Direct and Indirect Taxation Paper – II Goods and Service Tax Act-munotes

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INTRODUCTION AND BASIC CONCEPTS
Unit Structure
1.1 Introduction and Objectives
1.2 Assessment Year
1.3 Previous Year
1.4 Person
1.5 Assessee
1.6 Assessment
1.7 Income
1.8 Gross Total Income
1.9 Total Income
1.10 Scheme of charging income tax
1.11 Self Examin ation Questions
1.1 INTRODUCTION AND OBJECTIVES :
Under Entry 82 of the Schedule VII to the Constitution of India, the
Central Government is empowered to levy “Tax on income other than
agricultural income in India”.
Accordingly, the parliament enacted Inc ome Tax Act, 1961 [“The Act”] to
provide for the scope and machinery for levy and collection of income tax
in India.
The Act is supported by Income Tax Rules, 1962 and several other
subordinate rules and regulations.
Further, the Central Board of Direct Taxes (CBDT) and the Ministry of
Finance, Government of India are empowered to issue from time to time
circulars and notifications dealing with various aspects of the levy of
Income tax.
Unless otherwise stated, references to the sections throughout this book
will be the reference to the sections of the Income Tax Act, 1961.
Section 4 is the charging section. It says that income tax is a tax on the
total income of a person called the assessee , of the previous year
relevant to the assessment year at the rat es prescribed in the relevant
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2 This phrase sets the tone and agenda of any study on income tax law
including the basic framework for levy of income tax in India.
This lesson will explain various aspects, basic concepts and terms used in
the in come tax law, which include: -
(a) Assessment Year
(b) Previous Year,
(c) Person,
(d) Assessee,
(e) Meaning of income i.e. What is regarded as income?
(f) What is not regarded as income
(g) Income chargeable to tax
(h) Income not chargeable to income tax i.e. exempt income
(i) How to ch arge tax on income,
(j) Gross Total Income,
(k) Total Income or Taxable Income and
(l) Income -tax rates
1.2 ASSESSMENT YEAR – Section 2(9)
Section 2(9) defines an “Assessment year” as “the period of twelve
months starting from the first day of April every year ”
An asse ssment year begins on 1st April every year and ends on 31st March
of the next year.
Illustrations
1. Assessment year 2018 -19 means the period of one year beginning on
1st April, 2018 and ending on 31st March, 2019.
2. Assessment year 2022 -23 will mean the peri od of one year beginning
on 1st April, 2022 and ending on 31st March, 2023.
Income of an assessee during the previous year is taxed in the relevant
assessment year. Assessment year is sometimes also called as the “ tax
year ”


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3 1.3 PREVIOUS YEAR - Sections. 2(3 4) & 3
3.1. Defintion:
As per section 3 “previous year” means “the financial year immediately
preceding the assessment year” .
The year in which income is earned is called the “previous year ”.
The income earned by an assessee in one financial year ( previous year ) is
taxed in the next financial year called the “assessment year”.
Illustrations
3. Income earned during financial year 2021 -22 will be taxed in the
financial year 2022 -23.
Hence, 2022 -23 will be the assessment year.
The financial year 2021 -22 being the financial year immediately preceding
the assessment year will be the previous year.
4. For the assessment year 2017 -18, previous year will be 2016 -17 i.e.
from 1st April, 2016 to 31st March 2017.
3.2. Common previous year for all source of income:
A person is liable to pay taxes on total income earned by him during the
previous year from all sources of income.
The previous year will be common for all sources of income, even if he
maintains records or books of account separately for different source s of
income.
Illustration
5. Particulars of income earned by Ashok during the financial year
2021 -22 are : -
Rs (lakh) Salaries from X Limited 2.40
Salaries from Y Limited 4.80
Professional income 2.50
Dividend 1.20
Interest 1.75
Aggre gate Income 12.65
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4 Ashok has earned the aggregate income of Rs 12.65 lakh from different
sources during the financial year 2021 -22. Hence, the previous year for
all these sources of income will be the financial year 2021 -22 and the
relevant assessment year will be 2022 -23.
Ashok will be liable to pay tax on aggregate income of Rs. 12.65 lakh
from all the sources of income for the previous year 2021 -22 relevant to
assessment year 2022 -23.
3.3. New Business or Profession:
Where during a financial year where a
(a) business is newly set up or
(b) new source of income has arisen
during that financial year, the previous year will be the period (obviously
less than one year) commencing from the date of setting up of the new
business or the date of arising of t he new source of income and ending on
the 31st March next.
Illustration
6. R sets up a business on 01 March 2022. The period of one month
beginning on 1st March 2022 and ending on 31st March, 2022 will be the
previous year 2021 -22 and taxed in the assessmen t year 2022 -23. It is
Immaterial that previous year is of a period of less than 12 months.
3.4. Exceptions
The general rule that income of the previous year is taxable in the next
assessment year is subject to some exceptions and the assessee is liable to
pay t ax on the income in the same previous in which he earns it. In such
cases, previous year and assessment year will be the same.
These exceptional cases ensure safeguards to smooth collection of income
tax from a class of taxpayers who may not be traceable until the
commencement of the normal assessment year.
Some of such exceptions are as under: -
a) Income of non -residents from shipping business -section 172
b) Income of persons leaving India permanently or for a long period of
time and not likely to return b ack –section 173 and section 174;
c) Income of bodies formed for short duration for a particular event or
purpose – section 174A;
d) Income of a person trying to alienate his assets with a view to avoiding
payment of tax – section 175 ,
e) Income of a discontinued business - section 176 munotes.in

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5 f) bad debts written off allowed as deduction in earlier years is taxable
in the year of realization vide section 41(1)
g) Deemed dividend – Section - 56
1.4 PERSON –SECTION 2(31 )
4.1 Definition:
As per section 2(31) “person” includes:
a) an individual;
b) a Hindu undivided family (HUF);
c) a company;
d) a firm;
e) an association of persons(AOP) or a body of individuals,(BOI) whether
incorporated or not;
f) a local authority; and
g) every artificial juridical person not falling within any of the preceding
categories
4.2 Inclusive definition:
The definition of “person” is inclusive, not exhaustive. Accordingly an
entity not falling in the above seven categories may still be treated as
“person” inviting the provisions of the Act.
4.3 Profit motive not necessary :
Explanation to section 2(31) makes it clear that an entity need not be
formed for profit. Absence of profit motive will not be the criteria to
exclude any entity from being a “person”. Accordingly a non -profit
Organisation or charitable trusts will also be co vered by the definition of
“person” although their income is not taxable under the Act on satisfying
the certain terms and conditions.
4.4 Description of types of persons :
A brief description of these seven categories is as follows:
a. Individual means any liv ing persons of blood and flesh. Examples
Aruna, Arvind, Fatima, Albert, Ibrahim, Rose etc.
b. Hindu Undivided Family (HUF) or a Hindu joint family is regarded
as separate tax entity in view of the specific law of succession
prevalent among the Hindus.
c. Company as per section 2(31), includes any munotes.in

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6  Indian or foreign company,
 Public or private Company, or
 Charitable or non -profit company incorporated under section 8 of the
Companies Act, 2013 ( corresponding to old section 25 of the
Companies Act, 1956). How ever, such company is eligible to claim
exemption from tax, on compliance of the legal conditions given in
other provisions of the Act.
 Any institution declared by CBDT as a company.
d. Partnership firm including a limited liability partnership (LLP) is
regarded as distinct taxable units separate from their partners.
Accordingly, a firm is taxed separately as a firm and its partners are taxed
separately in their personal capacity.
e. Body of individuals (BOI) and Association of Persons (AOP) are the
group of p ersons carrying on some activities to earn income such as joint
venture.
Normally, AOPs are contractual in nature like a joint venture agreement if
such venture not formed as a partnership or a company.
On the other hand, BOI may be due to circumstances such as joint owners
of an estate. Clubs, societies, charitable trusts etc. are covered under this
head.
f. Local authorities include Municipal Corporations, Panchayats,
Cantonment Boards, Zila Parishads etc.
g. The seventh and final category is residual cate gory , which covers all
such persons which are not covered in any of the above six categories.
Illustration
7. Determine the category of the following entities as person as per
secion2(31) of the Income Tax Act, 1961:
Person Status
Rajul Individual
Smita Individual
Reliance Infra Limited Company
Gokul Co - Op Society Ltd AOP
Indian Red Cross Society AOP
Legal heirs to receive property of late
Shri Nusserwanji BOI
Tata Power Ltd Company munotes.in

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7 Virat Kohli Individual
Board for Cricket Control in I ndia AOP
Family of Shri PB Hindu HUF
Pune Cantonment Board Local Authority
Pune University Artificial Juridical Person
Ramu Brothers doing business in
partnership Firm

1.5 ASSESSEE –SECTION 2(7)
5.1 Definition
As per section 2(7), “assessee” means a person by whom income tax or
any other sum of money is payable under the Act and it includes:
a. every person in respect of whom any proceeding under the Act has
been taken for the assessment of his income or assessment of fringe
benefits or of the income of any other person in respect of which he is
assessable, or of the loss sustained by him or by such other person, or of
the amount of refund due to him or to such other person ;
b. every person who is deemed to be an assessee under any provision of
this Ac t ;
c. every person who is deemed to be an assessee in default under any
provision of this Act.
5.2 The definition of “assessee” is also an inclusive definition. The
definition is so wide in scope as to include any other person not covered in
the above categor ies.
Further ,the definition covers not only a person but also his representative
such as legal heir, trustee, liquidator of a company assessee etc.
Moreover, importance is given not only to the amount of tax payable but
also to refund due and the pro ceedings taken.
5.3 Thus, an assessees may be : -
(i) A person by whom income tax or any other sum of money is payable
under the Act
(ii) A person in respect of whom any proceeding under the Act has been
taken for the assessment of his :
a. income or
b. loss or
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8 (iii) A person who is assessable in respect of income or loss of another
person or
(iv) A person who is deemed to be an assessee,
(v) an assessee in default under any provision of the Act
5.4 A minor child is a separate assessee only in respec t of the income
generated : -
a. out of activities performed by him like singing in radio jingles, acting
in films, tuition income, delivering newspapers, etc. or
b. from an asset assets acquired from the minor’s sources of income
Other income of a minor child will be clubbed with or included in the
income of the parent having the higher income subject to a maximum
deduction of Rs 1500 per child under section 10 in respect of income so
clubbed .
1.6 ASSESSMENT - SECTION 2(8)
The Act does not define “assessment”. Instead, section 2(8) states “ an
assessment includes reassessment”.
In common parlance, assessment is the procedure to determine the taxable
income of an assessee and the tax payable by him.
Section 139, requires an assessee to file in prescribed form a self-
declaration of his income and tax payable by him called “return of
income”.
The Income Tax officer may accept the return summarily without making
any enquiry into its contents. This is called as the ‘summary assessment’
under section 143(1).
Alter natively, the officer may call upon the assessee to explain his return
of income and after making necessary enquiry, frame a reasoned order
determining the total income and the tax payable by the assessee this is
called the “regular assessment” under secti on 143(3).
Completed assessment becomes final except in certain circumstances.
These circumstances are:
1.7 Under section 147, an assessment can be reopened to assess income
which has escaped assessment,
1.8 Under section 263 , the Commissioner of Income Tax ma y ask an
assessment to be redone if the assessment order is erroneous and
prejudicial to the interest of the revenue ,
1.9 Under section 264, the Commissioner of Income Tax at the
application of an assessee or suo motu , may ask an assessment to be
redone. This is normally done to give relief to the assessee. munotes.in

