as may deem fit by the proper officer [Section 29(2)(e)].
19. No, the tax paper has to take separate registration in every State from where
he makes taxable supply of services.
20. The transferee or the successor shall be liable to be registered with effect
from the date of such transfer or succession and he will have to obtain a fresh
registration with effect from the date of such transfer or succession [Section
22(3)].

21. Yes. The principal place of business and place of business have been
separately defined under section 2(89) & 2(85) respectively. The taxpayer will
have to declare the principal place of business as well as the details of
additional places of business in the registration form.
22. Yes, as per section 29(5), every registered taxable person whose registration
is cancelled shall pay an amount, by way of debit in the electronic credit
ledger or electronic cash ledger, equivalent to the credit of input tax in
respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock or capital goods or plant and machinery on the
day immediately preceding the date of such cancellation or the output tax
payable on such goods, whichever is higher, calculated in prescribed manner.

REGISTRATION 9.97

•What is the treatment of exports while computing aggregate turnover?

1
•What is the treatment of value of inward supplies on which tax is payable

2 under reverse charge while computing aggregate turnover?
•What is the applicable threshold limit for registration if the person is

3 carrying out business of umbrellas and rain coats in Meghalaya?
•What is the treatment of CGST and SGST while computing aggregate

4 turnover?
•What is the treatment of Outward Supplies taxable under reverse charge

5 while computing ‘aggregate turnover’ of the supplier of such supplies?
•State whether Mr.X engaged in making supplies of ice cream in Gujarat is

required to obtain registration if his aggregate turnover in the financial
6 year is ` 25 lakh?
•What is the effective date of registration if application is submitted after

7 30 days of the applicant becoming liable to registration?

CROSSWORD PUZZLE
3 4
7 8
ACROSS
2. An agriculturist to the extent of supply of produce out of cultivation of------
----is not liable to registration.
4. Aggregate turnover to include total turnover of all branches (i.e. all GST
registrations) under same ----------. (Acronym)
5. Inter-State supplies are----------while computing aggregate turnover.
6. --------person means a person who is registered or liable to be registered

under section 22 or section 24
7. A person who has obtained more than one registration in one State shall, in
respect of each such registration, be treated as---------persons.

REGISTRATION 9.99
DOWNWARDS
1. Every supplier of goods is required to obtain registration in the State from

where he makes the-------- supply, if his aggregate turnover exceeds
specified threshold limit.
3. A business entity having its branches in multiple States will have to take-----
--State-wise registration for its branches in different States.
8. Proper officer can cancel registration on his own if registered person who is
monthly return filer, has not furnished returns for a continuous period of----
----- months.
Scan the following QR code for accessing the answers to Rapid Fire Quiz and
Scan the code


amendments made under the CGST Act and the IGST Act 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 30.04.2023.
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 36 of section 23(2) and 30(1) are
compared with the provisions as amended by the Finance Act, 2023.
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the chapter.
Section No. Existing provisions Provisions as Remarks

amended by the
Finance Act, 2023
23(2) The Government may, Notwithstanding Section 23(2) is

on the anything to the proposed to be
recommendations of contrary contained substituted, with
the Council, by in sub-section (1) of effect from the 1st
notification, specify the section 22 or section day of July, 2017, so
category of persons 24, the Government as to provide
who may be exempted may, on the overriding effect to
from obtaining recommendations of the said sub-
registration under this the Council, section over sub-
Act. section (1) of
by notification,
subject to such section 22 and
conditions and section 24 of the
restrictions as may said Act.
be specified therein,
36
Provisions existing on 30.04.2023

REGISTRATION 9.101
specify the category

of persons who may
be exempted from
obtaining
registration
under this Act.
30(1) Subject to such Subject to such

conditions as may conditions as may
be prescribed, any be prescribed, any
registered person, registered person,
whose registration is whose registration is
cancelled by the proper cancelled by the
officer on his own proper officer on his
motion, may apply to own motion, may
such officer for apply to such officer
revocation of for revocation of
cancellation of the cancellation of the
registration in registration in such
the prescribed manner manner, within such
within thirty days from time and
the date of service of subject to such
the cancellation order. conditions and
restrictions, as may be
Provided that such prescribed.
period may, on
sufficient cause being Provided that such
shown, and for reasons period may, on
to be recorded in sufficient cause
writing, be extended,- being shown, and for
(a) by the Additional reasons to be
Commissioner or the recorded in writing,
Joint Commissioner, as be extended,-
the case may be, for a (a) by the Additional
period not exceeding Commissioner or the
thirty days; Joint Commissioner,
as the case may be,

(b) by the for a period not

Commissioner, for a exceeding thirty
further period not days;
exceeding thirty days, (b) by the
beyond the period Commissioner, for a
specified in clause (a). further period not
exceeding thirty
days, beyond the
period specified in
clause (a).



a
CHAPTER a
10
TAX INVOICE; CREDIT

AND DEBIT NOTES
LEARNING OUTCOMES
This Chapter will equip you to –
❑ describe and analyse the provisions relating to tax invoice in case of taxable
supply of goods and in case of taxable supply of services – time limit and
manner of issuing the same.
❑ enumerate the particulars of a tax invoice.
❑ understand the provisions relating to e-invoicing.
❑ explain the provisions relating to revised tax invoice, bill of supply, receipt
voucher, refund voucher, payment voucher, etc.
❑ identify the cases where no tax invoice is required to be issued and identify
the suppliers of taxable service who are permitted to issue any document
other than tax invoice.
❑ explain the provisions relating to transportation of goods without issuance of
invoice.
❑ describe the provisions relating to issuance of credit and debit notes.
❑ explain the provisions relating to prohibition of unauthorised collection of tax.
❑ describe the provisions relating to amount of tax to be indicated in tax invoice
and other documents.

CHAPTER OVERVIEW
Revised Tax
Invoice
Consolidated Tax
Invoice
Tax Invoice, Credit and Debit Notes
Bill of Supply
Tax invoice Receipt Voucher
Payment
Credit and Debit notes
Voucher
Prohibition of unauthorised collection of tax Refund Voucher
Amount of tax to be indicated in tax invoice and

Delivery challan
other documents
1. INTRODUCTION
An invoice is a commercial
instrument issued by a supplier of
goods/services to a recipient. It
identifies both the parties involved,
and lists, describes the goods
sold/services supplied, quantifies the items sold, shows the date of
shipment and mode of transport, prices and discounts, if any, and
the delivery and payment terms(in case of supply of goods).
Invoicing is very crucial aspect for ensuring tax compliance under
any indirect taxation system. In order to ensure transparency, issuance of invoice
for every taxable transaction is a pre-requisite. In case of supply of goods or
provision of services, an invoice is raised by the supplier of such goods or services

TAX INVOICE, CREDIT AND DEBIT NOTES a 10.3 a
to the recipient of the same. Tax invoice acts as a document evidencing the
payment of the value of the goods or services or both as also the tax portion in the
same. In certain cases, an invoice serves as a demand for payment and becomes a
document of title when paid in full.
Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred
to in section 31 of the CGST Act, 2017. This section mandates the issuance of an
invoice or a bill of supply for every supply of goods or services.
Under GST law, a tax invoice is an important document. It not only evidences supply
of goods or services, but is also an essential document for the recipient to avail
Input Tax Credit (ITC). A registered person cannot avail input tax credit unless he is
in possession of a tax invoice or a debit note.
The provisions relating to tax invoices, credit and debit notes are contained in
Chapter VII - Tax Invoice, Credit and Debit Notes [Sections 31 to 34] of the CGST
Act and Chapter-VI: Tax Invoice, Credit and Debit Notes [Rules 46 to 55A] of Central
Goods and Services (CGST) Rules, 2017. State GST laws also prescribe identical
provisions in relation to Tax Invoice; Credit and Debit Notes.
Before proceeding to understand the provisions of Tax Invoice, Credit and Debit
Notes, let us first go through few relevant definitions.
Provisions of Tax invoice; Credit and Debit Notes under CGST Act have also been
made applicable to IGST Act vide section 20 of the IGST Act.
❑ Credit note: means a document issued by a registered person under sub-
section (1) of section 34 [Section 2(37)].
❑ Debit note: means a document issued by a registered person under sub-

❑ Continuous supply of goods: means [Section 2(32)]:
a supply of goods which is provided, or agreed to be provided, continuously

or on recurrent basis
under a contract
whether or not by means of a wire, cable, pipeline or other conduit, and
for which the supplier invoices the recipient on a regular or periodic basis and
includes supply of such goods as the Government may, subject to such

conditions, as it may, by notification, specify
❑ Continuous supply of services: means [Section 2(33)]:
supply of services which is provided, or agreed to be provided,

continuously or on recurrent basis
under a contract
for a period exceeding 3 months with periodic payment obligations and
includes supply of such services as the Government may, subject to such
conditions, as it may, by notification, specify
❑ Document: includes written or printed record of any sort and electronic

record as defined in clause (t) of section 2 of the Information Technology
Act, 2000 [Section 2(41)].
❑ Exempt supply: means supply of any goods or services or both which
attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the Integrated Goods and Services Tax
Act, and includes non-taxable supply [Section 2(47)].
❑ Invoice or tax invoice: means the tax invoice referred to in section 31
(discussed subsequently) [Section 2(66)].
❑ Quarter: shall mean a period comprising three consecutive calendar

months, ending on the last day of March, June, September and December
of a calendar year [Section 2(92)].
❑ Return: means any return prescribed or otherwise required to be
furnished by or under this Act or the rules made thereunder [Section
2(97)].

3. TAX INVOICE [SECTION 31]
Section 31 Tax invoice
(1) A registered person supplying taxable goods shall, before or at the

time of,—
(a) removal of goods for supply to the recipient, where the supply
involves movement of goods; or
(b) delivery of goods or making available thereof to the recipient,
in any other case
issue a tax invoice showing the description, quantity and value of
goods, the tax charged thereon and such other particulars as may
be prescribed.
the Council, by notification, specify the categories of goods or
supplies in respect of which a tax invoice shall be issued, within
such time and in such manner as may be prescribed.
(2) A registered person supplying taxable services shall, before or after

the provision of service but within a prescribed period, issue a tax
invoice, showing the description, value, tax charged thereon and
such other particulars as may be prescribed.
the Council, by notification—
(a) specify the categories of services or supplies in respect of
which a tax invoice shall be issued, within such time and in
(b) subject to the condition mentioned therein, specify the
categories of services in respect of which—

(i) any other document issued in relation to the supply

shall be deemed to be a tax invoice; or
(ii) tax invoice may not be issued.
(3) Notwithstanding anything contained in sub-sections (1) and (2)–

(a) a registered person may, within one month from the date of
issuance of certificate of registration and in such manner as
may be prescribed, 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;
(b) a registered person may not issue a tax invoice if the value of
the goods or services or both supplied is less than two hundred
rupees subject to such conditions and in such manner as may
be prescribed;
(c) a registered person supplying exempted goods or services or
both or paying tax under the provisions of section 10 shall issue,
instead of a tax invoice, a bill of supply containing such
particulars and in such manner as may be prescribed:
Provided that the registered person may not issue a bill of
supply if the value of the goods or services or both supplied is
less than two hundred rupees subject to such conditions and in
(d) a registered person shall, on receipt of advance payment with
respect to any supply of goods or services or both, issue a receipt
voucher or any other document, containing such particulars as
may be prescribed, evidencing receipt of such payment;
(e) where, on receipt of advance payment with respect to any
supply of goods or services or both the registered person
issues a receipt voucher, but subsequently no supply is made
and no tax invoice is issued in pursuance thereof, the said
registered person may issue to the person who had made the
payment, a refund voucher against such payment;
(f) a registered person who is liable to pay tax under sub-section
(3) or sub-section (4) of section 9 shall issue an invoice in
respect of goods or services or both received by him from the

supplier who is not registered on the date of receipt of goods

or services or both;
(g) a registered person who is liable to pay tax under sub-section
(3) or sub-section (4) of section 9 shall issue a payment voucher
at the time of making payment to the supplier.
(4) In case of continuous supply of goods, where successive statements

of accounts or successive payments are involved, the invoice shall
be issued before or at the time each such statement is issued or, as
the case may be, each such payment is received.
(5) Subject to the provisions of clause (d) of sub-section (3), in case of

continuous supply of services,––
(a) where the due date of payment is ascertainable from the
contract, the invoice shall be issued on or before the due date
of payment;
(b) 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;
(c) where the payment is linked to the completion of an event, the
invoice shall be issued on or before the date of completion of
that event.
(6) In a case where the supply of services ceases under a contract

before the completion of the supply, the invoice shall be issued at
the time when the supply ceases and such invoice shall be issued
to the extent of the supply made before such cessation.
(7) Notwithstanding anything contained in sub-section (1), where the

goods being sent or taken on approval for sale or return are
removed before the supply takes place, the invoice shall be issued
before or at the time of supply or six months from the date of
removal, whichever is earlier.

Explanation.––For the purposes of this section, the expression “tax invoice”

shall include any revised invoice issued by the supplier in respect of a supply
made earlier.
Section 31A Facility of digital payment to recipient
The Government may, on the recommendations of the Council,

prescribe a class of registered persons who shall provide prescribed
modes of electronic payment to the recipient of supply of goods or
services or both made by him and give option to such recipient to
make payment accordingly, in such manner and subject to such
conditions and restrictions, as may be prescribed.
ANALYSIS
The provisions relating to Tax Invoice are provided under
section 31 of the CGST Act as well as Chapter-VI: Tax
Invoice, Credit and Debit Notes of Central Goods and
Services (CGST) Rules, 2017. The provisions contained in
these rules have been incorporated at the relevant places.
There is no format prescribed for the Tax Invoice. Only certain fields have been
prescribed as mandatory fields.
A. TAX INVOICE ISSUED BY A SUPPLIER OF TAXABLE GOODS/ TAXABLE
SERVICES
A tax invoice shall be issued by a registered person supplying taxable goods
or taxable services or both. Such tax invoice shall show the prescribed
particulars.

(i) Time limit for issuance of invoice [Sections 31(1), (2), (4) & (5) read
with rule 47]
The time for issuing an invoice would depend on the nature of supply viz .
whether it is a supply of goods or supply of services.
A registered person supplying taxable goods shall issue
a tax invoice, before or at the time of removal of goods
(where supply involves movement of goods) or in any
other case, before or at the time of delivery or making
available the said goods to the recipient.
In case of supply of taxable services, tax invoice
may be issued before or after the provision of
services, but within the specified period.
Government may notify the categories of services
in respect of which any other document issued in
relation to supply shall be deemed to be a tax
invoice or tax invoice may not be issued.
The Government may, on the recommendations of the Council, by
notification, specify the categories of goods or services supplies in respect of
which a tax invoice shall be issued, within such time and in such manner as
may be prescribed.
In case of taxable In case of taxable supply of services

supply of goods
Invoice shall be Invoice shall be issued before or after the

issued before or at provision of service, but within a period of 30
the time of,— days* from the date of supply of service.
*45 days in case of an insurer or banking
(a) removal of goods company or financial institution, including a
for supply to the non-banking financial company (NBFC)
recipient, where

the supply
involves
movement of
goods; or
(b) delivery of goods

or making
available thereof
to the recipient, An insurer or a banking company or a
in any other case. financial institution, including NBFC, or a
telecom operator, or any other class of
supplier of services as may be notified by
the Government, making taxable supplies
of services between distinct persons as
specified in section 25
In case of continuous In case of continuous supply of services

supply of goods
Where successive Where the invoice shall be

statements of issued
accounts/ successive
payments are (a) due date of payment on or before the due
involved, is ascertainable from the date of payment
the invoice shall be contract
issued before/at the
(b) due date of payment before or at the time
time each such
is not ascertainable when the supplier
statement is issued or
from the contract of service receives
each such payment is
the payment
received.
(c) payment is linked to on or before the
the completion of an date of completion
event of that event.

(1) Ritu Manufacturers, Delhi supplies goods to Prakhar

Electronics, Haryana. The goods were removed from its factory in
Delhi on 23 rdSeptember.Ritu Manufacturers needs to issue a tax
invoice on or before 23 rd September.
(2) Katyani Security Services Ltd. provides security services to Royal
Jewellers for their Jewellery Exhibition to be organized on 5th
October. Katyani Security Services Ltd. needs to issue a tax invoice
within 30 days of supply of security services, i.e.on or before 4th November.
(ii) Where supply of services ceases before its completion [Section 31(6)]
In a case where the supply of services ceases under
a contract before the completion of the supply, the
invoice shall be issued at the time when the supply
ceases and such invoice shall be issued to the
extent of the supply made before such cessation.
(iii) Goods sent on sale or return basis [Section 31(7)]
Where the goods being sent or taken on approval for
sale or return are removed before the supply takes
place, the invoice shall be issued:
(i) before/at the time of supply
or
(ii) 6 months from the date of removal
(iv) Particulars of a tax invoice [Sections 31(1) & (2) read with rule 46]
As discussed earlier, there is no format prescribed for an invoice, but rules
make it mandatory for an invoice to have the following fields (only applicable
fields are to be filled):
Name, address and GSTIN of the supplier;

A consecutive serial number not exceeding 16 characters, in one or

multiple series, containing alphabets/numerals/special characters

hyphen or dash and slash, and any combination thereof, unique for a
FY;
Date of its issue;
If recipient is registered- Name, address and GSTIN or UIN of
recipient
If recipient is Particulars of invoice
unregistered and
value of supply is
` 50,000 or more Name and address of the recipient and the
address of delivery, along with the name of
State and its code
less than ` 50,000 unregistered recipient may still request the
aforesaid details to be recorded in the tax
invoice
Where any taxable service is supplied by or through an electronic

commerce operator or by a supplier of OIDAR services to a recipient
who is unregistered, irrespective of the value of such supply, a tax
invoice issued by the registered person shall contain the name and
address of the recipient along with its PIN code and the name of the
State and the said address shall be deemed to be the address on
record of the recipient.
HSN code for goods or services;

Description of goods or services;
Quantity in case of goods and unit or Unique Quantity Code thereof;
Total value of supply of goods or services or both;
Taxable value of supply of goods or services or both taking into
account discount or abatement, if any;
Rate of tax (central tax, State tax, integrated tax, Union territory tax
or cess);

Amount of tax charged in respect of taxable goods or services (central

tax, State tax, integrated tax, Union territory tax or cess);
Place of supply along with the name of State, in case of a supply i n
the course of inter-State trade or commerce;
Address of delivery where the same is different from the place of
supply;
Whether the tax is payable on reverse charge basis; and
Signature or digital signature of the supplier or his authorized
representative (not required in case of issuance of an electronic
invoice in accordance with the provisions of the Information
Technology (IT)Act, 2000).
Quick Response code, having embedded Invoice Reference Number
(IRN) in it, in case e-invoice has been issued 1
Note: The taxpayers exempted from the mandatory requirement of

e-invoicing (discussed subsequently) are required to provide a
declaration on the tax invoice stating that though their aggregate
turnover exceeds the notified aggregate turnover for e-invoicing, they
are not required to prepare an e-invoice.
(v) Number of HSN digits required on tax invoice and class of registered
person not required to mention HSN [Rule 46]
Board may, on the recommendations of the Council, by notification, specify:
(i) the number of digits of Harmonised System of Nomenclature (HSN)

code for goods or services that a class of registered persons shall be
required to mention; or
(ii) a class of supply of goods or services for which specified number of

digits of HSN code shall be required to be mentioned by all registered
taxpayers; and
1
in the manner prescribed under rule 48(4)

(iii) the class of registered persons that would not be required to mention
the HSN code for goods or services.
This provision is also applicable to Bill of Supply [The concept of Bill of Supply
is discussed in subsequent paras].
In view of the above powers,following has been notified vide Notification No.
12/2017 CT dated 28.06.2017 as amended:
S.No. Annual Turnover (AT) Number of Digits of HSN Code

in the preceding FY
1. AT ≤` 5 crores For B2B supply - 4
For B2C supply – 4 (optional)*
2. AT >` 5 crores For B2B supply and B2C supply – 6
*As mentioned above, a registered person having aggregate turnover up to

` 5 crores in the previous financial year has been exempted from the
requirement of mentioning the HSN Code in the manner specified in above
table in a tax invoice issued by him under the said rules in respect of supplies
made to unregistered persons.
(vi) Manner of issuing the invoice [Sections 31(1) & (2) read with rule 48]
In case of taxable supply of goods In case of taxable supply of

services
Invoice shall be prepared in Invoice shall be prepared in

TRIPLICATE DUPLICATE
Triplicate Duplicate

Original copy
Original copy
Duplicate copy
Duplicate copy
Triplicate copy
The serial number of invoices issued during a tax period shall be furnished
electronically [through the Common Portal – www.gst.gov.in], in FORM
GSTR-1 [Details of outward Supplies of goods or services].
Key points from aforesaid discussion have been summarized as follows:

1. All GST taxpayers are free to design their own Tax Invoice Format.
2. The law requires that only certain fields as mandatory fields in the Tax
Invoice. The same have been listed under heading (iv) above. The
mandatory fields have also been circled in the following Sample Tax
Invoice.
3. The time period for issuance of invoice is different for goods and services.
For goods, it is any time before or at its delivery and for services, it is within
30 days from the date of supply of services.

Sample Tax Invoice

E-invoicing
‘E-invoicing' has been introduced for reporting of business to business
(B2B) invoices to GST System for certain notified category of taxpayers.
All registered businesses with an
aggregate turnover (based on
PAN) in any preceding financial
year from 2017-18 onwards greater
than ` 10 crore (hereinafter
referred to as ‘notified persons’)
will be required to issue e-invoices.
E-invoicing is not voluntary; only
notified persons are enabled to report invoices on IRP ( Invoice Registration
Portal).
Before we proceed further, let us
first understand what is
‘e-invoicing’? E-invoicing is not
generation of invoice by a
Government portal. Taxpayers
will continue to create their GST
invoices on their own
Accounting/Billing/ERP Systems as per e-invoice scheme. These invoices will
then be reported to IRP. On such reporting, IRP will generate a unique ‘Invoice
Reference Number (IRN)’, digitally sign it and return the e-invoice to the
supplier. A GST e-invoice will be valid only with a valid IRN.
Presently, invoices, credit notes and debit notes, when issued by notified
persons (to registered persons (B2B) or for the purpose of exports) are
covered under
e-invoice. Though different
documents are covered, for
ease of reference and
understanding, the system is
referred as
‘e-invoicing’.

Advantages of e-invoicing
E-invoice has many advantages for businesses. One such advantage is auto-
reporting of invoices into GST return and auto-generation of
e-way bill2 (wherever required). Under e-invoicing, business has to report the
B2B invoice data only once in the e-invoice form and the same is reported in
multiple forms (GSTR-1, e-way bill etc.). E-way bill can be auto-generated
using e-invoice data. GSTR-1 can also be auto-populated with the e-invoice
data. It will become part of the business process of the taxpayer.
Consequently, there will be a substantial reduction in transcription errors as
same data will get reported to tax department as well as to the buyer to
prepare his inward supplies (purchase) register. On receipt of information
through GST System, buyer can reconcile the same with his Purchase Order.
Thus, it will facilitate

standardisation and inter-
operability leading to reduction of
disputes among transacting
parties, improve payment cycles,
reduction of processing costs and
thereby greatly improving overall
business efficiency.
Further, since a complete trail of

B2B invoices is available with the
Department, it will enable the
system-level matching of input tax
credit and output tax thereby reducing the tax evasion.
Last but not the least, e-invoicing will eliminate the fake invoices. Claiming
fictitious input tax credit (ITC) by raising fake invoices is also one of the
biggest challenges currently faced by tax-authorities. The
e-invoice system will help to curb the actions of unscrupulous taxpayers and
2
The provisions relating to e-way bill have been discussed in Chapter 12: E-way bill in this Module

reduce the number of fraud cases as the tax authorities will have access to
data in real-time.
E-invoicing statutory provisions
Rule 48(4) stipulates that the e-invoice shall be prepared by notified class of
registered persons, by uploading such particulars as contained in Form GST
INV-01 on the Common GST Electronic Portal 3and obtain an IRN (Invoice
Reference Number), in prescribed manner and subject to prescribed conditions
and restrictions.
However, the Commissioner may, on the recommendations of the Council, by
notification, exempt a person or a class of registered persons from issuance of
e-invoice under rule 48(4) for a specified period, subject to such conditions and
restrictions as may be specified in the said notification.
Every invoice, issued by above

persons, in any manner other
than the manner specified in rule
48(4) shall not be treated as an
invoice. Where e-invoicing is
applicable, there is no need of
issuing invoice copies in
triplicate/duplicate.
Class of persons notified to mandatorily issue e-invoice
In view of said powers, a registered person (except specified class of

persons4), whose aggregate turnover in any preceding financial year from
2017-18 onwards exceeds ` 10 crore, has been notified as class of persons
3
Ten dedicated Invoice Reference Portals have been notified as Common Goods and Service Tax
(GST) Electronic Portal for the purpose of preparing e-invoice. These portals are enlisted in
subsequent paras.
4
Special Economic Zones and insurer or banking company or financial institution including NBFC,
GTA, supplier of passenger transportation service, person supplying services by way of admission
to exhibition of cinematograph films in multiplex screens, a Government Department and a
local authority.

who shall prepare e-invoice in respect of B2B supplies (supply of goods or

services or both to a registered person) and for exports5.Thus, presently, such
notified persons are not required to report B2C invoices on IRP. However,
reporting of B2C invoices will be brought under e-invoice in the next phase.
Further, e-invoicing is also not applicable to invoices issued by Input Service
Distributor (ISD).
If the invoice issued by a notified person is in respect of supplies made by

him, tax on which is payable under reverse charge under section 9(3),
e-invoicing is applicable.
(3) A taxpayer (say a firm of advocates) having aggregate turnover

in a FY of more than `20 crore is supplying services to a company
(who will be discharging tax liability as recipient under reverse
charge mechanism), such invoices have to be reported by said tax payer (since
it is a notified person) on IRP.
On the other hand, where specified category of supplies are received by

notified person from unregistered persons [attracting reverse charge under
section 9(4)] or through import of services, e-invoicing doesn’t arise/ not
applicable. E-invoicing is also not applicable in case of import of goods (Bills
of Entry).
Exemption from e-invoicing
Following entities are exempt from the mandatory requirement of

e-invoicing:
❑ Special Economic Zone units**
❑ Insurer or banking company or financial institution including NBFC

❑ GTA supplying services in relation to transportation of goods by road
in a goods carriage
❑ Supplier of passenger transportation service
5
Notification No. 13/2020 CT dated 21.03.2020 as amended

❑ Person supplying services by way of admission to exhibition of

cinematograph films in multiplex screens
❑ a Government Department and a local authority
Thus, above mentioned entities are not required to issue e-invoices even if
their turnover exceeds ` 10 crore in any preceding financial year from 2017-
18 onwards.
Further, the above taxpayers exempted from the mandatory requirement
of e-invoicing are required to provide a declaration as below:-
that invoice is not required to be issued in the manner specified under
rule 48(4), in all cases where an invoice is issued, other than in the
manner so specified under the said rule 48(4), by the taxpayer having
aggregate turnover in any preceding financial year from 2017-18
onwards more than the aggregate turnover as notified under rule 48(4)
[presently its ` 10 crore]-
“I/We hereby declare that though our aggregate turnover in any
preceding financial year from 2017-18 onwards is more than the
aggregate turnover notified under sub-rule (4) of rule 48, we are not
required to prepare an invoice in terms of the provisions of the said sub-
rule.”
**It is important to note here that only SEZ units and not SEZ developers are
exempt from issuing e-invoices. Thus, SEZ developers whose turnover exceeds
` 10 crore in any preceding financial year from 2017-18 onwards are
mandatorily required to issue e-invoices. Further, in case of supplies made by
notified persons to SEZ units, e-invoices need to be issued.
(4) Maharaja Private Limited has an SEZ unit and a regular DTA
unit (both having same PAN). The aggregate total turnover of
Maharaja Private Limited is more than `10crore (considering both
the GSTINs). However, the turnover of DTA unit is `5 crore for preceding
financial year.
In this scenario, SEZ unit is exempt from e-invoicing. However, e-invoicing

will be applicable to DTA Unit because the aggregate turnover of the legal

entity in this case is >`10 crore. The applicability is based on annual

aggregate turnover on the common PAN.
It has been clarified 6 that the said exemption from generation of e-
invoices is for the entity as a whole and is not restricted by the nature of
supply being made by the said entity.
(5) A banking company providing banking services, may also
be involved in making supply of some goods, including
bullion. The said banking company is exempted from
mandatory issuance of e-invoice in terms of Notification No. 13/2020 CT
dated 21.03.2020, for all supplies of goods and services and thus, will
not be required to issue e-invoice with respect to any supply made by it.
How e-invoice is generated?
The taxpayer first prepares and generates his invoice using his own
ERP/accounting/billing system or manual system 7.The invoice must conform
to the e-invoice schema (standard notified format - discussed in detail
subsequent paras) and must have the mandatory parameters.
The details of this invoice are uploaded/reported by the taxpayer to the

Invoice Registration Portal (IRP). This way taxpayer registers his supply
transaction on IRP.
On uploading, IRP returns the e-invoice with a unique ‘Invoice Reference

Number (IRN)’ (explained in detail subsequent paras) after digitally signing the
e-invoice and adding a QR Code (Quick Response Code). Then, the supplier
shares the e-invoice with the receiver (along with QR Code).
6
7
For entities not having their own ERP/Software solutions, they can use the free offline utility
(‘bulk generation tool’) downloadable from the e-invoice portal. Through this, invoice data can be
easily reported to IRP and obtain IRN/signed e-invoice


How e-invoice data is consumed by GST System for generation of

e-way bill or populating relevant parts of GST Returns?
IRP sends the e-invoice data along with IRN 8 to the GST System as well as to
E-Way Bill System.
The GST system will auto-populate them into GSTR-1 of the supplier and
GSTR-2A of respective receivers. With source marked as ‘e-invoice’, IRN and
IRN date will also be shown in GSTR-1 and GSTR-2A.
The e-invoice schema (discussed subsequently) includes parameters e.g.
‘Transporter ID’ and ‘Vehicle Number’, etc. that are required for creating and
generating e-way bills. These can be entered if available with seller, at the
time of generation of e-invoice so that e-way bill can be created using this
data without any further requirement of data entry by the user. The e-invoice
reporting software already allows reporting of e-invoice and generation of
e-way bill with same data.
Cancellation/amendment of reported invoice
Where needed, the seller can cancel IRN for an e-invoice already reported by
reporting it on IRP within specified time9.
Amendment of e-invoice already uploaded on IRP will be done only on GST
portal(while filing GSTR-1). Amendment of invoices is not possible through
the IRP.
Implications for businesses
As apparent from the above discussion, e-invoicing does not mean that the
invoice needs to be prepared/generated on the Government portal. It is only
intimating the Government portal that invoice has been issued to the buyer,
by registering that particular invoice on the Government portal.
Consequently, businesses will continue to issue invoices as they were doing
earlier. Necessary changes on account of e-invoicing requirement (i.e. to
enable reporting of invoices to IRP and obtain IRN), be made by
8
This IRN is same as that has been returned by the IRP to the seller.
9
However, if the connected e-way bill is active or verified by officer during transit, cancellation of
IRN will not be permitted.

ERP/Accounting and Billing Software providers in their respective software.

They need to get the updated version having this facility.
Important terms
E-invoice Schema
Businesses use various accounting/billing software, each generating and storing
invoices in their own electronic formats. These different formats are neither
understood by GST System nor by the systems of suppliers and receivers.
(6) An invoice generated by SAP system cannot be read by a
machine which is using ‘Tally’ system, unless a connector is used.
With more than 300 accounting/billing software products, there
was no way to have connectors for all.
In this scenario, ‘e-invoicing’ was introduced aiming at machine-readability and
uniform interpretation. To ensure this complete ‘inter-operability’ of e-invoices
across the entire GST eco-system, an invoice standard is a must. By this,
e-invoices generated by one software can be read by any other software, thereby
eliminating the need of fresh/manual data entry. Since, there was no such
standard for e-invoice available earlier, as a first step, a standard format for e-
invoice has been finalized.
This uniform standard format (containing specified fields) applicable for all
the businesses across the country is known as ‘e-invoice schema’. It is notified
as Form GST INV-1. E-invoice schema mandates what particulars shall be
reported in electronic format to IRP. Invoice details in prescribed schema to be
reported to IRP in JSON format (JavaScript Object Notation). ‘JSON’ can be
understood as a common language for systems/machines to communicate
between each other and exchange data.
Invoice Registration Portal (IRP)
IRP is the website for uploading/reporting of invoices by the notified persons.
Following IRPs have been notified for the purpose of preparation of the e-
invoice:
www.einvoice1.gst.gov.in

Invoice Reference Number
As seen earlier, GST invoice will be valid only with a valid IRN.IRN is
different from invoice number. Invoice no. (e.g. ABC/1/2019-20) is assigned
by supplier and is internal to business. Its format can differ from business to
business and also governed by relevant GST rules. IRN, on other hand, is a
unique reference number (hash) generated and returned by IRP, on successful
registration of e-invoice. IRN is a unique 64-character hash, e.g.
35054cc24d97033afc24f49ec4444dbab81f542c555f9d30359dc75794e06bbe
The overall workflow of e-invoice generation, its reporting/registration and
receipt of confirmation is depicted in the diagrams on next page:
A. Interaction between the business (supplier) and the Invoice
Registration Portal (IRP).

B. Interaction between the IRP and the GST/E-Way Bill Systems and
the Buyer.
Other points:
❑ The e-invoicing system is also available for the E-Commerce Operators
(ECO) to report the invoices to the Invoice Registration portal,
generated by them on behalf of the suppliers.
❑ Bulk uploading of invoices to IRP is also possible 10.
❑ CBIC has clarified 11 that there is no requirement to carry the
physical copy of tax invoice in cases where e-invoice has been
generated by the supplier. Whenever e-invoice has been generated,
production of the Quick Reference (QR) code having an embedded
Invoice Reference Number (IRN) electronically, for verification by
the proper officer, would suffice.
10
Discussion on e-invoicing is primarily based on the relevant rules, notifications and FAQS on e-
invoicing hosted on GSTN website.
11

Quick Response (QR) code

Upon successful registration of invoice on IRP, it will
return a signed e-invoice to the supplier with IRN and QR
Code. IRN is embedded in the QR Code which shall be
extracted and printed on the invoice. The QR code
enables quick view, validation and access of the invoices
from the GST system from hand-held devices. The digitally
signed QR code will have a unique IRN which can be verified on the central
portal as well as by an offline app by the officer. This will be helpful for tax
officers checking the invoice offline on the roadside where internet may not
be available all the time.
The QR code consists of the following e-invoice parameters:
❑ GSTIN of supplier
❑ GSTIN of recipient
❑ Invoice number as given by supplier
❑ Date of generation of invoice

❑ Invoice value (taxable value and gross tax)
❑ Number of line items
❑ HSN code of main item (the line item having highest taxable value)
❑ Unique Invoice Reference Number (hash)
❑ Date of generation of IRN
Dynamic QR code on B2C invoices
All B2C invoices issued by a registered person whose aggregate turnover

in any preceding financial year from 2017-18 onwards exceeds ` 500
crores will have a QR code.
Sixth proviso to rule 46 has empowered the Government to specify that the
tax invoice shall have Quick Response (QR) code. Resultantly, it has been
notified12 that invoice issued by a registered person [except specified class of
12

persons(discussed subsequently)], whose aggregate turnover in a financial

year exceeds ` 500 crores, in respect of B2C supplies (supply of goods or
services or both to an unregistered person) shall have Dynamic QR code.
A Dynamic Quick Response (QR) code made available to buyer by such
registered person through digital display (with payment cross-reference) shall
be deemed to be having QR code. The purpose of this provision is to
enable and encourage digital payments where buyer can scan the
dynamic QR code and make payment from mobile wallet directly.
Today, many shops have static QR code at the payment counter which is
scanned by the buyer, but the buyer has to enter the amount to be paid to
the shop in the mobile payment App. The dynamic QR code, on the other
hand, will have the payment details and thus ‘scan and pay’ in one go is
possible.
This has no relevance or applicability to the e-invoicing in respect to B2B
supplies by notified class of taxpayers. Dynamic QR Code will be generated
by the seller himself either on the Point of Sale (PoS) machine or the invoice
issued.
Dynamic QR Code in case of an invoice, issued to person having a UIN.
Any person, who has obtained a Unique Identity Number (UIN), is not a
“registered person” as per the definition of registered person provided in
section 2(94). Therefore, any invoice, issued to such person having a UIN,
shall be considered as invoice issued for a B2C supply and shall be required
to comply with the requirement of Dynamic QR Code.
Non-applicability of requirement of Dynamic QR code
Dynamic QR code is not applicable to an invoice issued to an unregistered

person by following suppliers:
(i) Insurer or banking company or financial institution including NBFC
(ii) Goods transport agency supplying services in relation to transportation

of goods by road in a goods carriage
(iii) Supplier of passenger transportation service

(iv) Person supplying services by way of admission to exhibition of

cinematograph films in multiplex screens
(v) Supplier of online information and database access or retrieval (OIDAR)

services13.
No Dynamic QR code in case of exports: As regards the supplies made for
exports, though such supplies are made by a registered person to an
unregistered person, however, since e-invoices are required to be issued in
respect of supplies for exports treating them as B2B supplies, Dynamic QR
code requirement will not be applicable to them.
Parameters/ details to be captured in the Dynamic QR Code
Dynamic QR Code, inter-alia, shall contain the following information: -
❑ Supplier GSTIN number

❑ Supplier UPI ID
❑ Payee’s Bank A/c number and IFSC
❑ Invoice number & invoice date,

❑ Total invoice value and
❑ GST amount along with breakup i.e. CGST, SGST, IGST, Cess, etc.
Further, Dynamic QR Code should be such that it can be scanned to make a
digital payment.
Compliance with the Dynamic QR Code requirements in certain cases
The purpose of dynamic QR Code is to enable the recipient/ customer to scan and
pay the amount to be paid to the merchant/ supplier in respect of the said supply.
If the supplier has issued invoice having Dynamic QR Code for payment, the
said invoice shall be deemed to have complied with Dynamic QR Code
requirements. Compliance with the Dynamic QR Code requirements has been
examined in the following cases:
13
The provisions relating to OIDAR services have been discussed at the Final level.

Case-I: If a supplier provides/ displays Dynamic QR Code, but the

customer opts to make payment without using Dynamic QR Code and
supplier provides the cross reference of such payment made without use
of Dynamic QR Code, on the invoice
In cases where the supplier, has digitally displayed the Dynamic QR Code and
the customer pays for the invoice: -
i. using any mode like UPI, credit/ debit card or online banking or cash or
combination of various modes of payment, with or without using
Dynamic QR Code, and the supplier provides a cross reference of the
payment (transaction id along with date, time and amount of payment,
mode of payment like UPI, Credit card, Debit card, online banking etc.)
on the invoice; or
ii. in cash, without using Dynamic QR Code and the supplier provides a
cross reference of the amount paid in cash, along with date of such
payment on the invoice;
The said invoice shall be deemed to have complied with the requirement of
having Dynamic QR Code.
Case-II: If a supplier makes available to customers an electronic mode of
payment like UPI Collect, UPI Intent or similar other modes of payment,
through mobile applications or computer-based applications, where
though Dynamic QR Code is not displayed, but the details of merchant
as well as transaction are displayed/ captured otherwise.
In such cases, if the cross reference of the payment made using such
electronic modes of payment is made on the invoice, the invoice shall be
deemed to comply with the requirement of Dynamic QR Code.
However, if payment is made after generation/ issuance of invoice, the
supplier shall provide Dynamic QR Code on the invoice.
Case-III: In case of pre-paid invoices i.e. where payment has been made
before issuance of the invoice.
If cross reference of the payment received either through electronic mode or
through cash or combination thereof is made on the invoice, then the invoice

would be deemed to have complied with the requirement of Dynamic QR

Code.
In cases other than pre-paid supply i.e. where payment is made after
generation / issuance of invoice, the supplier shall provide Dynamic QR Code
on the invoice.
Case-IV: In case where the e-commerce operator (ECO)/online
application has complied with the Dynamic QR Code requirements,
whether the suppliers using such e-commerce portal or application will
still be required to comply with the requirement of Dynamic QR Code?
Dynamic QR code requirements apply to each supplier/registered person
separately, if such person is liable to issue invoices with Dynamic QR Code for
B2C supplies.
In case, the supplier is making supply through the e- commerce portal or
application, and the said supplier gives cross references of the payment
received in respect of the said supply on the invoice, then such invoices would
be deemed to have complied with the requirements of Dynamic QR Code. In
cases other than pre-paid supply i.e. where payment is made after generation
/ issuance of invoice, the supplier shall provide Dynamic QR Code on the
invoice.
Case-V: In case of retail sales over the counter, the payment from the
customer is received on the payment counter by displaying dynamic QR
code on digital display, whereas the invoice, along with invoice number,
is generated on the processing system being used by supplier/ merchant
after receiving the payment.
In such cases, it may not be possible for the merchant/ supplier to provide
details of invoice number in the dynamic QR code displayed to the customer
on payment counter. However, each transaction i.e. receipt of payment
from a customer is having a unique Order ID/ sales reference number, which
is linked with the invoice for the said transaction.
In such cases, the unique order ID/ unique sales reference number, which is
uniquely linked to the invoice issued for the said transaction, may be
provided in the Dynamic QR Code for digital display, as long as the details
of such unique order ID/ sales reference number linkage with the invoice
are available on the processing system of the merchant/ supplier and the

cross reference of such payment along with unique order ID/ sales reference
number are also provided on the invoice.
Case - VI: In case part-payment is received before dynamic QR code is
generated.
When the part-payment for any supply has already been received from
the customer/ recipient, either in advance or by adjustment (e.g. using a
voucher, discount coupon etc), before the dynamic QR Code is generated,
then the dynamic QR code may provide only the remaining amount
payable by the customer/ recipient against “invoice value”.
The details of total invoice value, along with details/ cross reference of
the part payment/ advance/ adjustment done, and the remaining amount
to be paid, should be provided on the invoice 14.
B. SPECIAL CASES
(i) Revised Tax Invoice [Section 31(3)(a) read with rule 53]
When issued?
❑ Every registered person who has
been granted registration with For the purposes of section 31,
effect from a date earlier than the the expression “tax invoice”
date of issuance of certificate of shall include any revised
registration to him, may issue invoice issued by the supplier in
Revised Tax Invoices. Such invoices respect of a supply made earlier
shall be issued against the invoices [Explanation to section 31].
already issued during said period.
❑ Revised Tax Invoices shall be issued within 1 month from the date
of issuance of certificate of registration. The words “Revised Invoice”
shall be indicated prominently on such invoices.
❑ This provision is necessary, as a person who becomes liable for
14
The discussion on Dynamic QR code is based primarily on sixth proviso to rule 46 alongwith
Notification No. 14/2020 CT dated 21.03.2020 and Circular no. 146/02/2021 GST dated
23.02.2021, Circular no. 156/12/2021 GST dated 21.06.2021 and Circular No. 165/21/2021
GST dated 17.11.2021.

registration has to apply for registration within 30 days of becoming

liable for registration. When such an application is made within the
stipulated time period and registration is granted, the effective date of
registration is the date on which the person became liable for
registration.
❑ Thus, there would be a time lag between the date of grant of certificate
of registration and the effective date of registration.
For supplies made by such person during this
intervening period, the law enables the issuance of
revised invoice(s), so that ITC can be availed by the
recipient on such supplies.
Revised Tax Invoices to be issued in respect of taxable
supplies effected during this period
Effective date of registration Date of issuance of certificate of

registration
(7) Sarabhai Private Ltd. commenced business of supply of

goods on 1st April in Delhi. Its turnover exceeded the applicable
threshold limit on 3rd September. Thus, it became liable to
registration on 3 rd September. It applied for registration on 29 th September
and was granted registration certificate on 5th October. Since it applied for
registration within 30 days of becoming liable to registration, registration
granted is effective from 3 rd September. Sarabhai Private Ltd. may issue
Revised Tax Invoices on or before 5th November in respect of taxable supplies
effected between 3 rd September and 5th October.
Consolidated Revised Tax Invoices in certain cases
A registered person may issue a Consolidated Revised Tax Invoice in respect

of all taxable supplies made to an unregistered recipient during such period.
However, in case of inter-State supplies where the value of supply does not
exceed ` 2.5 Lakh, a consolidated revised invoice may be issued separately in
respect of all unregistered recipients located in a State.

