Goods and


Services Tax

By:Adv.Samata Joshi
 
Definition and Concept
▪ GST is known as the Goods and Services Tax. It is an indirect tax which has
replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc.
The Goods and Service Tax Act was passed in the Parliament on 29th March 2017
and came into effect on 1st July 2017.

▪ In other words, Goods and Service Tax (GST) is levied on the supply of goods and
services. Goods and Services Tax Law in India is a comprehensive, multi-stage,
destination-based tax that is levied on every value addition. After subsuming
majority indirect taxes, GST is a single domestic indirect tax law for the entire
country.
▪ The motive
 has successfully helped the Indian Government achieve its ‘One Nation
One Tax’ agenda.

▪ GST is levied on the final market price of goods and services manufactured
internally, thereby reflecting the maximum retail price. Customers are required to
pay this tax on a purchase of goods or services as an inclusion in their final price.
Collected by the seller, it is then required to be paid to the government, thus
implying the indirect incidence.

▪ The GST rates on different goods and services are uniformly applied across the
country. Goods and services have, however, been categorised under different slab
rates for tax payment. While luxury and comfort goods are categorised under higher
slabs, necessities have been included in lower and nil slab rates. The main aim of
this classification is to ensure the uniform distribution of wealth among residents of
India.
 
Origin of GST

▪ The history of GST goes back as early as the year 1954, when it was first adopted by
France, followed by over 160 countries worldwide. Malaysia was one of the most recent
countries to adopt a valued-based tax system, GST, back in 2015. GST was first
introduced in India in 2017 when they decided to introduce a dual tax structure system.

▪ Back in 2000, the then Prime Minister of India introduced the concept of Goods and
Services Tax. He also formed a committee to draft new indirect tax law.

▪ It, however, took 17 more years for its implementation. Meanwhile, the bill went through
multiple introductions, amendments and rescheduling.
▪ 2000: Atal Bihari Vajpayee heads a committee led by Dr. Vijay Kelkar to lay out a
Goods and Services Tax (GST) model.

▪ 2004: The Kelkar Task Force recommends a comprehensive GST tool.

▪ 2006: GST idea was included in various budget speeches by then-Finance Minister P.
Chidambaram.

▪ 2009: The Empowered Committee of State Finance Ministers releases the first
dialogue paper on GST.

▪ 2011: To make GST more conceivable, a Constitution Amendment Bill was brought in
the Lok Sabha.

▪ 2014: The Constitution (122nd Amendment) Bill, 2014, was once again delivered in
Parliament.

▪ 2016: The bill is passed through both houses of parliament, after which it is enacted
after receiving the assent of the president.

▪ 2017: The GST was implemented on the 1st of July.

 Need of GST


▪ Our previous taxation system is very complex and very confusing also there are hidden
tax for exports, whereas no charge applicable on Importing of Goods/Services from one
state to another.

▪ Just to overcome these issues, Rajya Sabha introduced GST bill, which will bring
transparency to taxation and consumer will get to know how much tax amount they are
paying to government for sale/ purchase/ manufacturing.

▪ Imposing several taxes on goods and services was leading to high cost and inefficient tax
structure which can subject to shirking and revenue disclosures. The need for GST in
Indian Taxation System will add value at each stage and will set off the rates both at state
and at central level. Introducing GST, will increase the efficiency of taxation, improves the
economic growth and it will bring whole nation to one national market.
 Objective

▪ The key objectives of GST are-

▪ 'One Nation, One Tax’

GST took the place of many indirect taxes that existed before. It was introduced with a core motive and policy
called the 'One Nation, One Tax’. It was introduced as so to provide set tax rates for a service/product that every
state would follow. It even simplified administering taxes and compliances.

▪ To Subsume Indirect Taxes in India

To create a centralised and unified tax system on goods and services, GST was introduced in India. Under its
laws, the majority of indirect taxes were subsumed into one to simplify administration.

▪ Eliminating the Cascading Effect of Taxes

Before GST, businesses often faced the issue of 'tax on tax,' where the final consumer bore the burden of multiple
layers of taxation are included in the cost of goods and services. GST addresses this by implementing a
comprehensive input tax credit system, allowing businesses to claim credits for taxes paid on input services. This
mechanism significantly reduces the cascading effect, ensuring that tax is levied only on the value addition at each
stage of the supply chain, leading to lower costs for consumers and a more transparent taxation process
. Building a Common Market with Uniform Taxation

The Goods and Services Tax unifies India's market under a single tax regime. Doing so eliminates the
complex web  of state and central taxes that vary from one state to another. This law brought uniformity
in taxation which simplified the tax structure and also ensured that goods and services flow seamlessly
across state borders without additional tax burdens.