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9 1.10 Under section 254, the Income Tax Appellate Tribunal (ITAT) in
appeal proceedings may pass an order directing the assessment to be
redone.
In all the above cases “reassessment” of the income is required to be done.
The definition of assessment includes the regular assessment and reopened
or reassessment.
1.7 INCOME - Section 2(24)
7.1 Definition:
Section 2(24) gives an inclusive definition of income. It states that
Income " includes —
(i) profits and gains ;
(ii) dividend;
(iia) voluntary contributions received by
 A trust or any other legal obligation created wholly or partly for
charitable or religious purposes or
 an institution established wholly or partly for such purposes or
 an association or institution referred to in section 10(21) or (23), or
 a fund or trust or institution referred to in sub -clause (iv) or (v) or
 any university or other educational institution referred to in sub -clause
(iiiad) or(vi) or
 any hospital or other institution referred to in sub -clause 10
(23C)(iiiae) or (via) or
 an electoral trust.
(iii) the value of any perquisite or profit in lieu of salary taxable under
section 17 (2) and (3) ;
(iiia) any special allowance or benefit, other than perquisite included
under sub -clause (iii), specifically granted to the assessee to meet
expenses wholly, necessarily and exclusively for the performance of the
duties of an office or employment of profit ;
(iiib) any allowance granted to the assessee either to meet his personal
expenses at the place where the duties of his office or employment of
profit are ordinarily performed by him or at a place where he ordinarily
resides or to compensate him for the i ncreased cost of living ;
(iv) the value of any benefit or perquisite, whether convertible into money
or not, obtained from a company either by a director or by a person who
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10 such person, and any sum paid by any such company in respect of any
obligation which, but for such payment, would have been payable by the
director or other person aforesaid;
(iva) the value of any benefit or perquisite, whether convertible into
money or not, obtained by any representative assessee mentioned in
section 160 (1) (iii) (iv) or by any person on whose behalf or for whose
benefit ("beneficiary") any income is receivable by the representative
assessee and any sum paid by the representative assessee in respect of any
obligation which, but for such payment, would have been payable by the
beneficiary ;
(v) any sum chargeable to income -tax under section28 (ii) and (iii)
or section 41 or section 59 ;
(va) any sum chargeable to income -tax under section28 (iiia);
(vb) any sum chargeable to income -tax under section28 (iiib) ;
(vc) any sum chargeable to income -tax under section28 (iiic);
(vd) the value of any benefit or perquisite taxable under section 28 (iv);
(ve) any sum chargeable to income -tax under section 28 (v);
(vi) any capital gains chargeable under section 45 ;
(vii) the profits and gains of any business of insurance carried on by a
mutual insurance company or by a co -operative society, computed in
accordance with section 44 or any surplus taken to be such profits a nd
gains by virtue of provisions contained in the First Schedule ;
(viia) the profits and gains of any business of banking (including
providing credit facilities) carried on by a co -operative society with its
members;
(viii) [Omitted by the Finance Act, 19 88, w.e.f. 1 -4-1988.
(ix) any winnings from lotteries, crossword puzzles, races including horse
races, card games and other games of any sort or from gambling or betting
of any form or nature whatsoever.
For this purpose —
(i) "lottery" includes winnings fr om prizes awarded to any person by draw
of lots or by chance or in any other manner whatsoever, under any scheme
or arrangement by whatever name called;
(ii) "card game and other game of any sort" includes any game show, an
entertainment programme on telev ision or electronic mode, in which
people compete to win prizes or any other similar game ;
(x) any sum received by the assessee from his employees as contributions
to any provident fund or superannuation fund or any fund set up under the munotes.in

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11 provisions of the Employees' State Insurance Act, 1948 , or any other fund
for the welfare of such employees ;
(xi) any sum received under a Keyman insurance policy including the sum
allocated by way of bonus on such policy.
(xii) any sum referred to in section 28 (va);
(xiia) the fair market value of inventory referred to in section 28 (via)
(xiii) any sum referred to inspection (2) (v);
(xiv) any sum referred to in section 56 (2) (vi) ;
(xv) any sum of money or value of property referred to in section 56 (2)
(vii) or (viia);
(xvi) any consideration received for issue of shares as exceeds the fair
market value of the shares referred to in 56 (2)(viib);
(xvii) any sum of money referred to in 56 (2) (ix);
(xviia) any sum of money or value of property referred to in 56 (2) (x);
(xviib) any compensation or other payment referred to in section 56 (xi);
(xviii) assistance in the form of a subsidy or grant or cash incentive or
duty drawback or waiver or concession or reimbursement (by whatever
name calle d) by the Central Government or a State Government or any
authority or body or agency in cash or kind to the assessee other than, —
(a) the subsidy or grant or reimbursement which is taken into account for
determination of the actual cost of the asset in ac cordance with the
provisions section 43(1) explanation 10,
(b) the subsidy or grant by the Central Government for the purpose of the
corpus of a trust or institution established by the Central Government or a
State Government, as the case may be;
7.2. Section 2(24) gives an inclusive definition of “income”., which
covers income in its natural and general sense and also several items not
otherwise considered as income.
Income means not only the revenue receipts arising or accruing regularly
but also capita l receipts like gifts and even donations and gifts. On the
other hand, certain revenue receipts like agricultural income are left out
from the scope of the term income.
Some of the principles that have emerged out as a result of customs,
practices and ju dicial pronouncements to ascertain as to what does or does
not constitute income are as follows.
1. Ordinarily Income is a regular periodical receipt, received or
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12 2. The source of income must be external. No one can earn income b y
or from himself.
3. On this principle, income accruing to clubs, societies etc. from their
own members are not taken as taxable income on the ground of
mutuality.
4. Normally, only revenue receipts are regarded as income unless
specifically exempted.
5. On the other hand, capital receipts are not treated as income unless
the law specifically provides e.g. capital gains, gifts, maturity
proceeds of keyman insurance policy, sales tax subsidy, voluntary
contribution by a donor to a trust, which are included in income in
spite of being capital receipts.
Income is like the fruit of a tree, where tree is the source, or the capital
asset.
6. Income may be in cash or kind.
7. Income need not be legal. It may even be derived from illegal
sources like, smuggling, theft , bribery, corruption etc.
8. It is the receipt, which is income not its application or use.
9. Any receipt diverted at the origin or the source by overriding title
will not be regarded as income.
10. Any dispute in the title of the income does not take away its nature
as income.
11. A gift is a capital receipt given for personal considerations.
However, the is no longer valid proposition as the law specifically
provides for taxation of gifts, e.g.: -
 Gift by an employer to an employee is deemed to be tax able salary
u/s 17.
 Gift by a client or customer is deemed as the income under the head
profits and gains from business or profession u/s 28. Hence, a gift
given by a client to his lawyer or chartered accountant or a patient to
his doctor, or a disciple or pupil to his guru, will be taxable as the
income of the recipient (donee) from business or profession u/s 28 .
 Personal gifts in excess of Rs. 50,000, from all sources are taxable
as income from other sources u/s 56 subject to certain exceptions.
Further. Inadequate consideration on transfer of immovable or
movable assets is also considered as taxable gift u/s 56. This aspect
is dealt with in great detail in the lesson relating to income from
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13 12. Income may be recognised either on rece ipt basis or on accrual basis
depending upon the facts and circumstances of and the method of
accounting applied in each case.
13. Income must be certain. Contingent income is not regarded as
income unless and until such contingency occurs and the income
arises to the assessee.
14. Income is the sum total of all receipts from all the sources and
considered accordingly.
15. Pin money received by a woman for personal expenses or even the
savings made by her from such receipts is not considered as income.
However, the husband will not get any credit from his income for
these payments.
16. Income may be received in lump sum or in instalments. Thus, arrears
of salary received by a person in lump sum are regarded as his
income.
17. Awards received by a professional sportsperson w ould be income,
unless the award is in nature of a gift for personal consideration.
18. Income of wife is be taxable in the hands of the husband if the assets
out of which the income is arising have not been acquired out of the
sources of the wife or from an asset gifted by the husband except as
consideration for living apart.
19. Income of minor children is be taxable in the hands of the parents
having higher income [ mother or father] except when the income is
arising from the efforts of the minor child say m odeling charges.
1.8 GROSS TOTAL INCOME - Section 14
Section 14 of the Act defines the gross total income as the aggregate of the
incomes computed under the five heads after adjusting for set -off and
carry forward of losses. The five heads of income are as follows namely:
1. Income from salaries
2. Income from house property
3. Profits and gains from business & profession
4. Capital gains
5. Income from other sources
From the above it appears that: -
 The Gross Total Income is the agg regate of income computed under the
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14  Any income exempted from tax u/s 10 or other provisions E.G.,
conveyance allowance, capital gains on sale of personal effects,
dividend income, etc. is not consi dered or excluded from the income
computed under the respective heads.
 The aggregate income is before making any deduction under chapter
VIA i.e. sections 80C to 80U.
1.9 TOTAL INCOME:
The total Income of an assessee is computed by deducting from the Gross
Total Income all permissible deductions available under the Chapter VI A
of the Income Tax Act, 1961. This is also referred to as the “Net Income”
or “Taxable Income”.
1.10 SCHEME OF CHARGING INCOME TAX
Income tax is a tax on the total income of an assessee fo r a particular
assessment year. This implies that;
. Income -tax is an annual tax on income.
. Income of previous year is chargeable to tax in the next following
assessment year at the tax rates applicable for the assessment year This
rule is, however, subject to some exceptions discussed above.
. Tax rates are fixed by the annual Finance Act and not by the Income -
tax Act. For instance, the Finance Act, 2022 fixes tax rates for the
financial year 2021 -22 relevant to assessment year 2022 -23. Tax rates
are given i n the lesson dealing with computation of income.
. Tax is charged on every person if the total income exceeds the
minimum income chargeable to tax.
1.11 SELF ASSESSMENT QUESTIONS
1. Income of a previous year is chargeable tax in the immediately
following assessment year. Is there any exception to this rule?
Discuss
2. Define the term “person”
3. How would you calculate income tax for the assessment year
2018 -19 in the case of different assesses?
4. Explain how education cess will be computed for the assessment
year 2022 -23? [Ans: 4% ]
5. What will be the previous year for X, who starts his business on
April 6, 2021[ Ans: A.Y. 2022 -23] munotes.in