Thus, a revised/ consolidated revised invoice may be issued within one month
from the date of registration as follows:
• For each inter-State B2C taxable supply upto ` 2,50,000: State-wise
consolidated revised invoice
• For each inter-State B2C taxable supply more than ` 2,50,000:
Recipient wise revised invoice
• For all intra-State B2C taxable supplies irrespective of the amount:
Consolidated revised invoice
Particulars of Revised Tax Invoice
A consecutive serial number not exceeding 16 characters, in one or multiple

series, containing alphabets or numerals or special characters -hyphen or
dash and slash and any combination thereof, unique for a FY;
Date of issue of the document;
Name, address and GSTIN or UIN, if registered, of the recipient;
Name and address of the recipient and the address of delivery, along with
the name of State and its code, if such recipient is un-registered;
Serial number and date of the corresponding tax invoice or, as the case may
be, bill of supply;
Signature/digital signature of the supplier/his authorized representative.

ILLUSTRATION 1
Luv & Kush Pvt. Ltd. of Meghalaya engaged in the supply of gifts items and
repair services, provides you the following details:-
S. No. Particulars Date
1. Commencement of the business of supplying 1st August

goods and services
2. Turnover exceeds ` 10,00,000 on 15th August
3. Turnover exceeds ` 20,00,000 on 5thSeptember
4. Application for registration made on 28th September
5. Registration certificate granted on 6th October
The company seeks your advice as to how it should raise revised tax invoices for
supplies made. Is there any specific provision for issuance of revised tax invoices
to unregistered customers? Explain.
ANSWER
A supplier of both goods and services whose aggregate turnover in a financial
year exceeds ` 20 lakh in a State/UT [` 10 lakh in specified Special Category
States] 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
of ` 20 lakh/ ` 10 lakh) in terms of section 22. Since Meghalaya is not a
specified Special Category State, applicable threshold limit is ` 20 lakh.
Further, where the application is submitted within said period, the effective
date of registration is the date on which the person becomes liable to
registration; otherwise it is the date of grant of registration.
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 within 1 month from the date of issuance of
registration certificate in respect of taxable supplies effected during this
period i.e. from the effective date of registration till the date of issuance of
registration.

Since Luv & Kush Pvt. Ltd. has made the application for registration within 30
days of becoming liable for registration, the effective date of registration
becomes the date on which the company becomes liable to registration i.e.
5th September.
Thus, Luv & Kush Pvt. Ltd. may issue revised tax invoices against the invoices
already issued during the period between effective date of registration (5th
September) and the date of issuance of registration certificate (6th October),
within 1 month from 6th October.
Further, Luv & Kush Pvt. Ltd may issue a consolidated revised tax invoice in
respect of all taxable supplies made to unregistered dealers during such
period. However, in case of inter-State supplies where the value of supply
does not exceed ` 2.5 Lakh, a consolidated revised invoice may be issued
separately in respect of all unregistered recipients located in a State.
(ii) No Tax Invoice required to be issued if value <` 200 – A consolidated
Tax Invoice can be issued [Section 31(3)(b) read with fourth proviso to
rule 46]
A registered person may not issue a Tax Invoice if:
(i) Value of the goods/services/both 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 for
such supplies at the close of each day in respect of all such supplies.
Thus, small taxpayers, like small retailers, doing a large number of small
transactions for upto a value of ` 200 per transaction
to unregistered customers need not issue invoice for
every such transaction. They can issue one
consolidated invoice at the end of each day for all
transactions done during the day. However, they
need to issue an invoice when the customer demands.

However, this option is not available to a supplier engaged in making supply

of services by way of admission to exhibition of cinematograph films in
multiplex screens.
Above provision is also applicable to Bill of Supply.
ILLUSTRATION 2
Jain & Sons is a trader dealing in stationery items. It is registered under GST
and has undertaken following sales during the day:
S. No. Recipient of supply Amount (`)

1. Raghav Traders - a registered retail dealer 190
2. Dhruv Enterprises – an unregistered trader 358
3. Gaurav – a painter [unregistered] 500
4. Oberoi Orphanage –an unregistered entity 188
5. Aaradhya – a student [unregistered] 158
None of the recipients require a tax invoice [Raghav Traders being a
composition dealer].
Determine in respect of which of the above supplies, Jain & Sons may issue a
Consolidated Tax Invoice instead of Tax Invoice, at the end of the day.
ANSWER
In the given illustration, Jain & Sons can issue a Consolidated Tax Invoice only
with respect to supplies made to Oberoi Orphanage [worth `188] and
Aaradhya [worth `158] as the value of goods supplied to these recipients is
less than `200 as also these recipients are unregistered and don’t require a
tax invoice.
As regards the supply made to Raghav Traders, although the value of goods
supplied to it is less than `200, Raghav Traders is registered under GST. So,
Consolidated Tax Invoice cannot be issued.
Consolidated Tax Invoice can also not be issued for supplies of goods made
to Dhruv Enterprises and Gaurav although both of them are unregistered. The
reason for the same is that the value of goods supplied is not less than `200.

(iii) Bill of Supply [Section 31(3)(c) read with rule 49]

Section 31(3)(c) stipulates that a registered person supplying exempted
goods or services or both or a registered person paying tax under
composition levy, shall issue a bill of supply instead of a tax invoice 15.Person
opting for composition levy shall mention the words “composition taxable
person, not eligible to collect tax on supplies” at the top of the bill of supply
issued by him16.
Supplying exempted goods

or services or both
Tax Bill of
Paying tax under Invoice Supply
Registered
composition levy
Person
Particulars of Bill of Supply

A registered person opting for the composition levy does
not collect tax from the recipient on outward supplies made
by him. Similarly, in case of a registered person supplying
exempted goods and/or services, no tax implications are
there. Recipients should not expect Tax Invoice from such suppliers as they
cannot issue tax invoice.
Since no tax is collected from the recipient by a registered person opting for
the composition levy and a registered person supplying exempted goods
and/or services, Bill of Supply issued by such persons does not contain the
details pertaining to rate of tax and amount of tax. Further, value to be
mentioned in the Bill of Supply is not also taxable value.
15
Order No. 3/2019 CT dated 08.03.2019 has stipulated that a person paying tax under
Notification No. 2/2019 will also issue a bill of supply instead of tax invoice.
16
Fourth proviso to rule 49 stipulates that the Bill of supply shall have a Quick Response Code.
However, the same is not yet made effective.

A consecutive serial number not exceeding 16 characters, in one or more

multiple series, containing alphabets or numerals or special characters -
hyphen or dash and slash and any combination thereof, unique for a FY;
Date of its issue;
HSN Code for goods or services;
Description of goods or services or both;
Value of supply of goods or services or both taking into account

discount/ abatement, if any; and
Signature/ digital signature of supplier/his authorized representative.

However, signature or digital signature of the supplier or his authorized
representative shall not be required in the case of issuance of an
electronic bill of supply in accordance with the provisions of the
Information Technology Act, 2000.
Note: Any tax invoice or any other similar document issued under any other
Act for the time being in force in respect of any non-taxable supply shall be
treated as bill of supply for the purposes of the Act.
(8) Patel & Sons is a manufacturer of goods who has opted for
composition levy under section 10(1) and 10(2). It will issue a Bill
of Supply to the buyers of goods and not the tax invoice.
Invoice-cum-bill of supply [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. Rule 46A is notwithstanding
anything contained in rule 46 or rule 49 or rule 54 of CGST Rules. The said
single "invoice-cum-bill of supply" shall contain the particulars as
specified under rule 46 or rule 54, as the case may be, and rule 49.

(iv) Receipt Voucher [Section 31(3)(d) read with rule 50]

A registered person shall, on receipt of advance payment with
respect to any supply of goods or services or both, issue a
Receipt Voucher evidencing receipt of such payment.
Particulars of Receipt Voucher

multiple series, containing alphabets or numerals or special
characters -hyphen or dash and slash and any combination thereof,
unique for a FY
Date of its issue;
Amount of advance taken;
Rate of tax (central tax, State tax, integrated tax, Union territory tax
or cess);
Amount of tax charged in respect of taxable goods or services (central

tax, State tax, integrated tax, Union territory tax or cess);
Place of supply along with the name of State and its code, in case of
a supply in the course of inter-State trade or commerce;
Signature/digital signature of supplier/his authorized representative

Where at the time of receipt of advance, rate of tax and/or nature of

supply is not determinable
Where at the time of receipt of

advance -
(i) rate of tax is not tax shall be paid at the rate of 18%
determinable
(ii) nature of supply is not same shall be treated as inter-State

determinable supply
(v) Refund Voucher [Section 31(3)(e) read with rule 51]

Where, on receipt of advance payment with respect to any supply of goods
or services or both the registered person issues a Receipt Voucher, but
subsequently no supply is made and no tax invoice is issued in pursuance
thereof, the said registered person may issue to the person who had made
the payment, a Refund Voucher against such payment.
Advance payment
Receipt Voucher
Supply
Supplier Tax Invoice

Recipient
Refund Voucher
Particulars of Refund Voucher
A consecutive serial number not exceeding sixteen characters, in one

or multiple series, containing alphabets or numerals or special
unique for a FY;
Date of its issue;

Number and date of Receipt Voucher issued
Description of goods/services in respect of which refund is made
Amount of refund made
Rate of tax (central tax, State tax, integrated tax, Union territory tax or
cess)
Amount of tax paid in respect of such goods or services (central tax,

State tax, integrated tax, Union territory tax or cess)
(vi) Invoice and Payment Voucher [Section 31(3)(f) & (g) read with second
proviso to rule 46 and rule 52]
The recipient is liable to pay tax on reverse charge basis
where he receives supply of such goods/services/both
which are notified for reverse charge purposes under
section 9(3). Such supplies can be received from a
registered or an unregistered supplier.
Further, a builder/promoter is required to pay GST on reverse charge basis
under section 9(4) in one or more of the following cases:
(i) A builder/promoter must purchase 80% of inputs and input services
used in supplying the service from registered persons. In case of
shortfall, he’s required to pay tax under reverse charge on all such
inward supplies (to the extent short of 80% of the inward supplies from
registered supplier).
(ii) Where cement is received from an unregistered person,

promoter/builder has to pay tax on supply of such cement on reverse
charge basis and

(iii) GST on capital goods purchased from unregistered person is payable

by the promoter on reverse charge basis.
Invoice to be issued by recipient if he is liable to pay tax under
section 9(3)/(4) and receives supplies from an unregistered person
A registered person who is liable to pay tax under reverse charge [under
section 9(3)/9(4) of the CGST Act] shall issue an Invoice in respect of goods
or services or both received by him from the supplier who is not registered
on the date of receipt of goods or services or both. Thus, a recipient liable
to pay tax by virtue of section 9(3) has to issue invoice only when supplies
have been received from an unregistered supplier.
Payment voucher to be issued by recipient at the time of making
payment if he is liable to pay tax under section 9(3)/(4)
Besides, a registered person who is liable to pay tax under
reverse charge [under section 9(3)/9(4) of the CGST Act]
shall issue a Payment Voucher at the time of making
payment to the supplier.
Particulars of Payment Voucher
Name, address and GSTIN of the supplier if registered;

multiple series, containing alphabets or numerals or special characters -
hyphen or dash and any combination thereof, unique for a FY
Date of its issue;
Name, address and GSTIN of the recipient;
Amount paid;
Rate of tax (central tax, State tax, integrated tax, Union territory tax or
cess);
Amount of tax payable in respect of taxable goods or services

(central tax, State tax, integrated tax, Union territory tax or cess);

Place of supply along with the name of State and its code, in case of
a supply in the course of inter-State trade or commerce; and
(vii) Supplier permitted to issue any document other than tax invoice
[Section 31(2) and proviso to section 31(1) read with rules 54 and 55]
Government may, on the recommendations of
the Council, by notification and subject to such
conditions as may be mentioned therein, specify
the categories of services in respect of which––
(a) any other document issued in relation to
the supply shall be deemed to be a tax invoice; or
(b) tax invoice may not be issued.
Following suppliers may issue a tax invoice, but they are also permitted to
issue any other document in lieu of tax invoice, by whatever name called:
Supplier of Document in lieu of the tax invoice

taxable service
Optional information Mandatory
information
Insurer/Banking ❑ Serial number (It is Other information

company/Financial not mandatory for a (other than serial no.
institution, bank/insurance and address of
including NBFC company to serially recipient) as prescribed
number the for a Tax Invoice, under
invoices/document). rule 46.
❑ Address of the
A customer may avail
recipient of taxable
numerous services from
service.
the bank / insurer in a
given tax period. Such
entities may issue a
consolidated tax
invoice/ statement/

advice, any other

document in lieu
thereof, by whatever
name called may be
issued/ made available,
physically/
electronically,for
supply of services
made during a month
at the end of the
month.
However, the signature
or digital signature of
the supplier/his
authorised
representative shall
not be required in the
case of issuance of a
consolidated tax
invoice or any other
document in lieu
thereof in accordance
with the provisions of
the Information
Technology Act, 2000.
Goods Transport Gross weight of the

Agency (GTA) consignment
supplying services
in relation to
transportation of Name of the consignor
goods by road in a and the consignee
goods carriage
Registration number of
goods carriage in
which the goods are
transported

Details of goods
transported
Details of place of
origin and destination
GSTIN of the person

liable for paying tax
whether as consignor,
consignee or GTA
Other information as
prescribed for a tax
invoice, under rule 46
Supplier of ❑ Serial number Tax invoice shall include

passenger ❑ Address of the ticket in any form, by
transportation recipient of taxable whatever name called.
service service
Other information (other
than serial no. and
address of recipient) as
prescribed for a tax
invoice, under rule 46.
However, signature or
digital signature of the
supplier or his
authorized
representative shall not
be required in the case of
issuance of ticket in
accordance with the
provisions of the
Information Technology
Act, 2000.
Supplier is required to

Registered person Details of recipient of issue an electronic ticket

supplying services by service and the said electronic
way of admission to ticket shall be deemed
exhibition of to be a tax invoice.
cinematograph films
Other information (other
in multiplex screens
than details of recipient
of service) as prescribed
for a tax invoice, under
rule 46.
However, supplier of
such service in a screen
other than multiplex
screens may, at his
option, follow the above
procedure.
It is important to note here that keeping in view the large number of

transactions in banking, insurance and passenger transportation sector,
taxpayers need not mention the address of the customer and the serial
number in their invoices.
Delivery challan
Rule 55 specifies the cases where at the time of removal of goods for
transportation, goods can be removed on delivery challan and invoice may
be issued after delivery. These are provided in the following table:
Nature of Deliver challan Particulars of Delivery

supply 17 to be issued Challan
(1) Supply of • serially Date and number of the

liquid gas numbered not delivery challan
17
It may be noted that delivery challan is to be issued in case of transportation of goods for
job work also. The provisions relating to job work will be discussed at Fi nal level.

where the exceeding 16 Name, address and GSTIN of

quantity at the characters the consigner, if registered
time of • in one or Name, address and GSTIN or
removal from multiple UIN of the consignee, if
the place of series registered
business of the • at the time of
supplier is not removal of HSN code and description of
known, goods for goods,
(2) Transportation transportation Quantity (provisional, where
of goods for the exact quantity being
reasons other supplied is not known)
than by way of
Taxable value
supply, or
(3) Such other Tax rate and tax amount –
supplies as central tax, state tax,
may be notified integrated tax, union
by the Board territory tax or cess, where
the transportation is for
supply to the consignee
Place of supply, in case of
inter-state movement
Signature
A. Delivery challan in Triplicate
The delivery challan shall be prepared in TRIPLICATE, in case of supply of

goods, in the following manner:
Original copy
Duplicate copy
Triplicate copy
B. Declaration in E-way Bill

Where goods are being transported on a delivery challan in lieu of invoice,
the same shall be declared in E-Way Bill.

C. Tax invoice to be issued after delivery of goods

Where the goods being transported are for the purpose of supply to the
recipient but the tax invoice could not be issued at the time of removal of
goods for the purpose of supply, the supplier shall issue a tax invoice after
delivery of goods.
D. Goods transported in SKD/CKD conditionor in batches or lots
Where the goods are being transported in a semi knocked down or
completely knocked down condition or in batches or lots,
(a) the supplier shall issue the complete invoice before dispatch of the first
consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent
consignments, giving reference of the invoice;
(c) Copies of the corresponding delivery challan shall accompany each
consignment along with a duly certified copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last
consignment.
Goods may be moved within the State/from the State of registration to
another State for supply on approval basis and art works may be sent by
artists to galleries for exhibition on delivery challan along with
e-way bill wherever applicable
Suppliers of jewellery etc. who are registered in one State may have to visit
other States (other than their State of registration) and need to carry the
goods (such as jewellery) along for approval. In such cases if jewellery etc. is
approved by the buyer, then the supplier issues a tax invoice only at the time
of supply.
Since the suppliers are not able to ascertain their actual supplies beforehand
and while ascertainment of tax liability in advance is a mandatory requirement
for registration as a casual taxable person, the supplier is not able to register
as a casual taxable person. Such goods are also carried within the same State
for the purposes of supply.

In view of relevant provisions of rule 55, it is clarified that the goods which
are taken for supply on approval basis can be moved from the place of
business of the registered supplier to another place within the same State or
to a place outside the State on a delivery challan along with the e-way bill
wherever applicable and the invoice may be issued at the time of delivery of
goods.
For this purpose, the person carrying the goods for such supply can carry the
invoice book with him so that he can issue the invoice once the supply is
fructified [Circular No. 10/10/2017 GST dated 18.10.2017].
Likewise, in case where artists supply art works in different States - other than
the State in which they are registered as a taxable person and if the art work
is selected by the buyer, then the supplier issues a tax invoice only at the time
of supply, it is clarified that the art work for supply on approval basis can be
moved from the place of business of the registered person (artist) to another
place within the same State or to a place outside the State on a delivery
challan along with the e-way bill wherever applicable and the invoice may be
issued at the time of actual supply of art work [Circular No. 22/22/2017 GST
dated 21.12.2017].
4. CREDIT AND DEBIT NOTES [SECTION 34]
Section 34 Credit and Debit Notes

(1) Where one or more tax invoices have been issued for supply of any
goods or services or both and the taxable value or tax charged in
that tax invoice is found to exceed the taxable value or tax payable
in respect of such supply, or where the goods supplied are returned
by the recipient, or where goods or services or both supplied are
found to be deficient, the registered person, who has supplied such

goods or services or both, may issue to the recipient one or more

credit notes for supplies made in a financial year containing such
particulars as may be prescribed.
(2) Any registered person who issues a credit note in relation to a
supply of goods or services or both shall declare the details of such
credit note in the return for the month during which such credit
note has been issued but not later than the 30th day of
November following the end of the financial year in which such
supply was made, or the date of furnishing of the relevant annual
return, whichever is earlier, and the tax liability shall be adjusted
in such manner as may be prescribed.
Provided that no reduction in output tax liability of the supplier
shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person.
(3) Where one or more tax invoices have been issued for supply of any
goods or services or both and the taxable value or tax charged in
that tax invoice is found to be less than the taxable value or tax
payable in respect of such supply, the registered person, who has
supplied such goods or services or both, shall issue to the recipient
one or more debit notes for supplies made in a financial year
containing such particulars as may be prescribed.
(4) Any registered person who issues a debit note in relation to a
supply of goods or services or both shall declare the details of such
debit note in the return for the month during which such debit
note has been issued and the tax liability shall be adjusted in such
Explanation––For the purposes of this Act, the expression “debit
note” shall include a supplementary invoice.
ANALYSIS
(i) Issuance of Credit Note: During the course of trade or commerce, after the
invoice has been issued, there can be situations like:

❑ The supplier has erroneously declared a value which is more than the
actual value of the goods or services provided.
❑ The supplier has erroneously declared a higher tax rate than what is
applicable for the kind of the goods or services or both supplied.
❑ The quantity received by the recipient is less than what has been
declared in the tax invoice.
❑ The quality of the goods or services or both supplied is not to the

satisfaction of the recipient thereby necessitating a partial or total
reimbursement on the invoice value
❑ Any other similar reasons.
In order to regularize these kinds of situations, the supplier is allowed to issue
a document called as credit note to the recipient. Once the credit note has
been issued, the tax liability of the supplier will reduce.
The credit note is a convenient and legal method by which the value of the
goods or services in the original tax invoice can be amended or revised. The
issuance of the credit note easily allows the supplier to decrease his tax
liability in his returns without requiring him to undertake any tedious process
of refunds.
Section 34(1) provides that where one or more tax invoices have been issued
for supply of any goods or services or both and the taxable value or tax
charged in that/those tax invoice(s) is found to exceed the taxable value or
tax payable in respect of such supply, or where the goods supplied are
returned by the recipient, or where goods or services or both supplied are
found to be deficient, the registered person, who has supplied such goods or
services or both, may issue to the recipient one or more credit notes for
supplies made in a financial year containing the prescribed particulars.

It is important to note that credit note(s)are not permitted

to be issued in case secondary discounts18are allowed by Secondary
the supplier since the tax liability of the supplier does not discounts
get reduced in such case. However, supplier can issue
financial/ commercial credit note(s) to reduce the value of
supply payable by the recipient to the supplier [Circular 92/11/2019 GST
dated 07.03.2019].
(ii) Issuance of Debit Note: There can be situations when after the invoice has
been issued:
❑ The supplier has erroneously declared a value which is less than the
actual value of the goods or services or both provided.
❑ The supplier has erroneously declared a lower tax rate than what is
applicable for the kind of the goods or services or both supplied.
❑ The quantity received by the recipient is more than what has been
declared in the tax invoice.
❑ Any other similar reasons.
In order to regularize these kinds of situations, the supplier is allowed to issue
a document called as debit note to the recipient.
Section 34(3) provides that where one or
more tax invoices have been issued for Debit note shall include a
supply of any goods or services or both supplementary invoice.
and the taxable value or tax charged in
that tax invoice is found to be less than
the taxable value or tax payable in respect of such supply, the registered
person, who has supplied such goods or services or both, shall issue to the
recipient one or more debit notes for supplies made in a financial year
containing the prescribed particulars.
18
Secondary discounts are the discounts which are not known at the time of supply/are offered
after the supply is already over. These discounts are not excluded from the value of supply since
conditions laid down in section 15(3)(b) are not satisfied. Provisions of section 15 have been
discussed in detail in Chapter 7- Value of Supply of Module-1 of the Study material.

The issuance of a debit note/supplementary invoice creates additional tax

liability. The treatment of a debit note/supplementary invoice is identical to
the treatment of a tax invoice as far as returns and payment are concerned.
The debit note/supplementary invoice is a convenient and legal method by

which the value of the goods and/or services in the original tax invoice can
be enhanced. The issuance of the debit note allows the supplier to pay his
enhanced tax liability in his returns without requiring him to undertake any
other tedious process.
(iii) Details of Debit Note/Credit Note to be declared in return
I. Credit Note:
Any registered person who issues a credit note in
relation to a supply of goods or services or both shall
declare the details of such credit note in the return
for the month during which such credit note has been
issued but not later than:
(i) 30th November following the end of the financial year in which
such supply was made,
or
(ii) the date of furnishing of the relevant annual return,
The tax liability shall be adjusted in such manner as may be prescribed.
However, no reduction in output tax liability of the supplier shall be
permitted, if the incidence of tax and interest on such supply has been
passed on to any other person.
II. Debit Note:
Any registered person who issues a debit note in relation to a supply of
goods or services or both shall declare the details of such debit note in
the return for the month during which such debit note has been issued.
The tax liability shall be adjusted in such manner as may be prescribed.

III. Particulars of the Debit and Credit Notes [Rule 53(1A)]

There is no prescribed format, but credit and debit note issued by a
supplier must contain the following particulars, namely:–
Name, address and GSTIN of the supplier.
Nature of the document.

multiple series, containing alphabets or numerals or special
unique for a FY.
Date of issue of the document.
Name, address and GSTIN or UIN, if registered, of the recipient.
Name and address of the recipient and the address of delivery, along
with the name of State and its code, if such recipient is un-registered.
Serial number(s) and date(s) of the corresponding tax invoice(s) or,

as the case may be, bill(s) of supply.
Value of taxable supply of goods or services, rate of tax and the

amount of the tax credited or, as the case may be, debited to the
recipient
Signature/digital signature of the supplier/his authorized

representative.
ILLUSTRATION 3
Kartik & Co., a registered supplier under GST, provides the following
information regarding various tax invoices issued by it during the month of
March:
(i) Value of supply charged in invoice no. 1 was ` 2,50,000 against the actual
taxable value of ` 2,30,000.
(ii) Tax charged in invoice no. 4 was ` 32,000 against the actual tax liability
of ` 68,000 due to wrong HSN code being chosen while issuing invoice.
(iii) Value charged in invoice no. 8 was ` 3,20,000 as against the actual value

of ` 4,20,000 due to wrong quantity considered while billing.

Kartik & Co. asks you to answer the following:
(1) Who shall issue a debit/credit note under CGST Act?
(2) Whether debit note or credit note has to be issued in each of the above
circumstances?
(3) What is the maximum time-limit available for declaring the credit note
in the GST Return?
ANSWER
(1) The debit/credit note shall be issued by the registered person who has
supplied the goods and/or services, i.e. Kartik & Co.
(2) Yes, debit/credit note need to be issued in each of the circumstances as
under:
(i) A credit note is required to be issued as the taxable value in
invoice no. 1 exceeds the actual taxable value.
(ii) A debit note is required to be issued as the tax charged in the

invoice no. 4 is less than the actual tax payable.
(iii) A debit note is required to be issued as the value of supply
charged in the invoice no. 8 is less than the actual value.
(3) The details of the credit note cannot be declared later than 30th
November following the end of the financial year in which such supply
was made or the date of furnishing of the relevant annual return,
5. PROHIBITION OF UNAUTHORISED
COLLECTION OF TAX [SECTION 32]
A person who is not a registered person shall not collect in respect of any supply
of goods or services or both any amount by way of tax under this Act.
No registered person shall collect tax except in accordance with the provisions of

this Act or the rules made thereunder.

(9) Rujuta is engaged in providing grooming services. She is not
registered under GST law as her turnover is below the threshold limit.
Rujuta cannot collect tax on the grooming services provided by her as a
person who is not a registered person cannot collect any amount by way of tax under
GST law in respect of any supply of goods or services or both.
6. AMOUNT OF TAX TO BE INDICATED IN TAX

INVOICE AND OTHER DOCUMENTS [SECTION 33]
Notwithstanding anything contained in this Act or any other law for the time
being in force, 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.
LET US RECAPITULATE
Who can raise a tax invoice?
Registered Person
Receiving taxable goods or services

Supplying taxable goods or services
from unregistered supplier

Time limit for issuance of invoice
Taxable supply
Goods Services
Involving No movement Sale or return Within 30 days

movement of of goods supplies from the supply
goods of services
At the time Before or at the time of Insurance,

At the time of delivery supply, or within 6 Banking -
of removal months from the removal 45 days
– whichever is earlier
In case of •before/at the time each successive statements of

continuous accounts is issued or each successive payment is
supply of goods received
due date of payment is on/before due date of payment

ascertainable from the contract
In case of
continuous not so ascertainable before/at the time of receipt of
supply of payment
services payment is linked to the on/before the date of
completion of an event completion of that event

Important contents of tax invoice
Name & address of

Consecutive Serial Name, address & recipient alongwith
Name, address &
Number & date of GSTIN of recipient, delivery address ,
GSTIN of supplier
issue if registered name & State code,
if not registered
Description of Quantity in case of Total Value of

HSN
goods or services goods supply
Tax rate – Central

Taxable Value of Amount of tax
tax & State tax or Place of supply
supply charged
Integrated tax, cess
Signature of
Address of delivery supplier or QR code having
Tax payable on
where different authorised embedded IRN in it
reverse charge
than place of signatory - not req. - in case if e-invoice
basis
supply if e-invoice issued issued
as per IT Act, 2000
Manner of issuing the invoice
Supply of Goods Supply of services
Triplicate Duplicate
Original copy for recipient Original copy for recipient; and

Duplicate copy for transporter; and Duplicate copy for supplier
Triplicate copy for supplier
The serial number of invoices issued during a month / quarter shall be

furnished electronically in FORM GSTR-1.

E-invoicing
A. Class of persons mandatorily required to issue e-invoice [Notified

Taxpayers]
All registered businesses
with an aggregate turnover (based on Required to issue E-

PAN) greater than ` 10 crore invoice
in any preceding financial year from

2017-18 onwards
B. Important terms
E-invoice schema
Uniform standard
format
applicable for all

businesses across the Form GST INV-1
country
containing mandatory
specified fields to be
reported in electronic
format to IRP

Invoice Registration Portal [IRP]
website
for uploading or reporting of invoices
by notified persons
Invoice Reference Number [IRN]
Unique reference number
generated and returned by IRP
on successful registration of e-invoice
GST invoice will be valid only with a valid IRN
C. Advantages of e-invoicing
Auto-reporting of invoices into GST return
Auto-generation of e-way bill
Substantial reduction in transcription errors
Early payment
Cost reduction
Improved efficiency of business
Reduction of tax evasion
Elimination of fake invoices

D. Situations in which e-invoices are applicable
Supply of goods and/or services to a registered person by •Applicable

notified person [B2B supplies]
Exports by notified persons •Applicable
B2C supplies by notified persons •Not applicable
Invoices issued by Input Service Distributor •Not applicable
Supplies made by notified person, tax on which is payable under •Applicable

reverse charge under section 9(3)
Where specified category of supplies are received by notified
•Not
persons from unregistered persons [attracting reverse charge
applicable
under section 9(4)] or through import of services
Import of goods (Bills of Entry) •Not applicable
E. No requirement of issuing invoice copies in triplicate/duplicate
No need of issuing invoice copies

Where e-invoicing is applicable
in triplicate/duplicate
F. Exemption from e-invoicing
Special Economic Zone units
Insurer/banking company/financial institution including NBFC
GTA supplying services in relation to transportation of goods by road in a goods

carriage
Supplier of passenger transportation service
Person supplying services by way of admission to exhibition of cinematograph films

in multiplex screens
Government Department and local authority

G. Overall work flow of e-invoice
Taxpayers (suppliers) create GST Taxpayers upload

invoices on their own IRP
the
Accounting/Billing/ERP systems generates
e-invoice schema
as per e-invoice schema [Form IRN
to IRP
GST INV-01]
IRP returns IRP digitally signs
Supplier shares the
e-invoice to the e-invoice and
e-invoice with recipient
supplier add QR code
(along with QR code)
H. Generation of e-way bill/populating relevant parts of GST return through

e-invoicing data
IRP sends e-invoice data along with IRN
GST System E-way bill system
Parameters e.g. ‘Transporter

Auto-populate data
Auto-populate data ID’ and ‘Vehicle Number’, etc.
into
into reported in e-invoice schema
GSTR-2A of respective
GSTR-1 of supplier facilitate generation of e-way
receiver bill
I. Cancellation of reported invoice
by reporting IRN
Cancellation of
allowed by seller on IRP within
reported invoice
specified time.
J. Amendment of reported invoice
Possible only on GST portal

Amendment of e-invoice
already uploaded on IRP
Not possible through the IRP

Revised Tax Invoice
Revised Tax Invoices to be issued in respect of taxable

supplies effected during this period
Effective date of Date of issuance of

registration certificate of registration
Consolidated Revised Tax Invoice (CRTI) may be issued in respect of taxable

supplies made to an unregistered recipient during this period
In case of Inter-State supplies, where the value of a supply does not exceed
` 2,50,000, a CRTI may be issued separately in respect of all unregistered
recipients located in a State.
Consolidated Tax Invoice

Tax invoice is not required to
Value of supply < `200 Consolidated Tax

Invoice shall be
be issued
issued for such

Recipient is unregistered
supplies at the close
of each day in respect
Recipient does not require such invoice of all such supplies

Bill of Supply
Registered Person
Supplying exempted goods or services

Bill of
or both Tax Invoice
Supply
Paying tax under composition levy
Receipt Voucher
Advance payment
Supplier Recipient
Receipt Voucher
Where at the time of receipt of advance, rate of tax/ nature of supply is

not determinable
Where at the time of receipt of

advance
(i) rate of tax is not determinable tax shall be paid at the rate of 18%
(ii) nature of supply is not same shall be treated as inter-State

determinable supply
Refund Voucher
Advance payment
Receipt Voucher
Supplier Supply Recipient
Tax Invoice
Refund Voucher

Invoice and payment vouchers to be issued by recipient of

supply liable to pay tax under reverse charge
Payment Voucher
Where Recipient Receives the supplies taxable

is registered on Reverse Charge basis
under section 9(3) under section 9(4)
Supplier is Supplier is Supplier is

registered unregistered unregistered
Recipient will issue a Payment Voucher at the time of making payment to supplier.
Invoice
Where Recipient Receives the supplies taxable

is registered on Reverse Charge basis
under section 9(4)

under section 9(3)
Supplier is Supplier is Supplier is

registered unregistered unregistered
Recipient shall issue Invoice

Credit Notes
Where one or more tax invoices have issued for supply of any goods or services
or both
Taxable value in invoice

where goods or
>Taxable value in respect
where the
goods services or both
of such supply
supplied are OR supplied are
Tax charged in invoice OR returned by found to be
>Tax payable in respect the recipient deficient
of such supply
Registered Supplier may issue one or more Recipient of goods or

of goods or services credit notes for supplies services or both
or both made in a FY
Debit Notes
Where one or more tax invoices have been issued for supply of any goods or
services or both
Taxable value in invoice <Taxable value in respect of such supply
Tax charged in invoice < Tax payable in respect of such supply
Registered Supplier
of goods or services may issue one or more
or both debit notes for supplies
made in a FY

TEST YOUR KNOWLEDGE
1. Sultan Industries Ltd., Delhi, entered into a contract with Prakash

Entrepreneurs, Delhi, for supply of spare parts of a machine on 7 th September.
The spare parts were to be delivered on 30 th September. Sultan Industries Ltd.
removed the finished spare parts from its factory on 29th September for supply
to Prakash Entrepreneurs. Determine the date by which tax invoice must be
issued by Sultan Industries Ltd. under GST law.
2. MBM Caretakers, a registered person, provides the services of repair and
maintenance of electrical appliances. On April 1, it has entered into an annual
maintenance contract with P for its Air Conditioner and Washing Machine. As
per the terms of contract, maintenance services will be provided on the first day
of each quarter of the relevant financial year and payment for the same will
also be due on the date on which service is rendered. During the year, it
provided the services on April 1, July 1, October 1, and January 1 in accordance
with the terms of contract. When should MBM Caretakers issue the invoice for
the services rendered?
3. The aggregate turnover of Sangri Services Ltd., Delhi, exceeded ` 20 lakh on
12th August. He applied for registration on 3 rd September and was granted the
registration certificate on 6th September. You are required to advice Sangri
Services Ltd. 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.
4. Shyam Fabrics has opted for composition levy scheme in the current financial
year. It has approached you for advice whether it is mandatory for it to issue
a tax invoice. You are required to advise him regarding same.
5. Royal Fashions, a registered supplier of designer outfits in Delhi, decides to
exhibit its products in a Fashion Show being organised at Hotel Park Royal,
Delhi on 4 th January. For the occasion, it gets the service by way of makeover
of its models from Aura Beauty Services Ltd., Ashok Vihar, on 4th January, for
which a consideration of ` 5,00,000 (excluding GST) has been charged. Aura
Beauty Services Ltd. issued a duly signed tax invoice on 10 th February showing

the lumpsum amount of ` 5,90,000 inclusive of CGST and SGST @ 9% each for
the services provided. Answer the following questions:
(i) Examine whether the tax invoice has been issued within the time limit
prescribed under law.
(ii) Tax consultant of Royal Fashions objected to the invoice raised suggesting
that the amount of tax charged in respect of the taxable supply should be
shown separately in the invoice raised by Aura Beauty Services Ltd.
However, Aura Beauty Services Ltd. contended that there is no mandatory
requirement of showing tax component separately in the invoice. You are
required to examine the validity of the objection raised by tax consultant
of Royal Fashions.
6. Kidzee Toys Ltd., a wholesaler of toys registered in Chandigarh, is renowned in

the local market for the variety of toys and their reasonable prices. Kidzee Toys
Ltd. makes supply of 100 pieces of baby’s learning laptops and chat learning
phones to Nancy General Store on 25 th September by issuing a tax invoice
amounting to ` 1,00,000.
However, the said toys were returned by Nancy General Store on 30 th September.
Discuss which document Kidzee Toys Ltd. is required to issue in such a case?
7. Rana Sanga Ltd., a registered supplier, has made following taxable supplies to
its customer Babur in the quarter ending 30 th June.
Date Bill Particulars Invoice value

No. (including
GST)[`]
5th April 102 Notebooks [10 in numbers] 1,200
10th May 197 Chart Paper [4 in number] 600
20th May 230 Crayon colors [2 packets] 500
2nd June 254 Poster colors [5 packets] 900
22nd June 304 Pencil box [4 sets] 700

Goods in respect of bill no. 102, 230 and 254 have been returned by Babur. You
are required to advise Rana Sanga Ltd. whether it can issue a consolidated
credit note against all the three invoices?
8. Chidanand Products Pvt. Ltd. is a registered supplier who has opted for
composition levy in the current financial year. He wishes to know whether the
issue of a bill of supply can be dispensed with under any circumstances. You
are required to advise him.
9. A registered person has to mandatorily issue separate invoices for taxable and
exempted goods when supplying both taxable as well as exempted goods to an
unregistered person. Examine the validity of the statement.
10. A non-banking financial company can issue a consolidated tax invoice at the
end of every month for the supply made during that month. Examine the
validity of the statement.
11. Sakthi Enterprises, Kolkata entered into a contract with Suraj Enterprises, Surat for
supply of goods and the delivery shall be made on or before 31st October. The
goods were removed from the factory at Kolkata on 11th October for supply to
Suraj Enterprises. As per the agreement, the goods were to be delivered on or
before 31st October. Suraj Enterprises has received the goods on 14th October.
Determine the time of issue of invoice as per the provisions of CGST Act.
12. Trust and Fun Ltd., an event management company, has provided its services for
an event at Kapoor Film Agencies, Mumbai on 5th June. Payment for the event was
made on 19th June. Determine the time of issue of invoice as per the provisions of
CGST Act.
13. Udai Singh, a registered supplier, has received advance payment with respect
to services to be supplied to Sujamal. His accountant asked him to issue the
receipt voucher with respect to such services to be supplied. However, he is
apprehensive as to what would happen in case a receipt voucher is issued, but
subsequently no services are supplied. You are required to advise Udai Singh
regarding the same.
14. Bhoj Raj, a registered person, has availed GTA services from unregistered
supplier, on which he is liable to pay tax under reverse charge. He wishes to
know whether he is required to issue an invoice. Please advise him discussing
the relevant provisions under CGST Act and rules thereunder.

ANSWERS/HINTS
1. As per the provisions of section 31, invoice shall be issued before or at the
time of removal of goods for supply to the recipient, where the supply
involves movement of goods. Accordingly, in the given case, the tax invoice
must be issued on or before 29 th September.
2. Continuous supply of service means, inter alia, supply of any service which is
provided, or agreed to be provided continuously or on recurrent basis, under
a contract, for a period exceeding 3 months with the periodic payment
obligations.
Therefore, the given situation is a case of continuous supply of service as
repair and maintenance services have been provided by MBM Caretakers on
a quarterly basis, under a contract, for a period of one year with the obligation
for quarterly payment.
In terms of section 31, in case of continuous supply of service, where due date
of payment is ascertainable from the contract (as in the given case), invoice
shall be issued on or before the due date of payment.
Therefore, in the given case, MBM Caretakers should issue quarterly invoices
on or before April 1, July 1, October 1, and January 1.
3. As per section 25 read with CGST Rules, where an applicant submits
application for registration within 30 days from the date he becomes liable
to registration, effective date of registration is the date on which he becomes
liable to registration. Since, Sangri Services Ltd.’s turnover exceeded `20 lakh
on 12th August, it became liable to registration on same day. Further, it
applied for registration within 30 days of so becoming liable to registration,
the effective date of registration is the date on which he becomes liable to
registration, i.e. 12 th August.
As per section 31read with CGST Rules, every registered person who has been
granted registration with effect from a date earlier than the date of issuance
of certificate of registration to him, may issue Revised Tax Invoices. Revised
Tax Invoices shall be issued within 1 month from the date of issuance of

certificate of registration. Revised Tax Invoices shall be issued within 1 month

from the date of issuance of registration in respect of taxable supplies
effected during the period starting from the effective date of registration till
the date of issuance of certificate of registration.
Therefore, in the given case, Sangri Services Ltd. has to issue the Revised Tax
Invoices in respect of taxable supplies effected during the period starting
from the effective date of registration (12 th August) till the date of issuance
of certificate of registration (6th September) within 1 month from the date of
issuance of certificate of registration, i.e. on or before 6th October.
4. A registered person paying tax under the provisions of section 10
[composition levy] shall issue, instead of a tax invoice, a bill of supply
containing such particulars and in such manner as may be prescribed [Section
31(3)(c) read with CGST Rules, 2017].
5. (i) As per section 31 read with the CGST Rules, in case of taxable supply of
services, invoices should be issued before or after the provision of
service, but within a period of 30 days [45 days in case of insurer/
banking company or financial institutions including NBFCs] from the
date of supply of service.
In view of said provisions, in the present case, the tax invoice should
have been issued in the prescribed time limit of 30 days from the date
of supply of service i.e. upto3rd February. However, the invoice has been
issued on 10 th February.
(ii) Section 31 read with the CGST Rules, inter alia, provides that tax invoice
in addition to other mandatory details shall also contain the amount of
tax charged in respect of taxable goods or services (central tax, State
tax, integrated tax, Union territory tax or cess). Further, 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
charged in respect of taxable goods or services which shall form part of
the price at which such supply is made.

The objection raised by the tax consultant of Royal Fashions suggesting

that the amount of tax charged in respect of the taxable supply of
makeover services should be shown separately in the invoice raised by
Aura Beauty Services Ltd., is valid in law.
6. Kidzee Ltd. is required to issue a credit note in such a case.
As per section 34, where one or more tax invoices have been issued for supply
of any goods or services or both and the goods supplied are returned by the
recipient the registered person, who has supplied such goods or services or
both, may issue to the recipient one or more credit notes for supplies made
in a financial year containing such particulars as may be prescribed.
Therefore, Kidzee Ltd.is required to issue a credit note to Nancy General Store
for the good returned.
7. Where one or more tax invoices have been issued for supply of any goods
and/or services and
(a) the taxable value/tax charged in that tax invoice is found to exceed the
taxable value/tax payable in respect of such supply, or
(b) where the goods supplied are returned by the recipient, or
(c) where goods and/or services supplied are found to be deficient,
the registered person, who has supplied such goods and/or services, may
issue to the recipient one or more credit notes for supplies made in a financial
year containing prescribed particulars.
Thus, one (consolidated) or more credit notes can be issued in respect of
multiple invoices issued in a financial year without linking the same to
individual invoices.
Hence, in view of the above-mentioned provisions, Rana Sanga Ltd. can issue
a consolidated credit note for the goods returned in respect of all the three
invoices.
8. Yes. Chidanand Products Pvt. Ltd. may not issue a bill of supply if the value
of the goods or services or both supplied is less than ` 200 subject to the
condition that:
(a) the recipient is not a registered person; and

(b) the recipient does not require such bill of supply,

and he shall issue a consolidated bill of supply for such supplies at the close
of each day in respect of all such supplies.
9. The statement is not valid in law. As per the CGST Rules, 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.
10. The said statement is valid in law. A customer may avail numerous services
from a non-banking financial company in a given tax period. It may issue a
consolidated tax invoice/ statement/ advice, any other document in lieu
thereof, by whatever name called may be issued/ made available, physically/
electronically, for supply of services made during a month at the end of the
month.
11. A registered person supplying taxable goods shall issue a tax invoice, before
or at the time of removal of goods for supply to the recipient, where the
supply involves movement of goods.
Therefore, in the given case, invoice has to be issued on or before,
11th October (the time of removal of goods).
12. A registered person [other than an insurer/banking company/financial
institution, including an NBFC] supplying taxable services shall issue a tax
invoice before or after the provision of service, but within a period of 30 days
from the date of supply of service.
Thus, in the given case, invoice has to be issued within 30 days of 5 th June
(date of supply of service), i.e. on or before, 5 th July.
13. Udai Singh is required to issue a receipt voucher at the time of receipt of
advance payment with respect to services to be supplied to Sujamal. A
receipt voucher is a document evidencing receipt of advance money towards
a supply of goods and/or services or both. A registered person, on receipt of
advance payment with respect to any supply of goods or services or both,
shall issue a receipt voucher or any other document, evidencing receipt of
such payment.