Eliminating the Cascading Effect of Taxes

Before GST, businesses often faced the issue of 'tax on tax,' where the final consumer bore the burden
of multiple layers of taxation are included in the cost of goods and services. GST addresses this by
implementing a comprehensive input tax credit system, allowing businesses to claim credits for taxes
paid on input services. This mechanism significantly reduces the cascading effect, ensuring that tax is
levied only on the value addition at each stage of the supply chain, leading to lower costs for consumers
and a more transparent taxation process.
 Constitutional Provision governing GST

▪ The Constitution contains the Union List and the State List within which the power to levy separate taxes is
given to the Centre and States respectively. GST was to be levied in such a way that both the Centre and the
States received the power to levy and collect it. Further, the legislation had to remain consistent across the
Centre and the various State/Union Territory Legislatures. To provide for this, an amendment in the
Constitution was necessary.

▪ Constitution (101st Amendment) Act, 2016

▪ In order to suitably implement the GST legislation, this Act resulted in the insertion, deletion and amendment
of certain Articles of the Constitution. The following matters were dealt with as a result of these changes:

▪ The delineation of powers to levy and make laws with respect to GST

▪ The applicability and scope of the GST law

▪ The manner of apportionment of revenue from GST among Centre and States

▪ The constitution, powers and duties of the GST Council

▪ The discontinuation of existing taxes to give way for GST

▪ The manner of providing compensation to States for loss of revenue on account of the introduction of GST
▪ Article 246A: Special Provision for GST

▪ This Article was newly inserted to give power to the Parliament and the respective State/Union Legislatures to make laws
on GST respectively imposed by each of them. However, the Parliament of India is given the exclusive power to make laws
with respect to inter-state supplies. The IGST Act deals with inter-state supplies. Thus, the power to make laws under the
IGST Act will rest exclusively with the Parliament. Further, the article excludes the following products from the scope of
GST until a date recommended by the GST Council:

▪ Petroleum Crude

▪ High-Speed Diesel

▪ Motor Spirit

▪ Natural Gas

▪ Aviation Turbine Fuel

▪ Article 269A: Levy and Collection of GST for Inter-State Supply

▪ While Article 246A gives the Parliament the exclusive power to make laws with respect to inter-state supplies, the manner
of distribution of revenue from such supplies between the Centre and the State is covered in Article 269A. It allows the
GST Council to frame rules in this regard. Import of goods or services will also be called as inter-state supplies. This gives
the Central Government the power to levy IGST on import transactions. Import of goods was subject to Countervailing Duty
(CVD) in the earlier scheme of taxation. IGST levy helps a taxpayer to avail the credit of IGST paid on import along the
supply chain, which was not possible before.
What is the GST Council?

Goods and Services Tax (GST) was rolled out in the country through the 101st Act, 2016.
Consequently, the President constituted the GST council under Article 279A to make
recommendations on important GST-related issues.

As per Article 279A, a GST Council is a joint forum of the center and the states and is
responsible for taking all major decisions related to GST. Subsequently, the union cabinet
approved the first GST council on 12th September 2016, along with the setting up of the
GST Council secretariat in New Delhi.
What is the Structure of the GST Council?
Presently, the GST council consists of 33 members. As per Article 279A, a GST Council will have
the following members:

The Union Finance Minister as the chairperson of the GST Council

The Union Minister of State in charge of revenue (finance) from the center
A minister from each state who is either in charge of finance or taxation or has been nominated by
the state to serve as a member of the GST Council
Accordingly, the ministers of state will elect a vice-chairperson of the GST Council from amongst
the members. The Secretary (Revenue) will serve as the GST Council’s ex-officio secretary.

Additionally, the Central Board of Excise and Customs (CBEC)’s chairperson is a permanent
invitee to all the proceedings of the GST Council.

Functions of GST Council Members

The primary function of the GST Council is to create a user-friendly and IT-driven GST structure
based on wide consultation with the union and the states. Article 279A (4) enumerates the key
functions of the GST Council members. We elaborate on them below.
Powers and Duties of GST Council Members :
The GST Council is directed by the requirement for a harmonised national market and GST
structure when carrying out the functions bestowed by the GST act.