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15 6. Will the answer to Q 5 be different, if X starts his business on 28th
March,2021? [ Ans: A.Y. 2021 -22]
7. Explain that a financial year is a previous year and also an
assessment year. Every financial year can also be an assessment
year,
8. Previous year is a financial year immediately preceding the
Assessment year Comment
9. What will be the status of University of Mumbai?
[Ans: Arti ficial juridical person ]
10. Indicate whether the following persons will be taxed as individuals:
a) X a partner of a firm
b) Y, a managing director of A Ltd;”
c) Z is the member of Z HUF
d) Municipal Commissioner of Mumbai in respect of th e Income of
the Municipal Corporation
e) Municipal Commissioner of Mumbai in respect of his salary from
the Municipal Corporation
f) A minor acting in TV commercials
[Ans: All except (d) will be taxed, Firm X , A Ltd , Z HUF , Mun
Corpn. Separate tax enti ties ]



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16 2
REGISTRATION UNDER GST
Unit Structure
2.1 Introduction and Objectives
2.2 Need and Advantages of Registration
2.3 Liability for Registration
2.4 Registration Procedures
2.5 Amendment of Registration
2.6 Cancellation of Registration
2.7 Self- Examination Questions
2.1 INTRODUCTION AND OBJECTIVES
GST is a destination -based tax which is levied at each stage of supply
chaincomprising of manufacturer, distributor, retailer and consumer.
Liability for payment of tax to the Government is on the supplier of goods
or service at each stage.
At each stage of the supply chain, the supplier of goods or services or both
can claim credit for tax paid on inputs (ITC) at the previous stage. The
credit for tax paid can be claimed only against his liability for payment of
tax to the government at tha t stage.
The actual consumer is the final destination of goods, services or both.
Obviously, the actual consumer can not claim credit for tax paid by him as
he has no liability of making payment to the government. Hence, the
actual consumer has to bear th e burden of GST. Thus, actual and
factualtaxpayers aredifferent persons.
Registration establishes the chain between the government and the
consumer. The registration of suppliers not only helps the government to
identify the taxpayers but also enables th e taxpayerstocollect tax from the
consumers. Further, it establishes a seamless flow for claiming credit of
tax paid on inputs (ITC).
This lesson takes a detailed look at the provisions relating to Registration,
its need,advantages, liability for registra tion, exemption from registration,
procedural aspect for registration and its modification orcancellation etc.
2.2 NEED AND ADVANTAGES OF REGISTRATION
Registration is a process forobtaining a unique number from the
Government by a supplier of goods or servic e or both. It enables munotes.in

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17 orauthorizes the supplier to collecttax from the consumer of goods or
services or both on behalf of the Government and avail Input tax credit for
the taxes on his inward supplies.
Without registration, a supplier cannot collect tax from his customers nor
can he claim any input tax credit of tax paid by him.
Registration confers the following advantages on a taxpayer: -
a. Registration grants official recognition to a person as the supplier of
goods or services or both.
b. Only a registe red supplier is authorised to collect tax from the
consumers.
c. The supplier may pass on credit in respect of the taxes paid on the
goods or services or both supplied to the consumer.
d. The supplier may claim and utilise input tax credit of taxes paid
towar ds the discharge of his liability for taxes due on supply of goods
or services or both.
e. Registration establishes a supply chain at the national levelwith a
seamless flow of Input tax credit from the suppliers to the consumers.

2.3 LIABILITY FOR REGISTRATIO N

3.1. Liability for Registration by a supplier of goods and/or services in
four ways, viz.: -
a. Registrationon Migration of existing taxpayersfrom the old law to
the GST,
b. Registration based on minimum turnover of supply of goods and/or
services,
c. Compulsory Re gistration irrespective of the turnover limit and
d. Voluntary Registration irrespective of the turnover limit.

3.2. Migration of the existing taxpayers from the old law to the GST
When the GST came in to force on 01 July, 2017, as a transitory measure
all th e existing suppliers/ dealers who were registered or holding a license
under any of the existing laws such as central excise, service tax or VAT
etc. were required to migrate to GST and obtain Provisional Registration
under the GST latest by 30th June 2017 vide s ection 22(2) of the CGST
Act, 2017 and submit declaration of stocks and unavailed input credit on
30th June 2017 to facilitate smooth transition to the new regime.
The Provisional Registration was subject to final registration upon
submission of req uisite documents and information.
3.3. Registration based on turnover of taxable supply
3.3.1. As per section 22(1) of the CGST Act, 2017, every supplier,whose
aggregate turnover of taxable supply of goods or services or both exceeds
the threshold limit during a finan cial year, is liablefor registration in the
State or Union Territory, from where he makes a taxable supply of goods
or services or both. munotes.in

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18 3.3.2. The threshold orthe specifiedlimit of aggregate turnover:

Threshold Turnover limits for Registration
Type of Suppl ier Special Category States
except UT of Jammu &
Kashmir, Ladakh and
Assam ) Non-Special Category
States, (except
Puducherry)

For any taxable
person engaged in
supply of goods
only Twenty lakh rupees Forty lakh rupees
For any taxable
person engaged in supply of goods or services or both Ten lakh rupees Twenty lakh rupees

Notes:
1. SpecialCategory Statesinclude States of Arunachal Pradesh,
Assam,Manipur, Meghalaya, Mizoram Nagaland and Tripura and
Himachal Pradesh, Sikkim and Uttarakhand andUTs of Jam mu &
Kashmir& Ladakh

2. After 05 -08 2019 State of Jammu & Kashmir have been reorganized
into the Union Territories of Jammu & Kashmir and Union Territory
of Ladakh. Both the UTs fall in Special Category State butit hasopted
for threshold limit of Rs 40 lakh n ot 20 lakh.

3. Among the Non -Special Category States, State of Puducherry opted
for threshold limit of Rs.20 lakh in respect of goods NOT Rs.40 lakh.

4. As per proviso to section 22(1)of the CGST Actthe threshold limit of
turnover for a taxable person in a Non -Special Category State, having
a branch in Special Category State will be Rupees 20 lakh, not Rupees
40 lakh.

3.3.3. Meaning of Aggregate turnover
A. “Aggregate turnover” as per section 2(6), means the aggregate value
of-
i. all taxable supplies,
ii. exempt supplies,
iii. exports of goods or services or both, and
iv. inter-State supplies

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19 B. Aggregate turnover of supply of goods or s ervices or both is computed
a. for a supplier having the same Permanent Account Numberon the
principle of one PAN - one person,
b. for the whole of I ndia taken together,
c. with reference to the financial year i.e. April to March

C. The value of aggregate turnover excludes :-
a. Central tax, State tax, Union territory tax, Integrated tax and Cess;
b. The value of inward supplies on which tax is payable by a pers on on
reverse charge basis;

D. Vide explanation to the section 22 , the aggregate turnover includes :-
a. all supplies made by the taxable person on his own account ;
b. supplies made on behalf of all his principals; or
c. in case of a principal, the supply of goods by a registered job worker
after Completion of job -work.

3.3.4. Persons not liable for Registration -Section 23
A. Any person engaged exclusively in the business of supplying goods
or services or both, which are not liable to tax or wholly exempt
from tax under the CGST Act or under the IGST Act;
B. an agricultur ist, to the extent of supply of produce out of cultivation
of land;
C. Any class of persons specified by the Government on the
recommendation of the Council, by notification. Under this section,
the government has granted exemption from registration under th is
section, to :
(i) Individual advocates including senior advocates ,
(ii) Individual sponsorship service providers including players ,
(iii) Suppliers, whose all supplies are taxable under Reverse Charge (vide
Notification No. 5/2017 -Central Tax dated 19.06.2017).

3.3.5. Some relevant points
As per rule 18, every registered person shall display his certificate of
registration in a prominent place at his principal place of business and at
every additional place or places of business.
— Every registered person shall display his goods and services tax
identification number (GSTIN) on the name board exhibited at the entry of
his principal place of business and
3.3.6. at every additional place or places of business.
(i) The liability for registration is on “every supplier”.
(ii) The supplier s hould make a taxable supply of (i) goods or (ii) services
or (iii) both over the threshold limit of 10 lakh/20 lakh rupees.
(iii) Under section 22 read with section 23, asupplier of only tax -free
supplies is not liable for registration.
(iv) An agriculturist is speci fically exempted from registration to the
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20 (v) A supplier having tax -free supplies also has some taxable supply,
then, all supplies, whether taxable or tax -free in the course of export
or inter -State suppl y, will be considered in aggregate turnover.
(vi) A supplierof only supplies taxable under reverse charge e.g. a
transporter or lawyer is exempted from registration vide Notification
No. 5/2017 -Central Tax dated 19.06.2017.
(vii) All supplies by a taxable person wil l be included in his aggregate
turnover whether made
 on his own account;or
 as an agent on behalf of all his principals; or
 in case of a principal, the supply of goods, after completion of job -
work, by a registered job worker.
(viii) The value of the supply considered in the account of the principal,
shall not be included in the aggregate turnover of the registered job
worker because only one person should be liable for accounting the
turnover of supply.
(ix) Registration shall be taken in the state or union terr itoryfrom where
the supplier makes the taxable supply of goods or services or both.
3.2.5.Illustrations:
1. Ashoksupplies taxable goods from Imphal (Manipur) of Rs 21 lakh. A
is liable for registration as the value of supplies provided by him
exceeds Rs 20 l akh Manipur being a special category state.
2. Babu, who is a Kolkata based wholesaler in teaprovides supplies in
Panaji (Goa). B will be liable for registration in Panaji when the
aggregate turnover or supply (sales) exceeds Rs 40 lakh.
3. Anil supplies (sell s) taxable goods of Rs 35 lakh on his personal
account and Rs 7lakh on his principal B’s Account, for whom he acts
as the agent. Aggregate turnover of A is Rs 42 lakhs inclusive of
supply made on his account and on B’s account.A will be liable for
registra tion, when the turnover exceeds Rs 20 lakh
4. X jewellers Pune sends goods on job work to Y a registered artisan. Y
completes the job work and sends goods to X valued at Rs 24 lakh.
X’s own turnover is of Rs 20 lakh. Xwill be liable for registration
when his own turnover together with the goods received from Y
exceeds the threshold limit of Rs 40 lakh. However, then the turnover
of Rs 20lakh will be excluded from the turnover of the job worker.
5. University of Mumbai provides only tax - free education services
valued at Rs 50 lakh is not liable for registrationbecause it does not
provide any taxable supply.
6. The Bombay Hospital provides tax -free medical services of Rs 18 lakh
and taxable services of Rs 4 lakh. It will be liable for registration as its
aggregate turnover exceeds Rs 20 lakh.
7. Ashok makes export of taxable goods for Rs 100 lakh. Ashokwill be
liable for registration, although his tax liability will be Nil.
8. Maheshis engaged exclusively in supplying tax -free goods. He will not
be liable for registrati on although the turnover may be in excess of the
threshold limit of Rs 40 lakh. munotes.in