Where, on receipt of advance payment with respect to any supply of goods

or services or both the registered person issues a receipt voucher, but
subsequently no supply is made and no tax invoice is issued in pursuance
thereof, the said registered person may issue to the person who had made
the payment, a refund voucher against such payment. Therefore, in case
subsequently no services are supplied by Udai Singh, and no tax invoice is
issued in pursuance thereof, Udai Singh may issue a refund voucher against
such payment to Sujamal.
14. Bhoj Raj is required to issue an invoice with regard to the GTA services availed
by him. A registered person who is liable to pay tax under sub-section (3) or
sub-section (4) of section 9 (i.e. where the recipient is liable to discharge GST
on reverse charge basis) shall issue an invoice in respect of goods or services
or both received by him from the supplier who is not registered on the date
of receipt of goods or services or both.


•Is it correct that NBFC has to mandatorily issue e-invoice?

1
•Physical copy of tax invoice is to be mandatorily carried even in

cases where e-invoice has been generated by the supplier. Is it
2 valid in law?
•Is it correct that a registered person may not issue a tax Invoice,
if value of services supplied to unregistered recipient is less than
3 ` 200?
•Which document is required to be issued by a registered person

4 paying tax under composition levy?
•What will be the rate of tax if at the time of receipt of advance it

5 is not determinable?
•What will be the nature of supply if at the time of receipt of

6 advance it is not determinable?
•Which document is required to be issued in case of

transportation of goods for reasons other than supply without
7 invoice?
Which document is required to be issued if post issuance of

invoice, quantity received by recipient is less than what has been
8 declared in the tax invoice?


CROSSWORD PUZZLE
1
2 3
4 5 6
8 9
10
11 12
ACROSS
2. Invoice shall be issued before or at the time of -------------of goods for
supply to the recipient, where the supply involves movement of goods.
4. A registered person on receipt of advance payment with respect to any supply
of goods shall issue a ------Voucher.
8. Where tax invoice has been issued for supply of any goods and goods
supplied are found to be deficient, the registered person may issue ------
note.
11. Dynamic QR code is not applicable to an invoice issued to an ---------------
person by Insurer.

DOWNWARDS
1. Invoice shall be prepared in -------------in case of taxable supply of goods.
3. Name and address of the recipient and the address of delivery, along with
the name of State and its code is mandatory for tax invoice, if recipient is
unregistered and value of supply is ` 50,000 or------------.
5. A registered person supplying ---------services is required to issue a bill of
supply.
6. In case of supplier of passenger transportation service, tax invoice shall

include------------ in any form, by whatever name called.
7. Supplier of ----------transportation service are exempt from the mandatory
requirement of e-invoicing.
9. -------------- is the website for uploading/reporting of invoices by the
notified persons. (Acronym)
10. Where the goods being sent on approval for sale are removed before the
supply takes place, the invoice shall be issued before/at the time of supply or
------ months from the date of removal, whichever is earlier.
12. All registered businesses with an aggregate turnover in any preceding
financial year from 2017-18 onwards greater than ` -------------crore will be
required to issue e-invoices.
Scan the code


a
a
CHAPTER a 11
ACCOUNTS AND
RECORDS
LEARNING OUTCOMES
After reading this chapter, you shall be equipped to:

❑ enumerate the accounts and other records required to be
maintained under GST by registered person.
❑ list the additional records required to be maintained by
agent, manufacturer, service provider.
❑ describe the accounts and records to be maintained by
person executing works contract, clearing and forwarding
agent.
❑ Enumerate the accounts and records to be maintained by
owner/operator of a warehouse/godown and transporter.
❑ describe the period for which the books of accounts or
other records are required to be maintained.

CHAPTER OVERVIEW
Persons required to maintain books of accounts.

Accounts & Records
Records to be maintained by manufacturer, agent, service provider,

transporter etc
Manner of maintaining accounts & records
Failure to maintain the accounts
Period of retention of accounts
1. INTRODUCTION
Assessment in GST is mainly focused on self-assessment by the taxpayers
themselves. Every taxpayer is required to self-assess the taxes payable and furnish
a return for each tax period i.e. the period for which return is required to be filed.
The compliance verification is done by the
Department through scrutiny of returns and/or
investigation. Thus, the compliance verification is
to be done through documentary checks rather
than physical controls. This requires certain
obligations to be cast on the taxpayer for keeping
and maintaining accounts and records. Such
accounts and records may be used by the department for compliance verification.
Every registered person shall keep and maintain all records at his principal place
of business. Responsibility has been casted on the owner or operator of
warehouse or godown or any other place used for storage of goods and on every
transporter to maintain specified records even if they are not registered under
GST. They need not enroll for this purpose.

ACCOUNTS AND RECORDS a 11.3 a
Further, Commissioner is empowered to notify a class of

taxable persons to maintain additional accounts or
documents for specified purpose or to maintain accounts
in other prescribed manner. Similarly, the Commissioner
can permit a class of taxable persons to maintain accounts
in such manner as may be prescribed if that class of taxable person is not in a
position to keep and maintain accounts in accordance with the provisions of GST
Laws.
It is not mandatory to maintain the accounts in electronic form. Accounts and
records may be maintained either electronically or manually. Further, there is no
prescribed format for maintaining the accounts.
Chapter VIII – Accounts and Records
[Sections 35 and 36] of the CGST Act and
Chapter VII – Accounts and Records
[Rules 56 to 58] of the CGST Rules, 2017,
enumerates the accounts and records
required to be maintained by a taxpayer
and the period for which such accounts
and records are required to be
preserved. State GST laws also prescribe identical provisions in relation to
accounts and records.
Provisions relating to Accounts and Records under CGST Act have also been
Before proceeding to understand the accounts and records provisions, let us first
go through few relevant definitions.
❑ Agent: means a person, including a factor, broker, commission agent,
arhatia, del credere agent, an auctioneer or any other mercantile agent, by
whatever name called, who carried on the business of supply or receipt of
goods or services or both on behalf of another [Section 2(5)].

❑ Commissioner: means the Commissioner of central tax and includes the

Principal Commissioner of central tax appointed under section 3 and the
Commissioner of integrated tax appointed under the Integrated Goods
and Services Tax Act. [Section 2(24)]
❑ Invoice or Tax invoice: means the tax invoice referred to in section 31.
[Section 2(66)]
❑ Manufacture: means processing of raw material or inputs in any manner
that results in emergence of a new product having a distinct name,
character and use and the term "manufacturer" shall be construed
accordingly. [Section 2(72)]
warehouse, a godown or any other place where a taxable person stores
his goods, supplies or receives goods or services or both; or
a place where a taxable person is engaged in business through an

agent, by whatever name called.
❑ Taxable person: means a person who is registered or liable to be

registered under section 22 or section 24 [Section 2(107)].
❑ Principal place of business: means the place of business specified as

the principal place of business in the certificate of registration [Section
2(89)].
❑ Proper officer: in relation to any function to be performed under this
Act, means the Commissioner or the officer of the central tax who is
assigned that function by the Commissioner in the Board [Section 2(91)].

❑ Registered person: means a person who is registered under section 25,

but does not include a person having a Unique Identity Number [Section
2(94)].
record as defined in clause (t) of section 2 of the Information
Technology Act, 2000 [Section 2(41)].
❑ Voucher: means an instrument where there is an obligation to accept it
as consideration or part consideration for a supply of goods or services
or both and where the goods or services or both to be supplied or the
identities of their potential suppliers are either indicated on the
instrument itself or in related documentation, including the terms and
conditions of use of such instrument [Section 2(118)].
❑ Conveyance: includes a vessel, an aircraft and a vehicle [Section 2(34)].
❑ Works Contract: means a contract for building, construction,

fabrication, completion, erection, installation, fitting out, improvement,
modification, repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein transfer of property
in goods (whether as goods or in some other form) is involved in the
execution of such contract [Section 2(119)]
3. ACCOUNTS AND OTHER RECORDS [SECTION 35]
Section 35 Accounts and Other Records

(1) Every registered person shall keep and maintain, at his principal
place of business, as mentioned in the certificate of registration,
a true and correct account of
(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; and
(f) such other particulars as may be prescribed
Provided that where more than one place of business is
specified in the certificate of registration, the accounts relating
to each place of business shall be kept at such places of
business:
Provided further that the registered person may keep and
maintain such accounts and other particulars in electronic form
in such manner as may be prescribed.
(2) Every owner or operator of warehouse or godown or any other
place used for storage of goods and every transporter,
irrespective of whether he is a registered person or not, shall
maintain records of the consigner, consignee and other relevant
details of the goods in such manner as may be prescribed.
(3) The Commissioner may notify a class of taxable persons to
maintain additional accounts or documents for such purpose as
may be specified therein.
(4) Where the Commissioner considers that any class of taxable
persons is not in a position to keep and maintain accounts in
accordance with the provisions of this section, he may, for
reasons to be recorded in writing, permit such class of taxable
persons to maintain accounts in such manner as may be
prescribed.
(6) Subject to the provisions of clause (h) of sub-section (5) of
section 17, where the registered person fails to account for the
goods or services or both in accordance with the provisions of
sub-section (1), the proper officer shall determine the amount of
tax payable on the goods or services or both that are not
accounted for, as if such goods or services or both had been
supplied by such person and the provisions of section 73 or
section 74, as the case may be, shall, mutatis mutandis, apply
for determination of such tax.

ANALYSIS
The provisions relating to accounts and records required to be maintained under
GST are contained in sections 35 and 36 read along with Chapter VII - Accounts
and Records of CGST Rules, 2017. Relevant provisions of CGST Rules, 2017 have
been incorporated at relevant places.
(I) Who is required to maintain books of accounts and at which place? 1
Every registered person shall keep and maintain,

books of accounts at his principal place of
business (hereinafter referred to as PPoB) and
books of account relating to additional place of
business (hereinafter referred to as APoB) [as
mentioned in the certificate of registration].
Where more than one place of business is specified
in the certificate of registration, the accounts
relating to each place of business shall be kept at
such places of business.
Unless proved otherwise, if any documents, registers, or any books of
account belonging to a registered person are found at any premises other
than those mentioned in the certificate of registration, they shall be
presumed to be maintained by the said registered person.
(II) Which accounts and records are required to be maintained?
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 prescribed2
1
Section 35(1) read with rule 56(7) and 56(10)

The Commissioner may notify a class of taxable persons to maintain

additional accounts or documents for such purpose as may be specified
therein.3
Where the Commissioner considers that any class of taxable persons is not
in a position to keep and maintain accounts in accordance with the
provisions of this section, he may, for reasons to be recorded in writing,
permit such class of taxable persons to maintain accounts in such manner as
may be prescribed.4
The additional records to be maintained by specified persons are as
under:-
(i) Registered person
In addition to the particulars mentioned in section
35(1), the rules also provide that the registered
person5 is required to maintain a true and correct
account of:
❑ the goods/services imported/exported,
❑ supplies attracting payment of tax on reverse charge along with
relevant documents, including invoices, bills of supply, delivery
challans, credit notes, debit notes, receipt vouchers, payment
vouchers and refund vouchers 6.
❑ separate account of advances received, paid and adjustments
made thereto.
❑ particulars of:
✓ names and complete addresses
of suppliers from whom he has
received the goods or services
chargeable to tax under the Act;
2
Section 35(1)
3
Section 35(3)
4
Section 35(4)
5
Rule 56(1), (3), (5) and (6)
6
The detailed provisions relating to all such documents have already been discussed in Chapter 10:
Tax invoice, Credit and Debit Notes of this Module.

✓ names and complete addresses of the persons to whom

he has supplied goods or services, where required under
the provisions of this Chapter.
❑ particulars of the complete address of the premises where
goods are stored by him, including goods stored during transit
along with the particulars of the stock stored therein.
However, if any taxable goods are found to be stored at any

place(s) other than those so declared without the cover of any
valid documents, the proper officer shall determine the amount
of tax payable on such goods as if such goods have been
supplied by the registered person.
A supplier is required to maintain following records relating to
stock of goods and tax details. However, a supplier who has
opted for composition scheme is not required to maintain such
records7.
(a) 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.
(b) 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.
7
Rule 56(2) and (4)

(ii) Agent8
Every agent shall maintain accounts depicting the-
(a) particulars of authorisation received by
him from each principal to receive/supply
goods/services on behalf of such
principal separately;
(b) particulars including description, value
and quantity (wherever applicable) of goods/services received
on behalf of every principal;
(c) particulars including description, value and quantity (wherever

applicable) of goods/services supplied on behalf of every
principal;
(d) details of accounts furnished to every principal; and
(e) tax paid on receipts/ supply of goods/services effected on behalf
of every principal.
(iii) Manufacturer9
Apart from other records, every registered person
manufacturing goods has to maintain monthly
production accounts showing quantitative details
of raw materials/services used in the manufacture
and quantitative details of the goods so manufactured including the
waste and by products thereof.
(iv) Service Provider 10
Every registered person supplying services has to additionally
maintain the accounts showing quantitative details of goods used in
the provision of services, details of input services utilised and the
services supplied.
8
Rule 56(11)
9
Rule 56(12)
10
Rule 56(13)

(v) Person executing works contract 11

Every registered person executing works contract shall keep separate
accounts for works contract showing -
❑ the names and addresses of the
persons on whose behalf the
works contract is executed;
❑ description, value and quantity
(wherever applicable) of
goods/services received for the
execution of works contract;
❑ description, value and quantity (wherever applicable) of
goods/services utilized in the execution of works contract;
❑ the details of payment received in respect of each works
contract; and
❑ the names and addresses of suppliers from whom he received
goods or services.
(vi) Custodian/clearing and forwarding agent 12
Any person having custody over the goods in the capacity of a carrier
or a clearing and forwarding agent for delivery or dispatch thereof to
a recipient on behalf of any registered person shall maintain true and
correct records in respect of such goods handled by him on behalf of
such registered person and shall produce the details thereof as and
when required by the proper officer.
(vii) Owner/operator of a warehouse/ godown and transporter 13
Every owner or operator of warehouse or godown or any other place
used for storage of goods and every transporter, irrespective of
whether he is a registered person or not, shall maintain records of the
consigner, consignee and other relevant details of the goods in such
11
Rule 56(14)
12
Rule 56(17)
13
Section 35(2) read with rule 58

Enrolment, if not already registered in GST 14: If such persons are

not already registered, they shall obtain a unique enrollment number
by applying electronically [In Form GST ENR-01] at the GST Common
Portal.
The person enrolled as aforesaid in any other State or Union territory

shall be deemed to be enrolled in the State or Union territory.
Such person may also amend the details furnished in the prescribed
form.
Such person, once obtained unique enrollment number, shall not be

eligible to use any of the GSTIN.
Transporter15 : Any person engaged in the business of transporting

goods shall maintain records of goods transported, delivered and
goods stored in transit by him along with GSTIN of the registered
consignor and consignee for each of his branches.
Owner/operator of a warehouse/ godown 16:-
Every owner or operator of a warehouse or godown shall maintain

books of accounts with respect to the period for which particular
goods remain in the warehouse, including the particulars relating to
dispatch, movement, receipt, and disposal of such goods.
The owner or the operator of the godown shall store the goods in
such manner that they can be identified item-wise and owner-wise
and shall facilitate any physical verification or inspection by the proper
officer on demand.
14
Rule 58(1), 58(2) & 58(3)
15
Rule 58(4)(a)
16
Rule 58(4)(b) & rule 58(5)

(III) How the accounts and records will be maintained 17?

❑ Records may be maintained manually
✓ Each volume of books of account maintained manually by
the registered person shall be serially numbered.
❑ Records may be maintained in electronic form
✓ Books of account include any electronic
form of data stored on any electronic
device.
✓ The registered person may keep and maintain such accounts and
other particulars in electronic form stored on any electronic
device and record so maintained shall be authenticated by
means of a digital signature.
✓ Proper electronic back-up of records shall be maintained and
preserved in such manner that, in the event of destruction of
such records due to accidents or natural causes, the information
can be restored within a reasonable period of time.
✓ The registered person maintaining electronic records shall
produce, on demand, the relevant records or documents, duly
authenticated by him, in hard copy or in any electronically
readable format.
✓ Where the accounts and records are stored electronically by any
registered person, he shall, on demand, provide the details of
such files, passwords of such files and explanation for codes
used, where necessary, for access and any other information
which is required for such access along with a sample copy in
print form of the information stored in such files.
❑ No entry to be erased/overwritten
✓ Any entry in registers, accounts and documents shall not be
erased, effaced or overwritten.
17
Second proviso to section 35(1) read with rule 56(7), (8), (9), (15), (16) and (18) and rule
57

✓ All incorrect entries, otherwise than those

of clerical nature, shall be scored out
under attestation and there after correct
entry shall be recorded.
✓ Where the registers and other documents are maintained
electronically, a log of every entry edited or deleted shall be
maintained.
❑ Accounts maintained by the registered person together with all the
invoices, bills of supply, credit and debit notes, and delivery challans
relating to stocks, deliveries, inward supply and outward supply shall
be preserved for the period as provided in section 36 [discussed
subsequently in this Chapter] and shall, where such accounts and
documents are maintained manually, be kept at every related place of
business mentioned in the certificate of registration and shall be
accessible at every related place of business where such accounts and
documents are maintained digitally.
❑ Every registered person shall, on demand, produce the books of
accounts which he is required to maintain under any law for the time
being in force.
(IV) What are the consequences of failure to maintain the accounts 18 ?
Where the registered person fails to account for the goods and/or services
in accordance with the provisions of section 35(1), the proper officer shall
determine the amount of tax payable on the goods or services or both that
are not accounted for, as if such goods or services or both had been
supplied by such person and the provisions of section 73/section 7419, as
the case may be, shall, mutatis mutandis, apply for determination of such
tax.
18
Section 35(6)
19
The provisions of section 73 and section 74 will be discussed in detail at Final level.

4. PERIOD OF RETENTION OF ACCOUNTS

[SECTION 36]
Every registered person required to keep and maintain books of account or other
records in accordance with the provisions of section 35(1) 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 20 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.
LET US RECAPITULATE
Who is required to maintain his books of accounts and at which place?
Every registered person
is required to maintain his books

of accounts at
APoB PPoB APoB
20
The provisions pertaining to appeals and revision will be discussed in detail at the Final level.

Accounts and records required to be maintained
A true and correct account of following is

to be maintained:
Production Inward and Output
outward Records
or Stock of ITC tax
supply of prescribed
manufacture goods availed payable
goods or by rules
of goods and paid
services or
both
A true and correct account of:
Reverse charge Goods/

supplies along services
with relevant imported/
Suppliers of
documents exported
goods/services
chargeable to tax
Names and Separate
addresses of account of
advances
Recipient of
goods/services Address of
the premises
where
goods are
stored
Records which are to be maintained only by a supplier other than a

supplier opting for composition levy
Account of stock of goods received and Account of details of tax payable,collected
supplied including opening balance, and paid, ITC claimed, together with
receipt, supply, goods lost/stolen, register of tax invoice, credit-debit notes,
destroyed, written off, gifted, free delivery challan issued/received during any
samples, stock balance. tax period

Records to be maintained by agent
Authorisation received Particulars of

from each principal to goods/services
receive/supply received/supplied on
goods/services on behalf of every
behalf his behalf; principal
Tax paid on
Details of accounts receipts/supply of
furnished to every goods/services effected
principal on behalf of every
principal
Records to be additionally maintained by a manufacturer and service provider
raw
materials/services
Monthly production used in manufacture
accounts showing and
Manufacturer
quantitative details goods so
of manufactured
including waste and
by-products
quantitative details
of goods used in the
provision of services
Service provider Accounts showing
details of input
services utilised and
services supplied

Separate records for works contract to be maintained by a person executing works

contract
Persons on whose behalf the

works contract is executed
Names and
addresses of
Supplier from whom

goods/services are received
Separate
records to be
maintained
by a person
executing Description, value
Details of works and quantity of
payment contract goods/services
received in received
respect of each for/utilised in the
works contract execution of works
contract
Records to be maintained by owner or operator of godown or warehouse and

transporters provider
Records to be maintained by owner or operator of godown or warehouse and

transporters
whether registered or not
records of the consigner, consignee and other relevant details of the goods in such
manner as may be prescribed

goods transported, delivered
goods stored in transit by him

Transporter Records of
GSTIN of the registered consignor and
consignee
for each of his branches
for the period for which particular

Owner or goods remain in the warehouse
operator of Books of
godown or accounts including the particulars relating to
warehouse dispatch, movement, receipt, and
disposal of such goods
How the accounts and records will be maintained?
Records in electronic form be Proper electronic back-up of records be

authenticated by a digital signature maintained and preserved
Records in electronic form

(Books of account include
any electronic form of data
stored on any electronic
device.)
Such records need to be prodcued, on Details of files, their passwords and

demand, in hard copy or in any explanation for codes, and any other info
electronically readable format required for access

No entry to be erased/overwritten
Incorrect entries, other than those of clerical nature, be scored out under
attestation and there after correct entry be recorded.
In case electronic records beng maintained, a log of every entry edited or

deleted shall be maintained.
Books of account maintained manually be serially numbered
Books of accounts, are required to be produced, on demand.
Failure to maintain the accounts
•PO shall determine the tax payable
Failure to
on the unaccounted goods and/or
services, as if the same had been
maintain the
supplied by such person
•Provisions of section 73/74 shall,
accounts mutatis mutandis, apply

determination of such tax
for
Period of retention of accounts
72 months from the due date of furnishing of annual return for the year
pertaining to such accounts and records

Where an appeal/ 1 year after final disposal of such

revision/ any other appeal/revision/proceedings/investigation
proceedings before or
any Appellate/
Revisional Authority 72 months from the due date of furnishing
or Appellate of annual return for the year pertaining to
Tribunal or Court, such accounts and records
or an investigation whichever is later
is going on
TEST YOUR KNOWLEDGE
1. Who is required to maintain books of accounts and at which place in terms of

Section 35 read with relevant rules?
2. Mr. Sky is engaged in the business of trading of mobiles. He is eligible for
composition scheme and has opted for the same. He seeks your advice for
records which are not required to be maintained by him as composition taxable
person.
3. Mr. Harsh Manjula is engaged in the business of works contract services and
request your guidance as to specific records required to be maintained by him
under GST law, if any.
4. Chill Chain Cold is operating cold storage warehouse and seeks your guidance
on the GST accounts and records to be maintained by them in terms of Section
35.
5. Mr. X is of the view that records are to be mandatorily maintained manually
only. You are required to examine the view taken by Mr. X?
ANSWERS/HINTS
1. Every registered person shall keep and maintain, his books of accounts at his
principal place of business and books of account relating to additional place of
business as mentioned in the certificate of registration. Where more than one
place of business is specified in the certificate of registration, the accounts
relating to each place of business shall be kept at such places of business.

2. A supplier who has opted for composition scheme is not required to

maintain records relating to;
(a) 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.
(b) 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.
Thus, Mr. Sky is not required to maintain above mentioned records.
3. Mr. Harsh Manjula, executing works contract shall keep separate accounts
for works contract showing -
• the names and addresses of the persons on whose behalf the works
contract is executed;
• description, value and quantity (wherever applicable) of goods/services
received for the execution of works contract;
• description, value and quantity (wherever applicable) of goods/services
utilized in the execution of works contract;
• the details of payment received in respect of each works contract; and
the names and addresses of suppliers from whom he received goods or
services.
4. Chill Chain Cold shall maintain records of the consigner, consignee and
other relevant details of the goods in the prescribed manner.
Chill Chain Cold shall also maintain books of accounts with respect to the
period for which particular goods remain in the warehouse, including the
particulars relating to dispatch, movement, receipt, and disposal of such
goods.

Chill Chain Cold shall store the goods in such manner that they can be
identified item-wise and owner-wise and shall facilitate any physical
verification or inspection by the proper officer on demand.
5. The view taken by Mr. X is not valid in law. Books of account include any
electronic form of data stored on any electronic device. The registered
person may keep and maintain such accounts and other particulars in
electronic form stored on any electronic device and record so maintained
shall be authenticated by means of a digital signature. The registered
person maintaining electronic records shall produce, on demand, the
relevant records or documents, duly authenticated by him, in hard copy or
in any electronically readable format.
Where the accounts and records are stored electronically by any registered
person, he shall, on demand, provide the details of such files, passwords of
such files and explanation for codes used, where necessary, for access and
any other information which is required for such access along with a sample
copy in print form of the information stored in such files.

•State the correctness of statement -"Place of business includes a

place where a taxable person is engaged in business through an
1 agent, by whatever name called".
•Is it valid that document includes written or printed record of any sort
2 but does not include electronic record?
•Mr. X contends every owner has to maintain records of the consigner

3 & consignee only if he is a registered person ? Is Mr. X correct?
•Mr. Yuvi, a registered person imported raw material to be used in the

manufacture of finished goods. He opines that he is not required to
4 maintain account of goods imported. Is he correct?
•Miss Taavi, a composition dealer is of the view that she is not

mandatorily required to maintain account of goods disposed of by
5 way of gift. Is her view valid in law?

CROSSWORD PUZZLE
4 5
6 7
9 10
11
ACROSS
2. All incorrect entries, otherwise than those of ------nature, shall be scored
out under attestation.
3. Every registered person is required to retain books of account until the
expiry of 72 months from the due date of furnishing of -----return.
7. Every------------ person shall keep and maintain, books of accounts at his

principal place of business and books of account relating to additional place
of business.
8. Every transporter shall maintain records of goods transported, delivered and

goods stored in------------- by him.
9. Stock of -----------is not required to be maintained by a supplier who has
opted for composition scheme.

10. Every manufacturer has to maintain -------production accounts showing

quantitative details of raw materials/services used in the manufacture.
11. Every transporter shall maintain record of GSTIN of the registered consignor
and consignee for --------------of his branches.
DOWNWARDS
1. The operator of a warehouse is required to obtain a unique ------- number
if not already registered.
4. The owner of the godown has to store the goods so that they can be
identified --------wise and owner wise.
5. Books of account include any----------- form of data.
6. Any entry in registers, accounts and documents shall not be ---------
Scan the code



a
a
CHAPTER a
12
E-WAY BILL
The section numbers referred to in the Chapter pertain to CGST Act, unless
otherwise specified. Examples/Illustrations/Questions and Answers, as the case may
be, given in the Chapter are based on the position of GST law existing as on
30.04.2023.
LEARNING OUTCOMES
After reading this chapter, you shall be equipped to:

❑ comprehend the requirement of e-way bill and its benefits.
❑ identify the situations in which e-way bill is required to be
generated.
❑ analyse the information to be furnished in e-way bill.
❑ explain the provisions relating to consolidated e-way bills.
❑ identify the situations where e-way bill is not required to be
generated.

1. INTRODUCTION
Under GST regime, for quick and easy movement of
goods across India without any hindrance, all the check
posts across the country are abolished. However, in
order to monitor the movement of goods for controlling
any tax evasion, e-way bill system has been introduced.
Under this system, a taxpayer - prior to movement of goods via a conveyance -
would inform each transaction’s details to the tax department, obtain an
acknowledgement number for having thus informed, and then use this
acknowledgement number as a valid document accompanying the conveyance
carrying goods.
The idea is that the taxpayer be made to upload the details of each transaction to
a common portal through the internet, and once uploaded, the common portal
would automatically generate a document which can be tracked and verified
easily by any stakeholder.
E-way Bill provisions discussed in this Chapter are contained in section 68 read
with rules 138, 138A, 138B, 138C 138D and 138E [Chapter XVI] of the CGST Rules,
2017. State GST laws also prescribe identical provisions in relation to E-Way Bill.
Provisions relating to E-way Bill under CGST Act have also been made
Before proceeding to understand the e-way bill provisions, let us first go through
few relevant definitions.

E-WAY BILL a 12.3 a
warehouse, a godown or any other place where a taxable person stores
his goods, supplies or receives goods or services or both; or
a place where a taxable person is engaged in business through an

agent, by whatever name called.
❑ Taxable person: means a person who is registered or liable to be

registered under section 22 or section 24 [Section 2(107)].
❑ Principal place of business: means the place of business specified as
the principal place of business in the certificate of registration [Section
2(89)].
❑ Proper officer: in relation to any function to be performed under this
Act, means the Commissioner or the officer of the central tax who is
assigned that function by the Commissioner in the Board [Section 2(91)].
❑ Registered person: means a person who is registered under section 25, but
does not include a person having a Unique Identity Number [Section 2(94)].
record as defined in clause (t) of section 2 of the Information
Technology Act, 2000 [Section 2(41)].
❑ Voucher: means an instrument where there is an obligation to accept it
as consideration or part consideration for a supply of goods or services
or both and where the goods or services or both to be supplied or the
identities of their potential suppliers are either indicated on the
instrument itself or in related documentation, including the terms and
conditions of use of such instrument [Section 2(118)].
❑ Conveyance: includes a vessel, an aircraft and a vehicle [Section 2(34)].

3. E-WAY BILL [SECTION 68 READ WITH

RELEVANT CGST RULES, 2017]
Under GST regime, for quick and easy
movement of goods across India without
any hindrance, all the check posts across
the country are abolished. However, in
order to monitor the movement of goods
for controlling any tax evasion, e-way bill
system has been introduced.
Under this system, a taxpayer - prior to movement of goods via a conveyance -

would inform each transaction’s details to the tax department, obtain an
acknowledgement number for having thus informed, and then use this
acknowledgement number as a valid document accompanying the conveyance
carrying goods.
The idea is that the taxpayer be made to upload the details of each transaction to
a common portal through the internet, and once uploaded, the common portal
would automatically generate a document which can be tracked and verified
easily by any stakeholder.
Statutory requirement
Section 68 stipulates that the Government may require the person in charge of a
conveyance carrying any consignment of goods of value exceeding such amount
as may be specified to carry with him such documents and such devices as may
be prescribed. Rule 138 prescribes e-way bill as the document to be carried for
the consignment of goods in certain prescribed cases.
What is e-way bill?
A waybill is a receipt or a document issued by a carrier giving details and

instructions relating to the shipment of a consignment of goods and the details
include name of consignor, consignee, the point of origin of the consignment, its
destination, and route.
Electronic Way Bill (E-Way Bill) is a compliance mechanism wherein by way of a
digital interface the person causing the movement of goods uploads the relevant
information prior to the commencement of movement of goods and generates e-
way bill on the GST portal. In other words, E-way bill is an electronic document

E-WAY BILL a 12.5 a
generated on the GST portal evidencing movement of goods.

What are the benefits of e-way bill?
Following are the benefits of e-way bill mechanism:

(i) Physical interface to pave way for digital interface resulting in elimination of
state boundary check-posts
(ii) It will facilitate faster movement of goods
(iii) It will improve the turnaround time of trucks and help the logistics industry
by increasing the average distances travelled, reducing the travel time as
well as costs.
E-way Bill is generated electronically in Form GST EWB 01 on the common

portal (www.ewaybillgst.gov.in). E-way Bill can be generated through
various modes like Web (Online), Android App, SMS, using Bulk Upload Tool
and API (Application Program Interface) based site to site integration etc.
The facility of generation, cancellation, updation and assignment of e -way
bill is available to the supplier, recipient and the transporter, as the case
may be. The pre-requisite for generation of e-way bill is that the person
who generates e-way bill should be a registered person on GST portal and
he should register on the e-way bill portal using his GSTIN. If the
transporter is generating the e-way bill, but he is not registered person
under GST law, it is mandatory for him to get enrolled on e -waybill portal
before generation of the e-way bill to get 15-digit Unique Transporter Id
called TRANSIN.

TRANSIN or Transporter id is a unique number generated by EWB system for

unregistered transporter, once he enrolls on the system which is similar to GSTIN
format and is based on State code, PAN and check sum digit. This TRANSIN or
Transporter id can be shared by transporter with his clients, who may enter this
number while generating e-waybills for assigning goods to him for
transportation.
E-way Bill provisions [as contained in rules 138, 138A, 138B, 138C, 138D and
138E– Chapter XVI of the CGST Rules, 2017] are elaborated as under:
(1) When is e-way bill required to be generated? [Rule 138(1)]
Whenever there is a 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,
the registered person who causes such movement of goods shall furnish the
information relating to the said goods as specified in Part A of Form GST
EWB-01 before commencement of such movement.
It is important to note that “information is to be furnished prior to the

commencement of movement of goods” and “is to be issued whether
the movement is in relation to a supply or for reasons other than
supply”.
Who causes movement of goods?
If supplier is registered and undertakes to transport the goods, movement
of goods is caused by the supplier. If recipient arranges transport,
movement is caused by him. If goods are supplied by an unregistered
supplier to a registered recipient, movement shall said to be caused by such
recipient, if the recipient is known at the time of commencement of the
movement of goods.

E-WAY BILL a 12.7 a
Meaning of consignment value of goods

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 the Central tax, State or Union territory tax, integrated
tax 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.
As discussed earlier in this chapter, in case of movement of goods for
reasons other than supply, the movement is occasioned by means of a
delivery challan which has to necessarily contain the value of goods. The
value given in the delivery challan should be adopted in the e-way bill1.
(1) Bhanupratap Shoe Manufacturers, registered in Punjab, sold

shoes to a retail seller in Gujarat, at a value of ` 48,000
(excluding GST leviable @ 18%) and wants to send the
consignment of such shoes to Gujarat. The consignment value will be
` 56,640 [` 48,000 × 118%]. 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.
Special situation(s) where e-way bill needs to be issued even if the
value of the consignment is less than ` 50,0002:
Inter-State transfer of handicraft goods by a person exempted from
obtaining registration
1
As clarified by CBIC FAQs on E-way Bill.
2
E-way bill also needs to be issued even if the value of consignment is less than ` 50,000 in
case of inter-State transfer of goods by principal to job-worker. The provisions relating to job-
work are discussed in detail at the Final Level. This is only for the purpose of information and
not relevant from examination point of view.

Where handicraft goods* are transported from one State or Union territory
to another State or Union territory by a person who has been exempted
from the requirement of obtaining registration [under clauses (i) and (ii) of
section 24], the e-way bill shall be generated by the said person irrespective
of the value of the consignment [Fourth proviso to rule 138].
*Handicraft goods are the goods specified in Notification No. 56/2018 CT

dated 23.10.2018 which exempts the casual taxable persons making inter-
State taxable supplies of such handicraft goods from obtaining registration
upto specified turnover limit [Refer Chapter 9 – Registration].
E-way Bill in case of ‘Bill To Ship To’ Model
In a “Bill To Ship To” model of supply, there are three persons involved in a
transaction, namely:
‘A’ is the person who has ordered ‘B’ to send goods directly to ‘C’.
‘B’ is the person who is sending goods directly to ‘C’ on behalf of ‘A’.
‘C’ is the recipient of goods.
In this complete scenario. two supplies are involved and accordingly two tax
invoices are required to be issued:
Invoice -1: which would be issued by ‘B’ to ‘A’.
Invoice -2: which would be issued by ‘A’ to ‘C’.
It is clarified that as per the CGST Rules, 2017, for the movement of goods
which is taking place from “B” to “C” on behalf of “A”, either A or B can
generate the e-Way Bill, but it may be noted that only one e-Way Bill is
required to be generated [Press Release dated 23.04.2018]

E-WAY BILL a 12.9 a
(2) Information to be furnished in e-way bill:
An e-way bill Form GST EWB-01 contains two parts:

(I) Part A [comprising of details of GSTIN of supplier & recipient, place of
delivery (indicating PIN Code also), document (Tax invoice, Bill of
Supply, Delivery Challan or Bill of Entry) number and date, value of
goods, HSN code, and reasons for transportation, etc.]: to be
furnished by the registered person** who is causing movement of
goods of consignment value exceeding ` 50,000 and
(II) Part B (transport details) [Transporter document number (Goods
Receipt Number or Railway Receipt Number or Airway Bill Number or
Bill of Lading Number) and Vehicle number, in case of transport by
road]: to be furnished by the person who is transporting the goods.
**However, information in Part-A may be furnished:
✓ by the transporter, on an authorization received from such registered
person [First proviso to rule 138(1)] or
✓ by the e-commerce operator or courier agency, where the goods to be

transported are supplied through such an e-commerce operator or a
courier agency, on an authorization received from the consignor
[Second proviso to rule 138(1)].
Once the consignor/consignee enters all the details in Part-A of e-way bill, a
Part-A slip is generated which contains a temporary number. This slip can
be shared with the transporter or used by the supplier himself later to enter
the details in Part-B of e-way bill and generate the e-way bill.
This will be useful, when supplier has prepared invoice relating to his
business transaction, but doesn’t have the transportation details. Thus, he
can enter invoice details in Part A of e-way bill and keep it ready for
entering details of mode of transportation in Part B of e-way bill.
Once the goods are ready for movement from the business premises and
transportation details are known, the user can enter the Part-B details and
generate the e-way bill for movement of goods. E-way Bill can be
generated only after entering the details of Part-B.

(3) Who is mandatorily required to generate e-way bill?

E-way bill is to be generated by the consignor or consignee himself if the
transportation is being done in own/hired conveyance or by railways by air
or by vessel. If the goods are handed over to a transporter for
transportation by road, e-way bill is to be generated by the transporter.
Where neither the consignor nor consignee generates the e-way bill and the
value of goods is more than ` 50,000, it shall be the responsibility of the
transporter to generate it. This has been explained in detail below:
❑ Where the goods are transported by a registered person -
whether as consignor or recipient as the consignee (whether in his
own conveyance or a hired one or a public conveyance, by road), the
said person shall have to generate the e-way bill (by furnishing
information in part B on the common portal) [Rule 138(2)].
❑ Where the e-way bill is not generated by the registered person
and the goods are handed over to the transporter, for
transportation of goods by road, the registered person shall furnish
the information relating to the transporter in Part B 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 goods are transported by railways or by air or by
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, information in part B [viz
transport document number (Goods Receipt Number or Railway
Receipt Number or Airway Bill Number or Bill of Lading Number)] on
the common portal [Rule 138(2A)].
Other important points:
❑ Where the goods are transported by railways: there is no
requirement to carry e-way bill along with the goods, but railways has
to carry invoice or delivery challan or bill of supply, as the case may be
along with goods. Further, e-way bill generated for the movement is
required to be produced at the time of delivery of the goods.

E-WAY BILL a 12.11 a
Railways shall not deliver goods unless the e-way bill required under
rules is produced at the time of delivery [Proviso to rule 138(2A)].
❑ The registered person or, the transporter may, at his option, generate
and carry the e-way bill even if the value of the consignment is less
than ` 50,000 [First proviso to rule 138(3)].
❑ Where the movement is caused by an unregistered person either
in his own conveyance or a hired one or through a transporter, he
or the transporter may, at their option, generate the e-way bill
[Second proviso to rule 138(3)].
❑ Where the goods are supplied by an unregistered supplier to a
recipient who is registered, the movement shall be said to be caused by
such recipient if the recipient is known at the time of commencement of
the movement of goods [Explanation 1 to rule 138(3)].
(4) When is it not mandatory to furnish the details of conveyance in Part-B?
E-way bill is valid for movement of goods by road only when the
information in Part-B is furnished3.
Exceptions:
However, details of conveyance may not be furnished in Part-B of the e-way
bill where the goods are transported for a distance of upto 50 km within
the State/Union territory:
❑ from the place of business of the consignor to the place of business of
the transporter for further transportation4 or
❑ from the place of business of the transporter finally to the place of
business of the consignee 5.
3
Explanation 2 to rule 138(3)
4
Third proviso to rule 138(3)
5
Proviso to rule 138(5)

(5) Unique e-way bill number (EBN)

Upon generation of the e-way bill on the common portal, a unique e-way
bill number (EBN) shall be made available to the supplier, the recipient and
the transporter on the common portal [Rule 138(4)].
(6) Transfer of goods from one conveyance to another
Where the goods are transferred from one conveyance to another, the
consignor or the recipient, who has provided information in Part A, or the
transporter shall, before such transfer and further movement of goods,
update the details of conveyance in Part B of the e-way bill on the common
portal [Rule 138(5)].
Consignment of goods may be required to be transferred from the original
conveyance to due to unforeseen exigencies like break down of the vehicle.
In such case, the transporter transferring goods from one conveyance to
another in the course of transit shall, before such transfer and further
movement of goods, update the details of the conveyance.
In some cases, consignments are transported by the transporter through
transshipment using multiple vehicles (same mode of transportation) for
carrying the same consignment before it is delivered to the recipient at the
place of destination. Hence for each movement from one place to another,
the transporter needs to update the vehicle number in which he is
transporting that consignment in part B of the e-way bill.
The user can update Part-B (Vehicle details) as many times as he wants for
movement of goods to the destination. However, the updating should be
done within the validity period.
There can also be a case where one e-way bill can go through multiple
modes of transportation before reaching destination. As per the mode of
transportation, the EWB can be updated with new mode of transportation
by using the option of ‘Update Vehicle Number’.

(2) Babbal Associates is moving the goods from Cochin to

Chandigarh through road, ship, air and road again. First, Babbal
Associates generates the EWB by entering first stage of movement
(by road) from its place to shipyard and enters the vehicle number. Next, it
will submit the goods to shipyard and update the mode of transportation as
ship and transport document number on the e-way bill system.
After reaching Mumbai, Babbal Associates or concerned transporter updates
movement as road from shipyard to airport with vehicle number. Thereafter,
Babbal Associates or transporter updates using ‘update vehicle number’
option on the portal, the Airway Bill number.
Again, after reaching Delhi, Babbal Associates updates movement through
road with vehicle number. This way, the e-way bill will be updated with
multiple modes of transportation.
Assigning the e-way bill number to another transporter
The consignor/recipient, who has furnished the information in Part A, or the

transporter, may assign the e-way bill number to another
registered/enrolled transporter for updating the information in Part B for
further movement of the consignment [Rule 138(5A)]. However, once the
details of the conveyance have been updated by the transporter in Part B,
the consignor or recipient, as the case may be, who has furnished the
information in Part A shall not be allowed to assign the e-way bill number
to another transporter [Proviso to rule 138(5A)].
(3) A consignor is required to move goods from City X to City Z. He
appoints Transporter A for movement of his goods. Transporter A
moves the goods from City X to City Y. For completing the
movement of goods i.e., from City Y to City Z, Transporter A now hands over
the goods to Transporter B. Thereafter, the goods are moved to the
destination i.e. from City Y to City Z by Transporter B.
In such a scenario, only one e-way bill would be required. Part A can be
filled by the consignor and then the e-way bill will be assigned by the
consignor to Transporter A. Transporter A will fill the vehicle details, etc. in
Part B and will move the goods from City X to City Y.