(1) As per Article 279A (4), the GST Council should make recommendations on the following
aspects:

The goods and/or services that are either subject to or are exempt from GST.
Any taxes, cesses, and surcharges already levied by the central government, states, or local
bodies should be subsumed in the GST law.
Recommendations about model GST laws and principles governing Integrated Goods and
Services Tax (IGST) levy and place of supply.
Applicable GST rates and floor rates, particularly for raising additional resources during a natural
disaster or a calamity.
Special provisions for special category states and territories, including Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Himachal Pradesh, Uttarakhand, and
Jammu and Kashmir.
Threshold turnover limits below which GST is exempted on certain goods and/or services.
Any other GST-related issue as determined by the Council.

(2) The GST Council will propose the date from which GST on petroleum crude, motor spirit, high-
speed diesel, natural gas, and aviation turbine fuel (ATF) will become applicable.
(3) The GST Council members will institute a mechanism to settle any dispute surfacing out of the
council’s recommendations or their implementation between-

The Union and one or more states

The Union and any state(s) on one side versus one or more states
Any two or more states
(4) The GST Council members will determine the procedure for the performance of their functions.

(5) Half of the total GST Council members shall constitute the quorum. Finally, every decision of the
GST Council will require the majority approval of not less than three-quarters of the total votes of the
members present and voting, subject to

The Central Government votes hold a one-third weightage in total votes cast.
The state governments’ votes account for the remaining two-thirds weightage of the total votes cast.
However, as per the latest Supreme Court (SC) ruling in Union of India Vs Mohit Minerals Private
Limited, the recommendations made by the GST Council members are no longer binding on the
government. The court stated that under Article 246A, both parliament and state legislatures enjoy
the ‘simultaneous’ power of legislating on GST and can be flexible in accepting counsel of the GST
council.
Types of GST and GST Rules :
GST can be divided into four sections based on the kind of transaction it involves. Before a
business can determine its GST liability, assessing the following table about the Components of
GST is essential.
A seller in Maharashtra sells goods worth Rs. 1 lakh to a buyer in the same state. The tax
rate applicable to the goods is 12%, comprising 6% of CGST and 6% of SGST. The total
GST of Rs. 12,000 collected will be shared between the centre and the state at Rs. 6,000
each as the sale is made intra-state.

The same seller sold goods worth Rs. 50,000 from Maharashtra to Karnataka. The tax rate
applicable to these goods was 18%. The seller will thus charge IGST of Rs. 9,000 from the
buyer due to it being an inter-state sale. The tax collected will be submitted to the central
government.
 GST Rates :
Every business registered under GST must raise invoices with GST amounts charged on the supply
value. These GST amounts are derived as a percentage value of taxable amounts. Such as
percentage rate used is called the GST rate.

Therefore, GST rate is a percentage rate of tax imposed on the sale of goods or services under
the CGST, SGST and IGST Acts.

The primary GST slabs for any regular taxpayers are presently pegged at 0% (nil-rated), 5%,
12%, 18% & 28%. There are a few lesser-used GST rates such as 3% and 0.25%.
Zero-rated supplies refer to goods or services that are taxed at a rate of 0%, meaning no
Value Added Tax (VAT) or Goods and Services Tax (GST) is applied to them. In other
words, although these supplies are subject to taxation, the rate is set at zero, effectively
resulting in no tax being charged on them.

As taxable supplies, they are technically subject to VAT / GST, just at a rate of 0. This is
distinct from an exempt supply, which is not subject to VAT / GST at all.
Nil Rated
This type of supply attracts a GST of 0%. Input tax credit cannot be claimed on such
supplies. Some items which are nil rated include grains, salt, jaggery, etc.

Exempted
This supply includes items which are used for everyday purposes. Since they are basic
essentials, they do not attract any GST at all. You will not be able to claim any ITC on such
supplies. Some examples include bread, fresh fruits, milk, curd, etc.

Zero-Rated
Supplies made overseas and to Special Economic Zones (SEZs) or SEZ Developers come
under the zero-rated supplies. This supply attracts a GST of 0%. For such supplies, ITC can
be claimed.

Non-GST
Supplies which don’t come under the scope of the GST are termed as Non-GST supplies.
However, these supplies can attract taxes other than the GST as per the jurisdiction of the
state or the country. Some examples of such supplies include petrol, alcohol, etc.
Types of Exemptions :
Absolute exemption: Exemption without any conditions.

Ex: Transmission or distribution of electricity by an electricity transmission or distribution

utility.

Conditional Exemption: Exemption subject to certain conditions.

Ex: Health care services by a clinical establishment by way of providing room [other than
Intensive Care Unit (ICU)/ Critical Care Unit(CCU)/ Intensive Cardiac Care Unit (ICCU)/
Neonatal Intensive Care Unit (NICU)] having room charges exceeding Rs. 5000 per day.