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21 9. Babu supplies taxable goods worth Rs 50 lakh and taxableservices of
Rs 25 lakh. He will be liable for registration from the date on which
the aggregate turnover of supply of go ods/ services exceeds Rs 20
lakhs.
10. R has Turnover of supplies of goods and services Rs 16 lakh in
Maharashtra and Rs 8 lakh in Gujarat. His turnover from supplies of
goods and services is Rs 24 lakh which exceeds the threshold of Rs
20 lakh. Hence R is required to obtain Registration in both the States
Compulsory registration – Section 24
As per Section 24 of the CGST Act, 2017, following categories of persons
are liable for compulsory registration irrespective of the amount of
turnover: -
(i) Inter -State Su ppliers
Persons making any inter -State taxable supply (e.g. from Chennai to
Pune); However, vide Notification No. 10/2017 -Integrated Tax dated
13.10.2017, the benefit of threshold limit of 10 /20 lakhs has been
extended to persons making inter -State suppli es of taxable services,
having an aggregate turnover, to be computed on all India basis, not
exceeding an amount of twenty lakh rupees (ten lakh rupees for special
category States except J & K) and such persons will be exempted from
obtaining registration
(ii) Casual taxable person
A casual taxable person means a person,
 who has a registered business in one state or union territory and
 wants to effect taxable supplies from some other state or union
territory
 where he is not having any fixed place of business.
A casual taxable person will be liable for registration in the state from
where he seeks to effect taxable supply.
Example
A Kanpur (UP) based supplier of shoes wants to effect supply from
Mumbai, he will have to obtain registration as casual taxable person in
Mumbai.
A casual taxable person has to apply for registration at least five days in
advance of making such supply and make advance deposit of the
estimated tax liability.
Such registration is grantedfor a specified period onlynot exceeding 90
days but the period may be extended on makin g application.

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22 Exception
A casual taxable person making supplies of specifiedhandicraft goodsneed
not take compulsory registration, if his turnover does not exceed the
thresholdexemption of Rs. 20 Lakh/10 lakh.
(iii) Non-Resident Taxable Person
A Non -resident taxable person means
 a foreignernot having fixed place of business in India and
 who desires to make any taxable supply any State in India.
A Non -resident taxable person has to apply for registration at least five
days in advance of making such supply a nd make advance deposit of the
estimated tax liability
Registrationis granted to the non -resident taxable persons only for a
specified period only, but the period may be extended on making
application.
(iv) Payer of tax under reverse charge
Any persons required to pay tax under reverse charge mechanism (RCM)
on the supplies received by him such as client of advocates, receiver of
transport services from a goods transport agency etc.
(v) E-Commerce Operator
E-commerce operatornotified as liable for payment of GST undersection
9(5) of the CGST Act, 2017.

(vi) Tax Deductor
Persons required to deduct tax under section 51, whether or not separately
registered under this Act.
(vii) Agent
Any Person making taxable supply of goods or services or both on behalf
of other taxable per sons whether as an agent or otherwise;
(viii) Input Service Distributor whether or not separately registered
under this Act;

(ix) Supplier through E -Commerce Operator subject to TCS
Any person, who supplies goods or services or both, other than supplies
specified unde r section 9(5) through any E - Commerce Operator, who is
required to collect tax at source (TCS) under section 52.
(x) Supplier through E - Commerce Operator subject to TDS
Any person, who supplies goodsor services or both through any E -
Commerce Operators,who is required to collect tax at source. munotes.in

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23 However , suppliers of taxable servicesthrough e -commerce operators
need not take compulsory registration and are entitled to avail the
threshold exemption of Rs. 20 lakh/10 lakh(Notification No. 65/2017 -
Central tax dt. 15.11.2017)

(xi) E-commerce Operator , who provideplatform to the suppliers to
make supply through them.

(xii) Every person supplying Online Information and Database Access or
Retrieval Services (OIDAR) from a place outside India to an unregistered
person in India;

(xiii) Such other person or class of persons as may be notified by the
Government on the recommendations of the Council.

11. Voluntary r egistration
Any person having turnover below the threshold limit Rs. 20 lakh/10
lakhmay opt for voluntary registration. Entire turnover of such supplier
will be subject to GST from the day of registration without the benefit of
the threshold limit of Rs 20 lakh /10 lakh. Voluntary registration will not
be cancelled until one year from the date of registration.
2.4 REGISTRATION PROCE DURES
4.1. Nature of Registration and salient features
Different procedures have been prescribed for registration of different
classes of suppliers, namely non-resident taxable person, casual taxable
person, deductor of tax, collector of tax, supplier of O nline Information
Database Access and Retrieval (OIDAR) services and other suppliers.
These provisions have been dealt with separately at the appropriate places.
Salient features for registration procedures applicable to all other suppliers
are summarized below.
(i) Registration not tax specific but common registration for all the
taxes i.e. CGST, SGST/UTGST, IGST and Cesses.
(ii) GST Registration PAN based and State/UT specific. A given PAN
based legal entity would have one GSTIN per State/UT.
(iii) A taxable person r equired to register in each State or Union territory
from where he effects supply.
(iv) An entity having branches in multiple States will have to take
separate registration for the branches in different States/UTs.
(v) An entity having branches within one State o r Union territory, may
obtain single registration declaring one place as the principal place
of business and the other branches as additional places of
business.This rule is subject to 3 exceptions, where separate
registration is required even within a s tate, namely : -
i. a unit in SEZ ; or
ii. a SEZ developer;or munotes.in

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24 iii. Each of business verticals separately of business entity within a State
or Unit Territory.
“business vertical” as per Section 2(18) of CGTS Act, 2017 means “a
distinguishable component of an enterprise that is engaged in supplying an
individual product or service or a group of related products or services and
that is subject to risks and returns that are different from those of other
business verticals;
Explanation: Factors that should be considered in determining whether
products or services are related include:
(a) the nature of the products or services;
(b) the nature of the production processes;
(c) the type or class of customers for the products or services;
(d) the methods used to distribute the pr oducts or provide the services; and
(e) if applicable, the nature of the regulatory environment, for example,
banking, insurance, or public utilities.”
(vi) Upon registration -
(a) 15-digit ‘Goods and Service Tax Identification Number or “GSTIN”
is allotted to the s upplier. GSTIN comprising of
i. the first 2 digits forthe State code followed by
ii. 10 digits PAN of the legal entity,
iii. 2 digits for the entity code and t
iv. the last digit for check number.
(b) Certificate of Registration incorporating the GSTIN is issued to the
taxpayer,
(c) The GSTIN is made available to the applicant on the GSTN common
portal.
(d) Centralised Unique Identification Number (UIN) is issued in respect
of supplies to some notified agencies of United Nations organisation,
multinational financial institutions an d other organisations.

4.2. Standardisation of procedures for Registration
To ensureuniformity of the process all over the country and speeding up
the decision making process, GST Registration Rules prescribe as many as
30 standardforms / formats to be used 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.
The rules also st ipulate strict timelines for completion of different stages
of registration process. The standardized process for Registration is given
below.
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25 4.3 Procedure for Registration forRegular Taxpayers
Submission of application for registration
(i) Every taxable p erson, who is not a non -resident, deductor of tax and
collector of tax has to submit application for registration online
through the common portal (GSTN) or the Facilitation Centrein form
GST REG -01.
(ii) Time limit for submission of application is within thir ty days from
the date when liability to register arises.
(iii) Form for GST REG -01 is in two part – Part A and part B
 Part-A contains the applicant entity’s name,PAN, Mobile, email etc.
 Part -B gives the application reference no. given in acknowledgment
in GST -REG -02
(iv) Documents required for Registration
(1) PAN of the applicant
(2) Identify and address proof of the promotors
(3) Proof of registration of business, e.g. partnership deed, registration
certificate, certificate of incorporation etc.
(4) Address proof for place of business such as Rent receipt, electricity
bill , Municipal certificate etc.
(5) Bank account proof
(6) Digital Signature

(v) On submission of the application,PAN of the applicant is verified
through GST portal through One Time Password (OTP) on Mobile
no.

(vi) After v erificationIf the documents are found to be in order, an
acknowledgment is issued electronically in Form GST -REG -02.

(vii) Verification process
1. The application is then forwarded to the proper officer of the
respective State or the Central Government.
2. The Prope r Officer examines the application and the accompanied
documentsand upon the verification finds the same in order, shall
approve and grant the registration within three working days.
3. In case, wherethe proper officer finds the application to be deficient
for any reason or requires any further clarification, he shall intimate
to the applicant in form GST -REG -03.
4. The applicant shall submit the reply with clarificationin form GST -
REG -04within seven working days starting from the fourth day of
filing the origina l application/ the date of receipt of such information
in in form GST -REG -03. The clarification includes modification or
correction of particulars declared in the application for registration.

(viii) Grant or refusal of registration
The proper officer shall grant the application for registration within seven
working days thereafter and issue Registration Certificate in form GST -
REG -06 or reject the application in form GST -REG -05. munotes.in

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26 (ix) If the proper officer does not respond within 3 working days of
receipt of appli cation or within 7 working days from receipt of
clarification, then application under this Act shall be deemed to have been
approved.

(x) Physical verification in connection with registration
Since, the basic premise on which GST is based is evolution of a
technology based tax regime reducing physical interface, physical
verification is avoided to the extent possible.
However, where the proper officer is satisfied and deems necessity or
desirable to carry out physical verification, he may do so only
aftergran ting the registration.
After the verification, the Proper Officer shall upload the verification
report along with the supporting documents and photographs on the
common portal within fifteen working days.
4.4. Registration procedure for Casual Taxable Person
A Casual Taxable Person is 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.
Generally, Casual Taxable Persons, unlike the regular suppliers do not
have a fixed place of business located in a State or Union Territory where
they supply goods or services or both.
Persons running temporary business es like event management, business
fairs or exhibitions or other seasonal businesses fall under casual taxable
persons under GST.
Following provisions are applicable on a Casual Taxable Person: -
(i) Registration under GST is compulsory for casual taxable perso n
irrespective of the annual aggregate turnover.
(ii) A Casual Taxable Person shall make the application for GST
registration inform GST REG -01 at least 5 days prior to the
commencement of business.
(iii) Deposit for GST Registration
Nor only a Casual Taxable Person can not opt for composition scheme but
is required to deposit in advance an amount equivalent to the expected tax
liability during the validity period of registration. For this purpose, a
temporary reference number is generated for payment of GST deposit.
(iv) On paying the GST deposit, the Electronic Cash Ledger of the
taxpayer is credited, and GST Registration Certificate is released,
which will be valid initially for a period specified in the application or
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27 (v) The period of exte nsion may be extended for a further period of 90
days on making application in form GST -REG -11 before the expiry
of the original validity period of registration and deposit an amount
equivalent toadditional tax liability during the extended period. Other
procedures will be similar as those applicable mutatis mutandis to
regular taxable persons
(vi) Filing of returns :
A registered a casual taxable person has to file the following monthly
returns
 Form GSTR -1 on or before the 10th of the following month
giving detail of the outward supplies of goods or service made by him
 Form GSTR -2after the 10th but on or before the 15th of the following
month giving detail of the inward supplies made by him
 Form GSTR -2 after the 15th but on or before the 20th of the
following month showing the tax liability base on auto populated
details of GSTR 1 & 2.
 There is no requirement for filing annual return by a casual taxable
person .