On reaching City Y, Transporter A will assign the said e-way bill to the
Transporter B. Thereafter, Transporter B will be able to update the details of
Part B. Transporter B will fill the details of his vehicle and move the goods from
City Y to City Z [Press Release No. 144/2018 dated 31.03.2018].
(7) Consolidated E-way bill
After e-way bill has been generated, where multiple consignments are
intended to be transported in one conveyance, the transporter may indicate
the serial number of e-way bills generated in respect of each such
consignment electronically on the common portal and a consolidated e-way
bill in Form GST EWB-02 may be generated by him on the said common
portal prior to the movement of goods [Rule 138(6)].
Consolidated e-way bill is a document containing the multiple e-way bills
for multiple consignments being carried in one conveyance (goods vehicle).
That is, the transporter carrying multiple consignments of various
consignors and consignees in a single vehicle can generate and carry a
single document - consolidated e-way bill instead of carrying separate
document for each consignment in a conveyance.
Consolidated EWB is like a trip sheet and it contains details of different
e-way bills in respect of various consignments being transported in one
vehicle and these e-way bills will have different validity periods.
Hence, Consolidated EWB does not have any independent validity period.
Further, individual consignment specified in the Consolidated EWB should
reach the destination as per the validity period of the individual EWB.
Further, where the consignor/consignee has not generated the e-way bill in
Form GST EWB-01 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 in Form GST EWB-01 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 in Form GST EWB-02 on the
common portal prior to the movement of goods [Rule 138(7)].
The generation of Form GST EWB-02 is optional and not mandatory.
However, where the goods to be transported are supplied through an
e-commerce operator or a courier agency, the information in Part A of Form
GST EWB-01 may be furnished by such e-commerce operator or courier
agency [Proviso to rule 138(7)]. This proviso is not yet effective.

(8) Information submitted for e-way bill can be used for filing GST Returns
The information furnished in Part A of the e-way bill shall be made
available to the registered supplier on the common portal who may utilize
the same for furnishing the details in Form GSTR-1 [Rule 138(8)].
However, when the information has been furnished by an unregistered
supplier/unregistered recipient, he shall be informed electronically, if the
mobile number or the e-mail is available [Proviso to rule 138(8)].
(9) Cancellation of e-way bill
Where an e-way bill has been generated, but goods are either not
transported or are not transported as per the details furnished in the e-way
bill, the e-way bill may be cancelled electronically on the common portal
within 24 hours of generation of the e-way bill [Rule 138(9)].
However, an e-way bill cannot be cancelled if it has been verified in transit
in accordance with the provisions of rule 138B [First proviso to rule 138(9)].
Further, unique EWB number generated is valid for a period of 15 days for
updation of Part B [Second proviso to rule 138(9)].
(10) Validity period of e-way bill/consolidated e-way bill [Rule 138(10)]
The validity of e-way bill depends on the distance to be travelled by the
goods. For a distance of less than 200 km the e-way bill will be valid for a
day from the relevant date. For every 200 km thereafter, the validity will be
additional one day from the relevant date.
Sl. Distance within Validity period from relevant date*

No. country
1. Upto 200 km One day in cases other than Over

Dimensional Cargo or multimodal
shipment in which at least one leg
involves transport by ship
2. For every 200 km or One additional day in cases other than

part thereof Over Dimensional Cargo or multimodal
thereafter shipment in which at least one leg

3. Upto 20 km One day in case of Over Dimensional

Cargo or multimodal shipment in which
at least one leg involves transport by
ship
4. For every 20 km or One additional day in case of Over

part thereof Dimensional Cargo or multimodal
thereafter shipment in which at least one leg
*Relevant date means the date on which the e-way bill has been generated
and the period of validity shall be counted from the time at which the e-way
bill has been generated and each day shall be counted as the period
expiring at midnight of the day immediately following the date of
generation of e-way bill.
This can be explained by following examples –
(i) Suppose an e-way bill is generated at 00:04 hrs. on 14th March. Then
first day would end on 12:00 midnight of 15 -16 March. Second day
will end on 12:00 midnight of 16 -17 March and so on.
(ii) Suppose an e-way bill is generated at 23:58 hrs. on 14th March. Then
first day would end on 12:00 midnight of 15 -16 March. Second day
will end on 12:00 midnight of 16 -17 March and so on6.
The validity of the e-way bill starts when first entry is made in Part-B i.e.
vehicle entry is made first time in case of road transportation or first
transport document number entry in case of rail/air/ship transportation,
whichever is the first entry. It may be noted that validity is not re-calculated
for subsequent entries in Part-B7.
(4) A consignor hands over his goods for transportation on Friday to
transporter. However, the assigned transporter starts the movement
of goods on Monday. The validity period of e-way bill starts only
after the details in Part B are updated by the transporter for the first time.
6
As clarified by FAQs on E-way Bill by CBIC.
7
As clarified by FAQs on E-way Bill web portal.

In the given situation, consignor can fill the details in Part A on Friday and
handover his goods to the transporter. When the transporter is ready to move
the goods, he can fill Part B i.e. the assigned transporter can fill the details in
Part B on Monday and the validity period of the e-way bill will start from
Monday [CBIC Press Release dated 31.03.2018].
(5) A registered person has to transport goods from its warehouse to

its depot located at a distance of 500 km in a normal cargo. In the
given case, if e-way bill is generated, it will be valid for 3 days.
**Over dimensional cargo means a cargo carried as a single indivisible unit

and which exceeds the dimensional limits prescribed in rule 93 of the
Central Motor Vehicle Rules, 1989, made under the Motor Vehicles
Act, 1988.
Extension of validity period
If validity of the e-way bill expires, the goods are not supposed to be
moved. In general, the validity of the e-way bill cannot be extended
However, the validity of the e-way bill can be extended in following cases:
Extension by Commissioner for certain categories of goods:

Commissioner may, on the recommendations of the Council, by notification,
extend the validity period of an e-way bill for certain categories of goods as
may be specified therein.
Extension by transporter in exceptional circumstances: Under
circumstances of an exceptional nature, including trans-shipment, the goods
cannot be transported within the validity period of the e-way bill, the
transporter may extend the validity period after updating the details in
Part B, if required.
Thus, the transporter, who is carrying the consignment as per the e-way bill
system at the time of expiry of validity period, can extend the validity
period. Such transporter can extend the validity of the e-way bill, if the
consignment is not being reached the destination within the validity period
due to exceptional circumstance like natural calamity, law and order issues,
trans-shipment delay, accident of conveyance, etc. He needs to explain this

reason in details while extending the validity period 8. The validity of the
e-way bill may be extended within 8 hours from the time of its expiry.
(11) Acceptance of e-way bill
The details of the e-way bill generated shall be made available to the -
(a) supplier, if registered, where the information in Part A has been
furnished by the recipient/transporter; or
(b) recipient, if registered, where the information in Part A has been
furnished by the supplier/transporter,
on the common portal, and the supplier/recipient, as the case may be, shall
communicate his acceptance or rejection of the consignment covered by
the e-way bill [Rule 138(11)].
In case, the person to whom the information in Part-A is made available,
does not communicate his acceptance or rejection within the specified time,
it shall be deemed that he has accepted the said details. The time-limit
specified for this purpose is:
(i) 72 hours of the details being made available to him on the common
portal
or
(ii) the time of delivery of goods,
whichever is earlier [Rule 138(12)].
(12) E-way bill generated in one State is valid in another State
The e-way bill generated under this rule or under rule 138 of the Goods and
Services Tax Rules of any State or Union territory shall be valid in every
State and Union territory [Rule 138(13)].
8
As clarified by FAQs on E-way Bill web portal.

Points to remember
1. E-way bill is not valid for movement of goods without vehicle number on
it.
2. If there is a mistake, incorrect or wrong entry in the e-way bill, then it
cannot be edited or corrected. Only option is cancellation of e-way bill
within 24 hours of generation and generate a new one with correct
details.
3. E- Way Bill may be updated with vehicle number any number of times.
4. The latest vehicle number should be available on e-way bill and should
match with the vehicle carrying it in case checked by the department.
5. If multiple invoices are issued by the supplier to 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. That is, 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.
(13) Situations where e-way bill is not required to be generated

Notwithstanding anything explained above, no e-way bill is required to be
generated in the following cases:
(a) where the goods being transported are the ones given below:
S. No. Description of Goods
1. Liquefied petroleum gas for supply to household and

non-domestic exempted category (NDEC) customers
2. Kerosene oil sold under PDS
3. Postal baggage transported by Department of Posts
4. Natural or cultured pearls and precious or semi-precious

stones; precious metals and metals clad with precious metal

(Chapter 71)
5. Jewellery, goldsmiths’ and silversmiths’ wares and other

articles (Chapter 71) [excepting imitation Jewellery
(7117)]
6. Currency
7. Used personal and household effects
8. Coral, unworked (0508) and worked coral (9601)]
(b) where the goods are being transported by a non-motorised conveyance

(c) where the goods are being transported from the customs port, airport,
air cargo complex and land customs station to an inland container
depot or a container freight station for clearance by Customs
(d) in respect of movement of goods within such areas as are notified
under of rule 138(14)(d) of the State or Union territory GST Rules in
that particular State or Union territory
(e) where the goods [other than de-oiled cake], being transported, are
exempt from tax9
(f) where the goods being transported are alcoholic liquor for human
consumption, petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas or aviation turbine fuel
(g) where the supply of goods being transported is treated as no supply
under Schedule III of the CGST Act10
(h) where the goods are being transported -
(i) under customs bond from an inland container depot or a

container freight station to a customs port, airport, air cargo
complex and land customs station, or from one customs station
9
Notification No. 2/2017 CT(R) dated 28.06.2017
Provisions of Schedule III have been discussed in detail in Chapter 2 – Supply under GST in
10
Module 1 of the Study Material.

or customs port to another customs station or customs port, or

(ii) under customs supervision or under customs seal
(i) where the goods being transported are transit cargo from or to Nepal
or Bhutan
(j) where the goods being transported are exempt from tax under
Notification No. 7/2017 CT (R) 28.06.2017 [Supply of goods by the CSD
to the Unit Run Canteens or to the authorized customers and supply of
goods by the Unit Run Canteens to the authorized customers] and
Notification No. 26/2017 CT (R) 21.09.2017 [Supply of heavy water and
nuclear fuels by Department of Atomic Energy to Nuclear Power
Corporation of India Ltd. (NPCIL)]
(k) any movement of goods caused by defence formation under Ministry
of defence as a consignor or consignee
(l) where the consignor of goods is the Central Government, Government
of any State or a local authority for transport of goods by rail
(m) where empty cargo containers are being transported
(n) where the goods are being transported upto a distance of 20 km from
the place of the business of the consignor to a weighbridge for
weighment or from the weighbridge back to the place of the business
of the said consignor subject to the condition that the movement of
goods is accompanied by a delivery challan issued in accordance with
rule 55.
(o) where empty cylinders for packing of liquefied petroleum gas are being
moved for reasons other than supply
(14) Documents and devices to be carried by a person-in-charge of a
conveyance [Rule 138A]
The person-in-charge of a conveyance shall carry -
(a) the invoice or bill of supply or delivery challan, as the case may be;
and
(b) a copy of the e-way bill in physical form or the e-way bill number in
electronic form* or mapped to a RFID** embedded on to the

conveyance [except in case of movement of goods by rail or by air or

vessel] in such manner as may be notified by the Commissioner 11.
*Carrying e-way bill number in electronic form implies that person-in-charge
of conveyance can merely quote the e-way bill number to the proper tax
officer. Tax officer will do all the requisite verifications, based on that number.
**RFIDs are Radio Frequency Identification Device used for identification

Invoice Reference Number in lieu of tax invoice
In case, e-invoice is issued12, the Quick Response (QR) code having an
embedded Invoice Reference Number (IRN) in it, may be produced
electronically, for verification by the proper officer in lieu of the physical
copy of such tax invoice.
In such a case, the registered person will not have to upload the information
in Part A of e-way bill for generation of e-way bill and the same shall be
auto-populated by the common portal on the basis of the information
furnished in the prescribed form relating to e-invoice.
The Commissioner may, by notification, require a class of transporters to
obtain a unique RFID and get the said device embedded on to the
conveyance and map the e-way bill to the RFID prior to the movement of
goods.
Documents in lieu of e-way bill
Where circumstances so warrant, the Commissioner may, by notification,

require the person-in-charge of the conveyance to carry the following
documents instead of the e-way bill:
(a) tax invoice or bill of supply or bill of entry 13; or
11
In case of imported goods, the person in charge of a conveyance shall also carry a copy of the
bill of entry filed by the importer of such goods and shall indicate the number and date of the
bill of entry in Part A of e-way bill. The concept of bill of entry filed in respect of imported
goods under customs law will be discussed at Final Level.
12
in the manner prescribed under sub-rule (4) of rule 48
13
Bill of entry needs to be carried in lieu of e-way bill in case of import of goods. The concept of
bill of entry will be discussed at Final Level.

(b) a delivery challan, where the goods are transported for reasons other
than by way of supply.
(15) Verification of documents and conveyances [Rule 138B]
The Commissioner or an officer empowered by him in this behalf may
authorize the proper officer to intercept any conveyance to verify the e-way
bill in physical or electronic form for all inter-State and intra-State
movement of goods.
The Commissioner shall get RFID readers installed at places where the
verification of movement of goods is required to be carried out and
verification of movement of vehicles shall be done through such device
readers where the e-way bill has been mapped with the said device.
The physical verification of conveyances shall be carried out by the proper
officer as authorised by the Commissioner or an officer empowered by him
in this behalf.
However, on receipt of specific information on evasion of tax, physical

verification of a specific conveyance can also be carried out by any other
officer after obtaining necessary approval of the Commissioner or an officer
authorised by him in this behalf.
(16) Inspection and verification of goods [Rule 138C]
A summary report of every inspection of goods in transit shall be recorded
online by the proper officer in Part A of a prescribed form within 24 hours
of inspection and the final report in Part B of said form shall be recorded
within 3 days of such inspection.
However, where the circumstances so warrant, the Commissioner, or any

other officer authorised by him, may, on sufficient cause being shown,
extend the time for recording of the final report in Part B of said form, for a
further period not exceeding 3 days.
The period of 24 hours or, as the case may be, 3 days shall be counted from
the midnight of the date on which the vehicle was intercepted.
Where the physical verification of goods being transported on any

conveyance has been done during transit at one place within the

State/Union territory or in any other State/Union territory, no further

physical verification of the said conveyance shall be carried out again in the
State/Union territory, unless a specific information relating to evasion of tax
is made available subsequently.
(17) Facility for uploading information regarding detention of vehicle
[Rule 138D]
Where a vehicle has been intercepted and detained for a period exceeding
30 minutes, the transporter may upload the said information in specified
form on the common portal.
(18) Blocking of e-waybill generation facility [Rule 138E]
Blocking of e-waybill generation facility means disabling a taxpayer from
generating the e-way bill. Blocking of GSTIN for e-way bill generation
would only be for the defaulting supplier GSTIN and not for the
defaulting Recipient or Transporter GSTIN. Suspended GSTIN cannot
generate e-way bill as supplier. However, the suspended GSTIN can get
the e-way bill generated as recipient or as transporter.
As per rule 138E, no person (including a consignor, consignee, transporter,
an e-commerce operator or a courier agency) shall be allowed to furnish the
information in Part A of Form GST EWB-01 in respect of any outward
movement of goods of a registered person, who -
(i) being a person paying tax under composition scheme 14 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 (Statement of outward supplies) for any 2 months or quarters,
as the case may be.
(iv) Being a person whose registration has been suspended under the
provisions of rule 21A of the CGST Rules.
14
or under Notification No. 2/2019 CT (R) dated 07.03.2019

However, Commissioner (jurisdictional commissioner) may, on receipt of an

application from a registered person in prescribed form, on sufficient cause
being shown and for reasons to be recorded in writing, by order, in
prescribed form allow furnishing of the said information in Part A of
Form GST EWB-01, subject to prescribed conditions and restrictions. An
order rejecting said request shall not be passed without giving the said
person a reasonable opportunity of being heard. The permission granted or
rejected by the Commissioner of State tax or Commissioner of Union
territory tax shall be deemed to be granted or, as the case may be, rejected
by the Commissioner.
(19) It may be noted that the expressions ‘transported by railways’,
‘transportation of goods by railways’, ‘transport of goods by rail’ and
‘movement of goods by rail’ used in the provisions discussed above does
not include cases where leasing of parcel space by railways takes place.
(6) Mr. A, a registered person paying tax under regular scheme in
Delhi, has not filed Form GSTR-1 for last 2 months. Mr. B,
Haryana, (a regular return filer) wants to generate an e-way bill
for goods to be supplied to Mr. A.
Here, there will be no restriction in generating e-way Bill for Mr. B who is
making outward movement of goods, as he is a regular return filer.
Mr. A wants to generate an e-way bill in respect of an outward supply of
goods to Mr. H. E-way bill generation is blocked in this case as it’s an
outward movement of goods of Mr. A who has not filed GSTR-1 for past 2
months.
Tax invoice or bill of supply to accompany transport of goods [Rule 55A]
Person-in-charge of the conveyance shall carry a copy of the tax invoice or the bill
of supply issued in accordance with the provisions of rules 46, 46A or 49 in a case
where such person is not required to carry an e-way bill under these rules.

LET US RECAPITULATE
Meaning of e-way E-way bill is an electronic document generated on the

bill and why is it GST portal evidencing movement of goods.
required? Section 68 mandates that the Government may require
the person in charge of a conveyance carrying any
consignment of goods of value exceeding such
amount as may be specified to carry with him such
documents and such devices as may be prescribed.
Rule 138 prescribes e-way bill as the document to be
carried for the consignment of goods in certain
prescribed cases.
When is required to E-way Bill is mandatory in case of movement of goods

be generated? of consignment value exceeding ` 50,000.
Movement should be:

(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered
person,
Registered person causing movement of goods shall
furnish the information relating to the said goods in
Part A of Form GST EWB-01 before commencement
of such movement.
Exceptions to minimum consignment value of

` 50,000
Inter-State transfer of handicraft goods by a person
exempted from obtaining registration
Who causes If supplier is registered and undertakes to transport

movement of goods? the goods, movement of goods is caused by the
supplier. If recipient arranges transport, movement

would be caused by him.

If goods are supplied by an unregistered supplier to
a registered recipient (known at time of
commencement of movement of goods), movement
shall be caused by such recipient.
Information to be Part A: to be furnished by Part B: to be furnished by

furnished in e-way the registered person** the person who is
bill who is causing transporting the goods.
movement of goods.
**However, information in Part-A may be furnished:

❑ by the transporter if authorised or
❑ by the e-commerce operator/courier agency, if
authorised, where the goods are supplied through
them.
Who can generate E-way bill is to be generated by the registered

the e-way bill? consignor or consignee (if the transportation is being
done in own/hired conveyance or by railways by air or
by vessel) or the transporter (if the goods are handed
over to a transporter for transportation by road).
Where neither the consignor nor consignee
generates the e-way bill and the value of goods is
more than ` 50,000 it shall be the responsibility of
the transporter to generate it.
Other points ❑ Goods transported by railways shall be delivered

only on production of e-way bill.
❑ E-way bill can be optionally generated even if
consignment value is less than ` 50,000.
Details of In case of intra-State movement of goods upto 50 km

conveyance may not distance:

be furnished in ❖ from place of business (PoB) of consignor to PoB of

Part-B transporter for further transportation or
❖ from PoB of transporter finally to PoB of the
consignee.
Transfer of goods to In such cases, the transporter or generator of the

another conveyance e-way bill shall update the new vehicle number in Part
B of the EWB before such transfer and further
movement of goods.
Consolidated E-way After e-way bill has been generated, where

Bill in case of road multiple consignments are intended to be
transport transported in one conveyance, the transporter
may indicate the serial number of e-way bills
generated in respect of each such consignment
electronically on the common portal and a
consolidated e-way bill in Form GST EWB-02 may
be generated by him on the said common portal
prior to the movement of goods.
Where the consignor/consignee has not generated
the e-way bill in Form GST EWB-01 and the
aggregate of the consignment value of goods
carried in the conveyance is more than ` 50,000,
the transporter shall generate individual Form GST
EWB-01 on the basis of invoice or bill of supply or
delivery challan and may also generate a
consolidated e-way bill in Form GST EWB-02
prior to the movement of goods.
Cancellation of e- E-way bill can be cancelled if either goods are not

way bill transported or are not transported as per the details
furnished in the e-way bill. The e-way bill can be
cancelled within 24 hours from the time of generation.

Validity period of e- Sl. Distance within Validity period from

way bill/ No. country relevant date
consolidated e-way 1. Upto 200 km One day in cases other than
bill Over Dimensional Cargo or
multimodal shipment in
which at least one leg
2. For every 200 One additional day in cases

km or part other than Over
thereof Dimensional Cargo or
thereafter multimodal shipment in
3. Upto 20 km One day in case of Over

Dimensional Cargo or
multimodal shipment in
4. For every 20 km One additional day in case

or part thereof of Over Dimensional Cargo
thereafter or multimodal shipment in
Acceptance/rejection The details of e-way bill generated shall be made

of e-way bill available to the supplier (where information in Part A is
furnished by recipient/transporter) or recipient (where
information in Part A is furnished by
supplier/transporter), if registered, on the common
portal, who shall communicate his acceptance or
rejection of the consignment covered by the e-way bill.
In case, the supplier/ recipient does not communicate
his acceptance or rejection within 72 hours of the
details being made available to him on the common

portal, or time of delivery of goods whichever is earlier,

it shall be deemed that he has accepted the said details.
Is e-way bill required E-way bill is not required to be generated in certain

in all cases? specified cases. [Listed earlier in this chapter]
Documents/ devices ❑ invoice or bill of supply or delivery challan

to be carried by a ❑ copy of the e-way bill in physical form or the e-way
person-in-charge of bill number in electronic form or mapped to a RFID
a conveyance embedded on to the conveyance except in case of
movement of goods by rail or by air or vessel
Verification of Commissioner or an officer empowered by him in this

documents and behalf may authorise the proper officer to intercept
conveyances any conveyance to verify the e-way bill or the e-way
bill number in physical form or electronic form for all
inter-State and intra-State movement of goods.
Physical verification of a specific conveyance can also
be carried out by any officer, on receipt of specific
information on evasion of tax, after obtaining
necessary approval of the Commissioner or an officer
authorised by him in this behalf.
Inspection and A summary report of every inspection of goods in

verification of goods transit shall be recorded online on the common portal
by the proper officer within 24 hours of inspection and
the final report shall be recorded within 3 days of such
inspection.
Once physical verification of goods being transported
on any conveyance has been done during transit at
one place within the State or in any other State, no
further physical verification of the said conveyance
shall be carried out again in the State, unless a specific
information relating to evasion of tax is made available
subsequently. Where a vehicle has been intercepted
and detained for a period exceeding 30 minutes, the

transporter may upload the said information in on the

common portal.
Restriction on No person (including a consignor, consignee,

furnishing of transporter, an e-commerce operator or a courier
information in Part agency) shall be allowed to furnish the information in
A of Form GST EWB- Part A of Form GST EWB-01, in respect of any outward
01 movement of goods of a registered person, who -
(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. What are the documents and devices to be carried by person-in-charge of

conveyance under rule 138A of CGST Rules, 2017?
2. Explain the meaning of consignment value of goods.
3. Mr. X, a registered person has caused movement of goods of consignment
value exceeding ` 50,000 in relation to a supply and thus, generated e-way
bill. However, after generation of e-way bill, he found a mistake in the e-way
bill and wants to edit it. You are required to advise Mr. X whether he can do
so with the help of relevant provisions?
4. Talli Lal, a registered person, has transported alcoholic liquor for human
consumption of consignment value of ` 1,50,000 from Delhi to Haryana. He
has not generated e-way bill for the same. You are required to examine the
correctness of action taken by Talli Lal.
5. Dhananjay Associates registered in Gujarat deals in industrial grade iron and
steel products. The proprietor of Dhananjay Associates sold TMT Iron bars
(GST applicable @18%) to a retailer in Maharashtra at a value of ` 40,000
(excluding GST). As per the agreement of sale, goods are to be delivered at
the premises of retailer. The transportation cost of ` 7,000 has been charged
separately to deliver the same to the retailer in Maharashtra. In the above
scenario, determine whether an e-way bill is required to be issued under GST?
ANSWERS/HINTS
1. The person-in-charge of a conveyance has to carry -

(a) the invoice or bill of supply or delivery challan, as the case may be;
and
(b) a copy of the e-way bill in physical form or the e-way bill number in
electronic form or mapped to a Radio Frequency Identification Device
embedded on to the conveyance [except in case of movement of
goods by rail or by air or vessel] in such manner as may be notified by
the Commissioner

2. 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 the Central tax, State or Union territory tax, integrated
tax 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.
3. If there is a mistake, incorrect or wrong entry in the e-way bill, then it
cannot be edited or corrected. Only option is cancellation of e-way bill
within 24 hours of generation and generate a new one with correct details.
Thus, in view of the above-mentioned provisions, Mr. X cannot edit the e-
way bill. However, he can cancel the e-way bill within 24 hours of
generation and generate a new one with correct details.
4. E-way bill is not required to be generated where the goods being
transported are alcoholic liquor for human consumption.
Thus, the action of Talli Limited of not generating the e-way bill is correct in
law.
5. Consignment value of goods is the value determined in accordance with the
provisions of section 15, and also includes the central tax, state or union
territory tax, integrated tax and cess charged, if any, in the document.
Further, since arranging freight is the liability of supplier, it is a case of
composite supply and thus, freight charges are to be added in the value of
principal supply.
Accordingly, the value of supply as per section 15 in the given case would
include the transportation cost in the invoice value i.e. 47,000 (` 40,000 +
` 7,000).
Consignment value = ` 47,000 x 118% = ` 55,460.
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 under GST in the given case.


•Whether E-way bill generated in one State is valid or not in another State?
1
•E-way bill can be edited, any number of times in case of mistake. Examine
2 the correctness of statement?
•Mr. X contends that e-way bill is mandatorily required to be generated in

case of transportation of used personal and household effects? Is Mr. X
3 correct?
•What is the limit of consignment value for generation of e-way bill in case
4 of movement of goods for reasons other than supply?
•Who is required to furnish information in Part-B of E-way bill?

5

CROSSWORD PUZZLE
2 3
4 5
6 7
ACROSS
2. The unique number generated by EWB system for unregistered transporter

is __________. (Acronym)
6. Details of conveyance may not be furnished in Part-B of the e-way bill
where the goods are transported for a distance of__________50 km within the
State.

7. E way bill will be issued in case of movement of goods of consignment

value of ` 60,000 due to _______supply from an unregistered person.
8. ____________e-way bill is generated when multiple consignments intended to

be transported in one conveyance.
DOWNWARDS
1. E-way bill may be cancelled electronically on the common portal

_____________24 hours of generation of the e-way bill.
3. _____________GSTIN cannot generate e-way bill as supplier.
4. ____________includes written or printed record of any sort and electronic

record.
5. Consignment value of goods _________the Central tax and State tax.
Scan the code


CHAPTER a
13
PAYMENT OF TAX
The section numbers referred to in the Chapter pertain to CGST Act, unless
otherwise specified. Examples/Illustrations/Questions and Answers, as the
case may be, given in the Chapter are based on the position of GST law existing
as on 30.04.2023.
LEARNING OUTCOMES
❑ describe three kinds of ledgers/register available to a
registered person-electronic cash ledger, electronic credit
ledger and electronic liability register.
❑ understand the methodology of cross utilization of credit.
❑ comprehend and apply the chronological order in which the
liability of a taxable person has to be discharged.
❑ identify and analyse the circumstances in which penal interest
is levied.
❑ procedure for transfer of input tax credit between Central and
State Government

CHAPTER OVERVIEW
Relevant Definitions
Electronic Cash Ledger

Payment of Tax
Electronic Credit Ledger
Electronic Liability Register
Interest on delayed payment of tax
Transfer of input tax credit
1. INTRODUCTION
In the GST regime, for any intra-state supply, taxes to be paid are the Central GST
(CGST), going into the account of the Central
Government and the State GST (SGST)/(UTGST), going
into the account of the concerned State Government.
For any inter-state supply, tax to be paid is Integrated
GST (IGST) having components of both CGST and SGST. In addition, certain
categories of registered persons will be required to pay to the Government account

13.3
PAYMENT OF TAX a 13.3 a
- tax deducted at source (TDS) and tax collected at source (TCS)1. In addition,
wherever applicable, interest, penalty, fees and any other payment will also be
required to be made.
The introduction of E-ledgers is a unique feature under the GST regime. Electronic
Ledgers or E-Ledgers are of two types. One set is prepared and updated by the
Taxpayer – Electronic Cash Ledger and Electronic Credit Ledger. Second set is
prepared and updated on the basis of returns furnished by the Registered person
or Tax authority i.e. Electronic Liability register.
Once a taxpayer is registered on common portal (GSTN), two e-ledgers (Cash &
Input Tax Credit ledger) and an electronic tax liability register will be automatically
opened and displayed on his dashboard at all times.
Chapter X of the CGST Act, 2017, prescribes the provisions relating to payment of
tax containing sections 49 to 53A. Bird’s eye view of coverage under these sections
is as under-
▪ Section 49 discusses the three ledgers namely the electronic cash ledger,
electronic credit ledger and electronic liability register,
▪ Section 49A & 49B discusses about the utilisation of input tax credit and its
order of utilisation.
▪ Section 50 discusses about the interest on delayed payment of tax.
▪ Section 51 lays down the circumstances in which tax deduction at source
(TDS) becomes mandatory.
▪ Section 52 deals with the circumstances when tax is to be collected at source
(TCS) by the Electronic Commerce Operator.
▪ Further, the manner of transfer of ITC is laid down in section 53 and
▪ Transfer of certain amounts is discussed in section 53A.
1
It may be noted that sections 51 & 52 dealing with provisions relating to TDS & TCS have
been discussed in detail in chapter-14 in this Module of the Study Material.

Chapter IX of CGST Rules, 2017 containing Rules 85 to 88C deals with provisions
relating to payment of tax. Amongst these rules, rule 86A, 86B and 88B have
already been discussed in detail in Chapter-8: Input tax credit. Rule 88C will be
discussed in Chapter-15: Returns.
Provisions of payment of tax under CGST Act, 2017 have also been made
applicable to IGST Act, 2017 vide section 20 of the IGST Act, 2017.
Before proceeding to understand the provisions of section 49, 49A, 49B, 50, 53, 53A
& the relevant rules, let us first go through few relevant definitions.
❑ Agent means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or
services or both on behalf of another [Section 2(5)].
❑ Authorised bank shall mean a bank or a branch of a bank authorised by the
Government to collect the tax or any other amount payable under this Act
[Section 2(14)].
❑ Central Tax means the central goods and services tax levied under Section 9
[Section 2(21)].
❑ Common portal means the common goods and services tax electronic portal
referred to in section 146 [Section 2(26)].
❑ Council means the Goods and Services Tax Council established under article
279A of the Constitution [Section 2(36)].
❑ Cess shall have same meaning as assigned to it in the Goods and Service Tax
(Compensation to States) Act [Section 2(22)].
❑ Electronic Cash ledger means the electronic cash ledger referred to in sub-
section (1) of Section 49 [Section 2(43)].
❑ Electronic Credit ledger means the electronic credit ledger referred to in
sub-section (2) of section 49 [Section 2(46)].

13.5
❑ Integrated tax means the integrated goods and services tax levied under the
Integrated Goods and Services Tax Act [Section 2(58)].
❑ Input tax in relation to a registered person, means the central tax, State tax,
integrated tax or Union territory tax charged on any supply of goods or
services or both made to him and includes—
✓ the integrated goods and services tax charged on import of goods;
✓ the tax payable under the provisions of sub-sections (3) and (4) of
section 9;
✓ the tax payable under the provisions of sub-section (3) and (4) of
section 5 of the IGST Act;
✓ the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 9 of the respective State Goods and Services Tax Act; or
✓ the tax payable under the provisions of sub-section (3) and sub-section
(4) of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy [Section 2(62)].
❑ Input Tax Credit means the credit of input tax [Section 2(63)].
❑ Notification means a notification published in the Official Gazette and the
expression “notify” and “notified” shall be construed accordingly
[Section 2(80)].
❑ Output tax in relation to a taxable person, means the tax chargeable under
this Act on taxable supply of goods or services or both made by him or by his
agent but excludes tax payable by him on reverse charge basis [Section 2(82)].
❑ Person includes:-
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a limited liability Partnership;

(f) an association of persons or a body of individuals, whether incorporated

or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act, or
Provincial Act or a Government Company as defined in clause (45) of
section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside
India;
(i) a co-operative society registered under any law relating to co-operative
societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act,1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above
[Section 2(84)].
(a) where a consideration is payable for the supply of goods or services or
(c) where no consideration is payable for the supply of a service, the person
to whom the service is rendered,
an agent acting as such on behalf of the recipient in relation to the
goods or services or both supplied [Section 2(93)].
❑ State Tax means the tax levied under any State Goods and Services Tax Act
[Section 2(104)].

13.7

supplied [Section 2(105)].
❑ Tax Period means the period for which the return is required to be furnished
[Section 2(106]
❑ Taxable person means a person who is registered or liable to be registered
under Section 22 or section 24 [Section 2(107)].
❑ Valid return means a return furnished under sub-section (1) of section 39 on
which self-assessed tax has been paid in full [Section 2(117)].
After going through the various definitions relevant to this Chapter, let us discuss
the provisions of Chapter X of the CGST Act, 2017.
3. PAYMENT OF TAX, INTEREST, PENALTY AND

OTHER AMOUNTS [SECTION 49]
Section 49 Payment of tax, interest, penalty and other amounts

Sub- Clause Particulars
Section
(1) Every deposit made towards tax, interest, penalty, fee or any
other amount by a person by internet banking or by using credit
or debit cards or National Electronic Fund Transfer or Real Time
Gross Settlement or by such other mode and subject to such
conditions and restrictions as may be prescribed, shall be
credited to the electronic cash ledger of such person to be
maintained in such manner as may be prescribed.
(2) The input tax credit as self-assessed in the return of a registered
person shall be credited to his electronic credit ledger, in
accordance with section 41, to be maintained in such manner as
may be prescribed.

(3) The amount available in the electronic cash ledger may be used
for making any payment towards tax, interest, penalty, fees or
any other amount payable under the provisions of this Act or the
rules made there under in such manner and subject to such
conditions and within such time as may be prescribed.
(4) The amount available in the electronic credit ledger may be used
for making any payment towards output tax under this Act or
under the Integrated Goods and Services Tax Act in such manner
and subject to such conditions and restrictions within such time
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(a) integrated tax shall first be utilised towards payment of
integrated tax and the amount remaining, if any, may be
utilised towards the payment of central tax and State tax,
or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of
central tax and the amount remaining, if any, may be
utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State
tax and the amount remaining, if any, may be utilised
towards payment of integrated tax;
Provided that the input tax credit on account of State tax
shall be utilised towards payment of integrated tax only
where the balance of the input tax credit on account of
central tax is not available for payment of integrated tax;
(d) the Union territory tax shall first be utilised towards
payment of Union territory tax and the amount remaining,
if any, may be utilised towards payment of integrated tax;
Provided that the input tax credit on account of Union
territory tax shall be utilised towards payment of integrated
tax only where the balance of the input tax credit on
account of central tax is not available for payment of
integrated tax

13.9
(e) the central tax shall not be utilised towards payment of

State tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised
towards payment of central tax.
(6) The balance in the electronic cash ledger or electronic credit
ledger after payment of tax, interest, penalty, fee or any other
amount payable under this Act or the rules made thereunder
may be refunded in accordance with the provisions of section 54.
(7) All liabilities of a taxable person under this Act shall be recorded
and maintained in an electronic liability register in such manner
(8) 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;
(9) Every person who has paid the tax on goods or services or both
under this Act shall, unless the contrary is proved by him, be
deemed to have passed on the full incidence of such tax to the
recipient of such goods or services or both.
(10) 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 this
Act, to the electronic cash ledger for,––
(a) integrated tax, central tax, State tax, Union territory
tax or cess; or

(b) integrated tax or central tax of a distinct person as

specified in sub-section (4) or, as the case may be, sub-
section (5) of section 25, in such form and manner and
subject to such conditions and restrictions as may be
prescribed and such transfer shall be deemed to be a
refund from the electronic cash ledger under this Act:
Provided that, no such transfer under clause (b) shall be
allowed if the said registered person has any unpaid
liability in his electronic liability register.
(11) Where any amount has been transferred to the electronic cash
ledger under this Act, the same shall be deemed to be deposited
in the said ledger as provided in sub-section (1).
(12) Notwithstanding anything contained in this Act, the
Government may, on the recommendations of the Council,
subject to such conditions and restrictions, specify such
maximum proportion of output tax liability under this Act or
under the IGST Act, 2017 which may be discharged through
the electronic credit ledger by a registered person or a class
of registered persons, as may be prescribed.
Explanation.––For the purposes of this section,—
(a) the date of credit to the account of the Government in the
authorised bank shall be deemed to be the date of deposit
in the electronic cash ledger;
(b) the expression,—
(i) “tax dues” means the tax payable under this Act and
does not include interest, fee and penalty; and
(ii) “other dues” means interest, penalty, fee or any other
amount payable under this Act or the rules made
there under.
Section 49A Utilisation of input tax credit subject to certain
conditions
Notwithstanding anything contained in section 49, the input tax
credit on account of central tax, State tax or Union territory tax

13.11
shall be utilised towards payment of integrated tax, central tax,

State tax or Union territory tax, as the case may be, only after
the input tax credit available on account of integrated tax has
first been utilised fully towards such payment.
Section 49B Order of utilisation of input tax credit
Notwithstanding anything contained in this Chapter and subject
to the provisions of clause (e) and clause (f) of sub section (5)
of section 49, the Government may, on the recommendations of
the Council, prescribe the order and manner of utilisation of the
input tax credit on account of integrated tax, central tax, State
tax or Union territory tax, as the case may be, towards payment
of any such tax.
Section 53 Transfer of input tax credit
On utilisation of input tax credit availed under this Act for payment
of tax dues under the Integrated Goods and Services Tax Act in
accordance with the provisions of sub-section (5) of section 49, as
reflected in the valid return furnished under sub-section (1) of
section 39, the amount collected as central tax shall stand reduced
by an amount equal to such credit so utilised and the Central
Government shall transfer an amount equal to the amount so
reduced from the central tax account to the integrated tax account
in such manner and within such time as may be prescribed.
Section 53A Transfer of certain amounts
Where any amount has been transferred from the electronic cash
ledger under this Act to the electronic cash ledger under the State
Goods and Services Tax Act or the Union territory Goods and
Services Tax Act, the Government shall, transfer to the State tax
account or the Union territory tax account, an amount equal to
the amount transferred from the electronic cash ledger, in such
manner and within such time as may be prescribed.

ANALYSIS
A. ELECTRONIC CASH LEDGER [SECTION 49(1),(3),(6),(10)&(11)

READ WITH RULE 87 OF CGST RULES]
The Electronic Cash Ledger contains a summary of all the deposits/payments made
by a tax payer. Electronic Cash Ledger is maintained on the GST Common Portal.
Any deposit made towards payment of tax, interest, penalty, late fee or any other
amount will be credited to the electronic cash ledger. Any debit to the electronic
cash ledger represents payment therefrom towards tax, interest, penalty, late fee
or any other amount.
The deposit in the electronic cash ledger shall be made through any of the
following modes, namely:-
(i) Internet Banking through authorised banks;
(ii) Unified Payment Interface (UPI) from any bank;
(iii) Immediate Payment Services (IMPS) from any bank;
(iv) Credit card or Debit card through the authorised bank;
(v) National Electronic Fund Transfer (NEFT) or Real Time Gross Settlement
(RTGS) from any bank; or
(vi) Over the Counter payment through authorized banks for deposits up to ten
thousand rupees per challan per tax period, by cash, cheque or demand draft:
It may be noted that the restriction for deposit up to ten thousand rupees per
challan in case of an Over the Counter payment will not apply to deposit to be
made by –
(a) Government Departments or any other deposit to be made by persons
as may be notified by the Commissioner in this behalf;
(b) Proper officer or any other officer authorised to recover outstanding
dues from any person, whether registered or not, including recovery
made through attachment or sale of movable or immovable properties;
(c) Proper officer or any other officer authorised for the amounts collected
by way of cash, cheque or demand draft during any investigation or
enforcement activity or any ad hoc deposit.

13.13
Non-applicability of Over the Counter payment limit on deposits to be made

by
Proper officer or any other officer authorized

Government
Departments
to recover outstanding to collect the amount by

dues including way of
attachment cash/cheque/demand
proceedings or sale of draft during any Persons notified by
moveable/ immoveable investigation/enforceme Commissioner
properties nt activity /any ad hoc
deposit
Payment by Challan
❑ What is CPIN, CIN, BRN and E-FPB?
CPIN stands for Common portal Identification Number. It is created for every
Challan successfully generated by the taxpayer. It is a 14-digit unique number
to identify the challan. CPIN remains valid for a period of 15 days.
CIN or Challan Identification Number is generated by the banks, once
payment in lieu of a generated Challan is successful. It is a 17-digit number
that is 14-digit CPIN plus 3-digit Bank Code.
CIN is generated by the authorized banks/Reserve Bank of India (RBI) when

payment is actually received by such authorized banks or RBI and credited in
the relevant Government account held with them. It is an indication that the
payment has been realized and credited to the appropriate Government
account. CIN is communicated by the authorized bank to taxpayer as well as
to GSTN.
BRN or Bank Reference Number is the transaction number given by the bank
for a payment against a Challan.
E-FPB stands for Electronic Focal Point Branch. These are branches of
authorized banks which are authorized to collect payment of GST. Each

authorized bank will nominate only one branch as its E-FPB for PAN India
transaction.
The E-FPB will have to open accounts under each major head for all
governments. Any amount received by such E-FPB towards GST will be
credited to the appropriate account held by such E-FPB. For NEFT/RTGS/IMPS
Transactions, RBI will act as E-FPB.
❑ Are manual Challans applicable as allowed under the erstwhile indirect
tax regimes?
Manual or physical Challans are not allowed under the GST regime. It is
mandatory to generate Challans online on the GST Common Portal.
❑ How many types of Challans are prescribed for various taxes and
payments to be paid under the GST regime?
There is single Challan prescribed for all taxes, fees, penalty, interest, and
other payments to be made under the GST regime.
Other Aspects relating to Challan

❑ Any person, or a person on his behalf, can generate a challan in prescribed
form [Form PMT 06] on the common portal and enter the details of the
amount to be deposited by him towards tax, interest, penalty, fees or any
other amount.
❑ E-challan validity is for 15 days. The commission for Validity of
making payment through e-challan has to be borne challan-15 days
by the person making the payment.
❑ The mandate form obtained after making NEFT/RTGS/IMPS payment has to
be submitted in the Bank. The validity of the mandate form is 15 days.
❑ On successful credit of amount in the concerned (Central/State) Government
Account maintained in the authorized bank, a Challan Identification Number
(CIN) will be generated by the collecting bank which will be indicated in the
challan.
❑ On receipt of the CIN from the collecting bank, the said amount is credited
into the electronic cash ledger of the person on whose behalf the deposit is
made and the common portal will generate a receipt to this effect.

13.15
If CIN is not generated even after making payment and submission of

mandate form or when after generation, it has not been reflected in the
common portal, the person making the deposit or the person on whose
behalf the deposit has been made, can make a representation in prescribed
form i.e. FORM GST PMT-07 through the common portal or e-gateway
through which the payment has been made.
❑ Where the bank fails to communicate details of Challan Identification
Number to the common portal, the Electronic Cash Ledger may be
updated on the basis of e-Scroll of the RBI in cases where the details of
the said e-Scroll are in conformity with the details in challan generated
in Form GST PMT-06 on the common portal.
❑ Date of credit into the treasury of the State Government/Central Government
is deemed to be the date of debit in the electronic cash ledger and not the
actual date of deposit of amount in the electronic cash ledger of the taxable
person.
❑ Any amount deducted under section 51 [TDS] or collected under section 52
[TCS] and claimed by the registered taxable person from whom the said
amount was deducted or collected shall be credited to his electronic cash
ledger.
❑ In case any discrepancy is noticed in electronic cash ledger, the registered
person shall communicate the same to the officer exercising jurisdiction in
the matter, through the common portal in prescribed form
❑ An unregistered person has to make payment through electronic cash ledger on
the basis of temporary identification number generated through common
portal.
Manner of utilization of amount reflected in Electronic Cash Ledger
Sub-section 3 of section 49 of the CGST Act lays down the following:
The amount reflected in the electronic cash ledger may be used for making any
payment towards tax, interest, penalty, fee, or any other amount in the prescribed
manner.