Conditional or partial exemption: Intra-State supplies of goods and/or services received from
an unregistered person by a registered person is exempted from payment of tax under
reverse charge provided the aggregate value of such supplies received by a registered
person from all or any of the suppliers does not exceed `Rs 5000/- in a day.
Difference between Exempt, Nil Rated, Zero Rated and Non-GST supplies :
Input Tax Credit (ITC) :

Input Tax Credit (ITC) refers to the tax paid on purchases for the business which can be claimed
as deduction at the time of paying tax on output tax.

Input Tax Credit (ITC) is a mechanism that allows businesses to claim credit for the tax they’ve
paid on their purchases. Input Tax Credit in GST ensures that companies are only taxed on the
value they add at each stage of the supply chain, not on previous stages of production. By using
ITC, companies also avoid the “cascading effect” of taxes, where tax is charged on top of tax.

Here’s how:
When you buy a product/service from a registered dealer you pay taxes on the purchase. On
selling, you collect the tax. You adjust the taxes paid at the time of purchase with the amount of
output tax (tax on sales) and balance liability of tax (tax on sales minus tax on purchase) has to
be paid to the government. This mechanism is called utilization of input tax credit.
How to Calculate Input Tax Credit?
A business registered under GST purchases raw materials worth ₹10,000. The GST rate on raw
materials is 18%. The company also purchases office supplies worth ₹20,000, subject to a GST
rate of 18%.

1. ITC Calculation
Raw Materials ITC: ₹10,000 * 18% = ₹1,800

Office Supplies ITC: ₹20,000 * 18% = ₹3,600

Total ITC: ₹1,800 + ₹3,600 = ₹5,400

2. Output Tax
Assuming the business sells the finished goods or services worth ₹40,000 at a GST rate of 18%,
the output tax would be:

Output Tax: ₹40,000 * 18% = ₹ 7,200

3. Net GST Payable

Net GST Payable = Output Tax – ITC

Net GST Payable: ₹7,200 (Output Tax) – ₹5,400 (ITC) = ₹1,800

 1)you are a manufacturer:

Tax payable on output (final product) is Rs 450

Tax paid on input (purchases) is Rs 300

2)A manufacturer purchases raw materials worth ₹10,000 from a registered supplier and
pays 18% GST of ₹1,800. When the manufacturer sells the finished product for ₹15,000,
they collect 18% GST of ₹2,700 from the customer

How much You can claim input credit ? and what amount you may deposit as taxes ?
Who can claim ITC?

ITC can be claimed by a person registered under GST only if he fulfils all the conditions as
prescribed.

Conditions to claim an input tax credit under GST-

-The dealer should be in possession of tax invoice

-The said goods/services have been received
-GSTR-3B have been filed by the recipient
-The tax charged has been paid to the government by the supplier
-The recipient must have paid towards the invoice or debit note within 180 days from the invoice
date
-When goods are received in installments ITC can be claimed only when the last lot is received
-ITC can be claimed only for taxable supplies of goods or services and the purchases made must
be used in the furtherance of such business
-No ITC will be allowed if depreciation has been claimed on tax component of a capital good
ITC on the document, such as invoice or debit note, must be claimed within the time limit defined
which is earlier of two dates-
30th November of the year following the financial year in which the document is issued
date of filing the annual returns
CGST Rule 36(4) specifies that ITC claims made in GSTR-3B must match with the details
appearing in GSTR-2B
Must not be making supplies under the composition scheme
What can be claimed as ITC?

ITC can be claimed only for business purposes.

ITC will not be available for goods or services exclusively used for:

Personal use
Exempt supplies
Supplies for which ITC is specifically not available under the CGST Section 17(5)

There is an exclusion list under Section 17(5) of the CGST Act which keeps some
transactions and businesses out of the scope of ITC claims. ITC cannot be claimed
on such items. Apart from the list, all others are eligible for ITC claims.

Some cases of ineligible input tax credit are listed below-

Motor Vehicles: Used for personal purpose (exceptions for resale or commercial
use or mandated cab services)
Food and Beverages: Catering, health, and similar services unless legally required
Membership Fees: Club or gym memberships
Insurance: Health and life insurance, except for government mandates
Construction Expenses: Building immovable property
Lost or Destroyed Goods: Damaged or gifted items
Documents Required for Claiming ITC

The following documents are required for claiming ITC:

Invoice issued by the supplier of goods/services

The debit note issued by the supplier to the recipient (if any)
Bill of entry
An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if
the amount is less than Rs.200 or in situations where the reverse charge is applicable as per the
GST law
An invoice or credit note issued by the Input Service Distributor(ISD) as per the invoice rules under
GST
A bill of supply issued by the supplier of goods and services or both
For example, an invoice was issued on 30th December 2023 to ABC Company. They have not yet
filed the annual returns for FY 2023-24 yet. The company can claim ITC given on this invoice
before 30th November 2024. However, they can claim such ITC in the GSTR-3B of October 2024
due on 20th November 2024.
ITC can be claimed after a thorough reconciliation of entries in Invoice Management System and
GSTR-2B is done with purchase register. All regular taxpayers must report the amount of input
tax credit (ITC) in their monthly GST returns of Form GSTR-3B in Table 4
Declaring the correct ITC values in Table-4 is crucial as it contributes to the government's
computation of net tax liability and GST dues. Failure to report accurate values in this table
could result in discrepancies with the GSTR-2B, ultimately leading to notices and penalties!
Supply under GST :
Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person
undertakes either of these transactions during the course or furtherance of business for
consideration, it will be covered under the meaning of Supply under GST.
Elements of Supply :

Supply has two important elements:

Supply is done for a consideration

Supply is done in course of furtherance of business
If the aforementioned elements are not met with, it is not considered as a sale.

Examples:

Mr. A buys a table for Rs.10,000 for his personal use and sells it off after 10 months of use
to a dealer. This is not considered as supply under CGST as this is not done by Mr A for
the furtherance of business,

Mrs. B provides free coaching to neighboring students as a hobby. This is not considered
as supply as this act is not performed for a consideration.
However, as specified in Schedule I of GST Act, certain activities are considered as supply
even if it is made without consideration.
Composite supply and Mixed Supply:
A composite supply is two or more goods or services that are only sold as a set and cannot be sold
.
individually.

Every composite supply has a principal supply, which is the main product or service that the buyer
primarily wants. The rest of the supply is made up of supporting elements that add value to the
principal supply.

A composite supply is taxed at the GST rate of the principal supply.

Example 1: A gift-wrapped box of chocolates. Here, the chocolates are the principal supply, while the
box, gift wrapper, message card and gift wrapping service offered by the salesperson are supporting
elements that cannot be supplied individually without the chocolates. This is a composite supply, and
its GST rate will be same as the rate for the chocolates.

Example 2: A dealer sells a brand-new vehicle along with registration, insurance, a tool kit and first
aid kit, and 4 free maintenance services. This is a composite supply, because vehicle insurance,
registration and free maintenance services cannot be supplied without the vehicle (which is the
principal supply).

Note: Whenever a shopkeeper ships the contents of a composite supply, the tax rate associated with
the shipping charge will be equivalent to the tax rate of the principal supply (in case of example 1,
the GST on shipping will be equal to the GST on the box of chocolates).
A mixed supply is two or more independent products or services which are offered together as a
bundle but can also be sold separately.

In a mixed supply, the item or service with the highest GST rate is treated as the principal supply
(whether or not it is the main part of the bundle). The mixed supply is taxed at the GST rate of the
principal supply.

Example: A plant nursery sells cut flowers, ornamental plants, and gardening services together
as a bundle. When they’re sold separately, the plants and flowers incur GST at a rate of 5%, and
the gardening services incur GST at a rate of 18%. When they’re offered together as a bundle,
the whole bundle will incur GST at the 18% rate.
Place of Supply of Goods :

GST is a destination based tax, i.e., the goods/services will be taxed at the place where they are
consumed and not at the origin. So, the state where they are consumed will have the right to
collect GST.

Therefore, place of supply is crucial under GST as all the provisions of GST revolve around it.
Place of supply of goods under GST defines whether the transaction will be counted as
intrastate or interstate, and accordingly, levy of SGST, CGST & IGST will be determined.
Place of supply when there is movement of goods: Example 1- Intra-state sales Mr. Raj of Mumbai,
Maharashtra sells 10 TV sets to Mr. Vijay of
Nagpur, Maharashtra
The place of supply is Nagpur in Maharashtra.
Since it is the same state CGST & SGST will be
charged.

Example 2-Inter-State sales Mr. Raj of Mumbai,

Maharashtra sells 30 TV sets to Mr. Vinod of
Bangalore, Karnataka
The place of supply is Bangalore in Karnataka.
Since it is a different state IGST will be charged.