(vii) Refund of Tax

After filing all the returns for the registration period, a Causal Taxable
Person may claim refund in From GSTR3 in respect of the excess tax paid
by him.

4.5. Registration procedure for Non - Resident Taxable Person
A Non -Resident Taxable Person means any person or business or not -for-
profit organisation,who occasionally undertakes tra nsactions 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.
Foreigners and foreign entities supplying goods or services to India would
be no n-resident taxable persons under the GST law.
The procedure for registration by a Non -Resident Taxable Person is as
follows:
(i) Registration under GST is compulsory for the Non -Resident Taxable
Person irrespective of the annual aggregate turnoveror any ot her
criteria.
(ii) A Non -Resident Taxable Person shall identify a person resident in
Indiahaving a valid PAN in India to act as its authorised
representativein India.
(iii) Application for registration shall be submitted
1. at least 5 days prior to the commencement of business in India ,
2. shall bein form GST REG -09,and
3. signed by his authorized signatory having a valid PAN in India munotes.in

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28 (iv) A Non -Resident Taxable Person is required to file the following
documents for GST registration :
1. Documents showing proof of -
i. Principa l place of business such as rentreceipt agreement, electricity
bill or consent letter from the owner of the premises.
ii. Identity such as passport visa.etc.
iii. Bank account with IFC Code MICR etc.
2. Tax identification number or unique number,PAN on the basis of
which the entity is identified by the foreign government, if available.
3. Authorisation for authorised representative in India along with the
copy of the resolution of the board of directors granting such
Authorisation , if any
4. Certificate of incorporation of the company ;
5. License issued by foreign country, if any;
6. Clearance certificate issued by Government of India, if any;

(v) GST Deposit forNon -Resident Taxable Person
Non-Resident Taxable personsare also required to make deposit of an
amount equivalent to the expected tax liability during the validity of the
registration for GST registration, where upon the Registration Certificate
will be issued.
(vi) An application reference number would be generated for payment of
advance tax for obtaining GST registration .
(vii) For final registration, an application is required to be submitted in
form GST REG -26 electronically within a period of 3 months from
the provisional registration.
(viii) The proper officer, after verification shall issueregistration in form
GST REG -06.
(ix) If the officer is not satisfied with the correctness or completeness of
the information submitted or needs additional information, he shall
issue a show cause notice to the applicant in Form GST REG -27.
(x) If the reply to the show cause is satisfactory, the show cause notice
may be cancelled by issuing an order in Form GST REG -20,and if it
is not satisfactory , then the officer after giving opportunity of being
heard to the applicant may pass an order for cancellation of the
provisional registration granted t o the applicant in Form GST REG -
28.
(xi) After expiry of the period of the Registration Certificate, an
application may be filed for extension of registration Period in form
GST -REG -11. Also deposit will be required to be made equivalent to
the estimated tax li ability for the extended period.
(xii) Other provisions are similar to those applicable on the regular taxable
persons in regard to the final registration.
(xiii) The rules for filing of returns, refunds etc. are similar to those
applicable to the casual taxable pers ons.



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29 4.6. OIDAR Service Provider
A taxable person, who supplies Online Information and Data base Access
or Retrieval (OIDAR) Services to a non -taxable online recipient,is
required to file the applicationfor registration in Form GST REG -10
electronically and fo llow the procedure applicable to non - taxable persons.
4.7. Deductor or collector of GST
A person who is liable to deduct GST at source or collect GST e.g. e -
commerce operator will have to follow the normal procedure as
applicable except that application for registration shall be submitted
electronically in FormGST REG -7
4.8. Special agency like united nation organization etc.
UnitedNations and other connected specified agencies are not liable to
GST under the international protocols. However they are required to
obtain Registration by making an application in Form GST -REG -
13.Registration is required to claim refund of taxes paid on inward supply
of goods or service or both.
4.9. Succession or transfer of business
On succession or transfer of a business as result of amalgamation,
merger, demergeror change in constitution etc.,the transferee of a business
as going concernis liable for registration within30 days from the date of
transfer or succession and the transferee has to follow the applicable
procedure as above.
2.5 AMENDMENT OF REGISTRATION
Procedure for amendment in particulars of registration varies according to
the nature of amendmentsought, which may be of the following three
types:
(i) Changes in core field, which do not require cancellation of
Registration unde r section 29 of CGST Act :
Under Rule 12, a taxable person may make an application for amendment
in Form GST -REG -14 within 15 days of the following changes:
(i) Legal name of the business, or
(ii) State of place of business or
(iii) Additional place of business., or
(iv) Names of the functionaries – like partners,directors,etc.
The Proper Officer shall after making necessary inquiry,approve the
amendment electronically in form GST -REG -15within next 15 days from
the date of application.

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30 (ii) Change in Non - Core field
All the other correctionsamendments or change in the particulars of
registration are called the change in non - core field.This change includes a
change in the name of the authorised signatory by adding another name of
signatoryA taxable person suo motu (on his own ) may effect such
changeson the common portal without seekingapproval of the Proper
Officer. Otherwise the change will not be effective.
(iii) Change in Mobile , email etc.
Change in e -mail, or mobile numbers may be effectedin the common
portal by the taxable person after an online verification through one time
password (OTP) is issued.
Eligible persons
Change in the particulars can be effected by the following categories of
persons, viz:
1. Applicant or Taxable person
2. Person holding UIN Card or other notifie d person for registration
under TDS/TCS U. N. bodies category,
3. Non-Resident taxpayer
4. GST Practitioner , and
5. Online application and retrieval service provider.

(iv) Fields, which cannot be changed
The following changes which have the effect of changing theSta te specific
PAN based incidence of GST are not allowed:
a. Change in constitution of business ,
b. Modification of place of business from one state to another.
c. In these cases , a fresh registration will have to be obtained after
cancelling the existing registr ation.

The amendments will come into effect from the date of application for
amendment.
However, the Commissioner may allow the amendments with
retrospective effect.
2.6 CANCELLATION OF REGISTRATION

6.1. Under section 29(1), Registration can be cancelled onl y in two
circumstances: -
(i) Voluntarily when a taxable person no more requires it , or
(ii) Suo motu by the Proper Officer, when he considers the registration
liable due to some specific defaults

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31 6.2. Voluntary Cancellation :

6.2.1. Cancellation of Registration of migrat ed taxpayers :
An existing taxpayer, who has migrated from old tax regime to GST, may
opt for cancellation of Registrationonlineon GSTN portal, if he has not
issued any tax invoiceorin Form GST - REG - 16 if he has issued any tax
invoice.
In either case, can cellation is allowed only if his: -
(I.) Turnover is below the threshold limit , or
(II.) Supply is in exempted category.

6.2.2. Cancellation of registration of other taxpayers

1. Time condition
(i) Where a taxable person not being liable for obtaining registration, has
taken voluntary registration , cancellation of registration is not allowed
until expiry of one year from the effective date of registration.

(ii) Other taxpayer may opt for cancellation anytime as the condition of
one year does not apply on them.

2. Reasons for cancellation
The cancellation may be for the following reason: -
a) the business of the taxpayer has been discontinued ;
b) the business has been sold or transferred to some other entity and
that other entity needs to register under GST;
c) turnover is below the threshold limit; or
d) the supply is in exempted category.

6.2.3. Procedure for cancellation
A taxable person desirous of cancellation of registration may apply on the
common portal within 30 days of event warranting cancellation in Form
GST -REG -16. Such person is required to
a) declare in the application the stock held on the date with effect from
which he seeks cancellation ,
b) work out and declare
 the quantum of dues of payments,
 credit reversal, and
 the particulars of payments made towards discharge of such
liabilities.
On receipt of the application the Proper officer shall cancel the
registration within 30 days from the date of application or receipt of
explanations or clarifications in response to his notice issued by him in
Form GST -REG -16 , if any. The notice has to be replied in in Form GST -munotes.in

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32 REG -18 within seven days. The order of cancellation will be in Form
GST -REG -19.Revocation of notice will be in in Form GST -REG -20.
6.3. Suo-motu cancellation by the Officer
6.3.1. The Proper Officer may issue a show cause notic e in Form GST -
REG -16to a registered person and call for information. After considering
the information and hearing the taxpayer, the Proper Officer maycancel
the registration by passing an order in Form GST -REG -19, if he is
satisfied that the registered p erson has :

(i) contravened the provision of the Act and the Rules;
(ii) furnished returns for -
a) three consecutive tax periods in case of a composition taxpayer, or
b) Continuous period of six month in case of a regular taxpayer ;
(iii)obtained voluntary registration but not commenced business within six
months of registration;
(iv) obtained registration by means of fraud, willful misstatement or
suppression of facts;
(v) discontinued business from the registered place of business;
(vi) been issuing tax invoice without making the supply of goods or
services; or
(vii) Committed Such other defaults as may be specified.

6.3.2. Revocation of Cancellation
Where registration is cancelled suo motu, the taxable person,within a
period of 30 days the service of cancellation order, mayapply to theprop er
officer for revoking the cancellation order.
No such application shall be entertained unless the taxable person, before
making such application, has made good the defaults by filing all pending
returns, making payment of all dues etc. for which the re gistration was
cancelled by the officer.
On receipt of the application, the Proper Officer, if satisfied, mayeither
revoke the cancellation earlier ordered by him or reject the request for
revocation of cancellation, after observing the principle of nat ural justice
by way of issuing notice to the person and hearing him on the issue.
6.3.3. Cancellation not to affect pending tax lability :
Cancellation of registration will not affect the liability of taxes prior to
cancellation. Further, the taxpayer will have to pay his due taxes by
reversing the input credit in stock of raw materials, finished or semi -
finished goods or make payment, whichever is higher. Similarly, input
credit on capital goods also will have to be reversed or the payment will
have to be made.