In the e-ledger, information is kept minor head-wise for each major head. The
ledger is displayed major head-wise i.e., IGST, CGST, SGST/UTGST, and CESS. Each
major head is divided into five minor heads: Tax, Interest, Penalty, Fee, and Others.
A registered taxpayer can make cash deposits in the recognized Banks through the
prescribed modes to the Electronic Cash Ledger using any of the Online or Offline
modes permitted by the GST Portal. The Cash deposits can be used for making
payment(s) like tax liability, interest, penalties, fee, and others.
Major Heads Minor Heads

IGST Tax
CGST Interest
Penalty
SGST/UTGST
Fee
CESS
Others
Transfer of amount reflected in Electronic Cash Ledger

Sub-sections (10) and (11) of section 49 of the CGST Act, 2017 facilitates a registered
person to transfer an amount from one (major/minor) head to another
(major/minor) head in the electronic cash ledger or to transfer any amount
available in the electronic cash ledger, to the electronic cash ledger for
IGST/CGST of a distinct person, provided there is no unpaid liability in his
electronic liability register.
The amount available in the electronic cash ledger can be utilised for payment of
any liability for the major and minor heads. For instance, if the registered person
has made a deposit of tax erroneously i.e. by virtue of human error, under a
particular head instead of a specific head, the same can be transferred to the
respective intended head vide Form GST PMT-09.
Further, 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 to the electronic cash ledger for central tax or integrated tax of a
distinct person as specified in sub-section (4) or, as the case may be, sub-
section (5) of section 25, in Form GST PMT-09.

13.17
However, no such transfer shall be allowed if the said registered person has
any unpaid liability in his electronic liability register.
This Form can be used either for -

(i) transfer of erroneous deposits under any minor head of a major head to any
other minor head of same or other major heads or
(ii) transfer of any of the amounts already lying unutilised under any of the minor
heads in Electronic Cash ledger or
(iii) transfer of any amount lying in the electronic cash ledger to the
electronic cash ledger for CGST/IGST of a distinct person
For instance, a registered person has deposited a sum of ` 1,000 under the head of
“Interest” column of CGST & ` 1,000 under the head of “Interest” column of SGST,
instead of the head “Fee”. Such amount can be transferred using Form GST PMT-
09 for making a transfer to the head “Fee”. The said transfer is required using the
above Form PMT 09, because when the registered person has to make the
remittance of Tax/Interest/Penalty/Fee/Other amount at a stage “Offset Liabilities”
in any of the GST Returns/ Forms for Tax payments through Electronic Cash Ledger,
adequate amount should be available under the respective head of account.
Section 53A of the CGST Act and section 17A of the IGST Act provides for transfer
of amount between Centre and States in accordance with section 49 of the CGST Act
allowing transfer of an amount from one head to another head in the electronic cash
ledger of the registered person.
ILLUSTRATION 1
M/s. Daksha Enterprises has made a cash deposit of ` 10,000 under minor head 'tax'
of major head 'SGST’. It has a liability of ` 2,000 for minor head "Interest" under the
major head "SGST".
State whether M/s. Daksha Enterprises can utilise the amount available for payment
of interest.
ANSWER
The registered person is allowed to transfer the amount available under any minor
head of a major head to any of the minor head of the same or other major head as
per Section 49(10) of the CGST Act vide Form PMT-09.

Therefore, in the given case, amount of ` 10,000 available under minor head ‘tax’
of major head ‘SGST’ can be utilised for payment of liability of ` 2,000 under minor
head ‘interest’ of the same major head, after making a due transfer entry using
Form GST PMT-09 from the minor head of ‘tax’ to ‘interest’.
B. ELECTRONIC CREDIT LEDGER [SECTION 49(2),(4)&(5), SECTION 49A,

SECTION 49B READ WITH RULE 86, RULE 86A, RULE 86B AND RULE
88A OF CGST RULES]
Sub-section (2) of section 49 of the CGST Act provides that the self-assessed input
tax credit (ITC) by a registered person shall be credited to his Electronic Credit
Ledger.
Non-utilisation of ITC for tax liability under reverse charge mechanism
The amount available in the electronic credit ledger may be used for making any
payment towards output tax under
CGST or IGST. It is pertinent to note Input Tax Credit as self-assessed in
that “output tax” [as defined in Section monthly returns will be reflected in
2(18)] in relation to a taxable person, the Electronic Credit Ledger. The
means the tax chargeable under this credit in this ledger can be used to
Act on taxable supply of goods and/or make payment of ONLY TAX and
services made by him or by his agent not for other amounts such as
interest, penalty, fees etc.
but excludes tax payable by him on
reverse charge basis. Thus, ITC cannot
be utilised for tax payable under reverse charge mechanism.
Manner of utilisation of ITC [Combined reading of section 49(5), 49A, 49B,

rule 88A and Circular No. 98/17/2019 GST dated 23.04.2019] 2
IGST CGST SGST/UTGST
IGST (1) (2) [refer1(i)] (2) [refer1(i)]

CGST (2) (1) Not allowed
[refer 2 & 3(i)] [refer 2 & 3]
SGST/ UTGST (2) Not allowed (1)
[refer 2 & 4(i)] [refer 2 & 4]
The detailed provisions have already been discussed in Chapter-8: “Input tax credit”.
2

13.19
1. Available IGST credit in the credit ledger should first be utilized towards
payment of IGST.
(i) Remaining amount, if any, can be utilized towards the payment of
CGST and SGST/UTGST in any order and in any proportion, i.e. ITC
of IGST can be utilized either against CGST or SGST.
2. Entire ITC of IGST is to be fully utilised first before the ITC of CGST or
SGST/UTGST can be utilized.
3. Available CGST Credit in the credit ledger shall first be utilized for
payment of CGST.
(i) Remaining amount if any, will be utilized for payment of IGST
4. Available SGST /UTGST credit in the credit ledger shall first be utilized
for payment of SGST/UTGST.
(i) Remaining amount if any, will be utilized for payment of IGST, only
when credit of CGST is not available for payment of IGST
CGST credit cannot be utilized for payment of SGST/UTGST.

Similarly, SGST/UTGST credit cannot be utilized for payment of CGST.
Conditions of use of amount available in electronic credit ledger

[Rule 86A]
In case the Commissioner or an officer authorised by him in this behalf, not below
the rank of an Assistant Commissioner, has reasons to believe that ITC available
in the electronic credit ledger has been fraudulently availed or is ineligible, he may,
after recording reasons in writing, prohibit use of ITC for discharge of any liability
under section 49 or for claim of any refund of any unutilised amount. [Such
provisions have already been discussed in detail in Chapter 8: Input Tax Credit.]
Restrictions on use of amount available in electronic credit ledger [Rule 86B]
Rule 86B restricts the amount available in electronic credit ledger which a registered
person can use to discharge his output tax liability to 99% of such tax liability in
cases where the value of taxable supply other than exempt supply and zero-rated
supply, in a month exceeds ` 50 lakh. [Such provisions have already been discussed
in detail in Chapter 8: Input Tax Credit.]

Other Aspects of Electronic Credit Ledger

❑ In case any discrepancy is noticed in the electronic credit ledger, the
registered person shall communicate the same to the officer exercising
jurisdiction in the matter, through the common portal in prescribed form.
❑ No entry shall be made directly in the electronic credit ledger under any
circumstance except as provided in the provisions.
Common Points for Electronic Cash & Credit Ledger

❑ Where a person has claimed refund of any amount from the electronic cash or
credit ledger, the said amount shall be debited to the electronic cash or credit
ledger.
❑ If the refund so claimed is rejected, either fully or partly, the amount debited
earlier, to the extent of rejection, shall be credited to the electronic cash or
credit ledger by the proper officer by an order made in prescribed form.
❑ A unique identification number shall be generated at the common portal for
each debit or credit to the electronic cash or credit ledger.
❑ Similarly, the unique identification number relating to discharge of any liability
shall be indicated in the corresponding entry in the electronic liability register.
CBIC has provided clarifications 3 regarding utilization of the amounts

available in the electronic credit ledger and the electronic cash ledger for
payment of tax and other liabilities:-
Issue 1:
Whether the amount available in the electronic credit ledger can be used for
making payment of any tax under the GST Laws?
Clarification:
In terms of section 49(4), the amount available in the electronic credit ledger
may be used for making any payment towards output tax under the CGST Act
or the IGST Act, subject to the provisions relating to the order of utilisation of
ITC as laid down in section 49B read with rule 88A.
Rule 86(2) provides for debiting of the electronic credit ledger to the extent of
discharge of any liability in accordance with the provisions of section
3

13.21
49/49A/49B.
Further, output tax in relation to a taxable person (i.e. a person who is
registered or liable to be registered under section 22 or section 24) is defined
in section 2(82) as the tax chargeable on taxable supply of goods or services
or both but excludes tax payable on reverse charge mechanism.
Accordingly, it is clarified that any payment towards output tax, whether self-
assessed in the return or payable as a consequence of any proceeding
instituted under the provisions of GST laws, can be made by utilization of the
amount available in the electronic credit ledger of a registered person.
It is further reiterated that as output tax does not include tax payable under
reverse charge mechanism, implying thereby that the electronic credit ledger
cannot be used for making payment of any tax which is payable under reverse
charge mechanism.
Issue 2:
Whether the amount available in the electronic credit ledger can be used for
making payment of any liability other than tax under the GST laws?
Clarification:
As per section 49(4), the electronic credit ledger can be used for making
payment of output tax only under the CGST Act or the IGST Act. It cannot be
used for making payment of any interest, penalty, fees or any other amount
payable under the said Acts. Similarly, electronic credit ledger cannot be used
for payment of erroneous refund sanctioned to the taxpayer, where such
refund was sanctioned in cash.
Issue 3:
Whether the amount available in the electronic cash ledger can be used for
making payment of any liability under the GST laws?
Clarification:
As per section 49(3), the amount available in the electronic cash ledger may
be used for making any payment towards tax, interest, penalty, fees or any
other amount payable under the provisions of the GST laws.

C. ELECTRONIC LIABILITY REGISTER [SECTION 49(7), (8) & (9) READ

WITH RULE 85 OF CGST RULES]
Sub-section (7) of section 49 enumerates about the third kind of ledger [Auto
updated on common portal] viz. Electronic Liability Register. While the terms
“Electronic Cash Ledger” and “Electronic Credit Ledger” are defined in the Act, the
term “Electronic Liability Register” is not defined. The Section lays down that all
liabilities of a taxable person will be recorded & maintained in a separate register
named ‘Electronic Liability Register’.
❑ Order of discharge of tax and
other dues
Electronic Liability Register will
Sub-section (8) prescribes the reflect the total tax liability of a
chronological order in which the taxpayer for a particular tax
liability of a taxable person has to period.
be discharged:
✓ self -assessed tax and other
dues for the previous tax periods have to be discharged first.
✓ self-assessed tax and other dues for the current tax period have to be
discharged next.
✓ Once these two steps are exhausted, thereafter any other amount
payable including demand determined under section 73 or section
744 to be discharged. In other words, the liability if any, arising out of
demand notice and adjudication proceedings comes last. This sequence
has to be mandatorily followed.
The expression “other dues” referred above mean interest, penalty, fee or any
other amount payable under the Act or the rules made there under.
❑ Presumption that incidence of tax is passed on
Sub-section (9) of Section 49 contains a deeming clause. This part of the section
provides that when a taxable person has paid the GST under the corresponding
Act, the taxable person is deemed to have passed on the incidence of such
payment of tax to the recipient of such goods and /or services. Thus, if tax has
been paid under the CGST Act, 2017, then the taxable person is deemed to have
passed on the incidence of such payment of CGST to the recipient.
4
The provisions relating to section 73 and section 74 will be discussed in detail at Final level.

13.23
❑ Chapter IX of CGST Rules provide the following:

(I) Debit to electronic liability register:
• all amounts payable towards tax, interest, late fee and any other
amount as per return filed;
• all amounts payable towards tax, interest, penalty and any other
amount determined in a proceeding by a proper officer or as
ascertained by the said person;
• any interest amount that may accrue from time to time.
(II) Debit to Electronic Credit/Cash ledger:
Debit to Electronic Credit Debit to Electronic Cash Ledger

Ledger and Credit to and Credit to Electronic Liability
Electronic Liability Register Register
Payment of all the liabilities of a Payment of all the liabilities of a

registered person as per his registered person as per his return
return subject to section 49 or subject to section 49 or section 49A
section 49A or section 49B. or section 49B.
Payment of TDS deducted under
section 51, TCS deducted by e-
commerce operator under section
52, amount payable under reverse
charge basis, amount payable under
section 10, amount payable towards
payment of interest, penalty, fee or
any other amount under the Act.
❑ How do the payment systems benefit the taxpayer and the Commercial
Tax Department?
✓ No more queues and waiting for making payments as payments can be
made online 24 X 7.
✓ Instant online receipts for payments made online.
✓ Tax Consultants can make payments on behalf of the clients.

✓ Single Challan form to be created online, replacing the three or four

copy Challan.
✓ Revenue will come earlier into the Government Treasury as compared
to the old system.
✓ Greater transparency.
✓ Online payments made after 8 pm will be credited to the taxpayer’s
account on the same day.
4. INTEREST ON DELAYED PAYMENT OF TAX

[SECTION 50]
Section 50 Interest on delayed payment of tax
(1) Every person who is liable to pay tax in accordance with the
provisions of this Act or the rules made thereunder, but fails to pay
the tax or any part thereof to the Government within the period
prescribed, shall for the period for which the tax or any part thereof
remains unpaid, pay, on his own, interest at such rate, not
exceeding eighteen per cent., as may be notified by the
Government on the recommendations of the Council.
Provided 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 ledger5.
5
The proviso is effective with retrospective effect from 01.07.2017.

13.25
(2) The interest under sub-section (1) shall be calculated, in such

manner as may be prescribed, from the day succeeding the day on
which such tax was due to be paid.
(3) Where the input tax credit has been wrongly availed and
utilised, the registered person shall pay interest on such input
tax credit wrongly availed and utilised, at such rate not
exceeding 24% as may be notified by the Government**, on
the recommendations of the Council, and the interest shall be
calculated, in such manner as may be prescribed.
**The notified6 rate of interest under section 50(3) is 18% per annum
ANALYSIS
To promote greater discipline amongst taxpayer and timeliness in payment of tax,
the tax dues which are not paid within the stipulated time are made liable to
interest payment. This mechanism is automatic in nature by virtue of the provisions
laid under any tax laws. Interest liability is imposed on taxpayer who has withheld
the payment of any tax as and when it is due and payable. Basically, it is
compensatory in character and totally different from penalty which is penal in
character.
On similar lines, section 50 of the CGST Act, 2017 provides for applicability of
interest for default in payment of taxes within the stipulated time. Under GST law,
a registered person, can make the payment of tax through electronic credit ledger
or electronic cash ledger in terms of section 49 of CGST Act, 2017. Usually, the
balance in electronic credit ledger is exhausted first (subject to provisions of rule
86B) before utilizing the balance available in the electronic cash ledger. This
practice is adopted for a better working capital management.
In case a registered person does not have sufficient amount available in electronic
credit ledger to pay the tax dues for a particular tax period and also if the registered
person does not have sufficient money for making deposit of balance tax amount
6
Notification No. 13/2017 CT dated 28.06.2017 as amended by the Finance Act, 2022
retrospectively with effect from 01.07.2017

in electronic cash ledger then in such a situation, GST common portal doesn’t have
a mechanism to allow a registered person to make part payment of taxes.
If the law maker demands tax dues along with interest on the gross payments i.e.
tax paid through electronic cash ledger and credit ledger both, it may be an
unhealthy practice from business perspective. To counter such recovery
mechanism, the proviso under Section 50 provides that when a registered person
has paid his taxes through a return specified under Section 39 of CGST Act, 2017
belatedly, interest shall be applicable only on the net taxes paid through electronic
cash ledger and not on the gross taxes paid for such tax period.
As per the said proviso, the interest, in cases where the tax return has been
furnished after the due date (but furnished before commencement of proceedings
under Section 73 or Section 74), shall be levied on that portion of the output tax
which is being paid by debiting the electronic cash ledger. This means that the
interest liability shall not arise on that portion of the output tax liability which is
paid using the ITC available in the electronic credit ledger.
Accordingly, interest if any payable by the registered person for delay in remittance
of taxes beyond the stipulated due date on account of delay in filing of return under
section 39, shall be demanded only on the net cash liability of taxes and not on the
gross tax liability.
❑ When interest is payable?
Interest is payable in case of delay in payment of tax, in full or in part within
the prescribed period.
❑ Rate of interest
The rate of interest shall be notified by the Government on the basis of

recommendation of the Council. However, such rate to be notified shall not
exceed 18% in case of belated payment of tax i.e. on failure to pay tax (or
part of tax) to the Government’s account. [Notification No. 13/2017 CT dated
28.06.2017 has notified the rate of interest as 18% per annum].
❑ Computation of period for calculation of interest
Generally, the period of interest will be from the date following the due date
of payment to the actual date of payment of tax.

13.27
❑ Manner of calculating interest on delayed payment of tax [Rule 88B7]

In case, where the supplies made during a tax period are declared by the
registered person in the return for the said period and the said return is
furnished after the due date in accordance with 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,
the interest on tax payable in respect of such supplies shall be calculated
on the portion of tax which is paid by debiting the electronic cash ledger,
for the period of delay in filing the said return beyond the due date, at
such rate as may be notified under section 50(1).
In all other cases, where interest is payable under section 50(1), the
interest shall be calculated on the amount of tax which remains unpaid,
for the period starting from the date on which such tax was due to be
paid till the date such tax is paid at the rate specified under section 50(1).
Where interest is payable on the amount of ITC wrongly availed and
utilised in accordance with section 50(3), the interest shall be calculated
on the amount of input tax credit wrongly availed and utilised, for the
period starting from the date of utilisation of such wrongly availed input
tax credit till the date of reversal of such credit or payment of tax in
respect of such amount at the rate specified under section 50(3).
The explanation to the rule lays down that-

(i) input tax credit wrongly availed shall be construed to have been
utilised, when the balance in the electronic credit ledger falls below
the amount of input tax credit wrongly availed, and the extent of
such utilisation of input tax credit shall be the amount by which the
balance in the electronic credit ledger falls below the amount of
input tax credit wrongly availed.
(ii) the date of utilisation of such input tax credit shall be taken to be-
(a) the date, on which the return is due to be furnished under
section 39 or the actual date of filing of the said return,
whichever is earlier, if the balance in the electronic credit
7
This rule is effective with retrospective effect from 01.07.2017.

ledger falls below the amount of input tax credit wrongly

availed, on account of payment of tax through the said return;
or
(b) the date of debit in the electronic credit ledger when the
balance in the electronic credit ledger falls below the amount
of input tax credit wrongly availed, in all other cases.
❑ Other relevant points relating to interest
✓ The term “tax” here means the tax payable under the Act or Rules made
thereunder.
✓ The payment of interest in case of belated payment of tax should be
made voluntarily i.e. even without a demand.
✓ The interest payable under this section shall be debited to the Electronic
Liability Register.
✓ The liability for interest can be settled by adjustment with balance in
Electronic Cash Ledger but not with balance in electronic credit
ledger.
ILLUSTRATION 2
Mr. Alok, a registered supplier of taxable goods, filed GSTR 3B for the month of
January, 2023 on 15thApril, 2023. The prescribed due date to file the said GSTR 3B
was 20thFebruary, 2023. The amount of net GST payable, in Cash i.e. Electronic Cash
Ledger on supplies made by him for the said month worked out to be ` 36,500 which
was paid on 15thApril, 2023. Briefly explain the related provisions and compute the
amount of interest payable under the CGST Act, 2017 by Mr. Alok. Ignore the effect
of leap year, if applicable in this case.
ANSWER
Interest is payable in case of delayed payment of tax @ 18% per annum from the
date following the due date of payment to the actual date of payment of tax.
Thus, the amount of interest payable by Mr. Alok is as under:-
Period of delay = 21 st February, 2023 to 15th April, 2023 = 54 days
Hence, amount of interest = ` 36,500 x 18% x 54/365 = ` 972

13.29
ILLUSTRATION 3
ABC Ltd., have filed their GSTR3B for the month of July, 2022 within the due date
prescribed under Section 39 i.e. 20.08.2022. Post filing of the return, the registered
person has noticed during September 2022 that tax dues of ` 40,000 for the month
of July, 2022 have not been paid. ABC Ltd., has paid the above amount of
` 40,000, through GSTR-3B of September 2022, filed on 20.10.2022 [payment through
Cash ledger - ` 30,000 and Credit ledger ` 10,000]. Examine the Interest payable
under the CGST Act, 2017.
What would be your answer if, GSTR-3B for the month of July 2022 has been filed
belatedly on 20.10.2022 and the self-assessed tax of ` 40,000/- has been paid on
20.10.2022 [payment through electronic cash ledger - ` 30,000 and electronic credit
ledger ` 10,000]
Notes:
▪ No other supply has been made nor tax payable for the month of July, 2022
other than ` 40,000/- missed out to be paid on forward charge basis
▪ Ignore the effect of leap year, if applicable in this case.
ANSWER
Interest is payable under Section 50 of the CGST Act, 2017 in case of delayed
payment of tax @ 18% per annum from the date following the due date of payment
to the actual date of payment of tax.
As per proviso to sub-section (1) of Section 50, interest is payable on the net tax
liability paid in cash, only if the return to be filed for a tax period under Section 39,
has been filed after the due date to furnish such return.
In the above scenario, ABC Ltd., has defaulted in making the payment for
` 40,000 on self-assessment basis in the return for the month of July, 2022.
Accordingly, interest is payable on the gross liability and proviso of sub-section
50(1) shall not be applicable.
Thus, the amount of interest payable by ABC Ltd., is as under:-

Period of delay = 21st August, 2022 to 20th October, 2022 = 61 days
Hence, amount of interest = ` 40,000 x 18% x 61/365 = ` 1,203

Alternatively, if ABC Ltd., have filed the return for the month of July , 2022 on
20.10.2022, beyond the stipulated due date of 20.08.2022 and if the self-assessed
tax for July, 2022 has been paid on 20.10.2022, Interest under proviso to Section
50(1) shall be payable on the tax paid through Electronic Cash Ledger only.
Hence Interest is payable from 21 st August 2022 till 20th October 2022 = 61 days
Amount of Interest = ` 30,000 x 18% x 61/365 = ` 902
5. TRANSFER OF INPUT TAX CREDIT [SECTION

53 OF CGST ACT & SECTION 18 OF IGST ACT]
If the amount of CGST is utilised towards dues of IGST then, in terms of section 53
of the CGST Act, there shall be reduction in the amount of CGST, equal to the credit
so utilized, and the Central Government shall transfer such amount equivalent to
the amount so reduced in CGST account to the IGST account.
Similarly, if the amount of IGST is utilised towards dues of CGST/UTGST then, in
terms of section 18 of the IGST Act, there shall be reduction in the amount of IGST,
equal to the credit so utilized, and the Central Government shall transfer such
amount equivalent to the amount so reduced in IGST account to the CGST/UTGST
account.
However, if the amount of IGST is utilised towards dues of SGST then, in terms of
section 18 of the IGST Act, there shall be reduction in the amount of IGST, equal to
the credit so utilized, and will be apportioned to the ‘appropriate State’
Government and the Central Government shall transfer the amount so apportioned
to the account of the respective State Government. Here, "appropriate State" in
relation to a taxable person, means the State or Union territory where taxable
person is registered or is liable to be registered under the provisions of the Central
Goods and Services Tax Act.
LET US RECAPITULATE
The provisions relating to payment of tax, interest and other amounts have been
summarised by way of table and diagrams to help students remember and retain
the provisions in a better and effective manner:-

13.31
Definitions of certain key terms
Output
Tax
tax
excludes
payable
means on
reverse
charge
basis
GST chargeable on taxable supply of
goods and /or services
by taxable by agent of taxable

person person
Taxable Person
means
a person
who is registered liable to be registered
under section 22 of CGST Act under section 24 of CGST Act

Payments to be made in GST regime
CGST & SGST

For Intra-state supply
are to be paid.
IGST to be paid,
For Inter-state supply having components of
both CGST & SGST
Interest, penalty,
fees and any other
Wherever applicable
amount also to be
paid
Key Features of Payment process

❑ Electronically generated challan from GSTN common portal in all modes of
payment and no use of manually prepared challan;
❑ Facilitation for the tax payer by providing hassle free, anytime, anywhere
mode of payment of tax;
❑ Convenience of making payment online;
❑ Real time data for tax collection in electronic format;
❑ Faster remittance of tax revenue to the Government Account;
❑ Paperless transactions;
❑ Speedy Accounting and reporting;

❑ Electronic reconciliation of all receipts;
❑ Simplified procedure for banks;
❑ Warehousing of Digital Challan.

13.33
What are E-Ledgers/register?
Electronic ledgers or E-Ledgers are statements of cash and input tax credit in
respect of each registered taxpayer. In addition, each taxpayer shall also have an
electronic liability register.
Types of Electronic ledgers/register
Electronic Cash Ledger
Electronic
Ledgers
Electronic Liability
Register Electronic Credit Ledger
A. Electronic Cash Ledger

Modes of deposit in Electronic cash ledger
• No limit
Interned banking
• No limit
Credit/Debit card
• No limit
UPI
• No limit
NEFT/RTGS/IMPS
• Rs. 10,000 per challan per tax

Over the counter period
Major and minor Heads of payment
Each of these Major

Major Heads Heads have the five
following Minor Heads
• IGST
Minor Heads
•CGST
• Tax
• SGST/UTGST
• Interest
•CESS
• Penalty
• Fee
• Others
Cross utilization of funds across major or minor heads - Possible

13.35
Date of deposit of tax dues
Which date is considered as date of deposit of the tax dues ?
(i) Date of presentation of cheque ×
(ii) Date of payment ×
(iii) Date of credit of amount in the account of √

government by Debit of Electronic Cash
Ledger/Electronic credit ledger
B. Electronic credit ledger

Order of utilisation of input tax credit available in electronic credit
ledger
ITC Order of utilisation

(1) (2)
IGST IGST CGST/SGST/UTGST- any order
ITC of IGST to be completely exhausted first, mandatorily
CGST CGST IGST
ITC of CGST has been utilized fully before utilizing SGST for payment of IGST
SGST/UTGST SGST/UTGST IGST
The CGST credit cannot be utilized for payment of SGST/UTGST.

The SGST/UTGST credit cannot be utilized for payment of CGST.

C. Electronic liability register

Order of discharge of liability of taxable person
3. Any other
dues including
2. All dues
demand
related to
determined
current tax
under section
1. All dues period
73 and 74
related to
previous tax
period
Manner of making payment
Through debit of Electronic Credit In cash, by debit in the Electronic

Ledger Cash Ledger
Through debit of Credit Ledger of the Payment can be made in cash, by debit
tax payer maintained on the Common in the Cash Ledger of the tax payer
portal – ONLY Tax can be paid. maintained on the common portal.
E-Ledgers/Register
•It will reflect all deposits made in cash, and TDS/TCS made
on account of the tax payer.
Electronic Cash Ledger •This ledger can be used for making ANY PAYMENT
towards tax, interest, penalty, fees or any other amount
on account of GST.
•It will reflect Input Tax Credit as self-assessed in monthly

returns.
Electronic Credit Ledger •The credit in this ledger can be used to make payment of
ONLY TAX i.e. output tax and not other amounts such as
interest, penalty, fees etc.
Electronic Liability •Electronic Liability Register will reflect the total tax liability
Register of a taxpayer (after netting) for the particular month.

13.37
Payment of tax via Electronic Ledger

A. Electronic Cash Ledger
(Assume it as an account statement provided by bank, for easy understanding)
Debit Amount (DR) Credit Amount (CR)
• Credit amount of this ledger may be • Any deposit made towards tax,
used for payment of tax, interest, fees interest, penalty, late fee etc.
etc. via internet banking, RTGS,
• Remaining credit balance amount after IMPS, fund transfer etc.
payment of above tax etc can be claimed • TDS/TCS claimed
as refund by taxable person
B. Electronic Credit ledger
• Credit amount of this ledger may be • Input Tax credit as self-assessed

used for payment of output tax viz in the return in the form of IGST,
IGST, CGST, SGST, UTGST , CESS CGST, SGST, UTGST, CESS
C. Electronic Liability Register
• Amount payable towards tax, interest, • Electronic cash ledger

fees etc.
• Tax or interest payable
• Any other dues
• Amount payable towards output tax • Electronic credit ledger

Interest on delayed payment of tax [Section 50]
Person to pay interest

on unpaid amount on Interest Rate is 18% per annum
his own
Interest payable on the net cash liability of taxes [Section 50(1)]
Interest payable on tax declared and paid in GSTR-3B filed after due
date
Interest applicable
Tax paid through Tax Paid through
only on the Cash
Credit Ledger Cash Ledger
portion of Tax
(1)
Interest payable on the gross tax liability [Section 50(1)]
Interest payable on gross liability where returns is furnished after

commencement of proceedings under Section 73 or Section 74
Interest applicable
Tax paid through Tax Paid through on the tax paid
Credit Ledger Cash Ledger through Cash and
Credit Ledger

13.39
Interest payable due to wrongful availment and utilisation of ITC [Section

50(3)]
ITC availed but not utilised ITC availed as well as utilised
Interest from the date of utilisation

No interest liability
till reversal date
Transfer of input tax credit [Section 53 of CGST Act & section 18 of IGST
Act]
Amount equivalent to
ITC so used is transferred
Used for
ITC of CGST by Central Government
payment of IGST
(CG) from CGST account
to IGST account.
used for
payment of
Amount equivalent to
CGST
ITC so used is
used for transferred by CG from
payment of IGST account to
UTGST CGST/UTGST account.
ITC of IGST
Amount equivalent to ITC so

used is transferred by CG
used for
from IGST account to the
payment of SGST
respective SGST account of
the State Government .

TEST YOUR KNOWLEDGE
1. How many types of electronic ledger/register are being maintained on GST

common portal?
2. What are the main features of GST payment process?
3. Are principles of unjust enrichment applicable for payment of tax made under GST?
4. State the name of output tax under GST, where any of the input tax credit under
GST can be utilized?
5. Mr. A has deposited a sum of ` 30,000 under minor head of “Interest” column
for the major head “IGST”. At the time of filing GSTR-3B for a particular tax
period, he noticed that there is no sufficient amount under the minor head ‘Tax’
towards payment of ` 30,000. When approached with the consultant, Mr. A was
guided to deposit the tax amount under proper head of account and claim a
refund for the remittance of amount deposited under head ”interest”. Examine
the relevant provisions of CGST Act, 2017 towards payment of tax and
compliance with the law.
6. M/s ABC & Co., have defaulted in filing the return under Section 39 of CGST
Act, 2017 i.e. GSTR-3B for the month of March within the specified due date.
Reason for such delay is attributable to delay in closure of books for March,
which have been finalised during May. The GST Common portal prompted for
payment of late fees payable under Section 47 of CGST Act, 2017 for a sum of
` 2,000 under CGST and SGST each. Accountant, of M/s ABC & Co., sought your
confirmation for payment of such late fees through the balance available in
Electronic Credit Ledger Give your guidance in this regard
7. Sahil is a supplier of taxable goods in Karnataka. He got registered under GST
in the month of September and wishes to pay his IGST liability for the month.
Since he is making the GST payment for the first time, he is of the view that he
needs to mandatorily have the online banking facility to make payment of GST;
offline payment is not permitted under GST. You are required to apprise Sahil
regarding the various modes of deposit in the electronic cash ledger. Further,
advise him with regard to following issues:
(a) Are manual challans allowed under GST?

13.41
(b) What is the validity period of the challan?

(c) Is cross utilization among Major and Minor heads of the electronic cash
ledger permitted?
8. Suhasini is a registered software consultant. On account of her ill health, she
could not provide any services during the month of October. However, she had
to incur all the expenses relating to her office. She paid ` 75,000 to various
vendors. The total input tax involved on the goods and services procured by
her is ` 13,500. Out of the total bills paid by her, one bill for ` 15,000 relates to
security services availed for security of her office, tax on which is payable under
reverse charge. Input tax involved in such bill is ` 2,700.
Suhasini is of the opinion that for the month of October, no GST is payable from
electronic cash ledger as she has sufficient balance of ITC for payment of GST
under reverse charge on security services.
Do you think Suhasini is right? Explain with reasons assuming provisions of rule
86B are not applicable.
ANSWERS/HINTS
1. (a) Electronic cash ledger

(b) Electronic credit ledger
(c) Electronic liability register

2. The main features of GST payment process are as follows:-
(a) Electronically generated challan from GSTN common portal in all modes
of payment and no use of manually prepared challan;
(b) Facilitation for the tax payer by providing hassle free, anytime,
anywhere mode of payment of tax;
(c) Convenience of making payment online;

(d) Realtime data for tax collection in electronic format;

(e) Faster remittance of tax revenue to the Government Account;

(f) Paperless transactions;
(g) Speedy Accounting and reporting;

(h) Electronic reconciliation of all receipts;
(i) Simplified procedure for banks;
(j) Warehousing of Digital Challan.

3. Yes, as per Section 49(9) of the CGST Act, 2017 every person who has paid
the tax on goods or services or both under this Act shall, unless the contrary
is proved by him, be deemed to have passed on the full incidence of such tax
to the recipient of such goods or services or both.
4. IGST. IGST, CGST, SGST, UTGST i.e. all input tax credit can be utilized against
output tax liability known as IGST. However, it has to be utilized in prescribed
manner.
5. Provisions of Section 49(10) of CGST Act, 2017 permit a registered person for
transferring the amount deposited under any of the minor head i.e. tax, interest,
penalty, fees or others to any of the heads under IGST/CGST/SGST/UTGS and
make the payment of taxes there upon. Accordingly, Mr. A need not deposit the
tax amount under head “tax” and claim a refund for the remittance of amount
deposited under head ”interest”. Rather, using the Form GST PMT 09, such
amount can be transferred suo-moto on the common portal from “interest” to
“tax” head and tax liability be paid accrordingly.
6, Section 49(3) of the CGST Act, 2017 provides that the amount available in the
electronic cash ledger may be used for making any payment towards tax,
interest, penalty, fees or any other amount payable under the provisions of
this Act or the rules made there under in prescribed manner.
Further, section 49(4) provides that the amount available in the electronic
credit ledger may be used for making any payment towards output tax under
this Act or under the Integrated Goods and Services Tax Act in prescribed
manner.
Accordingly, as per the combined reading of the above provisions, late fees
shall be paid only through electronic cash ledger and not possible through
electronic credit ledger. Thus, contention of the accountant of M/s ABC & Co.,

13.43
is not correct and the above amount shown on the common portal has to be
deposited in Electronic Cash Ledger under appropriate minor head, through
any of the specified modes.
7. As per the provisions of CGST Act, 2017 read with relevant rules, the deposit in
electronic cash ledger can be made through any of the following modes, namely:-
(i) Internet Banking through authorised banks;
(ii) Unified Payment Interface (UPI) from any bank;
(iii) Immediate Payment Services (IMPS) from any bank;
(iv) Credit card or Debit card through the authorised bank;
(v) National Electronic Fund Transfer or Real Time Gross Settlement from
any bank; or
(vi) Over the Counter payment through authorised banks for deposits up to
ten thousand rupees per challan per tax period, by cash, cheque or
demand draft.
(a) Manual or physical challans are not allowed under the GST regime. It is
mandatory to generate challans online on the GST Portal.
(b) Challan is valid for a period of 15 days from the date of generation of
challan.
(c) 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 CGST Act, 2017 to the electronic cash ledger for
integrated tax, central tax, State tax or Union territory tax or cess.
8. The amount available in the electronic credit ledger, i.e. ITC may be used for
making any payment towards output tax. Output tax in relation to a taxable
person, means the tax chargeable on taxable supply of goods or services or
both made by him or by his agent but excludes tax payable by him on reverse
charge basis.
Therefore, ITC cannot be used to pay the tax liability under reverse charge.
The same is always required to be paid through electronic cash ledger and
not electronic credit ledger. Thus, Suhasini is wrong and she will need to pay
the GST of ` 2,700 on security service through electronic cash ledger.


•The deposit towards payment of interest and penalty will be credited to
1 which ledger?
•Whether deposit in the electronic cash through IMPS from bank is valid?
2
•Is it correct that there is no monetary limit for deposit in electronic cash
3 ledger by over the counter payment through authorised banks?
•For how much period CPIN remains valid?

4
•How many types of Challans are prescribed for various taxes and payments
5 to be paid under the GST regime?
•What is the condition for transfer of any amount available in the electronic
6 cash ledger, to the electronic cash ledger for IGST of a distinct person?
•What is the use of balance available in electronic credit ledger?

7
•Is Mr. X permitted to use UTGST credit for payment of CGST?

8
•Penalty of previous tax period has to be discharged first or last?

9
•In which order credit of IGST be utilised for payment of CGST & SGST?
10


13.45
CROSSWORD PUZZLE
2 3 4
5 6
ACROSS
5. Input tax does not include the tax paid under the---- levy.
7. The ITC wrongly availed shall be construed to have been utilised, when the
balance in the electronic credit ledger is ------ the amount of ITC wrongly
availed.
9. Entire ITC of ------is to be fully utilised first before utilising any other credit.
(Acronym)
DOWNWARDS
1. ------ return means a return furnished under section 39(1) of CGST Act on
which self-assessed tax has been paid in full.
2. Output tax -----tax payable by taxable person on reverse charge basis.

3. The liability arising out of----- notice comes last.

4. ------is the transaction number given by the bank for a payment against a
Challan. (Acronym)
6. The liability for ------can not be settled by adjustment with balance in
Electronic credit Ledger.
8. The deposit in the electronic cash ledger can be made through -----from any
bank. (Acronym)
Scan the code



CHAPTER 14
TAX DEDUCTION
AT SOURCE
AND COLLECTION
OF TAX AT SOURCE
otherwise specified. Examples/Illustrations/Questions and Answers given in the Chapter
are based on the position of GST law existing as on 30.04.2023.
LEARNING OUTCOMES
After studying this chapter, you will be able to –
❑ understand and analyse the provisions relating to TDS, i.e. tax
deduction at source including the list of deductors, standard
rate of deduction, value of supply.
❑ explain the remittance period and the time within which the
TDS certificate is to be issued.
❑ describe and analyse the TCS i.e. tax collection at source
provisions relating to collection, payment and reporting of
tax by electronic commerce operator.

CHAPTER OVERVIEW
Tax deducted at source and
collection of tax at source
Deductors of Tax at Source
Categories of persons not liable to deduct TDS
Situation where TDS is not to deducted
Person liable to collect TCS
Monthly & annual statements by ECO
1. INTRODUCTION
TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a
system, initially introduced by the Income Tax Department. It is one of the
modes/methods to collect tax, under which, certain percentage of amount is
deducted by a recipient at the time of making payment to the supplier. It facilitates
sharing of responsibility of tax collection between the
deductor and the tax administrator. This concept of TDS
ensures regular inflow of tax collection to the Government.
This mechanism acts as a powerful instrument to prevent tax
evasion and expands the tax net, as it provides for the creation of an audit trail.
Also, with the integration of data furnished by the Supplier and Buyer on the GST
common portal, there exists an audit trail to ensure for harmony of taxes paid by
the supplier.

TAX DEDUCTION AT SOURCE AND COLLECTION 14.3

OF TAX AT SOURCE
Section 511 of CGST Act, 2017 provides for deduction of tax at source in certain
circumstances. This Section specifically lists out the deductor’s who are mandated
by the Central Government to deduct tax at source, the rate of tax deduction and
the procedure for remittance of the tax deducted.
On the other hand, Tax Collection at Source (TCS) has similarities with TDS, as well
as a few distinctive features. TDS refers to the tax which is
deducted when the recipient of goods or services make
payment to or credits a supplier’s account under a contract etc.,
while TCS refers to the tax which is collected by the electronic
commerce operator, when a supplier supplies some goods or services through its
portal and the payment for that supply is collected by the electronic commerce
operator.
Section 522 of CGST Act, 2017 provides for collection of tax at source in certain
circumstances. The Section specifically lists out the tax collecting persons who are
mandated by the Central Government to collect tax at source, the rate of tax
collection and the procedure for remittance of the tax collected.
The amount of tax deducted/collected is reflected in the Electronic Cash Ledger of
the deductee/supplier respectively.
Provisions of TDS and TCS under CGST Act have also been made applicable to
IGST Act vide section 20 of the IGST Act.
❖ Local authority means
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;

(b) a “Municipality” as defined in clause (e) of article 243P of the
Constitution;
1
Students may refer “Standard Operating Procedure on TDS” issued by CBIC from CBIC website.
2
Students may refer “Frequently Asked Questions on TCS” issued by CBIC from CBIC website.

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other
authority legally entitled to, or entrusted by the Central Government or
any State Government with the control or management of a municipal
or local fund;
(d) a Cantonment Board as defined in section 3 of the Cantonments Act,
2006;
(e) a Regional Council or a District Council constituted under the Sixth
Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J of
the Constitution; or
(g) a Regional Council constituted under article 371A of the Constitution;
[Section 2(69)]
❖ Cess shall have the same meaning as assigned to it in the Goods and Services
Tax (Compensation to States) Act [Section 2(22)].
❖ Electronic Commerce means the supply of goods or services or both,
including digital products over digital or electronic network [Section 2(44)].
❖ Electronic Commerce Operator means any person who owns, operates or
manages digital or electronic facility or platform for electronic commerce
[Section 2(45)].
❖ Taxable supply means a supply of goods or services or both which is leviable
to tax under this Act [Section 2(108)].
❖ Supplier in relation to any goods or services or both, shall mean the person
supplied; [Section 2((105)]
❖ Notification means a notification published in the official gazette and the
expressions “notify” and “notified” shall be constructed accordingly.


OF TAX AT SOURCE
3. TAX DEDUCTION AT SOURCE [SECTION 51 OF

CGST ACT]
Section 51 Tax deduction at source

Sub-Section Clause Particulars
(1) Notwithstanding anything to the contrary contained in this Act, the
Government may mandate, —
(a) a department or establishment of the Central Government

or State Government; or
(c) Governmental agencies; or
(d) such persons or category of persons as may be notified by

the Government on the recommendations of the Council,
(hereafter in this section referred to as “the deductor”), to deduct
tax at the rate of one per cent from the payment made or credited
to the supplier (hereafter in this section referred to as “the
deductee”) of taxable goods or services or both, where the total
value of such supply, under a contract, exceeds two lakh and fifty
thousand rupees :
Provided that no deduction shall be made 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.
Explanation For the purpose of deduction of tax specified above, the value of
supply shall be taken as the amount excluding the central tax, State
tax, Union territory tax, integrated tax and cess indicated in the
invoice.

(2) The amount deducted as tax under this section shall be paid to the
Government by the deductor within ten days after the end of the
month in which such deduction is made, in such manner as may
be prescribed.
(3) A certificate of tax deduction at source shall be issued in such form
and in such manner as may be prescribed.
(5) The deductee shall claim credit, in his electronic cash ledger, of the
tax deducted and reflected in the return of the deductor furnished
under sub-section (3) of section 39, in such manner as may be
prescribed.
(6) If any deductor fails to pay to the Government the amount
deducted as tax under sub-section (1), he shall pay interest in
accordance with the provisions of sub-section (1) of section 50, in
addition to the amount of tax deducted.
(7) The determination of the amount in default under this section shall
be made in the manner specified in section 73 or section 743.
(8) The refund to the deductor or the deductee arising on account of
excess or erroneous deduction shall be dealt with in accordance
with the provisions of section 544 :
Provided that no refund to the deductor shall be granted, if the
amount deducted has been credited to the electronic cash ledger of
the deductee.
ANALYSIS
❑ Deductors of Tax at Source

Under the GST regime, section 51 of the CGST Act, 2017 prescribes the
authority and procedure for ‘tax deduction at source’. The TDS provisions
empower the Central Government to make it mandatory for the following
3
4
The provisions relating to section 54 will be discussed in detail at Final level.