Example 3- Deliver to a 3rd party as per

instructions Anand in Lucknow buys goods from
Mr. Raj in Mumbai (Maharashtra). The buyer
requests the seller to send the goods to Nagpur
(Maharashtra)

In this case, it will be assumed that the buyer in

Lucknow has received the goods & IGST will be
charged. Place of supply: Lucknow (UP) GST:
IGST
No movement of goods :
Example 1- No movement of goods Sales Heaven
Ltd. (Chennai) opens a new showroom in
Bangalore. It purchases a building for showroom
from ABC Realtors (Bangalore) along with pre-
installed workstations

Place of supply: Bangalore GST: CGST & SGST

There is no movement of goods (work stations), so
the place of supply will be the location of such
goods at the time of delivery (handing over) to the
receiver.

Example 2- Installing goods Strong Iron & Steel

Ltd. (Jharkhand) asks M/s SAAS Constructions
(West Bengal) to build a blast furnace in their
Jharkhand steel plant

Place of supply: Jharkhand GST: CGST & SGST

Although M/s SAAS is in West Bengal, the goods
(blast furnace) is being installed at site in
Jharkhand which will be the place of supply.
Goods supplied on a vessel/conveyance :

Example 1- Plane Mr. Ajay is travelling from Mumbai to Delhi by air. He purchases coffee and
snacks while on the plane. The airline is registered in both Mumbai and Delhi.

Place of supply: Mumbai GST: CGST & SGST The food items were loaded into the plane at
Mumbai. So, the place of supply becomes Mumbai.

Example 2- Plane- Business travel Mr. Ajay is travelling from Mumbai to Chennai by air on
behalf of his company Ram Gopal and Sons (registered in Bangalore). In the plane he
purchases lunch. The airline is registered in Mumbai & Chennai.

Place of supply: Mumbai GST: CGST & SGST The food items were loaded into the plane at
Mumbai. So, the place of supply becomes Mumbai. It does not matter where the buyer is
registered.
Imports and exports
The place of supply of goods:

imported into India will be the location of the importer.

exported from India shall be the location outside India.
Example 1- Import

Ms. Malini imports school bags from China

for her shop (registered in Mumbai)

Place of supply: Mumbai

GST: IGST

Example 2- Export

Ms. Anita (Kolkata) exports Indian perfumes

to UK

Place of supply: UK

GST: Exempted
 Valuation of Supply :
Currently, GST will be charged on the ‘transaction value’. Transaction value is the price actually
paid(or payable) for the supply of goods/services between un-related parties (i.e., price is the
sole consideration) The value of supply under GST shall include:

1)Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.
2)Any amount that the supplier is liable to pay which has been incurred by the recipient and is
not included in the price.
3)The value will include all incidental expenses in relation to sale such as packing, commission
etc.
4)Subsidies linked to supply, except Government subsidies will be included.
Interest/late fee/penalty for delayed payment of consideration will be included.

Value of supply under GST

The value of goods &/or services supplied is the

transaction value, i.e. the price paid/payable, which is Rs
3,000 in the example. Assuming CGST=9% and SGST=
9%
Time of Supply :

Time of supply means the point in time when goods/services are considered supplied’. When the
seller knows the ‘time’, it helps him identify due date for payment of taxes.

CGST and SGST or IGST must be paid at the time of supply. Goods and services have a
separate basis to identify their time of supply.
Time of Supply of Goods
Time of supply of goods is earliest of:

1. Date of issue of invoice

2. Last date on which invoice should have been issued

3. Date of receipt of advance/ payment

For example:

Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th January. The
payment was received on 31st January. The goods were supplied on 20th January.

*Note: GST is not applicable to advances under GST. GST on Advance is payable at the time
of issue of the invoice. Notification No. 66/2017 – Central Tax issued on 15.11.2017

Let us analyze and arrive at the time of supply in this case.

Time of supply is earliest of –

Date of issue of invoice – 15th January

Last date on which invoice should have been issued – 20th January.
Thus the time of supply is 15th January.

What will happen if, in the same example an advance of Rs 50,000 is received by Mr. X on 1st
January?

The time of supply for the advance of Rs 50,000 will be 1st January(since the date of receipt of
advance is before the invoice is issued). For the balance Rs 50,000, the time of supply will be
15th January.
Time of Supply for Services :

Time of supply of services is earliest of:

Date of issue of invoice

Date of receipt of advance/ payment.
Date of provision of services (if invoice is not issued within prescribed period)
Let us understand this using an example:

Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was issued on
20th January and the payment for the same was received on 1st February.

In the present case, we need to 1st check if the invoice was issued within the prescribed time.
The prescribed time is 30 days from the date of supply i.e. 31st January. The invoice was
issued on 20th January. This means that the invoice was issued within a prescribed time limit.