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33 2.7 SELF -EXAMINATION QUESTIONS
1. Explain the concept of casual taxable person .
2. What are the provisions for registration of a non - resident taxable
person
3. List out the forms used for registration and cancellation
3. State whether the following are true or false:
a) A migrated taxpayer cannot cancel his registration
b) Registration may be refused if turnover does not exceed the taxable
limit
c) A farmer is not liable to GST in respect of his agriculture
d) A plastic surgeon , who provides life -saving surg ery for Rs 10lakh
(exempt) and cosmetic surgery ( taxable)for Rs 12 lakh not liable for
registration .
e) A charitable trust is not liable for registration under GST.
f) An advocate is liable for registration under GST.
g) A Jammu taxpayer with taxable turnove r of Rs 15 lakh not liable for
registration .
h) Application for registrant in is to be made in GST -REG 1
i) A non - resident has to pay tax in advance
j) A GST number taken by fraud can be cancelled
k) A cancellation order cannot be revoked.
( False a, b, d, e, f a nd j , True c, g, h, i )


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34 3
TIME, PLACE AND VALUE OF SUPPLY
Unit Structure
3.1 Introduction and Objective
3.2 Inter -State Vs. Intra -State Supply
3.3 Location of the Recipient of services
3.4 Location of the Supplier of services
3.5 Place of supply in respect of goods and services
3.6 Place of supply in r espect of goods
3.7 place of supply in case of supply of services, when location of the
supplier and recipient is in India
3.8 place of supply in case of supply of services, when location of the
supplier and recipient is in India
3.9 Self- Examination Questions
3.1 INTR ODUCTION AND OBJECTIVE
This lesson will explain theprovisions relating to the determination of the
time, place and value of supply of goods and their implications with
reference to the location of the recipient of services and the location of the
supplier of services.
For every transaction, t hetime, place and value of supply of goods and/ or
services are important factors which determine the incidence of the GST.
Each transaction passes through the threefold test time, place and value of
supply of goods an d/ or services to ascertain:
(a) The point in time in which supply of goods or services has taken
place;
(b) The place where supply of goods or services has taken place,
(c) The value of goods or services supplied;
(d) The nature of the transaction whether Inter -State Supply Or Intra -
State Supply;
(e) Whetherthe transaction attracts GST;
(f) Type of the tax be levied, viz. IGST, CGST, SGST/UTGST on that
transaction;
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Time, Place and Value of
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35 (h) Who is to collect the tax on such transaction;
(i) The due date for depositing tax wit h the government and for filing
returns Etc.
3.2 TIME OF SUPPLY
Time of supply in relation to the supply of good and/or services means the
point in time, when such supply takes place. Time of supply is the vital
factor with reference to which the time when t he tax liability arises, the
type of tax payable i.e. IGST/ CGST, SGST/UTGST, the rate of tax and
other incidental matters such as due date for payment of tax, filing of
returns are determined.
There are separatecriteria to identifythe time of supplyfo r goods and
services.
A. Time of supply of goods.
Time of supply of goods will be the earliest of the following: -
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of payment / Advance.
Illustrations :
(1) From the following data determine the time of supply :
Date of sales of goods 1 January,2022
Date of issuing invoice 15January, 2022 Date of receipt of payment 25 January, 2022 The date of delivery of goods 20 January, 2022 Solution
The time of s upply will be 15 January, 2022 being the earliest of the
following: -
Date of issue of invoice 15 January, 2022 Last date on which invoice should have
been issued 20 January, 2022 Date of receipt of payment 25 January, 2022 (2) Assuming that 50% payment i s received in advance on 01 January,
2022, the time of supply will be
a. 01 January, 2022 for advance amount (50%)since the date of receipt
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36 b. 15 January, 2022 for the balance 50%.
B. Time of supply for serv ices
Time of supply of goods will be the earliest of the following: -
a. Date of issue of invoice (if issued within the prescribed time)
b. Date of provision of services (if invoice is not issued within
prescribed time.
c. Date of receipt of payment /advance.
Illustrations :
(1) From the following data determine the time of supply
Date of providing service 15 June 2022
Date of issuing invoice 30 June,2022 Date of receipt of payment 20 July, 2022 The time of supplyof will be 30 June, 2022 being earliest of the foll owing:
Date of issue of invoice 30 June2022
Last day for issue of invoice
(30 days from the date of provision Of Service15 June 2022)) 15 July 2022 Date of payment 20 July 2022 (2) Assuming the invoice was issued on 19July2022 after the prescribed
time of 30 days on 15 July 2022, then the time of supply of services will
be 15 June2022 being the date of providing service.
C. Time of supply of goods under Reverse Charge
Time of supply of goods for the recipient of the service will be 30 days
from date of issue of invoice for goods.
D. Time of supply of services under Reverse Charge
Time of supply of goods for the recipient of the service will be 60 days
from date of issue of invoice for goods.
a. Date of payment:
b. 60 days from date of issue of invoice for servi ces

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37 Illustrations
(1) A lawyer raised invoice on 1 June 2022 to a company to represent it
before the ITAT on 15 May2022. The company made the payment on 1
July 2022.
Lawyer’s fees are covered under the Reverse Charge. Hence, the time of
supply will be 1 July 2022 being earliest of the following: -
1. Date of payment1 July 2022
2. 60 days from date of date of invoice:31 July 2022
(2) If the above was a case of supply of goods, then the time of supply of
goods is 30 days from the date of invoice i.e. 1 July 2022.
Please note in RCM cases date of invoice is important not date of supply
of goods or services.
3.4 INTER -STATE SUPPLY VS. INTRA -STATE SUPPLY
3.4.1 Broadly, transactions fall in two categories: -
A. International or cross border transactions, viz.:
a. Imports of goods in to India; or
b. Export of goods outside India, and
B. Domestic transactions, viz:
a. Inter -state supply
b. intra-state supply
3.2. As per section 7 of the IGST Act, 2017 Inter -State Supply is when
“location of supplier” and “place of supply” are in different State s or
Union Territories.
In contrast, as per section 8 of the IGST Act, 2017 Intra -State Supply is
when “location of supplier” and “place of supply” are in the same State or
same Union Territory.
Examples
1. A supplier in Panji, Goasells good in Margaon, Goa . It is intra -state
supply, liable to CGST and Goa -SGST as location of the supplier and the
place of supply are within the same state (Goa).
2. The supplier in Daman (UT) sells goods inPanji Goa. itis an inter -
state supply attracting IGST as the location of the supplier and the place of
supply fall in different States/UT.
Interestingly the CGST Act vide sections 2(70) and 2(71) defines
“location of the recipient of services” and “location of the supplier of munotes.in

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38 services” respectively but it does not define “loca tion of the recipient of
goods” and “location of the supplier of goods” at any place.
3.5 LOCATION OF THE RECIPIENT OF SERVICES
As per section2(70) of CGST Act “location of the recipient of services”
means: —
(a) where a supply is received at a place of busin ess for which the
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 business
for which registration has been obtained (a fixed establishment elsewhere),
the location o f 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.
Thus, the location of the recipient primarily means: -
Supply Received at Location of Recipient of
Service
Place of business for which the
registration has been obtained Recipi ent’s Registered Office;
Place other than the place of
business for which registration
has been obtained, a fixed
establishment Recipient’s fixed
establishment
at more than one establishment,
whether the place of business or
fixed establishment The locat ion of the
establishment most directly
concerned with the receipt of
the supply
In absence of such places The location of the usual place
of residence of the recipient;

Illustration:
A is registered at Fort with head office at Dadar and branches at Than e
and Borivali.His residence is in Juhu.
For any supply received in Thane office, the place of recipient will be at:
1. Registered office atfort,
2. Dadar officeif A does not have registration at Fort; munotes.in

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39 3. Most connected office at Thane in absence of Fort and Dadar
offices.
4. Residence at Juhu, in absence of any of the above.
3.6 “LOCATION OF THE SUPPLIER OF SERVICES
As per section 2(71)of the CGST Act, “location of the supplier of
services” means: —
(a) where a supply is made from a place of business for which the
regis tration 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 (a fixed establishment
elsewhere), the location of such fixed establishmen t;
(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 provisions of the
supply; and
(d) in absence of such places, the loca tion of the usual place of residence
of the supplier;.
The yardstick for determining the location of the provider or supplier of
service is more or less similar to those applicable on location of the
receiver of the supply.
Supply made from Location of Sup plier of
Service
Place of business for which the
registration has been obtained Recipient’s Registered Office;
Place other than the place of
business for which registration
has been obtained, a fixed
establishment Recipient’s fixed establishment
at more than one establishment,
whether the place of business or
fixed establishment The location of the
establishment most
directlyconcerned with the
provision of the supply
in absence of such places The location of the usual place
of residence of thesupplier


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40 Example:
XYZ Limited is a companyhaving registered office at Vashi, corporate
office at Mumbai and branches all over the country. Goods are supplied to
Surat Branch ofXYZ Limited. Place of supply will beRecipient’s
Registered Office atVashi, fixed e stablishment at Mumbai and Surat in
that order.
3.7 PLACE OF SUPPLY OF GOODS AND SERVICES
Sections 10, 12and 13 of the IGST Act, 2017 lay down the principles for
determination of place of supply broadly in three categories viz.: -
Section 10 Supply of goods
Section 12 Supply of services where location ofboth the supplier and
the recipient is in India;
Section 13 Supply of services, where location of either the supplier or
the recipient is outside India.
3.8 PLACE OF SUPPLY IN RESPECT OF GOODS
Section 10 of t he IGST, Act, 2017 lays down the following principles to
determine place of service of goods
When there is movement of goods
When there is movement of goods, there may be two situations: -
A. Where supply involves movement of goods whether by the supplier
or the recipient or by any other person , place of supply is the place where
the movement terminates i.e. where the goods are delivered or the
ownership in goods is transferred.
Examples
1. Paresh of Pali sells 100 cotton bales to Suresh of Satara. The place of
supply is Satara in Maharashtra, where the movement of goods is
terminated. Both Pali and Satara are in the state of Maharashtra, it is
intra-State sales liable to CGST & SGST.
2. If Paresh sells goods to Bhupat of Bhopal in M.P., the place of supply
will be i n Bhopal M. P. M.P. and Maharashtra being different states,
it will be inter -state sales attracting IGST.
3. Manoj of Mumbai places an order to Nokia’s Chennai plant for
purchase of mobile phones goods ex -factory. In this case the goods are
delivered at Chenna i; hence, Chennai will be the place of supply.
Both, the place of supply and location of the supplier being in same State
Tamil Nadu, it will be intra -State sales chargeable to CGST and TN
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41 Once place of supply has been determined at Chennai, subseq uent
transport of goods to his place of business in Mumbai or anywhere else is
not relevant.
Delivery to a third party as per instructions
When goods are delivered by a seller to the recipient (whether agent or
not) on the direction of a buyer before or d uring the movement of goods,
by way of transfer of document of title to the goods or otherwise, the p lace
of supply will be the principal place of the buyer on the assumption that the
buyer has received the goods.
Examples
1. Jatin of Jodhpur buysumbrellas fr om Mahesh of Mumbai to be
delivered to his Mithun living in Mumbai.
This is a case of third party delivery. Hence, delivery of umbrellas by
Mahesh to the third party i.e. Mithun in Mumbai will be treated as
delivery to Jatin at his principal place in Jodh pur. Hence, Place of supply
will be Jodhpur in Rajasthan.
RajasthanandMaharashtra being different states, it will be inter -State
salechargeable to I GST.
2. Mayank of Mumbai places an order for two watches on Snapdeal (an
E-Commerce Operator) Manufactured by Foss Ltd., Bengaluru (registered
with Snapdeal) to be delivered to his sister Hema in Hubli.
This is again a case of thirdpartydelivery. Delivery of watch toHema in
Hubli will be assumed to be delivery to Raju at his principal place in
Mumbai by the Sup plier Foss Ltd.(Bengaluru Karnataka). Hence, Mumbai
will be the place of supply. Karnataka and Maharashtra being different
states, it will be inter -State sale chargeable to I GST .
When there is no movement of goods
A. Where supply does not involve movement of goods, the place of
delivery of goods will be the place of supply.
Examples
1. Alok of Ahmedabad has his goods lying in Punit’s godown in Pune.
Punit offers to buy those goods and Alok agrees to sell these goods to
Punit.
In this case, there is no physica l movement of goods. Delivery of goods is
effected when Punit appropriates the goods. Place of supply will be Pune.
This being intra - state as the supplier and the place of supply both are in
the same stateCGST and MH SGST will be charged.
2. In the above exa mple, if Alok sells goods to Ramesh in Pune, who
takes the delivery from Punit;the place of supply will be Pune. Pune and
Ahmedabad being in different states, IGST will be charged. munotes.in