OF TAX AT SOURCE
persons (the deductor) to deduct tax at source from payments made to the
suppliers of taxable goods and/or services.
department or establishment Local Authority [Section 51(1)(b)]
[Section 51(1)(a)]
Governmental Agencies Notified Persons/category of

[Section 51(1)(c)] persons [Section 51(1)(d)]
With respect to deductors under section 51(1)(a), provisions of TDS are

applicable to certain prescribed authorities of Ministry of Defence, remaining
authorities under the Ministry of Defence are exempt. Detailed list has been
specified under Notification 57/2018 CT dated 23.10.2018.
The following persons have been notified under clause (d) of sub-section (1) of
section 51 of the CGST Act by the Central Government:
(a) an authority or a board or any other body, -
(i) set up by an Act of Parliament or a State Legislature; or

with 51% or more participation by way of equity or control, to carry out
any function;
It has been clarified vide Circular No. 76/50/2018 GST dated 31.12.2018 that
the rider of 51% or more participation by way of equity or control is applicable
to both the items (i) and (ii). Thus, the provisions of section 51 of the CGST
Act are applicable only to such authority or a board or any other body set up
by an Act of parliament or a State legislature or established by any
Government in which 51% or more participation by way of equity or control
is with the Government.
(b) society established by the Central Government or the State Government
or a Local Authority under the Societies Registration Act, 1860;
(c) public sector undertakings:

❑ Categories of persons not liable to deduct TDS

Tax is not liable to be deducted at source in the following cases:-
(i) When goods and/or services are supplied from a public sector
undertaking (PSU) to another PSU, whether or not a distinct person
[Notification No. 61/2018 CT dated 05.11.2018]
(ii) When supply of goods and/or services takes place between one
person to another person specified in clauses (a), (b), (c) and (d) of
section 51(1) of the CGST Act.
[Notification No. 73/2018 CT dated 31.12.2018]
❑ Deductees
The deductees are the suppliers whose total value of supply of taxable goods
and/or services under a contract exceeds ` 2,50,000 exclusive of tax & cess
as per the invoice.
❑ Standard Rate of deduction
The tax would be deducted @ 1% under CGST TDS-1% +1% [CGST +
Act, 2017 of the payment made to the supplier SGST] on net value of
(the deductee) of taxable goods and/or services, taxable supplies
where the total value of such supply, under a
contract, exceeds ` 2,50,000 (excluding the
amount of Central tax, State tax, Union Territory tax, Integrated tax and cess
indicated in the invoice). Thus, individual supplies may be less than
` 2,50,000/-, but if total value of supplies under a contract is more than
` 2,50,000/-, TDS has to be deducted.
The deductors have to deduct tax at the rate of 1% from the payment made
or credited to the supplier of taxable goods and/or services under CGST Act,
2017.
It may be noted that Section 20 of IGST Act provides that in the

case of tax deducted at source, the deductor shall deduct tax at
the rate of 2% from the payment made or credited to the
supplier.


OF TAX AT SOURCE
❑ NO TDS
The Proviso to Section 51(1) lays down that when the location of the supplier
and the place of supply is in a State/ Union territory which is different from
the State/ Union territory of registration of the recipient, there will be no TDS.
The above statement can be explained in the following situations:
(a) Supplier, place of supply and recipient are in the same state.
It would be intra-State supply and TDS (Central plus State tax) shall be
deducted. It would be possible for the supplier (i.e. the deductee) to take
credit of TDS in his electronic cash ledger.
(b) Supplier as well as the place of supply are in different states.
In such cases, Integrated tax would be levied. TDS to be deducted would
be TDS (Integrated tax) and it would be possible for the supplier (i.e. the
deductee) to take credit of TDS in his electronic cash ledger.
(c) Supplier as well as the place of supply are in State A and the recipient
is located in State B.
The supply would be intra-State supply and Central tax and State tax would
be levied. In such case, transfer of TDS (Central tax + State tax of State B)
to the cash ledger of the supplier (Central tax + State tax of State A) would
be difficult. So, in such cases, TDS would not be deducted.
Thus, when both the supplier as well as the place of supply are different
from that of the recipient, no tax deduction at source would be made.
Location of Place of Registration of TDS u/s 51

Supplier Supply Recipient
State A State A State A Yes
State A State A State B No
State A State B State B Yes
UT1 UT1 UT1 Yes
UT1 UT2 UT2 Yes
UT1 UT1 UT2 No

❑ Value of Supply
The amount indicated in the invoice excluding the
Value of supply
Central tax, State tax, Union territory tax, Integrated tax shall exclude
and cess element, is the value of supply for the purpose tax & cess
of TDS under Section 51 of CGST Act, 2017.
❑ Deposit of TDS with the Government
The amount of tax deducted at source should be deposited to the
Government account by deductor by 10th of the succeeding month.
❑ TDS Certificate
A TDS certificate is required to be issued by deductor (the person who is
deducting tax) in prescribed form to the deductee (the supplier from whose
payment TDS is deducted).
The content of Form GSTR 7A (TDS Certificate) are given below:

1. TDS Certificate No.
2. GSTIN of deductor
3. Name of deductor
4. GSTIN of deductee
5. (a) Legal name of the deductee
(b) Trade name, if any
6. Tax period in which tax deducted and accounted for in GSTR-7
7. Details of supplies
8. Amount of tax deducted
❑ Non- remittance by the deductor

If the deductor has not remitted the amount deducted as TDS to the
Government within the prescribed time limit, he is liable to pay penal interest
under Section 50 in addition to the amount of tax deducted.


OF TAX AT SOURCE
❑ Reflection of amount of TDS

The amount of tax deducted is reflected in
➢ Electronic Cash Ledger of deductee.
➢ Return filed by deductor under section 39(3). [GSTR-7] [Refer
Chapter:15 Returns for detailed discussion on GSTR-7].
The deductee can claim credit of the tax deducted, in his electronic cash
ledger. This provision enables the Government to cross check whether the
amount deducted by the deductor is correct and that there is no mis-match
between the amount reflected in the electronic cash ledger and the amount
shown in the return filed by deductor.
This is similar to existing practice in income tax relating to E-TDS returns filed
by deductor and 26AS statement available for viewing the TDS remitted in
respect of transactions by deductee.
❑ Determination of amount in Default
Any default in determination of the amount under Section 51 shall be made in
the manner specified in Section 73 or section 74,5 as the case may be.
❑ Refund on excess/erroneous deduction

The deductor or the deductee can claim refund of excess deduction or
erroneous deduction. The provisions of section 54 6 relating to refunds would
apply in such cases.
❑ Registration7 [Rule 12 of CGST Rules, 2017]
Any person required to deduct tax in accordance with the provisions of
section 51 shall electronically submit a registration application in prescribed
form through the common portal. The proper officer shall, after due
verification, grant registration within 3 working days from the date of the
application. Also, on a request or upon an enquiry or pursuant to any other
5
6
7
The provisions relating to registration have already been discussed in Chapter-9 of this
Module.

proceeding under the Act, if the proper officer is satisfied that a person is no
longer liable to deduct tax at source under section 51, then the said officer
may cancel the said registration, following procedures as provided in Rule 22
of the CGST Rules for the cancellation of registration.
(1) Supplier makes a supply worth ` 20 lakh to a recipient and the
GST at the rate of 18% is required to be paid. The recipient, while
making the payment of ` 20 lakh to the supplier, shall deduct 2%
[CGST 1% + SGST 1%] viz ` 4 lakh as TDS.
The value for TDS purpose shall not include 18% GST. The TDS, so deducted,
shall be deposited in the account of Government by 10th of the succeeding
month.
The TDS so deposited in the Government account shall be reflected in the
electronic cash ledger of the supplier (i.e. deductee) who would be able to use
the same for payment of tax or any other amount.
4. COLLECTION OF TAX AT SOURCE [SECTION

52 OF CGST ACT]
Section 52 Collection of tax at source
Sub-Section Clause Particulars
(1) Notwithstanding anything to the contrary contained in this Act,

every electronic commerce operator (hereafter in this section
referred to as the “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 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.


OF TAX AT SOURCE
Explanation For the purposes of this sub-section, the expression “net value of
taxable supplies” shall mean the aggregate value of taxable supplies
of goods or services or both, other than services notified under sub-
section (5) of section 9, made during any month by all registered
persons through the operator reduced by the aggregate value of
taxable supplies returned to the suppliers during the said month.
(2) The power to collect the amount specified in sub-section (1) shall
be without prejudice to any other mode of recovery from the
operator.
(3) The amount collected under sub-section (1) shall be paid to the
Government by the operator within ten days after the end of the
month in which such collection is made, in such manner as may be
prescribed.
(4) Every operator who collects the amount specified in sub-section (1)
shall furnish a statement, electronically, containing the details of
outward supplies of goods or services or both effected through it,
including the supplies of goods or services or both returned through
it, and the amount collected under sub-section (1) during a month,
in such form and manner as may be prescribed, within ten days
after the end of such month
Provided that the Commissioner may, for reasons to be recorded in

writing, by notification, extend the time limit for furnishing the
statement for such class of registered persons as may be specified
therein:
Provided further that any extension of time limit notified by the

Commissioner of State tax or the Commissioner of Union territory
tax shall be deemed to be notified by the Commissioner
(5) Every operator who collects the amount specified in sub-section (1)
shall furnish an annual statement, electronically, containing the
details of outward supplies of goods or services or both effected
through it, including the supplies of goods or services or both
returned through it, and the amount collected under the said sub-
section during the financial year, in such form and manner as may

be prescribed, before the thirty first day of December following the

end of such financial year
Provided that the Commissioner may, on the recommendations of

the Council and for reasons to be recorded in writing, by
notification, extend the time limit for furnishing the annual
statement for such class of registered persons as may be specified
therein:
Provided further that any extension of time limit notified by the

Commissioner of State tax or the Commissioner of Union territory
tax shall be deemed to be notified by the Commissioner
(6) If any operator after furnishing a statement under sub-section (4)

discovers any omission or incorrect particulars therein, other than
as a result of scrutiny, audit, inspection or enforcement activity by
the tax authorities, he shall rectify such omission or incorrect
particulars in the statement to be furnished for the month during
which such omission or incorrect particulars are noticed, subject to
payment of interest, as specified in sub-section (1) of
section 50:
Provided that no such rectification of any omission or incorrect

particulars shall be allowed after the thirtieth day of November
following the end of the financial year or the actual date of
furnishing of the relevant annual statement, whichever is earlier.
(7) The supplier who has supplied the goods or services or both
through the operator shall claim credit, in his electronic cash
ledger, of the amount collected and reflected in the statement of
the operator furnished under sub-section (4), in such manner as
may be prescribed.
(12) Any authority not below the rank of Deputy Commissioner may
serve a notice, either before or during the course of any proceedings
under this Act, requiring the operator to furnish such details
relating to —


OF TAX AT SOURCE
(a) supplies of goods or services or both effected through

such operator during any period; or
(b) stock of goods held by the suppliers making supplies

through such operator in the godowns or warehouses, by
whatever name called, managed by such operator and
declared as additional places of business by such
suppliers,
as may be specified in the notice.
(13) Every operator on whom a notice has been served under sub-
section (12) shall furnish the required information within fifteen
working days of the date of service of such notice.
(14) Any person who fails to furnish the information required by the
notice served under sub-section (12) shall, without prejudice to any
action that may be taken under section 1228, be liable to a penalty
which may extend to twenty-five thousand rupees.
Explanation For the purposes of this section, the expression “concerned supplier”
shall mean the supplier of goods or services or both making
supplies through the operator.
ANALYSIS
Overview of TCS
TCS refers to the tax which is collected by the electronic commerce operator when
a supplier supplies taxable goods or services through portal of e-commerce
operator and the payment for that supply is collected by said electronic commerce
operator. The nature of working of electronic commerce operator can be better
understood with the following example.
8

(2) There are many e-Commerce operators [hereinafter referred to as an

Operator], like Amazon, Flipkart, Urban clap etc. operating in India. These
operators display on their portal products as well as services which are
actually supplied by some other person to the consumer.
The goods or services belonging to other suppliers are displayed on the portals of the
operators and consumers buy such goods/services through these portals. On placing
the order for a particular product/service, the actual supplier supplies the selected
product/service through the Operator to the consumer.
The price/consideration for the product/ service is collected by the Operator from the
consumer and passed on to the actual supplier after the deduction of commission and
incidental expenses mutually agreed upon by the Operator.
Let us now have a look at the statutory provisions relating to TCS.

❑ Who is liable to collect TCS ?
Every Electronic Commerce Operator (ECO), not being an agent, has been
mandated to collect tax at source (TCS) on the net value of taxable supplies
[supplies net of returns if any] made through it by suppliers, where the ECO
collects the consideration on behalf of the supplier for such supplies.
❑ Rate of TCS
Half percent of the net value of intra-State taxable supplies. 1% of the net
value of inter-State taxable supplies.
(3) Suppose a certain product is sold at ` 1,120 [including GST
@12%] through an Operator by a supplier. The operator would
collect tax @ 1% of the net value of ` 1,000 i.e. ` 10 in case of inter-
State supplies.


OF TAX AT SOURCE
Aggregate value of taxable supplies

taxable supplies of returned to
goods and / or services suppliers
other than notified services under section 9(5)

by all registered persons supplied through
operator
Currently, services notified under section 9(5) of CGST Act, 2017 vide
Notification No. 17/2017 CT (R) dated 28.06.2017/ Notification No. 14/2017
IT (R) dated 28.06.2017 as amended are given as below9:
(a) services by way of transportation of passengers by a radio-taxi, motorcab,
maxicab, motor cycle, omnibus or any other motor vehicle;
(b) services by way of providing accommodation in hotels, inns, guest houses, clubs,
campsites or other commercial places meant for residential or lodging purposes,
except where the person supplying such service through electronic commerce
operator is liable for registration under section 22(1) of the CGST Act.
(c) services by way of house-keeping, such as plumbing, carpentering etc, except
where the person supplying such service through electronic commerce operator
is liable for registration under sub-section 22(1) of the CGST Act.
(d) supply of restaurant service other than the services supplied by restaurant,
eating joints etc. located at specified premises.
9
The provisions relating to section 54 will be discussed in detail at Final level..

It may be noted that Section 20 of IGST Act provides that in

case of tax collected at source, the operator shall collect tax
at such rate not exceeding two per cent, as may be notified on
the recommendations of the Council, of the net value of taxable supplies.
The rate has been notified as 1% for tax collection at source under IGST.
Further, the power conferred on the e-commerce operator to collect tax at

source, is without prejudice to other modes of recovery from operator. The
powers of e-commerce operator are restricted only to the extent of tax
collection at source under circumstances specified therein and nothing more.
❑ Deposit of TCS by ECO to Government

The TCS amount collected by the ECO has to be remitted to the Government
Treasury within 10 days after the end of the month in which the collection was made.
(4) If the TCS has been collected in the month of July, the amount
has to be remitted into the Government Treasury on or before 10 th
August.
ILLUSTRATION 1
Mr. X is a supplier selling his own products through a web site hosted by him. Does he
fall under the definition of an “electronic commerce operator”? Whether he is required
to collect TCS on such supplies?
ANSWER
As per the definitions in Section 2(44) and 2(45) of the CGST Act, 2017, Mr. X
will come under the definition of an “electronic commerce operator”.
However, according to Section 52 of the Act ibid, TCS is required to be
collected on the net value of taxable supplies made through it by other
suppliers where the consideration is to be collected by the ECO. In cases,
where someone is selling their own products through a website, there is no
requirement to collect tax at source as per the provisions of this Section.
These transactions will be liable to GST at the prevailing rates.


OF TAX AT SOURCE
ILLUSTRATION 2
If Mr. A purchase goods from different vendors and in turn Mr. A, is selling them
on his own website under his own billing, Is TCS required to be collected on
such supplies?
ANSWER
No. According to Section 52 of the CGST Act, 2017, TCS is required to be
collected on the net value of taxable supplies made through E-commerce
operator by other suppliers where the consideration is to be collected by the
ECO. In this case, there are two transactions - Mr. A purchase the goods from
the vendors, and those goods are sold through his own website. For the first
transaction, GST is leviable, and will need to be paid to vendor, on which
credit is available to Mr. A. The second transaction is a supply on own account
of Mr. A, and not by other suppliers and there is no requirement to collect
tax at source. The transaction will attract GST at the prevailing rates.
❑ Registration10 [Rule 12 of CGST Rules, 2017]
Any person required to deduct tax in accordance with the provisions of
section 52 shall electronically submit a registration application in prescribed
form through the common portal. The proper officer shall, after due
verification, grant registration within 3 working days from the date of the
application.
Also, on a request or upon an enquiry or pursuant to any other proceeding
under the Act, if the proper officer is satisfied that a person is no longer liable
to deduct tax at source under section 52 then the said officer may cancel the
said registration, following procedures as provided in Rule 22 of the CGST
Rules for the cancellation of registration.
❑ Filing of Monthly & Annual Statements by ECO11
✓ An electronic statement [Form GSTR 8] has to be filed by the ECO
containing details of the outward supplies of goods and/ or services
10
The provisions relating to registration have already been discussed in Chapter-9 of this
Module.
11
The detailed provisions of monthly and annual statements have been discussed in Chapter
15: Returns.

effected through it, including the supplies returned through it and the
amount collected by it as TCS during the month within 10 days after the
end of the each month in which supplies are made.
✓ Additionally, the ECO is also mandated to file an Annual Statement
[Form GSTR 9B] on or before 31st day of December following the end of
the financial year.
✓ The Commissioner has been empowered to extend the due date for
furnishing of monthly and annual statement by the person collecting
tax at source.
❑ Notice to the Operator seeking details
✓ An officer not below the rank of Deputy Commissioner can issue notice
to an operator, asking him to furnish details relating to volume of the
goods/services supplied, stock of goods lying in warehouses/godowns
etc.
✓ The operator is required to furnish such details within 15 working days.
✓ In case an operator fails to furnish the information, besides being liable

for penal action under section 12212, it shall also be liable for penalty
up to ` 25,000.
12


OF TAX AT SOURCE
LET US RECAPITULATE
The provisions relating to TDS & TCS have been summarised by way of table and
diagrams to help students remember and retain the provisions in a better and
effective manner:-
Definition of Key terms
Electronic
Commerce
including
means digital
products over
supply of
supply of supply of digital electronic
goods and
goods services network network
services
Electronic Commerce Operator
means
Any person who
owns
digital/ electronic
facility/ platform
operates for electronic
commerce
manages

Rate of TDS
under CGST 1%
Rate of TDS
under IGST 2%
TDS
Person liable to Threshold Rate of

Due date of
deduct tax at limit deduction NO TDS payment of TDS to
source under CGST
Government
Central and 1%
State
Government Within 10 days
Total value of
supply under a from the end
contract > of month
Local authority ` 2.5 lakh,
When location
exclusive of
of supplier and
GST as per
place of supply
invoice
Governmental is different from
agencies the state of
registration of
recipient.
Notified
persons


OF TAX AT SOURCE
Manner of account of TDS by TDS deductor
1. Such deductor need to get compulsorily registered under section 24 of the

CGST/SGST Act.
2. They need to remit such TDS collected by the 10th day of the month
succeeding the month in which TDS was collected.
3. The amount deposited as TDS will be reflected in the electronic cash ledger
of the supplier.
Manner of account of TDS by supplier

❖ Any amount shown as TDS will be reflected in the electronic cash ledger of the
concerned supplier.
❖ He can utilize this amount towards discharging his liability towards tax, interest
fees and any other amount.
Applicability of TDS
Situations
Supplier and place Supplier & place of

Supplier, place of supply - same State &
supply & recipient- of supply-different
States recipient located in
same State another State
Inter-State supply
Intra-State supply Intra-State supply
TDS (IGST) to be
TDS (CGST + SGST)
deducted
to be deducted
NO TDS

Consequences of not complying with TDS provisions
S. No. Event Consequence
1. TDS not deducted Interest to be paid along with the TDS

amount; else the amount shall be
determined and recovered as per the
law
2. TDS deducted but not paid to Interest to be paid along with the TDS
the Government or paid later amount; else the amount shall be
than 10th of the succeeding determined and recovered as per the
month law
3. Late filing of TDS Late fee of ` 100/- for every day during
returns which such failure continues, subject
to a maximum amount of ` 5,000.
Type of supply liable to TCS
Type of Supply
Supply of Goods Supply of Services

through E through E
commerce commerce
Subject to TCS Other than Notified Notified Services

under Sec. 52 Services
E commerce operator has

to pay GST under reverse
charge. TCS Not applicable.
Section 9(5)


OF TAX AT SOURCE
TCS applicability in major types of E-commerce
Selling own products TCS provisions not

through own website applicable
Selling bought out

products through own TCS provisions not
website under own applicable
billing
Major types of e-
commerce Mere facilitating the
transaction between
customer & supplier TCS provisions
▪ Operator do not applicable
own goods
▪ Billing directly by
seller to customer Operator shall deduct
▪ consideration TCS while making
colected by operator payment to other
& then paid to suppliers.
supplier
Rate of TCS
under CGST 1/2%
Rate of TCS
under IGST 1%

Significant aspects of TCS
TCS
Person liable Value for Due date of

Threshold Rate of
to collect tax collection of payment of TCS to
limit collection
at source tax at source Government
Electronic 1% Net value of Within 10 days

Nil from the end of
commerce [(CGST+SG taxable
operator supply month
ST)/IGST]
Net value of taxable supplies
other than notified services under section

Aggregate value of
taxable supplies of 9(5) by all registered persons supplied
goods and/or through operator
services
Net value of Taxable

Supplies
taxable supplies
returned to supplier


OF TAX AT SOURCE
TEST YOUR KNOWLEDGE
1. Whether the rate of tax of 1% notified under section 52 is CGST or SGST or a

combination of both CGST and SGST?
2. Is every e-commerce operator required to collect tax on behalf of actual supplier?

3. State whether the provisions pertaining to tax collected at source under section
52 of CGST Act, will be applicable, if Fitan Ltd. sells watch on its own through
its own website?
4. There is no onus of filing any monthly & annual statements by ECO. Examine the
technical veracity of the statement by explaining relevant provisions.
5. State whether the provisions pertaining to tax collected at source under section
52 of CGST Act, will be applicable, if ABC limited who is dealer of Royul brand
sells watches through Slipkart, an electronic commerce operator?
ANSWERS/HINTS
1. 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%.
2. Yes, every e-commerce operator is required to collect tax where consideration
with respect to the supply 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.
3. 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 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.
4. The given statement is invalid. An electronic statement has to be filed by the
ECO containing details of the outward supplies of goods and/ or services
effected through it, including the supplies returned through it and the
amount collected by it as TCS during the month within 10 days after the end
of the each month in which supplies are made.
Additionally, the ECO is also mandated to file an Annual Statement on or
before 31st day of December following the end of the financial year.
The Commissioner has been empowered to extend the due date for
furnishing of monthly and annual statement by the person collecting tax at
source.
5. 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 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. If ABC limited who is dealer of Royul brand sells watches
through Slipkart, then the provision of TCS will be applicable to Slipkart.


OF TAX AT SOURCE

•Is it correct or not that public sector undertakings is liable to deduct TDS
1 from payments made to the suppliers of taxable goods?
•What is the implication of TDS in case services are supplied from a public
2 sector undertaking (PSU) to another PSU?
•Mr. X contends that tax is liable to be deducted if total value of supply of

taxable goods under a contract is ` 2,50,000 exclusive of tax. Is his
3 contention valid in law or not?
•What is the implication of TDS in case supplier, place of supply and

4 recipient are in the same state?
•What is the implication of TDS in case location of supplier is in State A

5 and place of supply as well as registration of recipient are in State B?
•What is the implication of TDS if supplier as well as the place of supply

6 are in State A and the recipient is located in State B. ?
•What is the rate of TCS under CGST?

7
•Is it valid that services by way of transportation of passengers by motor

8 cycle is to be included while computing net value of taxable supplies?


CROSSWORD PUZZLE
1 2
3 4
5 6
ACROSS
1. TDS is not attracted if services are supplied from a PSU to another ----------
.(Acronym)
3. Value of supply shall------------ tax & cess for the purpose of TDS under
Section 51 of CGST Act, 2017.
5. The amount of tax deducted at source should be deposited to the
Government account by 10th of the succeeding-----------.
8. Net value of taxable supplies shall mean the aggregate value of taxable
supplies of goods and/or services, other than services notified under sub-
section (5) of section 9, made during any month by all registered persons


OF TAX AT SOURCE
through the operator reduced by the aggregate value of taxable supplies----

---------- to the suppliers during the said month.
9. ------------------ sector undertakings are notified to deduct tax at source
from payments made to the suppliers.
DOWNWARDS
2. TDS would be deducted if supplier, place of supply and recipient are in the--
----------- State.
4. The TDS deductees are the suppliers whose total value of supply of taxable
goods under a contract exceeds ` 2,50,000 ------------of tax & cess as per the
invoice.
6. Every Electronic Commerce Operator (ECO), not being an agent, has been
mandated to collect tax at source (TCS) on net value of taxable supplies made
------------it by suppliers.
7. The TCS amount collected by the ECO has to be remitted to the Government
Treasury within------days after the end of the month in which the collection
was made.
Scan the code


CHAPTER a
15
RETURNS
The section numbers referred to in the Chapter pertain to CGST Act and rule numbers referred
to in the Chapter pertain to CGST Rules, unless otherwise specified.
Examples/Illustrations/Questions and Answers given in the Chapter are based on the position
of GST law existing as on 30.04.2023.
LEARNING OUTCOMES

❑ comprehend and analyse the provisions relating to filing of
various types of statements and returns by registered persons,
❑ determine the late fee for delayed filing of return
❑ explain the provisions relating to GST practitioner

GST, ITR, Audit, Tally, Excel, Mutual Funds, Project Report, AI, MS Office14.2
& More
CHAPTER OVERVIEW
Furnishing details of outward supplies
Furnishing details of inward supplies

GSTR-3B
Furnishing of returns under section 39 GSTR-4
GSTR-5
RETURNS
First Return
GSTR-8
Annual Return
Other returns/Statements GSTR-99
Final Return
GSTR-10
GSTR-11
Notice to return
defaulters
Default/delay in furnishing return
Levy of late fee
Goods and services tax practitioners
1. INTRODUCTION
The term “return” ordinarily means statement of information (facts) furnished by
the taxpayer, to tax administrators, at regular intervals. The information to be
furnished in the return generally comprises of the details pertaining to the nature
of activities/business operations forming the subject matter of taxation; the

RETURNS 15.3
measure of taxation such as sale price, turnover, or value;

deductions and exemptions; and determination and
discharge of tax liability for a given period.
In any tax law, “filing of returns” constitutes the most
important compliance procedure which enables the
Government/ tax administrator to estimate the tax collection
for a particular period and
determine the correctness and completeness of the tax
compliance of the taxpayers.
The returns serve the following purposes:
a) Mode for transfer of information to tax
administration;
b) Compliance verification program of tax administration;
c) Finalization of the tax liabilities of the taxpayer within stipulated period of
limitation;
d) Providing necessary inputs for

taking policy decision;
e) Management of audit and anti- Filing of GST returns helps in
evasion programs of tax determination of tax liability of
administration the return filer and at the same
The taxpayer is generally required to time it also has a huge bearing
furnish the return in a specific statutory on determination of tax
liability of other persons with
format. These formats are, therefore,
whom the former has entered
designed to take care of all the
into taxable activities.
provisions of the law that have a
bearing on computation of tax liability
of a taxpayer. Hence, a study of various
fields contained in the form of return vis-à-vis the relevant corresponding
provisions of the tax law, can facilitate overall understanding of the tax law in a
better manner.
Under the GST laws, the correct and timely filing of returns is of utmost importance
because of two reasons. Firstly, under GST laws, a taxpayer is required to estimate
his tax liability on “self-assessment” basis and deposit the tax amount along with

& More
the filing of such return. The return, therefore, constitutes a kind of working
sheet/supporting document for the tax authorities that can be relied upon as the
basis on which the tax has been computed by the taxpayer. Secondly, under the
GST regime, filing of returns not only determines the tax liability of the person filing
the same, but it also has a huge bearing on determination of tax liability of other
persons with whom the former has entered into transactions in course or
Chapter IX of the CGST Act [Sections 37 to 48 1] prescribe the provisions relating to
filing of returns as under:
Section 37 Furnishing details of outward supplies

Section 38 Furnishing details of inward supplies
Section 39 Furnishing of returns
Section 40 First return
Section 44 Annual Return
Section 45 Final Return
Section 46 Notice to return defaulters
Section 47 Levy of late fee
Section 48 Goods and services tax practitioners
Apart from this, section 52, inter alia, prescribes a statement for tax collection at
source to be furnished by Electronic Commerce Operator. Provisions of section 41
relating to availment of input tax credit have already been discussed in Chapter 8 –
Input Tax Credit in this Module of the Study Material; thus, said provisions are not
discussed here. The provisions relating to forms and manner, in which information
is to be furnished through returns, are given under Chapter VIII of the CGST Rules
[Rules 59-842]. State GST laws also prescribe identical provisions in relation to filing
of returns.
Provisions of returns, other than late fee, under CGST Act have also been
1
Sections 42, 43 and 43A have been omitted.
2
Rules 69, 70, 71, 72, 73, 74, 75, 76, 77 and 79 have been omitted.

RETURNS 15.5
All the returns under GST laws are to be filed electronically. Taxpayers can file
the statements and returns by various modes. Firstly, they can file their statement
and returns directly on the GST common portal online. However, this may be
tedious and time consuming for taxpayers with large number of invoices. For such
taxpayers, offline utilities have been provided by GSTN that can be used for
preparing the statements offline after downloading the auto populated details and
uploading them on the common portal. GSTN has also developed an ecosystem of
GST Suvidha Providers (GSP) that will integrate with the common portal.
The details furnished by the taxpayer in the form of returns shall be consolidated
and stored at the common portal which will be common for both, i.e. Central
Government and State Governments.
❑ Common portal means the common goods and services tax electronic portal
referred to in section 146 [Section 2(26)].
❑ Credit note means a document issued by a registered person under sub-
❑ Casual taxable person means a person who occasionally undertakes
transactions involving supply of goods or services or both in the course or
furtherance of business whether as principal, agent or in any other capacity,
in a State or a Union Territory where he has no fixed place of business [Section
2(20)].
❑ Debit note means a document issued by a registered person under sub-

& More
❑ Electronic cash ledger means the electronic cash ledger referred to in sub-
❑ Electronic commerce means the supply of goods or services or both,
including digital products over digital or electronic network [Section 2(44)].
❑ Electronic commerce operator means any person who owns, operates or
manages digital or electronic facility or platform for electronic commerce
[Section 2(45)].
❑ Electronic credit ledger means the electronic credit ledger referred to in
sub-section (2) of section 49 [Section 2(46)].
❑ Exempt supply means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act, and includes
non-taxable supply [Section 2(47)].
❑ Goods and services tax practitioner means any person who has been
approved under section 48 to act as such practitioner [Section 2(55)].
❑ Invoice or tax invoice means the tax invoice referred to in section 31 [Section
2(66)].
❑ Inward supply in relation to a person, shall mean receipt of goods or services

or both whether by purchase, acquisition or any other means with or without
consideration [Section 2(67)].
❑ Non-resident taxable person means any person who occasionally
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India [Section 2(77)].
❑ Outward supply in relation to a taxable person, means supply of goods or
services or both, whether by sale, transfer, barter, exchange, licence, rental,
lease or disposal or any other mode, made or agreed to be made by such
person in the course or furtherance of business [Section 2(83)].
❑ Prescribed means prescribed by rules made under this Act on the
recommendations of the Council [Section 2(87)].

RETURNS 15.7
❑ Proper officer in relation to any function to be performed under this Act,

means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].
❑ Quarter shall mean a period comprising three consecutive calendar months,
ending on the last day of March, June, September and December of a
calendar year [Section 2(92)].
• where a consideration is payable for the supply of goods or services or

• where no consideration is payable for the supply of goods, the person

• where no consideration is payable for the supply of a service, the person

to whom the service is rendered,
as a reference to the recipient of the supply and shall include an agent acting
as such on behalf of the recipient in relation to the goods or services or both
❑ Registered person means a person who is registered under section 25 but
does not include a person having a Unique Identity Number [Section 2(94)].
❑ Return means any return prescribed or otherwise required to be furnished by
or under this Act or the rules made thereunder [Section 2(97)].
❑ Reverse charge means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services or
both under sub-section (3) or sub-section (4) of section 9, or under sub-
section (3) or sub- section (4) of section 5 of the Integrated Goods and
Services Tax Act [Section 2(98)].

& More
❑ Tax period means the period for which the return is required to be furnished
[Section 106].
❑ Taxable person means a person who is registered or liable to be registered
under section 22 or section 24 [Section 2(107)].
❑ Taxable supply means a supply of goods or services or both which is leviable
to tax under this Act [Section 2(108)].
❑ Valid return means a return furnished under sub-section (1) of section 39 on
which self-assessed tax has been paid in full [Section 2(117)].
3. FURNISHING DETAILS OF OUTWARD

SUPPLIES [SECTION 37 READ WITH RULE 59]
(i) Who is required to furnish the details of outward supplies?
[Section 37(1) read with rule 59(1)]
The details of outward supplies (see
definition) of both goods and services are
required to be furnished by every
registered person including casual
registered person except the following:
❑ input service distributor (ISD)
❑ non-resident taxable person (NRTP)
❑ person paying tax under composition scheme
❑ person deducting tax at source
❑ person collecting tax at source i.e., e-commerce operator (ECO), not
being an agent
❑ supplier of online information and database access or retrieval services
(OIDAR) located in non-taxable territory and providing such services to
a non-taxable online recipient 3.
3
Provisions for filing of returns by an input service distributor and a supplier of online
information and database access or retrieval services (OIDAR) will be discussed at the Final
level.

RETURNS 15.9
 ISD
 Non-resident taxable person
All registered  Composition taxpayer
Persons persons
required including  Person deducting tax at source
to file casual  Person collecting tax at source
GSTR-1 registered  Supplier of OIDAR services
person located in non-taxable territory
providing services to non-
taxable online recipient
(ii) What is the form for submission of

details of outward supplies? [Section
37(1) read with rule 59(1)]
The details of outward supplies are required to
be furnished, electronically, in Form GSTR-1
for the month or quarter. Such details can be furnished through the
common portal, either directly or from a Facilitation Centre notified by the
Commissioner.
Further, a Nil GSTR-1 can be filed through an SMS using the registered mobile
number of the taxpayer.
(iii) What is the due date of submission of GSTR-1? [Section 37(1)]
GSTR-1 for a particular tax period is filed on or before the 10 th day of the
immediately succeeding tax period. In other words, GSTR-1 of a
month/quarter can be filed any time between 1 st and 10th day of the
succeeding month/quarter. The due date of filing GSTR-1 may be extended
by the Commissioner/ Commissioner of State GST/ Commissioner of UTGST
for a class of taxable persons by way of a notification.
The time limit for furnishing the details of outward supplies in Form GSTR-1
is extended4 as follows:
4
vide Notification No. 83/2020 CT dated 10.11.2020

& More
Class of registered person Time limit for furnishing the details

of outward supplies in Form GSTR-1
for each quarter/month
Registered persons opting for 13th day of the month succeeding

QRMP scheme5 such quarter
Others 11th day of the month succeeding

such month
(iv) Invoice Furnishing Facility [IFF] for taxpayers opting for QRMP
Scheme [Sub-rules (2) and (3) of rule 59]
Invoice Furnishing Facility (IFF) is a facility provided to quarterly
taxpayers who are in QRMP scheme, to file their details of outward
supplies in first two months of the quarter, to pass on the credit to their
recipients.
Invoice furnishing facility (IFF) is not mandatory, but an optional facility made
available to the registered persons under the QRMP scheme. At his option, a
registered person may choose to furnish the details of outward supplies made
during a quarter in Form GSTR-1 only, without using the IFF.
The facility of furnishing details of invoices in IFF has been provided so as to
allow details of such supplies to be duly reflected in the Form GSTR-2A and
Form GSTR-2B of the concerned recipient. Otherwise, in case where a buyer
has made purchases from a person opting for QRMP scheme, he could not
have claimed full ITC but due to introduction of IFF, such delay will not occur
as the details submitted using IFF will be reflected in the GSTR-2A, GSTR-2B,
GSTR-4A or GSTR-6A6 of the recipients, as the case may be.
Taxpayers opting for QRMP Scheme may furnish the details of such
outward supplies to a registered person, as he may consider necessary, for
the 1st and 2nd months of a quarter, upto a cumulative value of ` 50 lakh in
5
QRMP scheme - a Quarterly Return scheme where payment has to be made on monthly basis -
has been discussed in detail subsequently in this chapter.
6
Form GSTR-6A is the system generated statement of inward supplies for an ISD. Provisions
relating to ISD are discussed in detail at the Final level.

RETURNS 15.11
each of the first 2 months of the quarter using IFF electronically on the
common portal. However, invoices pertaining to last month of a quarter are
to be uploaded in GSTR-1 only.
The invoices are to be furnished in IFF between the 1 st day of the succeeding
month till the 13th day of the succeeding month. After 13 th of the month, this
facility for furnishing IFF for previous month would not be available. As a
facilitation measure, continuous upload of invoices would also be provided
for the registered persons wherein they can save the invoices in IFF from the
1st day of the month till 13 th day of the succeeding month.
The said facility would however be available, say for the month of July, from
1st August till 13th August. Similarly, for the month of August, the said facility
will be available from 1 st September till 13 th September.
The details of invoices furnished using IFF in the first 2 months of the quarter
are not required to be furnished again in GSTR-1 for the said quarter.
(1) A registered person who has availed the QRMP scheme wants
to declare 2 invoices out of the total 10 invoices issued in the 1 st
month of quarter since the recipient of supplies covered by those
2 invoices desires to avail ITC in that month itself. Details of these 2 invoices
may be furnished using IFF.
The details of the remaining 8 invoices shall be furnished in Form GSTR-1 of
the said quarter. The two invoices furnished in IFF shall be reflected in Form
GSTR-2B of the concerned recipient of the 1 st month of the quarter and
remaining 8 invoices furnished in Form GSTR-1 shall be reflected in Form
GSTR-2B of the concerned recipient of the last month of the quarter.
However, if a registered person does not opt to upload invoices using IFF,
then he has to upload invoice details for all the 3 months of the quarter in
Form GSTR-1.
(v) What are the cases where a registered person is debarred from
furnishing details of outward supplies in GSTR-1/IFF? [Section
37(4) read with rule 59(6)]
A registered person shall not be allowed to furnish the details of outward
supplies for a tax period, if the details of outward supplies for any of the
previous tax periods has not been furnished by him.

& More
However, the Government may, on the recommendations of the Council,

by notification, subject to such conditions and restrictions as may be
specified therein, allow a registered person or a class of registered
persons to furnish the details of outward supplies, even if he has not
furnished the details of outward supplies for one or more previous tax
periods [Section 37(4)].
In this regard, rule 59(6) stipulates that:
(i) a registered person shall not be allowed to furnish the details of
outward supplies in Form GSTR-1, if he has not furnished the return in
Form GSTR-3B for the preceding month.
(ii) a registered person, opting for QRMP scheme shall not be allowed to
furnish the details of outward supplies in Form GSTR-1 or using IFF, if
he has not furnished the return in Form GSTR-3B for preceding tax
period.
(iii) a registered person, to whom an intimation has been issued on the

common portal under the provisions of rule 88C(1) in respect of a
tax period, shall not be allowed to furnish the details of outward
supplies in Form GSTR-1 or using IFF for a subsequent tax period,
unless he has either deposited the amount specified in the said
intimation or has furnished a reply explaining the reasons for any
amount remaining unpaid, as required under the provisions of rule
88C(2). Rule 88C has been discussed subsequently in this chapter.
A taxpayer cannot file GSTR-1 before the end of the current tax
period.
However, following are the exceptions to this rule:
a. Casual taxpayers, after the closure of their business
b. Cancellation of GSTIN of a normal taxpayer
A taxpayer who has applied for cancellation of registration will be
allowed to file GSTR-1 after confirming receipt of the application.

RETURNS 15.13
(vi) What are the contents of GSTR-1?
CONTENTS OF GSTR- 1
Basic & Other Details Details of Outward Supplies

• GSTIN • B2B including UIN holders
• Legal name • B2C inter-State supplies where
• Trade name, if any invoice value  ` 2.5 lakh
• Aggregate turnover in • Consolidated details of other
previous year B2C supplies
• Year and Month • Zero rated and Deemed
• HSN-wise summary of exports
outward supplies • Debit/ Credit notes issued
• Details of documents issued • Nil rated/ Exempted/ Non-
during the tax period GST
• Amendments for prior period
• Advances received/advances
adjusted
GST is a destination-based consumption tax. Hence, the tax

revenue is transferred to the State which is the place of
supply7 of the particular transaction. Since, the place of
supply is crucial for determining the share of every State in the tax
revenue, GSTR-1 also captures information relating to place of supply.
(vii) What kind of details of outward supplies are required to be

furnished in GSTR-1 and IFF? [Explanation to section 37 read
with sub-rules (4) and (5) of rule 59]
Uploading of invoices in IFF and GSTR-1 depends on whether the supply is
B2B or B2C. Further, uploading of invoice in GSTR-1 also depends on whether
the supply is intra-State or inter-State. Let us first understand what is B2B
supply and what is B2C supply?
7Principles determining the place of supply as contained in sections 10 and 12 of the IGST Act have
been discussed in detail in Chapter 4 – Place of Supply in Module 1 of this Study Material.

& More
B2C means business to

B2B means business to
consumer transaction. In
business transaction. In
such type of transactions,
such type of transactions,
the recipient is consumer
the recipient is also a
or unregistered and
registered supplier and
hence, will not take or
hence, takes ITC.
cannot take ITC.
(A) Details of outward supplies required to be furnished in IFF

In the IFF, the registered person has to submit the B2B (business to
business) invoice details of both inter-State and intra-State supply
transactions along with debit and credit notes of the B2B invoices
issued during the month.
The details of outward supplies furnished using IFF shall include the –
(a) invoice wise details of inter-State and intra-State supplies made

to the registered persons;
(b) debit and credit notes, if any, issued during the month for such
invoices issued previously.
From the above discussion, it can be inferred that IFF shall include
invoices pertaining to B2B supplies irrespective of whether they are
intra-State or inter- State supplies. This is so because the recipients will
take ITC basis such invoices.
(B) Details of outward supplies required to be furnished in GSTR-1
The registered person is required to furnish details of invoices and

revised invoices issued in relation to supplies made by him to
registered and unregistered persons (i.e. B2B as well as B2C supplies)
and debit notes and credit notes in GSTR-1 in the following manner:

RETURNS 15.15
Sl. Invoice-wise* Consolidated details Debit and

No. details of ALL of ALL credit
notes
(i) Inter-State and Intra-State supplies Issued

Intra-State supplies made to unregistered during the
made to registered persons for each rate month for
persons, i.e. B2B of tax invoices
supplies. issued
previously
(ii) Inter-State Inter-State supplies

supplies made to made to unregistered
unregistered persons with invoice
persons with value upto ` 2,50,000
invoice value for each rate of tax
exceeding separately for each
` 2,50,000, i.e. B2C State
supplies
Form above discussion, it can be inferred that for B2B supplies, all
invoices need to be uploaded in GSTR-1 irrespective of whether they
are intra-State or inter- State supplies. This is so because the recipient
will take ITC basis such invoices.
For B2C supplies, uploading in general is not required as the buyer will
not be taking ITC. However, still in order to implement the destination-
based principle, invoices of value more than ` 2.5 lakh in inter-State B2C
supplies need to be uploaded. For inter-State invoices upto ` 2.5 lakh,
State wise summary is sufficient and for all intra-State invoices, only
consolidated details need to be given.
(2) Mr. XY makes intra-State taxable supplies for ` 10,000
and ` 50,000 to Mr. AB, a registered person and ` 1,00,000
to Mr. DE, an unregistered person. He also makes inter-State
taxable supplies for ` 2,60,000 and ` 45,000 to Mr. RS, a registered
person and ` 1,50,000 to Mr. OP, an unregistered person. Mr. XY will
report invoice-wise details of intra-State supplies made to Mr. AB and
inter-State supplies made to Mr. RS, in GSTR-1 to be filed by him.