The time of supply will be earliest of –

Date of issue of invoice – 20th January

Date of payment = 1st February
This means that the time of supply of services will be 20th January.
Reverse Charge Mechanism :

Typically, the supplier of goods or services pays the tax on supply. Under the reverse charge
mechanism, the recipient of goods or services becomes liable to pay the tax, i.e., the
chargeability gets reversed.

The objective of shifting the burden of GST payments to the recipient is to widen the scope of
levy of tax on various unorganized sectors, to exempt specific classes of suppliers, and to tax
the import of services (since the supplier is based outside India).

Only certain types of business entities are subject to the reverse charge mechanism. Find out
the business constitution of any GST number using the GST search tool.
Section 9(3), 9(4) and 9(5) of Central GST and State GST Acts govern the reverse charge
scenarios for intrastate transactions. Also, sections 5(3), 5(4) and 5(5) of the Integrated GST Act
govern the reverse charge scenarios for inter-state transactions.

A. Supply of certain goods and services specified by the CBIC

As per the powers conferred in section 9(3) of CGST Acts, the CBIC has issued a list of goods
and services on which reverse charge is applicable.

B. Supply from an unregistered dealer to a registered dealer

Section 9(4) of the CGST Act states that if a vendor is not registered under GST supplies goods
to a person registered under GST, then reverse charge would apply. This means that the GST
will have to be paid directly by the receiver instead of the supplier. The registered buyer who has
to pay GST under reverse charge has to do self-invoicing for the purchases made.

In intra-state purchases, CGST and SGST have to be paid under reverse charge mechanism
(RCM) by the purchaser. Also, in the case of inter-state purchases, the buyer has to pay the
IGST. The government notifies the list of goods or services on which this provision gets
attracted from time to time.
C. Supply of services through an e-commerce operator

All types of businesses can use e-commerce operators as an aggregator to sell products or provide
services. Section 9(5) of the CGST Act states that if a service provider uses an e-commerce
operator to provide specified services, the reverse charge will apply to the e-commerce operator and
he will be liable to pay GST. This section covers the services such as:

Transportation services to passengers by a radio-taxi, motor cab, maxi cab and motorcycle. For
example – Ola, Uber.

Providing accommodation services 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 due to turnover
exceeding the threshold limit. For example – Oyo and MakeMyTrip.

Housekeeping services, such as plumbing and carpentering, except where the person supplying
such services through electronic commerce operators are liable for registration due to turnover
beyond the threshold limit. For example, Urban Company provides the services of plumbers,
electricians, teachers, beauticians etc. In this case, Urban Company is liable to pay GST and collect
it from the customers instead of the registered service providers.

Also, suppose the e-commerce operator does not have a physical presence in the taxable territory.
In that case, a person representing such an electronic commerce operator will be liable to pay tax
for any purpose. If there is no representative, the operator will appoint a representative who will be
held liable to pay GST.
Time of Supply Under RCM
A. Time of supply in case of goods

In case of reverse charge, the time of supply for goods shall be the earliest of the following
dates:

the date of receipt of goods

the date of payment*
the date immediately after 30 days from the date of issue of an invoice by the supplier
If it is not possible to determine the time of supply, the time of supply shall be the date of
entry in the books of account of the recipient.

*This point is no more applicable based this Notification No. 66/2017 – Central Tax issued
on 15th November 2017

Illustration:

Date of receipt of goods 15th May 2021

Date of invoice 1st June 2021
Date of entry in books of receiver 18th May 2021
The time of supply of service, in this case, will be 15th May 2021.
B. Time of supply in case of services

In case of reverse charge, the time of supply shall be the earliest of the following dates:

The date of payment

The date immediately after 60 days from the date of issue of invoice by the unregistered supplier
The date of issue of invoice by the recipient*
*This will come into force once notified by the CBIC.

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in
the books of account of the recipient.

Illustration:

Date of payment 15th July 2021

Date immediately after 60 days from the date of issue of the invoice (Suppose the date of the
invoice is 15th May 2021, then 60 days from this date will be 14th July 2021)
Date of entry in books of receiver 18th July 2021
Date of issue of invoice by the recipient 24th July 2024
The time of supply of service, in this case, will be 14th July 2021
Registration Rules Under RCM :
Section 24 of the CGST Act, 2017 states that a person liable to pay GST under the reverse
charge mechanism have to compulsorily register under GST. The threshold limits of Rs.20 lakh
or Rs.40 lakh, as the case may be, will not apply to them.

Who Should Pay GST Under RCM?

The recipient of goods/services should pay GST under RCM. However, as per the provisions of
GST law, the person supplying the goods must mention in the tax invoice whether tax is payable
under RCM.