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42 3. Johor, a Mumbai based film producer purchases astudio inKolkata
with pre -installed audio -visual equipments. The p lace of supply is Kolkata
being the location of equipments at the time of delivery alongwith the
studio building, which is same as the location of the supplier. Hence,
CGST and WB SGST will be charged as intra -State sale. There will be no
GST on sale of building being a capital asset.
B. The goods assembled or installed at site
Where, goods are assembled or installed at the site of the buyer, site will
be the place of supply.
Example
InfosysLtd ., Bengaluru installs a sophisticated internet -server for MTNL
in Mumbai.
In this case,the place of supply will be Mumbai being thebuyer’s place or
siteof installation of server.
This will be inter -State supply from Bengaluru (Karnataka) to Mumbai
(Maharashtra) subject to levy of IGST.
However, Infosys may apply for registration as Casual Taxable Person in
Mumbai and pay CGST & MH SGST.
C. Goods Supplied on a Vessel/Conveyance
Where the goods are supplied on board a conveyance including any vessel,
aircraft, train or a motor vehic le, place of supply is the location where
such goods are taken (loaded) on board.

Examples
1. A buys food articles on board whiletravelling from Kolkata to
Guwahati by air.
The food items are loaded into the plane atKolkata. Hence, Kolkata will be
the place of supply. If the Airline is registered in Kolkata, CGST&WB
SGST will be charged. But if the Airline is registered in other state e.g.
Mumbai (Maharashtra), IGST will be charged. In practice, most airlines
are registered across the country andcharge CGST/S GST.
2. Kamal, a consultant for JW Ltd, Indore buys food articles on board,
while flying from Patna to Lucknow.
CGST &MP SGST will be charged as inter - State sales in Indore (M.P.)
being the place of supply, where the food articles were loaded and the
Airlin e is registered in MP. But if the Airline is registered in other state
IGST will be charged.
3. Kutty is travelling from Jaipur (Rajasthan) to Kochi (Kerala) by
Himgiri express starting from New Delhi (NCR).He buys lunch on board
at Wadi in Andhra. The lunch was loaded by the IRCTC in Sholapur
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43 The food items were loaded in Sholapur, hence place of supply isSholapur
(Maharashtra). Since IRCTC is registered throughout India, CGST &SGST
will be charged.
D. Where place of supply cannot be determined, the Parliament will
make ruleson the recommendation of GST Council .

E. Where, supply is by transfer of documents, place of supply will be the
principal place of business of the person receiving the supply.

Example
Dilip of Dehradun (Uttarakhand) sells good s by endorsing airways bill for
goods lying in Mumbai, from where the buyer takes the delivery of the
goods. The place of supply is in Mumbai (Maharashtra) being the
principal place of business of the person receiving the supply. It will be
inter-state sal es and IGST will be charged.
F. In case of import of goods into India, place of supply is location of
the importer and IGST will be charged.
Example
A toy dealer having his principal office in Puri (Odisha) imports Chinese
toys in Mumbai port. Place of suppl y is Puri. IGST will be charged on the
value of imports
G. In case of export of goods outside India, place of supply is outside
India. Exports are exempt from GST.
Example
A of Patna exports garments to San Francisco, U.S. from Kolkata airport.
Place of su pply will be in San Francisco. Exports are exempt from GST.
3.9 PLACE OF SUPPLY IN RESPECT OF SERVICES
WHEN LOCATION OF THE SUPPLIER AND
RECIPIENT IS IN INDIA
Section 12 of the IGST Act lays down the following principles for
determination of place of sup ply in case of supply of services, when
location of the supplier and recipient is in India: -
1. General Rule
Where the services are provided to a registered person, place of supply of
services is place of location of the registered recipient of services.
Example
A computer mechanic provides services to a Chartered Accountant
registered in Thane. Place of service will be in Thane. munotes.in

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44 2. Where, the recipient is not registered, place of supply is the address on
record of the recipient.
Example
In the above illustrat ion, the Chartered Accountant is not registered and
his address on record is at Pune.Place of service will be at the address on
record (i.e. Pune)
3. In other cases, it is location of supplier of services.
4. Immovable Properties -Architects, surveyor etc.
Place of supply of services in case of services related to immovable
property like architects, interior decorator, property agents, surveyors,
engineers, hotels, inns, guest houses, lodges, club, banquet halls etc. shall
be the location of the immovable prope rty.
Example
An U.S. Architectmakes designs and plans for Trump Tower in Mumbai.
Place of service shall be Mumbai as the service is related to immovable
property located in Mumbai.
5. Performance based service
In case of restaurant and catering, personal gro oming services like beauty
treatment, health, fitness etc. shall be the place of performance of these
services.
Example
A bridal makeup artist of Mumbai goes to provide service in wedding in
Delhi. Place of service will be Delhi, where the grooming servic e was
provided.
6. Transport & Insurance etc.
Several services such as transportation of goods, transportation of
passengers, Insurance etc., place of supply shall be the location of
registered person.
7. Banking Services
In case of banking, place of suppl y is location of the recipient on record.
8. Telecommunication services
In case of telecommunication services involving fixed line, circuits, dish
etc., place of supply is location of such fixed equipment.
Example
In respect of set top box fixed at the homes of viewers, place of service
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45 9. Mobile / Internet Services
In case of post -paid services,place of service is location of billing address
of the recipient and In case of sale of pre -paid voucher, place of supp ly is
place of sale of such vouchers. In other cases, it is address of the recipient
in records.
Examples
1. Billing Address for mobile phone of Rajua resident of Thane is at his
Chandigarh home address. Place of service shall be Chandigarh.
2. Yashvant, reside nt of Chandigarh purchasesaJIO prepaid talk -time
voucher in Raipur, place of service shall be Raipur.
3.10 PLACE OF SUPPLY OF SERVICES WHEN
LOCATION OF EITHER THE SUPPLIER OR THE
RECIPIENT IS OUTSIDE INDIA – SECTION 13
International transactions where both the recipient and the provider
of service are outside India are not covered under GST in
India. International transactions, where either of the service recipient
or the service provider is outside India, place of service will be
determined as per the principles laid down in section 13 of IGST, Act,
viz:
3.11 General Rule
In international transactions,place of supply of services shall bethe
location of recipient of service.
Example
A Chartered Accountant provides service to his counterpart in London,
U.K. As per sec tion 13 of the IGST Act, place of supply shall be London,
U.K. being the location of the recipient of service.
3.12 Non- availability of the location of service recipient
Where the location of service recipient is not available, the place of supply
shall be location of the supplier of services.
Example
A Chartered Accountant provides consultancy services to a person outside
India, whose location is not known, the place of service shall be India
being the location of the supplier of services.
3.13 Services involvin g actual performance
Services involving actual performance, place of actual performance of
services will be location of service.
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46 Example
Sonu Nigam performs at IAFA awards ceremony in Macau, the place of
service shall be Macau, China.
3.14 Processing of good s
When supply of service involves doing some activity on some goods,
place of supply is location of goods.
Example
If packing of goods imported is to be done in London, the place of service
shall be London for providing packing service.
3.15 Services related to immovable property
Services related to immovable property, place of supply of services is
location of immovable property.
Example
An Engineer in India makes structural plans for a tower in Dubai. The
place of service will be Dubai, not India
3.16 Event based Services
Place of supply with respect to event based services like exhibition,
conference, fair etc. shall be place where such events are held.
Examples
1. A decorator organises a business fair in Rome, the place of service will
be Rome.

2. AHollywood based Ame rican event manager organises Oscar award
ceremony in Mumbai. The place of service shall be Mumbai. The event
manager will have to take registration as a Non -Resident Taxable
Person at least five days advance of the event.
3.17 Services of Banking companies, t ransport hiring and
intermediaries
In case of banking company, or intermediary services or hiring of means
of transport etc. shall be location of the supplier of services.
Example
1. A German company gives buses on rent to an Indian troupe visiting
Berlin and charters a plane for returning to Mumbai. Place of service will
be the location of supplier in Germany.
2. Bank charges payable to a Swiss bank in Geneva, the place of service
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47 3.18 Transportation of goods
Place of supply in case of transportation shall be place of destination of
such goods.
Example
1. For a truck carrying goods to Nepal, the place of service shall be
Nepal.
2. All ocean going ships or air crafts, place of service will be the
destination port.
3.19 Transportation of passengers
In case of transportation of passengers, place where the passenger embarks
on the conveyance.
Example
A travel agent carries passengers from Hardwar to Mansrovar in China,
the place of service shall be Hardwar.
3.20 Online data information
Place of supply of s ervices in case of online information and database
access, place of recipient of services.
Example
Charges paid to google or Facebook for making available or data
information in India, the place of service shall be India.
3.11 VALUE OF SUPPLY OF GOODS OR SERVIC ES-
SECTION 15
Thetax liability by way of CGST / SGST / UTGST or IGST is calculated
ad valorem with reference to the value of the taxablesupply of goods
and/or services
As per section 15 (1), “value of taxable supply” will be the transaction
valueand “trans actionvalue” meansthe price paid or payable for supply of
goods and/ or services if: -
(i) The supplier and the recipient are not related; and
(ii) price is the sole consideration for the supply.
Transactional value is the value at which unrelated parties would t ransact
in the normal course of business at normal price being the sole
consideration. Hence in cases, where the parties are related (e.g., sister
concerns) and a reasonable value may not be charged, or transaction may
take place as a barter or exchange; t he Act provides for determination of
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48 The phrase “price is the sole consideration for supply” implies that
 value of any additional consideration received, whether monetary or
non-monetary, and