& More
Invoices related details can be uploaded any time during the tax period
and not just at the time of filing of IFF/ GSTR-1.
Details related to invoices can be modified/deleted any number of times till

the submission of IFF/ GSTR-1 of a tax period. The uploaded invoice details
are in a draft version till the time IFF/GSTR-1 is submitted and can be changed
irrespective of due date.
Scanned copies of invoices are not required to be uploaded. Only

certain prescribed fields of information from invoices need to be
furnished e.g., invoice no., date, value, taxable value, rate of tax, amount
of tax etc. In case there is no consideration, but the activity is a supply
by virtue of Schedule I of CGST Act, the taxable value will have to be
worked out as prescribed and furnished.
Description of each item in the invoice need not be furnished. Only

HSN (Harmonized System of Nomenclature) code in respect of supply of
goods and accounting code in respect of supply of services need to be
fed.
Indication of HSN details

The minimum number of digits of HSN code that a filer has to upload depend
on his turnover in the last year.
HSN or HS (Harmonized Commodity Description and Coding

System) is a standardized system of nomenclature of
different goods developed by World Customs Organization,
which is accepted globally. HSN uses 6-digits uniform codes to classify
different goods. India uses eight-digits codes for more specific and
precise classification.

RETURNS 15.17
HSN would be disclosed as under 8:
Aggregate Annual turnover in Number of Digits of HSN Code

the preceding financial year
Upto ` 5 crore For B2B supply - 4

For B2C supply – 4 (optional)
More than ` 5 crore 6
(3) The turnovers of Yellow Lemon Pvt. Ltd., Red Pepper Pvt. Ltd.
and Blue Berry Pvt. Ltd. in the previous financial year are ` 1.5 crore,
` 4.8 crore and ` 6 crore respectively. While Yellow Lemon Pvt. Ltd.
and Red Pepper Pvt. Ltd. will be required to upload 4 digits of HSN code of
the goods sold to registered persons, uploading of 4 digits HSN code will be
optional for the two companies when the goods are sold to unregistered
persons. Blue Berry Pvt. Ltd. will have to upload 6 digits of HSN code of
goods sold by it.
(viii) How are the details of outward supply furnished in prior
periods amended? [Section 37(3)]
(a) Scope of amendment/ correction entries
Tables 9, 10 and 11(II) of GSTR-1 provide for amendments in details of
taxable outward supplies furnished in earlier periods (hereinafter
referred to as “Amendment Table”). The details of original debit notes/
credit notes / refund vouchers issued by the tax-payer in the current tax
period as also the revision in the debit notes/ credit notes / refund
vouchers issued in the earlier tax periods are required to be shown in
Table 9 of the GSTR-1.
Ordinarily, in Amendment Table, the supplier is required to give details
of original invoice (No and Date), the particulars of which have been
wrongly entered in GSTR-1 of the earlier months and are now sought
to be amended. However, it may happen that, a supplier altogether
forgets to include the entire original invoice while furnishing the
GSTR-1 for a particular month.
8

& More
In such cases also, he would be required to furnish the details of the

said missing invoice which was issued in earlier month in the
Amendment Table only, as such type of errors would also be regarded
as data entry error.
by way of
can be amended
Particulars Amendment
furnished Tables given
in GSTR-1 in GSTR-1 of
of prior subsequent
periods
periods
(b) Rectification of errors

If the supplier discovers any error or omission, he shall rectify the same
in the tax period during which such error or omission is noticed, and
pay the tax and interest, if any, in case there is short payment, in the
return to be furnished for such tax period.
(4) A supplier discovers a mistake in details of the invoice

furnished in GSTR-1 for the month of August, in October. He
can rectify the said mistake in the GSTR-1 for the month of
October.
(c) Time limit for rectification
In above example, suppose for some reason, supplier could not make
correction at the time of filing of GSTR-1 for the month of October then
he can make such amendments in the subsequent periods. However,
the maximum time limit within which such amendments are permissible
is earlier of the following dates:
❑ 30th day of November following the end of the financial year to
which such details pertain or
❑ Date of filing of the relevant annual return
(5) An entity has furnished the annual return for the previous
financial year on 15 th August in the current financial year. An
error is discovered in respect of a transaction pertaining to

RETURNS 15.19
the month of November of the previous financial year. In this case, any
error pertaining to the transaction in the month of November of the
previous financial year cannot be rectified beyond 15th August in the
current financial year.
It may be noted that, the expression ‘due date’ is missing in

time limit prescribed for making amendments u/s 37(3) [GSTR-1].
Therefore, such date apparently means actual date of filing and not
the due date.
(ix) Nil GSTR-1 [Rule 67A]

Filing of GSTR-1 is mandatory for all normal and casual taxpayers, even if
there is no business activity in any particular tax period. For such tax
period(s), a Nil GSTR-1 is required to be filed as prescribed under rule 67A.
A Nil GSTR-1 does not have any entry. For example, a Nil GSTR-1 for a tax
period cannot be filed, if the taxpayer has made any outward supply
(including exempt, nil rated or non-GST supplies), or it has received supplies
on which tax is payable under reverse charge or an amendment needs to be
made to any of the supplies declared in an earlier return or any credit or debit
notes is to be declared / amended etc.
A Nil GSTR-1 can be filed through an SMS using the registered mobile
number of the taxpayer. GSTR-1 submitted through SMS is verified by
registered mobile number-based OTP facility.
A taxpayer can file Nil GSTR-1, anytime from 1 st day of the month subsequent
of the tax period. For example, GSTR-1 for the calendar month of April, can
be filed from 1 st May onwards. GSTR-1 for the quarter of April to June can
be filed from 1st July onwards.
✪ Taxpayer opting for voluntary cancellation of GSTIN has to

file GSTR-1 for active period.
✪ In cases where a taxpayer has been converted from a normal taxpayer to
composition taxpayer at the beginning of any financial year, GSTR-1 will
be available for filing only for the period during which the taxpayer was
registered as normal taxpayer. The GSTR-1 for the said period, even if filed
with delay would accept invoices for the period prior to conversion.

& More
What are the precautions that a taxpayer is required to take for a hassle-free
compliance under GST?
One of the most important things under GST is the timely uploading of the details of
outward supplies in GSTR-1. How best this can be ensured will depend on the number
of B2B invoices that the taxpayer issues. If the number is small, the taxpayer can
upload all the information in one go. However, if the number of invoices is large, the
invoices (or debit/ credit notes) should be uploaded on a regular basis.
GST common portal allows regular uploading of details of invoices. Till the return is
actually submitted, the system also allows the taxpayer to
Regular modify the uploaded invoices’ details. Therefore, it would
uploading of always be beneficial for the taxpayers to regularly upload
invoices the invoices. Last minute rush makes uploading difficult
and comes with higher risk of possible failure and default.
The second thing would be to ensure that taxpayers
follow up on uploading the invoices of their inward Follow up with
supplies by their suppliers. This would be helpful in suppliers to upload
ensuring that the ITC is available without any hassle and the invoices of
delay. Recipients can also encourage their suppliers to inward supplies
upload their invoices on a regular basis instead of doing
it on or close to the due date. The system would allow
recipients to see if their suppliers have uploaded invoices pertaining to them.
4. COMMUNICATION OF DETAILS OF INWARD

SUPLIES AND INPUT TAX CREDIT
[SECTION 38 READ WITH RULE 60]
The details of outward supplies furnished by the registered persons under
section 37(1) and of such other supplies as may be prescribed, and an
Auto-Generated Statement containing the details of ITC shall be made
available electronically to the recipients of such supplies in such form and
manner, within such time, and subject to such conditions and restrictions as
may be prescribed.

RETURNS 15.21
(i) by any registered person within such

(A) period of taking registration as may be
Details of inward prescribed
supplies in respect of
which ITC may be (ii) by any registered person, who has
available to the defaulted in payment of tax and where such
recipient default has continued for such period as
may be prescribed
(iii) by any registered person, the output

Auto- tax payable by whom in accordance with
generated
GSTR-1 furnished by him during such period,
(B) as may be prescribed, exceeds the output tax
statement paid by him during the said period by such
Details of supplies in
respect of which such limit as may be prescribed**
ITC cannot be availed,
whether wholly or (iv) by any registered person who,
partly, by the recipient, during such period as may be prescribed,
on account of the has availed ITC of an amount that exceeds
details of the said the credit that can be availed by him in
accordance with (A) , by such limit as may
supplies being
be prescribed
furnished under sub-
section (1) of section 37 (v) by any registered person, who has
defaulted in discharging his tax liability in
accordance with the provisions of section
49(12) subject to such conditions and
restrictions as may be prescribed; or
(vi) by such other class of persons as

may be prescribed
**Rule 88C provides the mechanism for dealing with difference in liability
reported in statement of outward supplies between Form GSTR-1 and Form GSTR-
3B. Accordingly, where the tax liability as per Form GSTR-1 for a tax period
exceeds the tax liability as per Form GSTR-3B for that period by more than a
specified extent, the registered person would be intimated on the portal of such
difference and be directed to either (i) pay the differential tax liability along with
interest, or (ii) explain the difference, within 7 days’ period.
Unless the taxpayer either deposits the amount specified in the said intimation
or furnishes a reply explaining the reasons for any amount remaining unpaid,
such a person should not be allowed to file Form GSTR-1/ IFF for the subsequent
tax period.

& More
Rule 88C reads as follows:

Where the tax payable by a registered person, in accordance with the statement
of outward supplies furnished by him in Form GSTR-1 or using the IFF in respect
of a tax period, exceeds the amount of tax payable by such person in accordance
with the return for that period furnished by him in Form GSTR-3B, by such amount
and such percentage, as may be recommended by the Council, the said registered
person shall be intimated of such difference.
Such registered person shall be intimated in prescribed form, electronically on the
common portal, and a copy of such intimation shall also be sent to his e-mail
address*.
In said intimation, the said difference between GSTR-1 and GSTR-3B will be
highlighted and he will be directed to:
(a) pay the differential tax liability, along with interest under section 50,
through prescribed form; or
(b) explain the aforesaid difference in tax payable on the common portal,
within a period of 7 days.
*email address which registered person has provided at the time of registration or as
amended from time to time
Such registered person shall, upon receipt of the aforesaid intimation, either:
(a) pay the amount of the differential tax liability, as specified in intimation,
fully or partially, along with interest under section 50, and furnish the
details thereof electronically on the common portal; or
(b) furnish a reply electronically on the common portal, incorporating reasons
in respect of that part of the differential tax liability that has remained
unpaid, if any,
within the period of 7 days.
Where any amount specified in the said intimation remains unpaid within 7 days’
period and where no explanation or reason is furnished by the registered person
in default or where the explanation or reason furnished by such person is not
found to be acceptable by the proper officer, the said amount shall be recoverable
in accordance with the provisions of section 799.
9
Provisions of section 79 – Recovery of tax - has been discussed at the Final level.

RETURNS 15.23
Form and manner of ascertaining details of inward supplies – GSTR-

2A and GSTR-2B
Form GSTR-2A
Form GSTR-2A - is a system generated read only statement
of inward supplies for a recipient. This statement is updated on
a real time basis.
Details of outward supplies furnished by the supplier in Form GSTR-1 or using the
IFF is made available electronically to the concerned registered persons (recipients)
in Form GSTR-2A. Further, Form GSTR-4A is the system generated statement of
inward supplies for composition taxpayer 10.
Details of invoices furnished by a non-resident taxable person (NRTP) in Form
GSTR-511, details of TDS by deductor furnished in Form GSTR-7 and details of TCS
by an e-commerce operator furnished in Form GSTR-8, are made available to the
recipient, deductee or concerned person, in Form GSTR-2A.
Further, details of the IGST paid on the import of goods or goods brought in DTA
from SEZ unit/developer on a bill of entry are also made available in
Form GSTR-2A.
The details become available to the recipient for view/download and are updated
incrementally as and when supplier(s) upload or change details in their respective
form of return/statement, for the given tax period.
Form GSTR-2B
Form GSTR-2B – an auto-generated statement containing the
details of eligible ITC - is made available to the registered
person (recipient) for every month.
It is a static statement and is available only once a month.
10
System generated statement of inward supplies for an ISD is GSTR-6A. Provisions relating to
ISD are discussed in detail at the Final level.
11
Details of invoices furnished by an ISD in Form GSTR-6 are also made available to a recipient
in GSTR-2A.

& More
It consists of –
(i) the details of outward supplies furnished by the suppliers in Form GSTR-1,
other than a supplier who has opted for QRMP scheme, between the day
immediately after the due date of furnishing of Form GSTR-1 for the previous
month to the due date of furnishing of Form GSTR-1 for the month.
(ii) the details of invoices furnished by a non-resident taxable person in GSTR-512

and the details of outward supplies furnished by his supplier who has opted
for QRMP scheme, in Form GSTR-1 or using the IFF, as the case may be,-
(a) for the 1 st month of the quarter, between the day immediately after
the due date of furnishing of Form GSTR-1 for the preceding quarter to
the due date of furnishing details using the IFF for the 1 st month of the
quarter;
(b) for the 2 nd month of the quarter, between the day immediately after
the due date of furnishing details using the IFF for the 1 st month of the
quarter to the due date of furnishing details using the IFF for the 2 nd
month of the quarter;
(c) for the 3 rd month of the quarter, between the day immediately after
the due date of furnishing of details using the IFF for the 2 nd month of
the quarter to the due date of furnishing of Form GSTR-1 for the
quarter.
(iii) the details of IGST paid on the import of goods or goods brought in the DTA
from SEZ unit/developer on a bill of entry in the month.
Form GSTR-2B consists of all documents filed by suppliers/ISD in their Form GSTR-
1, 5 & 6, between the cut-off dates. It also consists of import data for the period
which are received within 13 th of the succeeding month.
In case of monthly Form GSTR-1, the cut-off date is 00:00 hours on
12th of the relevant month to 23:59 hours, on 11 th of the succeeding month.
Whereas for quarterly Form GSTR-1/IFF, Form GSTR-5 and Form GSTR-6, the cut-
off date is 00:00 hours on 14 th day of relevant month to 23:59 hours, on 13 th day of
succeeding month.
12
Details of invoices furnished by an ISD in his return in GSTR-6 are also reflected in GSTR-
2B. ISD provisions will be discussed at the Final level.

RETURNS 15.25
The details filed in Form GSTR-1 & 5 (by supplier) & Form GSTR-6 (by ISD) would
reflect in the next open Form GSTR-2B of the recipient irrespective of
supplier’s/ISD’s date of filing.
(6) If a supplier opting for QRMP files an invoice dated 15 th July on 13th
August, it will get reflected in GSTR-2B of July (generated on 14 th
August).
The statement in Form GSTR-2B for every month shall be made available to the
registered person,-
(a) for the 1 st and 2 nd month of a quarter, a day after the due date of furnishing
of details of outward supplies for the said month,
❑ in the IFF by a registered person opting for QRMP, or
❑ in Form GSTR-1 by a registered person other than opting for QRMP,
whichever is later.
(b) in the 3 rd month of the quarter, a day after the due date of furnishing of
details of outward supplies for the said month, in Form GSTR-1 by a
registered person opting for QRMP.
(7) For the quarter July-September, Form GSTR-2B for a registered
person (recipient) who has received supplies from QRMP suppliers
as well as from other suppliers will be generated as follows:
Month Date of generation of GSTR 2B
July 14th August
August 14th September
September 14th October

& More
5. FURNISHING OF RETURNS UNDER SECTION 39

1. GSTR-3B [Section 39(1) read with rule 61 & 61A]
(a) Person eligible to file return [Section 39(1)]
Section 39(1) prescribes a monthly return for every
registered person, other than an input service
distributor or a non-resident taxable person or a
composition taxpayer, a person deducting tax at
source, a person collecting tax at source, i.e. an GSTR-3B
electronic commerce operator and supplier of
OIDAR services located in non-taxable territory
providing such services to non-taxable online
recipient in such form and manner, and within such time, as may be
prescribed.
However, the Government may, on the recommendations of the Council,
notify certain class of registered persons who shall furnish a return for every
quarter or part thereof, subject to the specified conditions and restrictions.
Under this proviso, QRMP scheme has been notified which has been
discussed in subsequent paras.
(b) Return to be filed in Form GSTR-3B
GSTR-3B is the form prescribed for filing return under section 39. It contains
summary of outward supplies, inward supplies liable to reverse charge,
eligible ITC, payment of tax etc. Thus, GSTR-3B does not require invoice-wise
data of outward supplies.
GSTR-3B can be submitted electronically through the common portal, either
directly or through a Facilitation Centre notified by the Commissioner.
Further, a Nil GSTR-3B can be filed through an SMS using the registered
mobile number of the taxpayer. GSTR-3B can be filed monthly or quarterly.
(c) Due date for filing return
(1) Monthly GSTR-3B -on or before 20th of the month succeeding the
month for which return is furnished.
(2) Quarterly GSTR-3B- on or before 22nd or 24th of the month
succeeding the quarter for which return is furnished in case of a
taxpayer opting for QRMP scheme - (discussed below).

RETURNS 15.27
(d) Quarterly Return Monthly Payment (QRMP) Scheme

Quarterly Return Monthly Payment (QRMP) Scheme is a trade facilitation
measure which
further eases the
process of doing
business.
QRMP Scheme is an optional return filing scheme, introduced for small
taxpayers having aggregate annual turnover (PAN based) of upto ` 5 crore in
the preceding financial year to furnish their Form GSTR-1 and Form GSTR-
3B on a quarterly basis while paying their tax on a monthly basis through
a simple challan.
This will significantly reduce the compliance burden on such taxpayers as now
the taxpayers need to file only 4 GSTR-3B returns instead of 12 GSTR-3B
returns in a year. Similarly, they would be required to file only 4 GSTR-1
returns since Invoice Filing Facility (IFF) is provided under this scheme.
Opting of QRMP scheme is GSTIN
wise. Distinct persons can avail
QRMP scheme option for one or
more GSTINs. It implies that some GSTINs for a PAN can opt for the QRMP
scheme and remaining GSTINs may not opt for the said scheme.
(A) Eligibility for QRMP scheme
Registered persons13, having an aggregate turnover up to ` 5 crore in
the preceding financial year, and who have opted to furnish quarterly
return under QRMP scheme14 as the class of persons who shall furnish a
return for every quarter and pay the tax due every month 15.
Thus, the taxpayers whose aggregate turnover is up to ` 5 crore in the
preceding financial year are eligible for QRMP scheme. For computing
aggregate turnover, details furnished in returns for tax periods in the
preceding financial year shall be taken into account.
13
other than supplier of online information and database access or retrieval services (OIDAR)
located in non-taxable territory and providing such services to a non-taxable online recipient
14
opted under rule 61A of the CGST Rules, 2017
15
in accordance with the proviso to section 39(7)

& More
Condition to be fulfilled for becoming eligible to opt for QRMP

scheme
Registered persons under QRMP scheme must have furnished the
return for the preceding month, as due on the date of exercising such
option. A registered person shall not be eligible to opt for QRMP
scheme if he has not furnished the last return due on the date of
exercising such option.
(8) If a registered person intending to avail of QRMP scheme
for the quarter ‘July to September’ is exercising his option
on 27 th July for the said quarter, he must have furnished the
return for the month of June which was due on 20th July.
(B) Manner of exercising option of QRMP scheme
A registered person intending to opt for QRMP scheme for any quarter
shall indicate his preference for furnishing of return on a quarterly basis
from 1st day of the 2 nd month of the preceding quarter till the last day
of the 1 st month of the quarter for which the option is being exercised.
(9) A registered person intending to avail of QRMP scheme
for the quarter ‘July to September’ can exercise his option
from 1st May to 31 st July.
No need to exercise option every quarter
Registered persons under QRMP scheme are not required to exercise
the option every quarter. Where such option has been exercised once,
they shall continue to furnish the return as per the selected option for
future tax periods, unless they revise the said option.
Further, where such option has been exercised once, the said registered
person shall continue to furnish the return on a quarterly basis for
future tax periods, unless he–
(a) becomes ineligible for this scheme as per the conditions and
restrictions notified in this regard; or
(b) opts for furnishing of return on a monthly basis, electronically, on
the common portal.

RETURNS 15.29
(C) Option of QRMP scheme to lapse

In case where a registered person’s aggregate turnover crosses ` 5 crore
during a quarter in a financial year, he shall not be eligible for furnishing
of return on quarterly basis from the first month of the succeeding quarter.
He shall opt for furnishing of return on a monthly basis, electronically, on
the common portal, from the first month of the quarter, succeeding the
quarter during which his aggregate turnover exceeds ` 5 crore.
The facility for opting out of the scheme for a quarter will be available
from 1st day of 2 nd month of preceding quarter to the last day of the 1 st
month of the quarter.
(D) Form and manner of filing return – GSTR-3B under QRMP scheme
Due date for filing return in case of a taxpayer opting for QRMP
scheme - Quarterly GSTR-3B on or before 22 nd or 24th of the month
succeeding the quarter for which return is furnished (Refer the Table
given below for details**).
**Due dates for taxpayers opting for QRMP scheme
Class of registered persons Due date

Registered persons whose principal place of 22nd day of the
business is in the States of Chhattisgarh, month
Madhya Pradesh, Gujarat, Maharashtra, succeeding such
Karnataka, Goa, Kerala, Tamil Nadu, Telangana, quarter.
Andhra Pradesh, Union territories of Daman &
Diu & Dadra & Nagar Haveli, Puducherry,
Andaman and Nicobar Islands or
Lakshadweep.
Registered persons whose principal place of 24th day of the
business is in the States of Himachal Pradesh, month
Punjab, Uttarakhand, Haryana, Rajasthan, succeeding such
Uttar Pradesh, Bihar, Sikkim, Arunachal quarter.
Pradesh, Nagaland, Manipur, Mizoram,
Tripura, Meghalaya, Assam, West Bengal,
Jharkhand or Odisha, the Union territories of
Jammu and Kashmir, Ladakh, Chandigarh or
Delhi.

& More
(e) Nil GSTR-3B

Filing of GSTR-3B is mandatory for all normal and casual taxpayers, even if
there is no business activity in any particular tax period. For such tax
period(s), a Nil GSTR-3B is required to be filed.
A Nil GSTR-3B does not have any entry in any of its tables. For example, a Nil
GSTR-3B for a tax period cannot be filed, if the taxpayer has made any outward
supply (including nil-rated, exempt or non-GST supplies) or has received any
supplies which are taxable under reverse charge or it intends to take ITC etc.
A Nil GSTR-3B can be filed through an SMS using the registered mobile
number of the taxpayer. GSTR-3B submitted through SMS is verified by
registered mobile number-based OTP facility.
A taxpayer may file Nil GSTR-3B, anytime on or after the 1 st day of the
subsequent month/quarter for which the return is being filed for.
The broad contents of GSTR-3B are given below
CONTENTS OF GSTR- 3B
Basic Details Other details relating to supplies
• GSTIN • Summarised details of outward

supplies and inward supplies liable to
• Legal name of the
reverse charge
registered person
• Summarised details of inter-State
• Year and
supplies made to unregistered
Month/Quarter
persons, composition taxable persons
and UIN holders
• Eligible and ineligible ITC
• Values of exempt, nil-rated and non-
GST inward supplies
• Payment of tax
• TDS/TCS credit

RETURNS 15.31
(f) Rectification of errors/omissions [Section 39(9)]
If a return has been filed, how can

it be revised if some changes are
required to be made?
In GST since the returns are built from details of individual

transactions, there is no requirement for having a revised return. Any
need to revise a return may arise due to the need to change a set of
invoices or debit/ credit notes. Instead of revising the return already
submitted, the system allows changing the details of those
transactions (invoices or debit/credit notes) that are required to be
amended. They can be amended in any of the future GSTR- 1 in the
tables specifically provided therein for the purposes of amending
previously declared details.
Omission or incorrect particulars discovered in the returns filed u/s 39 can be
rectified in the return to be filed for the tax period during which such omission
or incorrect particulars are noticed.
Any tax payable as a result of such error or omission will be required to be
paid along with interest.
Exception
It is important to note that section 39(9) does not permit rectification of error
or omission discovered on account of scrutiny, audit, inspection or
enforcement activities by tax authorities.
Hence, assessee may not be able to pass on the ITC to the receiver in respect
of tax payments made by him in pursuance of any of the aforementioned
situations.

& More
Time limit for making rectification

The maximum time limit within which the rectification of errors/omissions is
permissible is earlier of the following dates:
❑ 30th day of November following the end of the financial year to which
such details pertain or
❑ Actual date of filing of the relevant annual return
The last date of filing of annual return for a financial year is 31 st December of
next financial year.
Hence, if annual return for a financial year is filed before 30th November (of
next financial year), then no rectification of errors/omissions in returns
pertaining to the said financial year would be permitted thereafter.
✪ A return furnished under section 39(1) on which self-assessed

tax has been paid in full is considered as a valid return.
✪ Filing of returns for current month is possible only when
returns for any of the previous tax periods and GSTR-1 for the said tax
period has been furnished by him 16.
✪ A taxpayer needs to electronically sign the submitted returns otherwise
it will be considered not-filed.
✪ Taxpayers can electronically sign their returns using a DSC (mandatory
for all types of companies and LLPs), E-sign (Aadhaar-based OTP
verification), or EVC (Electronic Verification Code sent to the registered
mobile number of the authorized signatory)
16
The Government may, on the recommendations of the Council, by notification, subject to
such conditions and restrictions as may be specified therein, allow a registered person or a
class of registered persons to furnish the return, even if he has not furnished the returns for
one or more previous tax periods or has not furnished the details of outward supplies under
sub-section (1) of section 37 for the said tax period [Proviso to section 39(10)].

RETURNS 15.33
2. GSTR-4 – Return for composition supplier [Section 39(2) and

second proviso to section 39(7) read with rule 62]
(a) Person eligible to file return, periodicity and form of return
A registered person paying tax under composition levy (provisions of
section 10), shall, for each financial year or part thereof, furnish a return,
electronically, of turnover in the State or Union territory, inward
supplies of goods and/or services, tax payable, tax paid and such other
particulars in such form and manner, and within such time, as may be
prescribed.
Every registered person paying tax under section
10, i.e. a composition supplier is required to file a
return on yearly basis in Form GSTR-4.
GSTR-4 for a financial year or part of a financial year
should be filed electronically through the common portal either directly
or through a Facilitation Centre notified by the Commissioner.
Quarterly statement for payment of self-assessed tax
Every composition supplier shall pay
to the Government, the tax due CMP-08-Statement for payment of self-assessed tax
taking into account turnover in the

State or Union territory, inward
supplies of goods or services or both,
tax payable, and such other
particulars during a quarter, in such
form and manner, and within such
time, as may be prescribed.
The composition supplier are required to furnish a statement in the
Form GST CMP-08 containing details of payment of self-assessed tax,
for every quarter (or part of the quarter), by 18 th day of the month
succeeding such quarter.

& More
While a composition supplier is required to file the

return GSTR-4 annually, he is required to pay the tax
quarterly.
(b) Due date for filing Form GSTR-4 and Form GST CMP-08
GSTR-4 for a financial year should be furnished by 30 th April of the
succeeding financial year.
Due date of filing By 30th day of April

GSTR-4 for a financial following the end of
year such financial year
GST CMP-08 (quarterly statement for payment of self-assessed tax)

should be furnished by 18 th day of the month succeeding such quarter.
Due date of filing GST By 18th day of the month

CMP-08 for a quarter succeeding such quarter
(c) What kind of details of outward supplies are required to be

furnished in GSTR-4?
GSTR-4 shall include the—
(a) invoice-wise inter-State and intra-State inward supplies received
from registered and unregistered persons; and
(b) consolidated details of outward supplies made.
(d) Auto-population of inward supplies
The inward supplies of a composition supplier received from registered
persons filing GSTR-1 will be auto populated in FORM GSTR-4A for
viewing.

RETURNS 15.35
The broad contents of GSTR-4 are given below.

CONTENTS OF GSTR- 4
Details regarding Inward and

Basic & Other Details
Outward Supplies
• GSTIN • Invoice-wise details of all inward
supplies (i.e., intra and inter-
• Legal name and Trade
State supplies and from
name
registered and unregistered
• TDS/TCS credit received persons) including reverse
[Table 7] charge supplies and import of
• Tax, interest, late fee services [Table 4]
payable and paid [Table 8] • Summary of self-assessed
• Refund claimed from liability as per GST CMP-08 (Net
Electronic cash ledger of advances, credit & debit notes
[Table 9] and any other adjustments due
to amendments etc.) [Table 5]
• Tax rate wise details of outward
supplies/inward supplies
attracting reverse charge (Net of
advances, credit & debit notes
and any other adjustments due
to amendments etc.) -
Consolidated details of outward
supplies [Table 6]
◪ Consolidated details of outward supplies
Composition taxpayers are neither entitled for any ITC nor entitled
to pass on any ITC to its customers. Therefore, composition
taxpayers are required to provide consolidated details of outward
supplies in GSTR-4 (Table 6) and not invoice-wise details.
However, details of inter-State and intra-State inward supplies
received from registered and un-registered persons are to be
provided invoice-wise (Table 4).

& More
◪ Tax liability
Since composition suppliers are not eligible to take ITC, they

discharge their tax liability only by debiting electronic cash ledger.
(e) Nil GST CMP-08 [Rule 67A]
Filing of GST CMP-08 is mandatory for all taxpayers who have opted to
pay tax under composition scheme, even if there is no business activity
in any particular tax period. For such tax period(s), a Nil GST CMP-08 is
required to be filed.
A Nil GST CMP-08 does not have any entry in any of its tables. For
example, a Nil GST CMP-08 for a tax period cannot be filed, if the
taxpayer has made any outward supplies or has received any supplies
which are taxable under reverse charge.
A Nil GST CMP-08 can be filed through an SMS using the registered
mobile number of the taxpayer. A Nil GST CMP-08 submitted through
SMS is verified by registered mobile number-based OTP facility.
(f) Statements/ return for the period prior to opting for

composition scheme
If a registered person opts to pay tax under composition scheme from

the beginning of a financial year, he will, where required, furnish
statements/return relating to the period prior to paying tax under
composition scheme till the
❑ due date of furnishing the return for the month of September of

the succeeding financial year, or
❑ furnishing of annual return of the preceding financial year,
The composition supplier will not be eligible to avail ITC on receipt of

invoices or debit notes from the supplier for the period prior to their
opting to pay tax under composition scheme.

RETURNS 15.37
(g) GSTR-4 for the period prior to exiting from composition scheme
A registered person opting to withdraw from the composition scheme
at his own motion or where option is withdrawn at the instance of the
proper officer will, where required, furnish-
(1) GST CMP-08 (2) GSTR-4
relating to the period prior to his exiting from composition

scheme
TILL
18th of the month succeeding 30th April following the end

the quarter in which the date of the financial year during
of withdrawal falls which such withdrawal falls
The provisions explained in points (f) and (g) above have been explained
by way of a diagram given at next page:
As per section 29(2), a proper officer is empowered to cancel

the registration of a taxable person if, inter alia,:
(a) a person paying tax under composition scheme has not
furnished his GSTR-4 for a financial year beyond 3 months
from the due date of furnishing the said return.
(b) any other taxable person has not furnished returns for such
continuous tax period as may be prescribed.

& More
Regular Composition taxpayer Regular

taxpayer taxpayer
Opting for composition scheme Exit from composition scheme
Statements/Return relating
to period prior to opting for GST CMP-08 for GSTR 4 for period
composition scheme to be period prior to prior to exit from
filed exit from composition
composition scheme to be
scheme to be filed by
filed by
till
 due date of furnishing
the return for the 30th April
18th day of the
month of September of following the
month
the succeeding end of the
succeeding the
financial year financial year
quarter in which
OR during which
the date of
 furnishing of annual such withdrawal
withdrawal falls
return of the preceding falls
financial year
WHICHEVER IS EARLIER
3. GSTR-5 - Return for Non-Resident Taxable Persons [Section

39(5) read with rule 63]
Non-Resident Taxable Persons (NRTPs) are those suppliers who do not have
a business establishment in India and have come for a short period to make
supplies in India. They would normally import their products into India and
make local supplies. The concept of Non-Resident Taxable Person has been
discussed in detail in Chapter 9 – Registration in this Module of the Study
Material.

RETURNS 15.39
(a) Monthly return

A registered NRTP is not required to file the Statement of Outward
Supplies and return which are otherwise applicable for a normal
taxpayer.
In place of the same, a simplified monthly tax
return has been prescribed in Form GSTR-5
for a NRTP for every calendar month or part
thereof. The details of outward supplies and
inward supplies of an NRTP are incorporated
in GSTR-5.
(b) Last date of filing return
GSTR-5 should be furnished within 13 days after the end of the
calendar month or within 7 days after the last day of validity period of
the registration, whichever is earlier 17.
(c) Payment of interest, penalty, fees or any other amount payable
An NRTP should pay the tax, interest, penalty, fees or any other amount
payable under the CGST Act or the provisions of the Returns Chapter
under CGST Rules till the last date of filing GSTR-5.
An NRTP is not
required to file
an annual return.
17
As per rule 63, GSTR-5 needs to be furnished within 20 days after the end of the tax period or
within 7 days after the last day of the validity period of registration, whichever is earlier.

& More
4. GSTR-7 - Return for tax deducted at source [Section 39(3) read

with rule 66]
Normally, whenever taxable goods or services or both are supplied to a Central/
State Government’s Department/ establishment or, local authority, or
Governmental agencies, recipient is required to deduct tax at source under
section 51 where the total value of such supply exceeds ` 2,50,000.
(a) Monthly return
Deductor shall furnish a monthly return in Form
GSTR-7.
(b) Last date of filing return
The details in GSTR-7 should be furnished on/before 10 th of the
month succeeding the calendar month in which tax has been
deducted at source.
(c) TDS details available to deductee on common portal
The details of TDS furnished by the deductor in GSTR-7 shall be made
available electronically to each of the deductees on the common portal
after filing of Form GSTR-7. The supplier can take this amount as credit
in his electronic cash ledger after validation and use the same for
payment of tax or any other liability.
(d) Tax Deduction at Source (TDS) Certificate
A TDS certificate is required to be issued by deductor (the person who
is deducting tax) in Form GSTR-7A to the deductee (the supplier from
whose payment, TDS is deducted), within 5 days of crediting the amount
to the Government. It contains the details pertaining to value on which
tax has been deducted, rate of deduction, amount of tax deducted at
source and amount paid to the Government.
6. DUE DATE FOR PAYMENT OF TAX [SECTION

39(7)]
Every registered person who is required to furnish a return under sub-section (1),
other than the person referred to in the proviso thereto, or sub-section (3) or
sub-section (5), shall pay to the Government the tax due as per such return not
later than the last date on which he is required to furnish such return.

RETURNS 15.41
However, every registered person furnishing return under QRMP scheme

shall pay to the Government, in such form and manner, and within such
time, as may be prescribed –
(a) an amount equal to the tax due taking into account inward and
outward supplies of goods or services or both, ITC availed, tax
payable and such other particulars during a month; or
(b) in lieu of the amount referred to in clause (a), an amount

determined in such manner and subject to such conditions and
restrictions as may be prescribed.
Due dates for payment of tax in respect of the persons required to file
monthly GSTR-3B, GSTR-5 and GSTR-7 are linked with the due dates for filing
of such returns, i.e. the last dates (due dates) of filing such returns are also
the due dates for payment of tax in respect of persons required to file such
returns.
However, due dates for payment of tax in respect of the persons required to
file quarterly GSTR-3B under QRMP Scheme for 1st two months of the quarter
is delinked. Every registered person under QRMP scheme shall pay the tax
due for each of the first 2 months of the quarter, by depositing the said
amount in, by the 25th day of the month succeeding such month.
Similarly, in case of registered persons paying tax under composition scheme,
the due date for payment of tax and filing of GSTR-4 is delinked. While GSTR-
4 for a financial year is required to be filed by 30 th April of the following year,
tax for a quarter is to be paid by 18 th of the month succeeding such quarter.
Further, NRTPs or casual taxable persons are required to make advance
deposit of an amount equivalent to their estimated tax liability for the period
for which registration is sought or extension of registration is sought in terms
of section 27(2).
Every registered person required to furnish return 18 shall, discharge their

liability towards tax, interest, penalty, fees or any other amount payable under
GST law by debiting the electronic cash ledger or electronic credit ledger and
include the details in the return.
18
subject to the provisions of section 49

& More
Monthly payment of tax under QRMP Scheme

The registered person under the
QRMP Scheme would be required to
pay the tax due in 1 st month or 2 nd
month or both the months of the
quarter by depositing the tax due 19. The payment is to be made by 25 th day
of the month succeeding such month.
However, the Commissioner may, on the recommendations of the Council, by
notification, extend the due date for depositing the said amount i, for
specified class of taxable persons. Further, any extension of time limit notified
by the Commissioner of State tax/UT shall be deemed to be notified by the
Commissioner:
While making a deposit of tax, such a registered person may –
(a) for the 1 st month of the quarter, take into account the balance in the
electronic cash ledger.
(b) for the 2 nd month of the quarter, take into account the balance in the
electronic cash ledger excluding the tax due for the 1st month.
At the time of filing the return for the said quarter in Form GSTR-3B, the
amount deposited by the registered person in the first 2 months of the
quarter shall be debited. This amount is debited solely for the purposes of
offsetting the liability furnished in that quarter’s Form GSTR-3B. However,
any amount left after filing of that quarter’s Form GSTR-3B may either be
claimed as refund or may be used for any other purpose in subsequent
quarters.
While generating the challan, taxpayers should select “Monthly payment for
quarterly taxpayer” as reason for generating the challan. The said person can
use any of the following two options provided below for monthly payment of
tax during the first 2 months –
19
under first proviso to sub-section (7) of section 39

RETURNS 15.43
Fixed sum method

Options for making monthly
payment of tax
Self-assessment method
(a) Fixed sum method: If a taxpayer chooses this option, a facility is

available on the GST portal for generating an auto-generated/pre-filled
challan in Form GST PMT-06. The challan amount is calculated by the
system which cannot be edited. The amount is equal to:
(i) 35% of the tax paid in cash in the return for the preceding
quarter where the return was furnished quarterly; or
(ii) tax liability paid in cash in the return for the last month of the
immediately preceding quarter where the return was furnished
monthly.
For easy understanding, the same is explained by way of examples given

below:
(i) In case the last return filed was on quarterly basis for quarter
ending March:
Tax paid in cash in Tax required to be paid in

quarter (January - each of the months – April
March) and May
CGST 100 CGST 35
SGST 100 SGST 35

IGST 500 IGST 175
Cess 50 Cess 17.5
(ii) In case the last return filed was monthly for tax period March:
Tax paid in cash Tax required to be paid in each of the

in March months – April and May
CGST 50 CGST 50

& More
SGST 50 SGST 50
IGST 80 IGST 80
Cess - Cess -
However, no such amount may be required to be deposited-

(a) for the 1 st month of the quarter, where the balance in the
electronic cash ledger/electronic credit ledger is adequate for the
tax liability for the said month or where there is nil tax liability;
(b) for the 2 nd month of the quarter, where the balance in the
electronic cash ledger/electronic credit ledger is adequate for the
cumulative tax liability for the 1 st and the 2 nd month of the quarter
or where there is nil tax liability
Monthly tax payment through this method would not be available
to those registered persons who have not furnished the return for
a complete tax period preceding such month.
A complete tax period means a tax period in which the person is
registered from the first day of the tax period till the last day of
the tax period.
(b) Self-Assessment Method: The said persons, in any case, can pay the
tax due by considering the tax liability on inward and outward supplies
and the ITC available, in Form GST PMT-06. In order to facilitate
ascertainment of the ITC available for the month, an auto-drafted input
tax credit statement has been made available in Form GSTR-2B, for
every month.
The registered person under QRMP is free to avail either of the two tax
payment methods above in any of the two months of the quarter.
As already discussed earlier, at the time of filing the return for a quarter in
Form GSTR-3B, the amount deposited by the registered person in the first 2
months of the quarter shall be debited. Further, any amount left after filing
of that quarter’s Form GSTR-3B may either be claimed as refund or may be
used for any other purpose in subsequent quarters.

RETURNS 15.45
However, such refund claim shall be permitted only after the return in Form
GSTR-3B for the said quarter has been furnished. Further, this deposit cannot
be used by the taxpayer for any other purpose till the filing of return for the
quarter.
Applicability of interest
A. For registered person making payment of tax by opting Fixed Sum
Method
No interest would be payable in case the tax due is paid in the first 2
months of the quarter by way of depositing auto-calculated fixed sum
amount (as discussed above) by the due date.
In other words, if while furnishing return in Form GSTR-3B, it is found
that in any or both of the first 2 months of the quarter, the tax liability
net of available credit on the supplies made /received was higher than
the amount paid in challan, then, no interest would be charged
provided they deposit system calculated amount for each of the first 2
months and discharge their entire liability for the quarter in Form GSTR-
3B of the quarter by the due date.
In case such payment of tax by depositing the system calculated
amount in Form GST PMT-06 is not done by due date, interest would
be payable at the applicable rate, from the due date of furnishing Form
GST PMT-06 till the date of making such payment.
Further, in case Form GSTR-3B for the quarter is furnished beyond the
due date, interest would be payable as per the provisions of section 50
for the tax liability net of ITC.
(10) A registered person, who has opted for the QRMP
Scheme, had paid a total amount of ` 100/- in cash as tax
liability in the previous quarter of October to December.
He opts to pay tax under fixed sum method. He therefore pays ` 35/-
each on 25th February and 25 th March for discharging tax liability for the
first 2 months of quarter viz. January and February.
In his return for the quarter, it is found that liability, based on the
outward and inward supplies, for January was ` 40/- and for February it
was ` 42/-. However, no interest would be payable for the lesser

& More
amount of tax (i.e. ` 5 and ` 7 respectively) discharged in these 2

months provided that he discharges his entire liability for the quarter in
the Form GSTR-3B of the quarter by the due date.
(11) A registered person, who has opted for the QRMP

Scheme, had paid a total amount of ` 100/- in cash as tax
liability in the previous quarter of October to December.
He opts to pay tax under fixed sum method. He therefore pays ` 35/-
each on 25th February and 25th March for discharging tax liability for the
first 2 months of quarter viz. January and February.
In his return for the quarter, it is found that total liability for the quarter
net of available credit was ` 125, but he files the return on 30 th April.
Interest would be payable at applicable rate on ` 55 [` 125 – ` 70
(deposit made in cash ledger in first and second month)] for the period
between due date of quarterly GSTR 3B and 30 th April.
B. For registered person making payment of tax by opting Self-

assessment method
Interest amount would be payable as per the provision of section 50 for
tax or any part thereof (net of ITC) which remains unpaid / paid beyond
the due date for the first 2 months of the quarter.
Interest payable, if any, shall be paid through Form GSTR-3B.
Note: It is clarified that no late fee is applicable for delay in payment of
tax in first 2 months of the quarter.
7. OTHER RETURNS/ STATEMENTS

(i) First return [Section 40]
When a person becomes liable to registration after his
turnover crosses the threshold limit, he may apply for
registration within 30 days of so becoming liable. Thus,
there might be a time lag between a person becoming
liable to registration and grant of registration certificate.
During the intervening period, such person might have made the outward

RETURNS 15.47
supplies, i.e. after becoming liable to registration but before grant of the
certificate of registration.
Now, in order to enable such registered person to declare the taxable supplies
made by him for the period between the date on which he became liable to
registration till the date on which registration has been granted so that ITC
can be availed by the recipient on such supplies, firstly, the registered person
may issue revised tax invoices against the invoices already issued during said
period within 1 month from the date of issuance of certificate of registration
[Section 31(3)(a) read with rule 53– Discussed in detail in Chapter-10: Tax
Invoice, Credit and Debit Notes]. Further, section 40 provides that registered
person shall declare his outward supplies made during said period in the first
return furnished by him after grant of registration. The format for this return
is the same as that for regular return.
(ii) GSTR – 8 - Statement for tax collection at source [Sub-sections
(3), (4), (6) and (7) of section 52 read with rule 67]
(a) Monthly statement
An ECO liable to collect tax at source shall
furnish a monthly statement in Form GSTR-8
electronically through the common portal.
Form GSTR-8 contains the details of supplies of
goods or services or both effected through
ECO, including the supplies of goods or
services or both returned through it and the amount of tax collected at
source.
(b) Last date of filing statement and for deposit of tax collected at
source
The details in GSTR-8 should be furnished on/before 10th of the month

succeeding the calendar month in which tax has been collected at
source.
The due date of filing GSTR-8 may be extended by the
Commissioner/Commissioner of State GST/Commissioner of UTGST for
a class of taxable persons by way of a notification.