The following points should be kept in mind while making GST payments under RCM:

The recipient of goods or services can avail of the ITC on the tax amount paid under RCM only if
such goods or services are used for business or furtherance of business.
A composition dealer should pay tax at the normal rates and not the composition rates while
discharging liability under RCM. Also, they are ineligible to claim any input tax credit of tax paid.
GST compensation cess can apply to the tax payable or paid under the RCM.
Input Tax Credit (ITC) Under RCM

A supplier cannot take the GST paid under the RCM as ITC. The recipient can avail of ITC on GST
amount paid under RCM on receipt of goods or services, only if such goods or services are used or
will be used for business purposes

In case the recipient issues the invoice after the time of supply of the said supply and pays tax
accordingly, he will be required to pay interest on such delayed payment of tax. Further, in cases
of such delayed issuance of invoice by the recipient, he may also be liable to penal action under
Section 122 of the CGST Act.

The recipient cannot use the ITC to pay output GST on goods or services under reverse charge
and should be paid in cash only.
Self Invoicing?

Self-invoicing is to be done when purchased from an unregistered supplier, and such purchase
of goods or services falls under reverse charge. This is because your supplier cannot issue a
GST-compliant invoice to you, and thus you become liable to pay taxes on their behalf. Hence,
self-invoicing, in this case, becomes necessary.

Also, section 31(3)(g) states that a recipient who is liable to pay tax under section 9(3) or 9(4)
shall issue a payment voucher at the time of making payment to the supplier.
GST Composition Scheme :

It is, in effect, a tax-paying mechanism offered to the country’s small businesses to impart
benefits like reduced tax compliance and paperwork alongside lower taxation liabilities.

Businesses with a turnover of less than Rs. 1.5 crore can opt for the Composition Scheme under
GST and pay their taxes at a fixed rate of their annual turnover.

For instance, those registering under this scheme can pay their taxes at the rates of 1% to 6% of
their total turnover and file one quarterly and one annual return each year. Alternatively, those not
registered under this scheme need to submit 4 GST returns each year – 3 monthly and one
annual.
Who is Eligible to Opt for this Composition Scheme?
As mentioned before, taxpayers with annual turnover below Rs. 1.5 crore can opt for this scheme.
Further, for Himachal Pradesh and the North-Eastern states, this limit has been further reduced to
Rs. 75 lakh per year. This cap is, however, set solely for manufacturers, traders and restaurants
that do not serve alcohol.

For service providers, the cap is set at Rs. 50 lakh.

One must remember here that the collective turnover of businesses registered under the same
PAN will be taken into account while gauging their eligibility to avail the benefits extended under
GST Composition Scheme.
Conditions to Opt for this Scheme
These special category states/UTs have opted to increase their GST registration exemption limit
for the sale of goods to Rs. 40 lakh. Special Category States/UTs Opting for New Limit of Rs. 20
Lakh The following special category states have chosen a new limit of Rs. 20 lakh:
Puducherry, Meghalaya, Mizoram & Tripura
Manipur, Sikkim, Nagaland, Arunachal Pradesh & Uttarakhand
Note 1: The two hilly states of Jammu & Kashmir and Assam have chosen to increase their GST
registration threshold to Rs. 40 lakh. Note 2: Kerala has been authorized to impose a 'calamity
cess' of up to 1% on all intra-state supplies of goods and services.
 GST registration is an essential compliance for any business or professional in India. There are
set criteria for one to qualify for the GST registration. Alternatively, businesses can also
voluntarily obtain GST registration or GSTIN.

The process of obtaining registration or GSTIN (GST Identification Number) in all these cases is
known as GST registration.

If the entity carries on business without registering under GST when mandated, it is an offence
under GST and heavy penalties will apply.

GST registration usually takes between 2-6 working day

Who should obtain the GST registration?

Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax, etc.)
Businesses with turnover above the threshold limit of Rs.40 lakh or Rs.20 lakh or Rs.10 lakh, as
the case may be

Persons making interstate supplies

Casual taxable person / Non-Resident taxable person

Agents of a supplier & Input service distributor

Those paying tax under the reverse charge mechanism

A person who supplies via an e-commerce aggregator (other than supplies specified under CGST
Section 9(5))

Every e-commerce aggregator under CGST Section 52

Persons who are required to pay tax under the CGST Section 9(5)
Government departments/offices of Government required to deduct TDS under the CGST Section
51
Person supplying online information and database access or retrieval services from a place outside
India to a person in India, other than a registered taxable person
Every person supplying online money gaming from a place outside India to a person in India