& More
Further, the amount of tax collected by ECO (TCS amount) is also

required to be deposited by the 10 th of the month succeeding the
calendar month in which tax has been collected at source.
(c) TCS details available to suppliers on common portal and claiming
of TCS by suppliers
The details of TCS furnished by the ECO in GSTR-8 shall be made

available electronically to each of the suppliers who supplied goods
and/or services through ECO on the common portal after filing of GSTR-
8. The supplier can take this amount reflected in GSTR-8 as credit in his
electronic cash ledger after validation and use the same for payment of
tax or any other liability.
(d) Rectification of errors/omissions in GSTR-8
If after submission of GSTR-8, the ECO discovers any discrepancy
therein on his own - not being the result of any scrutiny, audit,
inspection or enforcement proceedings - he should rectify such
discrepancy in GSTR-8 to be filed for the month during which such
discrepancy is noticed, subject to payment of interest under section 50.
The rectification is not allowed after 30th November following the end
of the financial year or the actual date of filing of the relevant annual
statement [GSTR-9B], whichever is earlier.
(iii) GSTR – 9/9A and GSTR-9B - Annual Return [Sections 44, 52(5)
read with rule 80]
(a) Who is required to furnish the annual return and what is the due
date for the same?
All registered persons are required to
file an annual return. However,
following persons are not required to
GSTR-9
file annual return:
(i) Casual taxable persons
(ii) Non-resident taxable person

RETURNS 15.49
(iii) Input service distributors 20

(iv) Persons authorized to deduct/collect tax at source under
section 51/52, and
The Commissioner may, on the recommendations of the Council, by
notification, exempt any class of registered persons from filing
annual return under this section.
The annual return for a financial year needs to be filed by 31 st
December of the next financial year.
(b) What is the prescribed form for annual return/statement?
The annual return is to be filed electronically in Form GSTR-9
through the common portal.
Person registered under composition levy: A person paying tax
under composition scheme is required to file the annual return in
Form GSTR-9A.
It may be noted that an ECO required to collect tax at source is

required to file an annual statement referred to in section 52(5) in
Form GSTR-9B (yet to be notified). The statement for a financial
year needs to be filed by 31st December of the next financial year.
(c) Who is required to furnish a self-certified reconciliation statement?
(i) All registered persons are required to file furnish a self-
certified reconciliation statement alongwith annual return if
their aggregate turnover during a financial year exceeds ` 5
crores. However, following persons are not required to file
self-certified reconciliation statement:
(a) Casual taxable persons
(b) Non-resident taxable person
(c) Input service distributors
(d) Persons authorized to deduct/collect tax at source under
section 51/52, and
20
Provisions relating to ISD have been discussed at the Final level.

& More
(ii) Such registered person should furnish, electronically, the

annual return along with a copy of self-certified
reconciliation statement, duly certified, in Form GSTR-9C.
Self-certified reconciliation statement will reconcile the value of

supplies declared in the return furnished for the financial year with
the audited annual financial statement.
Value of supplies declared Value of supplies declared in audited

in Annual return Annual Financial Statement
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 an annual return including self-certified reconciliation statement.
(iv) GSTR - 10 - Final Return [Section 45 read with rule 81]
(a) Who is required to furnish final return?
Every registered person who is required to
furnish return u/s 39(1) and whose
registration has been surrendered or
cancelled is required to file a final return
electronically in Form GSTR-10 through
the common portal.
(b) What is the time-limit for furnishing final return?
The final return has to be filed within 3 months of the:
(i) date of cancellation
or
(ii) date of order of cancellation
whichever is later.

RETURNS 15.51
(v) GSTR – 11 - Details of inward supplies of persons having UIN

[Rule 82]
(a) When UIN is issued for claiming refund of taxes paid on inward
supplies
Such person shall furnish the details of those
inward supplies of taxable goods and/or services
on which refund of taxes has been claimed in
Form GSTR-11, along with application for
such refund claim.
(b) When UIN is issued for purposes other than refund of taxes paid
Such person shall furnish the details of inward supplies of taxable goods
and/or services as may be required by the proper officer in Form GSTR-
11.
8. DEFAULT/DELAY IN FURNISHING RETURN

[SECTIONS 46 & 47]
(i) Notice to return defaulters [Section 46 read with rule 68]
A notice in prescribed form is issued, electronically,

to a registered person who fails to furnish return
under section 39 [Normal Return] or section 44
[Annual Return] or section 45 [Final Return] or
section 52 [TCS Statement]. The notice requires the registered person to
furnish the return within 15 days, failing which the tax liability will be assessed
under section 62, based on the relevant material available with the proper
officer. In addition to tax so assessed, applicable interest and penalty will
also be payable.
(ii) Late fees for delay in filing return [Section 47]

Late fee is applicable for delay in furnishing of return / details of outward
supply as per the provision of section 47.
Delay in filing any of the following by their respective due dates, attracts late
fee as given hereunder:

& More
(A) Statement of Outward Supplies [Section 37]

(B) Returns (including returns under QRMP Scheme) [Section 39]
(C) Final Return [Section 45]
(D) TCS Statement [Section 52]
`100 for every day during

Quantum of late which such failure continues.
fee
` 5,000
It may be noted that the late fee payable by a registered

person for delayed filing of a return and/or annual return
under section 47 is with reference to only the CGST Act. An
equal amount of late fee is payable by such person under the respective
SGST/UTGST Act as well. Hence, the late fee amount mentioned herein
pertains to both CGST as well as SGST/UTGST.
Rationalisation of late fees for delayed filing of Forms GSTR-1, GSTR-3B,

GSTR-4, GSTR-7 and GSTR-9
The late fee can be waived off partially or fully by the Central Government
[Section 12821]. In view of this, late fees for delayed filing of Forms GSTR-1,
GSTR-3B, GSTR-4, GSTR-7 and GSTR-9 have been rationalized22 as follows:
(i) For delayed filing of GSTR-1 and/or GSTR-3B:-
Amount of late fee payable under section 47 by the registered person
who fail to furnish Form GSTR-1 and/or Form GSTR-3B by the due date,
shall be as follows:
21
Section 128 has been discussed at the Final level.
22
vide Notification No. 4/2018 CT dated 23.01.2018, Notification No. 73/2017 CT dated
29.12.2017, Notification No. 76/2018 CT dated 31.12.2018, Notification Nos 19-22/2021 CT all
dated 01.06.2021 and Notification No. 07/2023 CT dated 31.03.2023

(1) Registered persons who have nil ` 500 (` 250 each under CGST &
outward supplies in the tax period/ whose SGST/UTGST)
total amount of tax payable in the GSTR-
3B is Nil, as the case may be
` 20 (` 10 CGST + ` 10 SGST/UTGST) for every
day during which such failure continues
` 2,000 (` 1,000 each under CGST &

(2) Registered persons other than
SGST/UTGST)
those covered in (1) above whose
aggregate turnover ≤ ` 1.5 crores in
the preceding FY ` 50 (` 25 CGST + ` 25 SGST/UTGST) for every

` 5,000 (` 2,500 each under CGST &
(3) Registered persons other than
SGST/UTGST)
those covered in (1) above whose AT
in the preceding FY is:
` 5 crores ≥ AT> ` 1.5 crores, ` 50 (` 25 CGST + ` 25 SGST/UTGST) for every
RETURNS
Delayed filing of GSTR-1 and/or GSTR-3B

` 10,000 (` 5,000 each under CGST &
SGST/UTGST)
Registered persons whose
aggregate turnover >
` 5 crores in the preceding
15.53
` 50 (` 25 CGST + ` 25 SGST/UTGST) for every

FY
(ii) For delayed filing of GSTR-4:-
Amount of late fee payable under section 47 by a composition supplier who fails to furnish Form GSTR-
4 by the due date, shall be as follows:
Class of registered persons Quantum of late fee
15.54
` 500 (` 250 each under CGST &

(1) Total tax SGST/UTGST)
payable in
GSTR-4 is
Nil
` 20 (` 10 CGST + ` 10 SGST/UTGST) for every day
during which such failure continues

Where
(2) ` 2,000 (` 1,000 each under CGST &

Registered SGST/UTGST)
persons
GOODS AND SERVICES TAX
other than
those
covered in ` 50 (` 25 CGST + ` 25 SGST/UTGST) for every day
(1) above during which such failure continues
(iii) For delayed filing of GSTR-9:-
Class of registered persons Quantum of Late fee
` 50 per day (` 25 CGST + ` 25

Registered persons SGST/UTGST)
having aggregate
turnover ≤ ` 5 crores in 0.04 % of of turnover in the State or
the relevant FY Union territory (0.02% CGST + 0.02%
SGST/UTGST)
Registered persons having ` 100 per day (` 50 CGST + ` 50

following aggregate SGST/UTGST)
turnover:

` 5 crores < aggregate
turnover≤ ` 20 crores in the 0.04 % of turnover in the State or
relevant FY Union territory (0.02% CGST + 0.02%
SGST/UTGST)
` 200 for every day during which such failure
Delayed filing of Annual return

Registered persons continues (` 100 CGST + ` 100 SGST/UTGST)
RETURNS
having aggregate
turnover > ` 20 crores 0.50% of the turnover of the registered
in the relevant FY person in the State/Union Territory (0.25%
CGST + 0.25% SGST/UTGST)
15.55
(iv) For delayed filing of GSTR-7:-

Total amount of late fee payable under section 47 by any registered
person, required to deduct tax at source under the provisions of section
51 for delayed filing of GSTR-7, shall be as follows:
` 50 (`25 each
under CGST &
SGST/UTGST) for
every day during
Quantum of
which such failure
late fee
continues.
` 1,000
9. GOODS AND SERVICES TAX PRACTITIONERS

[SECTION 48]
Section 48 provides for the authorisation of an eligible person to act as approved
Goods and Services Tax Practitioner (GSTP). A registered person may authorise an
approved GSTP to furnish information, on his behalf, to the Government. The
manner of approval of GSTPs, their eligibility conditions, duties and obligations,
manner of removal and other conditions relevant for their functioning have been
prescribed in the rules 83, 83A and 84.
GSTN provides separate user ID and Password to GSTP to enable him to work on
behalf of his clients without asking for their user ID and passwords. They can do all
the work on behalf of taxpayers as allowed under GST Law. A taxpayer may choose
a different GSTP by simply unselecting the previous one and then choosing a new
GSTP on the GST portal.
Standardized formats have been prescribed for making application for enrolment
as GSTP, certificate of enrolment, show cause notice for disqualification, order of
rejection of application of enrolment, list of approved GSTPs, authorisation letter
and withdrawal of authorisation. A GSTP enrolled in any State or Union Territory
shall be treated as enrolled in the other States/Union territories.

RETURNS 15.57
(i) What is the eligibility criteria for GSTP?

The eligibility criteria for GSTP has been explained by way of diagrams given
at next page.
Indian citizen
Person of sound
mind
A
person
Not adjudicated as
who is insolvent
Not been convicted

by a competent court
satisfies any of the conditions
Retired officer of Commercial Tax Department of any State Govt./CBIC

who, during service under Government had worked in a post not lower
than the rank of a Group-B gazetted officer for a period ≥ 2 years
Enrolled as a Sales Tax Practitioner or Tax Return Preparer under the

earlier indirect tax laws for a period of not less than 5 years
Has acquired any of the prescribed qualifications (mentioned below)

& More
(i) Graduate or postgraduate degree or its equivalent examination having a degree

in Commerce, Law, Banking including Higher Auditing, or Business Administration
Prescribed Qualifications
or Business Management from any Indian University established by any law for the
time being in force
(ii) Degree examination of any Foreign University recognised by any Indian

University as equivalent to the degree examination mentioned in sub-clause (i)
(iii) Any other examination notified by the Government, on the recommendation

of the Council, for this purpose
(iv) Any degree examination of an Indian University or of any Foreign University

recognized by any Indian University as equivalent of the degree examination
(v) Has passed final examination of ICAI/ ICSI/ Institute of Cost Accountants of
India.
(ii) What are the activities which can be undertaken by a GSTP?

A GSTP can undertake any/all of the following activities on behalf of a
registered person, if so authorised by him:
Furnish Make deposit Furnish Furnish details

Furnish details
monthly, for credit into information for of challan in
of outward
annual or final electronic cash generation of the prescribed
supplies
return ledger e-way bill form
File an File an intimation

application for to pay tax under File an application
amendment or the composition File a claim for for amendment/
cancellation of scheme or refund cancellation of
enrolment withdraw from the registration
under rule 58 said scheme
Also allowed to appear as authorised

representative before any officer of
Department, Appellate Authority or Appellate Confirmation from the registered
Tribunal, on behalf of such a registered person person shall be sought
provided he is enrolled as GSTP under rule 83.

RETURNS 15.59
Furnishing returns through GSTP: When a registered person opts to furnish

his return through GSTP, such registered person:
Before confirming submission of any

Gives his consent in prescribed statement prepared by GSTP, ensures
form to any GSTP to prepare and that the facts mentioned in the return
furnish his return are true and correct.
Thus, the responsibility for correctness of any particulars furnished in the

return or other details filed by the GSTP continues to rest with the registered
person on whose behalf such return and details are furnished. The registered
person before confirming, should ensure that the facts mentioned in the
return are true and correct before signature. However, failure to respond to
request for confirmation is treated as deemed confirmation.
(iii) Other points
❑ A registered person gives his consent and authorises a GSTP in the
prescribed form by listing the authorised activities in which he intends
to authorise the GSTP. The GSTP accepts the authorisation in Part B of
the same form.
❑ The GSTP can undertake only such tasks as indicated in the prescribed
form. The registered person may, at any time, withdraw such
authorization.
❑ Any statement furnished by the GSTP is made available to the registered
person on the common portal. For every statement furnished by the
GSTP, a confirmation is sought from the registered person over email
or SMS.
❑ The GSTP should prepare all statements with due diligence and affix his
digital signature on the statements prepared by him or electronically
verify using his credentials.
❑ If the GSTP is found guilty of misconduct, his enrolment will be liable to
be cancelled and a show cause notice would be issued to him.

& More
(iv) What is the procedure for enrolment as GSTP?

The procedure for enrolment of GSTP has been depicted by way of a diagram
is given below:
ENROLMENT OF GSTP
An application in The application shall In case, the

prescribed form may be be scrutinised and application is
made electronically GST practitioner rejected, proper
through the common certificate shall be reasons shall
portal for enrolment as granted in the have to be
GSTP. prescribed form. given.
Any person who has been enrolled
as GSTP by virtue of him being No person enrolled
enrolled as a Sales Tax Practitioner or as a GSTP is eligible The enrolment
Tax Return Preparer under the earlier to remain enrolled once done
Indirect Tax law shall remain enrolled unless he passes remains valid
only for a period of 30 months from such examination till it is
the appointed date unless he passes conducted at such cancelled.
the said examination within the said periods by NACIN
period of 30 months.

RETURNS 15.61
LET US RECAPITULATE
1. Meaning of Returns
A statement of information furnished by the taxpayer,

to tax administrators, at regular intervals.
Return
Filing of returns constitutes the most important

compliance procedure which enables the
Government/ tax administrator to estimate the tax
collection for a particular period and determine the
correctness and completeness of the tax compliance
of the taxpayers.
2. Modes of filing returns

All the returns are to be filed online.
Modes of filing return
GSTN portal (www.gst.gov.in)
Offline utilities provided by GSTN
GST Suvidha Providers (GSPs)

& More
3. Furnishing details of outward supplies [Section 37 read

with rule 59]
Who is required to furnish the details of outward supplies?
Return of Outward supply of Goods
All registered persons including Casual registered

To be Filed by
person
Input Service Distributor (ISD)

and Services
Non-resident taxable person
Composition taxpayer
Exclusions
Person deducting tax at source
Person collecting tax at source
Supplier of OIDAR services located in non-taxable

territory providing services to non-taxable online
recipient
What is the form for submission of details of outward supplies?
FORM for filing Return of Outward Supply
GSTR-1
Can be furnished or through a

electronically on portal Facilitation centre

RETURNS 15.63
Due Dates for Submission of Form GSTR-1
Class of registered person Time limit for furnishing the details

of outward supplies in Form GSTR-1
for each quarter/month
Registered persons opting for 13th day of the month succeeding

QRMP scheme such quarter
Others 11th day of the month succeeding said

month
Invoice Furnishing Facility [IFF] for taxpayers opting for QRMP Scheme
an optional facility
provided to quarterly taxpayers who are in QRMP scheme,
to file their details of outward supplies in first 2 months of the

quarter,
IFF
between the 1st day of the succeeding month till the 13th day of
the succeeding month
upto a cumulative value of ` 50 lakh in each of the first 2

months of the quarter
to pass on the credit to their recipients

& More
What are the cases where a registered person is debarred from furnishing
details of outward supplies in GSTR-1/IFF?
Registered person not
return not furnished in Form GSTR-3B for the

GSTR-1
allowed to furnish
preceding month
person, opting for QRMP scheme, has not

furnished GSTR-3B for preceding tax period
GSTR-1/IFF
person to whom intimation has been
issued under rule 88C unless he deposits
the amount in intimation or furnishes a
reply explaining reasons for unpaid
amount
What kind of details of outward supplies are required to be furnished in

GSTR-1 and IFF?
Details to be furnished through IFF
Outward Taxable Supplies
B2B supplies
Inter-state Intra-state
supplies supplies
• Invoice-wise details of all supplies to be uploaded

• Debit/credit notes issued during the month for such
invoices issued previously to be uploaded

RETURNS 15.65
Details to be furnished in GSTR-1
Outward Taxable Supplies
B2B supplies B2C supplies
supplies supplies
supplies supplies
Rate-wise
Invoices > Invoices ≤ consolidated
` 2,50,000 details of all
Invoice-wise details ` 2,50,000
invoices to be
of all supplies to be
uploaded
uploaded
Invoice-wise details to State-wise rate-wise consolidated
be uploaded details to be uploaded
Rectification of errors in GSTR-1 filed for previous periods
by way of
Particulars Amendment
furnished Tables given
in GSTR-1 in GSTR-1 of
of prior subsequent
periods
periods
Maximum time limit within which such amendments are permissible is earlier
of the following dates:
❑ 30th day of November following the end of the financial year to which
such details pertain or
❑ Date of filing of the relevant annual return

& More
Filing of Nil GSTR-1
• Filing of GSTR-1 is mandatory for all normal

Nil GSTR-1 and casual taxpayers, even if there is no
business activity in any particular tax period.
4. Furnishing details of inward supplies [Section 38 read

with rule 60]
Details of inward who is a new registrant. (Specified

supplies in respect of period from taking registration will be
which ITC may be prescribed for this purpose.)
available to the
recipient
who has defaulted in payment of tax for
(A) a prescribed period.
whose output tax payable as per GSTR-

Auto- 1/IFF exceeds the output tax paid in
generated GSTR-3B for a particular tax period by
statement prescribed limit.
Details of supplies in
respect of which such
ITC cannot be availed, who has availed ITC of an amount that
whether wholly or exceeds the credit that can be availed by
partly, by the recipient, him as per GSTR-2B during prescribed
on account of the period and by prescribed limit.
details of the said
supplies being
furnished by a who has defaulted in discharging his tax
registered supplier liability in accordance with the
provisions of section 49(12) read with
rule 86B, i.e. who has discharged more
tax liability from electronic credit ledger
than prescribed under rule 86B.
other specified classes of persons

RETURNS 15.67
Form and manner of ascertaining details of inward supplies – GSTR-2A and

GSTR-2B
GSTR- 2A and its features
System generated read only statement of

Updated on Real Time basis
inward supplies
Reflects details of invoices furnished by a

Reflects details of invoices furnished by
non-resident taxable person in Form GSTR-
Input Service Distributor in Form GSTR-6
5
Reflects details of TDS by deductor Reflects details of TCS by an e-commerce

furnished in Form GSTR-7 operator furnished in Form GSTR-8
GSTR- 2B and its features
Auto-generated statement containing Available once a month

the details of eligible ITC
Reflects details of outward supplies

Static statement furnished by the suppliers in Form GSTR-1, 5
& 6, between the cut-off dates
Details of outward supplies furnished by Reflects details of IGST paid on the import
the supplier who has opted for QRMP of goods, goods brought in the DTA from
scheme, in Form GSTR-1 or using the IFF SEZ unit/developer
between the cut off dates

& More
5. Furnishing of returns under section 39
Return forms under section 39
GSTR-4 GSTR-5 GSTR-7

GSTR-3B
(For Composition (For Non-Resident (For Tax Deducted at
(For all registered persons)
Taxpayers) Taxable Persons Source)
excluding
ISD
NRTP
Composition taxpayer
Supplier of OIDAR services located in non-taxable territory providing

services to non-taxable online recipient
Due dates for furnishing Form GSTR-3B

GSTR-3B can be filed monthly or quarterly and due date for filing are as follows:
❖ Monthly GSTR-3B on or before 20th of the month succeeding the month for
which return is furnished.

RETURNS 15.69
❖ Quarterly GSTR-3B on or before 22nd and 24th of the month (Depending

upon State) succeeding the quarter for which return is furnished in case of a
taxpayer opting for QRMP scheme.
QRMP scheme
Optional return filing scheme
Quarterly Return
Monthly payment
•Taxpayers having aggregate turnover of up

Eligibility
to ` 5 crore in the preceding financial year
Condition to be fulfilled for •Taxpayer must have furnished the last return,
becoming eligible as due on the date of exercising such option
•Taxpayers can opt in for any quarter from 1st

Manner of Exercising day of 2nd month of preceding quarter to
option the last day of the first month of the quarter
for which the option is being exercised
•Taxpayers are not required to exercise their

option every quarter. Where such option has
Validity of option once been exercised once, they shall continue to
exercised furnish the return as per the selected option
for future tax periods, unless they revise the
said option.

& More
Opting of QRMP
Scheme is GSTIN wise A person may avail QRMP
scheme option for some
GSTIN(s) and not for other
GSTIN(s)
Opting out of the QRMP Scheme
•Aggregate turnover has exceeded ` 5 crore

Taxpayers opting out of the in the financial year
QRMP Scheme
Availability of facility of opting •Available from from 1st day of 2nd month of
out of QRMP Scheme for a preceding quarter to the last day of the first
quarter month of the quarter
Nil GSTR-3B
• Filing of GSTR-3B is mandatory for all normal

Nil GSTR-3B and casual taxpayers, even if there is no
business activity in any particular tax period.
3. Form GSTR-4 and GST CMP-08: For Composition dealers

❖ A composition supplier is required to file the return GSTR-4 annually
and is required to pay the tax quarterly in Form GST CMP-08.
Details to be Due Date:

furnished:
GSTR-4 By 30th day
(i) Invoice wise Frequency: of April
(Annual inward supplies Yearly following the
Return)
(ii) Consolidated end of such
outward supplies financial year

RETURNS 15.71
Details to be Due Date:

GST CMP-08
furnished:
(For quarterly Frequency: By 18th day of
Details of month
payment of Quarterly
payment of self- succeeding
tax)
assessed tax such quarter
Note:
(1) The inward supplies of a composition supplier received from registered
persons filing GSTR-1 will be auto populated in FORM GSTR-4A for
viewing.
(2) Filing of NIL GST CMP-08 is mandatory for all taxpayers who have opted
to pay tax under composition scheme if there is no business activity in
any tax period.
4. Form GSTR-5: For Non-Resident Taxable Person (NRTPs)
Due Date:
Details to be (i) within 13 days after
furnished: the end of the calendar
Frequency
month, or
GSTR-5
(i) Details of inward :
supplies (ii) within 7 days after the
Monthly
(ii) Details of last day of validity period
outward supplies of the registration
whichever is earlier
Note: A NRTP is not required to file an Annual Return.
5. Form GSTR-7: For Tax Deducted at Source (TDS)

❖ GSTR-7 is a return for tax deducted at source, whenever taxable goods
or services or both are supplied to a Central/ State Government’s
Department/ establishment or, local authority, or Governmental
agencies, recipient is required to deduct tax at source and total value
of supply exceeds ` 2,50,000.

& More
❖ GSTR-7A- Form for issue of TDS certificate by deductor to the

deductee.
GSTR-7 Frequency:
Due Date:
On/before 10th of the month succeeding
Monthly
(For TDS) the calendar month
7. Due date for payment of tax

Due dates for payment of tax for
the person required to file
Monthly GSTR-3B,
Last date of filing returns
GSTR-5 and GSTR-7
Tax for a quarter is to be paid by 18th of the month

GSTR-4
succeeding such quarter
Payment of tax under QRMP scheme
Tax due in each of the first 2 months of the quarter
To be paid by depositing in pre filled Form GST PMT-06
Payment to be made by 25th of the succeeding month
Options for making monthly payment of tax under QRMP scheme
Fixed sum method

Options for making monthly payment of tax
Self assessment method

RETURNS 15.73
Method 1: Fixed Sum Method
35% of the tax paid in cash in the

return for the preceding quarter
Pay tax due in where the return was furnished
each of the first quarterly
two months of
Fixed sum the quarter
method Tax liability paid in cash in the
Deposit in PMT- return for the last month of the
06 by 25th day immediately preceding quarter
of the month where the return was furnished
succeeding such monthly
month
Monthly tax payment through this method would not be available to those registered persons
who have not furnished the return for a complete tax period preceding such month.
Method 2: Self Assessment Method
Self assessment
method
Taxpayers can pay tax by considering

tax liability on inward and outward in Form GST PMT-06
supplies and ITC available
Applicability of Interest -
(1) For Fixed Sum method taxpayers
Where auto-calculated •No interest would be applicable even if the liability for
fixed sum amount for the said month was found higher
first 2 months of quarter •If GSTR-3B of the quarter is filed by the due date by
is paid by due date discharging the entire liability
Where tax payer makes
•Interest is payable at the applicable rate from due date
monthly payment
of furnishing GST PMT-06 till date of making payment
beyond due date
Where Form GSTR-3B is

•Interest payable as per provisions of section 50 of the
furnished beyond due
CGST Act, 2017 for the tax liability net of ITC
date

& More
(2) For Self-assessment method taxpayers
Interest payable as per provisions of section 50 of the CGST Act
for tax or any part thereof (net of ITC) which remains unpaid/ paid beyond
the due date
for the first 2 months of the quarter
8. Rectification of errors/omissions
Revision
of return
Rectification on
account of
Rectification scrutiny, audit,
in inspection or
subsequent enforcement
return activities
Maximum time limit for rectification

30th day of November of next FY
OR
Actual date of filing annual return

RETURNS 15.75
6. OTHER RETURNS/ STATEMENTS
(i) First return
Registered person to declare

First outward supplies in the period
Return between the date on which he after grant of
became liable to registration till registration
(GSTR-10) the date on which registration
has been granted
(ii) GSTR – 8 - Statement for tax collection at source
Statement Filed by:

Monthly statement for Due date:
for TCS E-Commerce Operator E-
10th of the
depicting supplies Commerce
(GSTR-8) effecting through it Operator
next month
(iii) Final return
Within 3 months of
Taxable person the date of
Final Return
whose registration
cancellation or date
has been
(GSTR-10) surrendered or of order of
cancelled. cancellation,
whichever is later.

& More
(iv) Annual Return & Annual Statement
Annual return
Furnished by:
Prescribed form
All registered
persons
GSTR-9
(For registered persons)
GSTR-9A
excluding
(Composition tax payer)
GSTR-9B
(ECO)
ISD
NRTP

RETURNS 15.77
Annual Self-certified Reconciliation Statement
All registered persons

Prescribed form
are required to file furnish the statement
alongwith annual return if their aggregate GSTR-9C
turnover during a financial year exceeds
` 5 crores.
excluding
ISD
NRTP
(v) GSTR – 11 - Details of inward supplies of persons having UIN
Persons who have been Details of inward

GSTR-11 issued a Unique Identity supplies of persons
Number (UIN) having UIN

& More
TEST YOUR KNOWLEDGE

1. Mr. X, a registered taxpayer under regular scheme, did not make any taxable
supply during the month of July.
Is he required to file a GSTR-3B if he is monthly filer?
2. If a return has been filed, how can it be revised if some changes are required to
be made?
3. “All taxpayers are required to file GSTR-1 only after the end of the tax period.”
4. Mr. Kohli is a registered supplier in the State of Gujarat. He is filing
GSTR-1 every month. During the month of February, he went out of India and
thus, could not do any business transaction during that month. He believes
that as there is no transaction, there is no need to file GSTR-1 for the month of
February.
Is he correct if he is a monthly filer? Explain.
5. Mr. Kalpesh is a registered dealer in Kerala paying tax under composition levy
from 1st April. However, he opts to pay tax under regular scheme from 1 st
December.
Is he liable to file GSTR-4 for the said F.Y. during which he opted out of
composition scheme? Discuss.
6. Mrs. Zarina, a registered dealer in Rajasthan, did not file GSTR-3B for the month
of June but she wants to file GSTR-3B for the month of July.
Is it possible? Answer with reference to section 39.
7. List the details of outward supplies which can be furnished using Invoice
Furnishing Facility (IFF).
8. A is a chartered accountant in practice and is registered under GST. On a query
regarding return filing process by a potential client, A has represented him as
a GST practitioner. A is of the view that since he is a qualified chartered

RETURNS 15.79
accountant with a GST registration in the name of his proprietorship firm, he

also qualifies as GST practitioner.
Is the understanding of A correct? Discuss.
9. Quicktax, a GST return filing service provider, has asked its clients to provide
the scanned copies of the tax invoices issued to B2B customers for uploading
on the GST portal and filing the return.
Whether the process followed by Quicktax is correct?
10. X Ltd., a normal taxpayer, is winding up its business in Rajasthan. The Tax
Consultant of X Ltd. has suggested that X Ltd. will have to file either the annual
return or the final return at the time of voluntary cancellation of registration in
the state of Rajasthan.
Do you agree with the stand taken by Tax Consultant of X Ltd.? Offer your
comments.
ANSWERS
1. A registered taxpayer is required to furnish a return u/s 39 for every month

(every quarter in case of quarterly filers) even if no supplies have been
effected during such period. In other words, filing of Nil GSTR-3B is also
mandatory.
Therefore, being a monthly filer, Mr. X is required to file GSTR-3B even if he
did not make any taxable supply during the month of July.
2. In GST since the returns are built from details of individual transactions, there
is no requirement for having a revised return. Any need to revise a return
may arise due to the need to change a set of invoices or debit/ credit notes.
Instead of revising the return already submitted, the system allows
amendment in the details of those individual details of those transactions
(invoices or debit/credit notes) that are required to be amended. They can
be amended in any of the future GSTR- 1 in the tables specifically provided
for the purposes of amending previously declared details.

& More
As per section 39(9), omission or incorrect particulars discovered in the

returns filed u/s 39 can be rectified in the return to be filed for the month
during which such omission or incorrect particulars are noticed. Any tax
payable as a result of such error or omission will be required to be paid along
with interest. The rectification of errors/omissions is carried out by entering
appropriate particulars in “Amendment Tables” contained in GSTR-1.
However, no such rectification of any omission or incorrect particulars is
allowed after the due date for furnishing of return for the month of
September or second quarter (in case of quarterly filers) following the end of
the financial year to which such details pertain, or the actual date of furnishing
of relevant annual return, whichever is earlier.
3. The statement is partially valid.
A taxpayer cannot file Form GSTR-1 before the end of the current tax period.
However, following are the exceptions to this rule:
a. Casual taxpayers, after the closure of their business
b. Cancellation of GSTIN of a normal taxpayer.
A taxpayer who has applied for cancellation of registration will be allowed to
file Form GSTR-1 after confirming receipt of the application.
4. No, Mr. Kohli is not correct. GSTR-1 needs to be filed even if there is no
business activity in the tax period. Therefore, in the given case, even though
Mr. Kohli was out of India and thus, could not do any business transaction
during the month of February, he is still required to file GSTR-1 for that
month.
5. Where a taxpayer opts to withdraw from the composition scheme, he has to

file GSTR-4 for the period for which he has paid tax under the composition
scheme. Such return is required to be furnished till 30th day of April following
the end of the financial year during which such withdrawal falls. Therefore, in
the given case, Mr. Kalpesh is liable to file GSTR-4 for the said F.Y. during
which he opted out of composition scheme by 30 th April of next F.Y.
6. As per section 39(10), a registered person is not allowed to furnish a return
for a tax period if the return for any of the previous tax periods has not been
furnished by him.

RETURNS 15.81
Therefore, in the given case, Mrs. Zarina cannot file GSTR-3B for July if she
has not filed GSTR-3B for the preceding month, i.e., June.
7. Details of outward supplies which can be furnished using IFF are as follows:
(a) invoice wise details of inter-State and intra-State supplies made to the
registered persons;
(b) debit and credit notes, if any, issued during the month for such invoices
issued previously.
8. The understanding of A is not correct.
A chartered accountant can become a GST practitioner (GSTP). However,
holding a certificate of practice as a chartered accountant and having GST
registration does not imply that such chartered accountant is a GST
practitioner as well. For becoming a GSTP, even a chartered accountant in
practice has to follow the enrolment process of GSTP as provided under the
GST law and only upon approval of such enrolment can a chartered
accountant represent himself as a GSTP.
9. No, the process followed by Quicktax is not correct.
The registered persons supplying goods or services to B2B customers are
required to upload the invoice wise details of supplies made during the tax
period. However, there is no requirement to upload the scanned copies of
the invoices issued to the customers on the GST portal at the time of filing
returns. Only information required as per the format of GST returns is to be
captured in the return filing utility and the same is to be uploaded on the GST
portal and not the scanned copies of the actual invoices.
10. No, the stand taken by Tax Consultant of X Ltd. is not correct.
Annual return is required to be filed by every registered person paying tax as
a normal taxpayer. Final return is filed by the registered persons who have
applied for cancellation of registration within three months of the date of
cancellation or the date of cancellation order.
In the given case, X Ltd., a registered person, is winding up its business and
has thus, applied for cancellation of registration. Therefore, it is required to
file both annual return and final return.

& More
•What is the due date for payment of tax by a composition supplier for a
1 particular quarter?
•Whether a composition supplier is required to file return quarterly or yearly?

2
•Who's the person who owns, operates or manages digital or electronic facility
3 or platform for electronic commerce?
•Determine whether Form GSTR-1 furnsihes the details of Inward supplies or

4 Outward supplies.
•Whether GSTR-2B is a real time updated statement or a static statement?

5
•Under IFF, what is the cumulative value of invoice in each of the 1st two
months of the quarter beyond which invoice wise details cannot be
6 submitted?
•Whether GSTR-2A is a real time updated statement or a static statement?

7
•How many GSTR-3B returns are to be submitted in a year by a person who

8 has opted for QRMP Scheme?
What is the due date for filing of return for the month in which tax has been
9 deducted at source by a TDS deductor?
•Which return is to be furnished by a registered person required to furnish

return under section 39(1) and whose registration has been surrendered or
10 cancelled?

RETURNS 15.83
CROSSWORD PUZZLE
ACROSS
2. Form GSTR-2B is a -------statement and is available only once a month.

8. All registered persons are required to file furnish a self-certified -------
statement alongwith annual return if their aggregate turnover during a
financial year exceeds ` 5 crores.
10. The late fees for delay in filing of GSTR-7 is ` 50 for every day during which
such failure continues or ` 1,000 whichever is--------.

& More
11. When there is no business activity in any particular tax period,------GSTR-1 is

to be filed.
DOWN
1. Form GSTR-2B contains the details of eligible-------.(Acronym)

3. ------- taxpayers are required to pay tax on quarterly basis in Form CMP-08.
4. A NRTP is not required to file an------ return.

5. A composition supplier is required to file a return on------ basis.
6. Every registered person who is required to furnish return u/s 39(1) and whose
registration has been surrendered is required to file a -------return.
7. A TDS certificate is required to be issued by deductor in Form GSTR-7A to the
deductee within ---- days of crediting the amount to the Government.
9. GSTR-3B does not require invoice-wise data of ----- supplies.
Scan the code

RETURNS 15.85
Most of the amendments made in the CGST Act and the IGST Act 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
30.04.2023. 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 23 of sections 37, 39, 44 and 52 of
the CGST Act are compared with the provisions as amended by the Finance Act,
2023.
is made by the ICAI, students should read the amended provisions given hereunder
in place of the related provisions discussed in the Chapter.

No. amended by the
Finance Act, 2023
37 Sub-section (5) New sub-section (5)

inserted in section 37 to be
A registered person inserted so as to
shall not be allowed provide a time limit
to furnish the upto which the
details of outward details of outward
supplies under sub- supplies for a tax
section (1) for a tax period can be
period after the furnished by a
expiry of a period of registered person.
three years from the Further, it also seeks
due date of to provide an
furnishing the said enabling provision
details: for extension of the
said time limit,
23
Provisions existing as on 30.04.2023

& More
Provided that the subject to certain

Government may, conditions and
on the restrictions, for a
recommendations registered person or
of the Council, by a class of registered
notification, subject persons.
to such conditions
and restrictions as
may be specified
therein, allow a
registered person or
a class of registered
persons to furnish
the details of
outward supplies
for a tax period
under sub-section
(1), even after the
expiry of the said
period of three
years from the due
date of furnishing
the said details.

to furnish a return upto which the return
for a tax period for a tax period can
after the expiry of a be furnished by a
period of three registered person.
years from the due Further, it also seeks
date of furnishing to provide an
the said enabling provision
return: for extension of the
said time limit,
Provided that the
subject to certain
Government may,
conditions and

RETURNS 15.87
on the restrictions, for a

recommendations registered person or
of the Council, by a class of registered
notification, subject persons.
to such conditions
and restrictions as
may be specified
therein, allow a
registered person or
a class of registered
persons to furnish
the return for a tax
period, even after
the expiry of the
said period of three
years from the due
date of furnishing
the said return.

to furnish an annual upto which the
return under sub- annual return under
section (1) for a sub-section (1) of the
financial year after said section for a
the expiry of a financial year can be
period of three furnished by a
years from the due registered person.
date of furnishing Further, it also seeks
the said annual to provide an
return: enabling provision
Provided that the for extension of the
Government may, said time limit,
on the subject to certain
recommendations conditions and
of the Council, by restrictions, for a

& More
notification, and registered person or

subject to such a class of registered
conditions and persons.
restrictions as may
be specified therein,
allow a registered
person or a class of
registered persons
to furnish an annual
return for a
financial year under
sub-section (1),
even after the
expiry of the said
period of three
years from the due
date of furnishing
the said annual
return.

The operator shall inserted so as to
not be allowed to provide a time limit
furnish a statement upto which
under sub-section Statement for Tax
(4) after the expiry Collected at Source
of a period of three for a month can be
years from the due furnished by an
date of furnishing electronic commerce
the said statement: operator. Further, it
Provided that the seeks to provide an
Government may, enabling provision
on the for extension of the
recommendations said time limit,
of the Council, by subject to certain
notification, subject conditions and
to such conditions restrictions, for an
electronic commerce

RETURNS 15.89
and restrictions as operator or a class of

may be specified electronic commerce
therein, allow an operators.
operator or a class
of operators to
furnish a statement
under sub-section
(4), even after the
expiry of the said
period of three
years from the due
date of furnishing
the said statement.

Note
The Study Material follows a systematic approach of
explaining the GST law by first extracting the statutory
provisions followed by their analysis. Students may note that
the provisions which do not form part of the syllabus are not
included in such statutory provisions. Such excluded
provisions can either be complete sections or rules or sub-
sections/sub-rules of sections/rules.
However, where a section/rule is included in the syllabus, but
contains reference to inter alia another section/rule which is
excluded from the syllabus, the entire section has been given
in the statutory provisions i.e., the reference to the excluded
section has not been removed while reproducing the statutory
provisions. While analysing the section, however, only the
relevant portion has been dealt with in detail.
The discussion on the GST law in this Study Material
incorporates the content and images made available by the
CBIC on its website www.cbic.gov.in namely, FAQs on GST, e-
flyers issued on various aspects of GST, sectoral FAQs as also
the user manuals and FAQs available on the GST common
portal www.gst.gov.in, to the extent relevant to such
discussion.



GST Full Book WWW - Capiyush.online

Uploaded by

Copyright:

Available Formats

GST Full Book WWW - Capiyush.online

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

GST Full Book WWW - Capiyush.online

Uploaded by

Copyright:

Available Formats

WWW.CAPIYUSH.

FOR 25+ EARNING ORIENTED PRACTICAL

Practical Earning Start Own Practice Or Simple Hindi

Huge GST Collection

LARGE NUMBER OF CLIENTS

After studying this Chapter, you will be able to:

© The Institute of Chartered Accountants of India

1.2 GOODS AND SERVICES TAX

Genesis of GST in india

Need for GST in India

Framework of GST as introduced in India

1. OVERVIEW OF TAXATION SYSTEM IN INDIA

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

1.4 GOODS AND SERVICES TAX

At Intermediate level, we will study the select provisions of

2. GENESIS OF GST IN INDIA

Subsequently, the then Union Finance Minister, Shri P. Chidambaram, while

© The Institute of Chartered Accountants of India

In the year 2000, the then Prime The Constitution

Announcement by Union 2014 The

© The Institute of Chartered Accountants of India

1.6 GOODS AND SERVICES TAX

© The Institute of Chartered Accountants of India

Manufacturer Distributor Retailer Consumer

Cost: 1,00,000 Cost: 1,00,000 Cost: 1,11,200 Cost: 1,60,291.2

Input Tax Input Tax Input Tax Input Tax

Paid to Paid to Paid to Tax Borne by

Value Addition = Value Addition= Value Addition= Value Addition=

© The Institute of Chartered Accountants of India

1.8 GOODS AND SERVICES TAX

4. NEED FOR GST IN INDIA

Deficiencies A cure for

© The Institute of Chartered Accountants of India

Assessable value of goods under excise law ` 1,000

Excise duty @ 12.5% ` 125

Taxable value for VAT ` 1,125

VAT @ 14.30% ` 160.88

Total invoice value ` 1,285.88

© The Institute of Chartered Accountants of India

1.10 GOODS AND SERVICES TAX

Non-inclusion of several Cascading of taxes on account of (i) levy

No CENVAT after Non-integration Double taxation of

© The Institute of Chartered Accountants of India

5. FRAMEWORK OF GST AS INTRODUCED IN

© The Institute of Chartered Accountants of India

1.12 GOODS AND SERVICES TAX

and collected by Union Territories without Legislatures, on intra-State

III. Legislative Framework

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

1.14 GOODS AND SERVICES TAX

the supplier is engaged exclusively in supply of goods, or exclusively in

States with States with threshold States with threshold

© The Institute of Chartered Accountants of India

It may be noted that ITC of CGST cannot be utilized for payment of

© The Institute of Chartered Accountants of India

1.16 GOODS AND SERVICES TAX

(i) Supply of goods/ services by A to B