 payment made directly or indirectly by the recipient to the supplier
will constitute the price actually paid or payable and shall be added to
the consideration to arrive at the transaction value.
Illustration
Ashok sells a computer to Babu for Rs 50,000 payable in cash subject to
the condi tion that Babu shall waive an old loan of Rs 50,000 due to him by
Ashok.In this case the price of Rs.50,000 is not the sole consideration for
sale. The loan of Rs 50,000 written off will also be the part of the
consideration for supply of goods. The value of the transaction will be Rs
one lakh not.
Under section 15(2)Transaction value will include:
(a) any taxes, duties, cesses, fees & charges levied under any statute, if
charged separately by the supplier to the recipient. Municipaltaxes, import
duty are the e xamples of such taxes. However, taxes under this Act i.e.
CGST/IGST/ SGST/ UTGST/ Cess etc will not be included in
transaction value.
(b) any amount that the supplier is liable to pay in relation to the 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 and/ or
services. In other words, where the supplier is under an obligation for
which receiver has made the payment, such payment in connection with
the supply i.e. Transportati on will form part of transaction value.
Illustration
A purchases a computer on onsite installation basis from B. A collects the
computer from B and pays freight and installation charges. This expenses
as per the original contract are to be incurred by B, will be included in the
transaction value of the computer.
(c) Incidental expenses
Any incidental expenses, such as commission and packing, charged by the
supplier to the recipient of a supply, including 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 the goods or supply of the
services;
Illustrations:
(1) A buys ice cream from Naturals and pays Rs 50 for special dry -
packing for home delivery. Cost of such packing will b e included in the
value of ice cream even if it is separately paid by the recipient. munotes.in

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Time, Place and Value of
Supply
49 (2) A suppliers supplies a diary of Rs 500 and asks the recipient to pay Rs
50 as the commission to the agent appointed by the supplier to procure the
orders and remit the b alance Rs 450. Transaction value will be Rs 500
inclusive of commission.
(d) Interest or Late Fees
Interest or Late fee or penalty for delayed payment of any consideration
will be part of transaction value
Illustration
MTNL raises a telephone bill of Rs 500 payable within 15 days and Rs
600 if paid after 15 days. The interest or penalty of Rs100 will form part
of the transaction value.
(e) Subsidies
Any subsidies directly linked to the price will form part of
transaction value, unless such subsidies are pr ovided by the Central
or State Governments e.g. subsidy on gas cylinder, fertilisers or
export subsides.
Illustration
A Temple Trust grants subsidy linked to the price of household
products like honey etc. produced by the members of its clan, the such
subsidy will be included in the price.
Exclusions from the Transaction Value - Section 15 (3)
Discount will be excluded from the transactional value in the
following cases
(a) If discount is given before or at the time of the supply andsuch
discount has been duly recorded in the invoice issued in respect of such
supply;
(b) If the discount is givenafter the supply has been affected, in terms
of an agreement entered into at or before the time of such supply and
(i) such discount is specifically linked to relevant inv oice;
(ii) Input credit attributable to the discount has been reversed by the
recipient.
Illustrations
(1) Under a sales promotion scheme, Maruti offers 5% discount to the
dealer who achieves a certain volume of turnover. Maruti Ltd. sells a car
of Rs 10 lakh fo r Rs 9.50 lakh to the dealer indicating 5% discount in the
invoice, the transaction value will be Rs. 9.50 lakh.
(2) X purchases from Y goods for Rs 25,000 on 1 January 2022 on credit
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50 pays R s 22000 to settles his account. Transaction value will be Rs 25,000
as discount is not known before or at the time of supply.
(3) In the above illustration if the invoice mentions that discount of Rs
3,000 will be allowed if the payment is made before the du e date,
thetransactional value will be Rs 22,000.
Value of supply not determinable - Sections 15(4)&15(5)
As per section 15(4),w here the value of supply of goods or services cannot
be determined under section 15(1), the same shall be determined in the
prescribed manner.
Further as per section 15(5), the value of supplies by the Central or a State
Government, on the recommendation of the GST council, shall be
determined in prescribed. Manner. In this regard following rules have
been framed .
1. Rule 1 –Where, the consideration is not wholly in money, the value
will be the o pen market value of such supply, and if there is no open
market, the sum total of consideration in money and any such further
consideration not in money if such amount is known at the time of su pply.
If the value of supply is not determinable, value of like kind and quality of
goods or services or as per Rules 4 &5.
Illustrations
(1) A washing machine under an exchange offer is available for Rs. 10,000
and Rs 12,000 without exchange. Open market val ue of the new machine
will be Rs. 12000.
(2) A desktop is exchanged for a laptop costing Rs 25,000. Cost of the
desktop is not known, then the value of desktop will be Rs 25,000.
2. Rule 2. Value of a supply between distinct or related person, will be
the o pen m arket value of such supply, and if there is no open market, the
sum total of consideration in money and any such further consideration
not in money if such amount is known at the time of supply.
If the value of supply is not determinable, value of like ki nd and quality of
goods or services or as per rules 4 &5 or where the recipient is eligible for
full input tax credit, the value declared in the invoice shall be deemed to
be the open market value of goods or services”
3. Rule 3. Value of supply of goods made or received through an
agent will be the -
 open market value of goods supplied, or
 at the option of the supplier, 90% of the price charged for the supply of
goods of like kind and quality by the recipient to his customer not being a
related person, where the goods are intended for further supply by said
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Time, Place and Value of
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51 If the value of supply is not determinable, value of like kind and quality of
goods or services or as per Rules 4 &5.
Illustration
X supplies goods to his agent Y. Y sells like kind and quantit y for Rs
10,000. Z , another supplier gives like kind and quantity to Z for Rs.
8,000. Value of the supply goods will be Rs 8,000 or at the option of X
90% of Rs 10,000 or Rs 9,000.
4. Rule 4 - Where the value of a supply of goods/ services is not
determinab le by any of the preceding rules, the value of supply shall be
110% of the following
(a) cost of production/ manufacture or
(b) cost of acquisition of such goods or
(c) cost of provision of such services.
5. Rule 5 - Where the value of supply of goods or services or both cannot
be determined under rules 1 to 4, the same shall be determined using
reasonable meansconsistent with the principles & general provisions of
section 15 and these rules. A supplier of services may opt for this rule,
disregarding Rule 4”
6. Rule 6:Value o f other supplies:
(a)Money changing
Value of service for purchase or sale of foreign currency or money
changingin Indian rupee (INR) will be the buying rate or selling rate less
RBI reference rate and if there is no RBI reference rate, 1% of the gross
amount o f Indian Rupees received or given by changing of money. RBI
reference rate is available for USD, British pound, Euro and Yen only.
When neither of the currencies exchanged is Indian Rupee, the value of
service will be equal to 1% of lesser of the two amoun ts, the person
changing the money would have received by converting any of the two
currencies at RBI reference rate.
Illustration
A changes US $ 100 for Rs 69.72 against the RBI reference rate of Rs
69.45. Value of service - Rs 0.27 X $100 = Rs. 27. If RB I refence rate is
not there, the value of service will be 1% of Rs 69.72=X $100= Rs 69.72.
(b)booking of air tickets
Value of services on booking of air tickets will be 5% of basic fare for
domestic bookings, and 10 % of basic fare for International booking.
Basic Fare Means the part of ait fare on which commission is normally
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52 (c)Life insurance agents
Value of service will be the gross amount charged to the policyholder
reduced by the amount allocated for investment on behalf of the
policyholder, if such amount is intimated to the policy holder at the time
of supply of service and 10% of the premium, in case of single premium
annuity policies.For policies towards risk coverage only, the value will be
tank at Nil.
(d)Buying and sellingof second hand goods
Value of supply shall be the difference between the selling price and
purchase price, and if the value of supply is negative it shall be ignored.
However this subject to the condition that used goods are sold as such or
after such minor processing which does not change the nature of the
goods, and no input tax credit has been availed on purchase of such goods
(e)Token/ Voucher/ Coupon/ Stamp
Value of Token/ Voucher/ Coupon/ Stamp etc. will be equal be equal to
the money value of the goods or services or both redeemable against such
token, voucher, coupon, or stamp.
7. Rule 7 - The expenditure or costs incurred by the supplier as a pure
agent of the recipient of supply of services shall be excluded from the
value of supply on fulf ilment of certain conditions. Example demurrage
charges paid by customs house agent for their client’s or property taxes
paid by a housing society on behalf of the flat owners will be decocted if
the same are paid as pure agent.
Meaning of Certainterms:
(a) open market value
A supply of goods or services or both means the full value in money,
excluding the integrated tax, central tax, state tax, union territory tax and
the cess payable by a person in a transaction, where the supplier and the
recipient of the supply are not related and price is the sole consideration,
to obtain such supply at the same time when the supply being valued is
made.
(b) Supply of goods or services or both of like kind & quality
Any other supply of goods or services or both made under sim ilar
circumstances that, in respect of the characteristics, quality, quantity,
functional components, materials, and reputation of the goods or services
or both first mentioned, is the same as, or closely or substantially
resembles, that supply of goods or services or both.
(c) Related person
 Officers or directors of one another’s businesses
 legally recognised partners in business
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Time, Place and Value of
Supply
53  Any person who directly or indirectly owns, controls or holds 5% or
more of the outstanding voting stock or s hares of both of them
 One of them directly or indirectly controls the other
 Both of them are directly or indirectly controlled by a third person;
 Together they directly or indirectly control a third person
 Members of the same family
3.12 SELF - EXAMINATION QUEST IONS
1. What is the meaning of “location of the recipient of service:
2. Explain the term’ location of provider of service ‘
3. How the place of service is determined for supply of goods?
4. Explain the rules for determining place of supply of services.
5. What determin ation of place of service is important.
6. What are the types of taxes, How the will be affected by the place of
service.
7. How the value of service will be determined?




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54 4
INPUT TAX CREDIT
Unit Structure
4.1 Introduction and Objectives
4.2 Input Tax Credit (ITC)
4.3 Eligibility to claim input credit
4.4 Restrictions on Availment of Input Tax Credit
4.5 Document requirement
4.6 Reversal of Input credit
4.7 Utilisation of input credit
4.8 Matching of ITC
4.9 Conditions for availing ITC
4.10 Reversal of credit
4.11 Other provisions
4.12 Self-Examination Questions
4.1 INTRODUCTION AND OBJECTIVES
The GST was introduced to establish a pan -Indian supply chain from the
manufacturer of the goods to the end consumer and to devise a seamless
flow of input tax credit (ITC) across the chain.
Indeed, the GST laws and rules made thereunder make elaborate
provisions to attain this objective.
This lesson seeks to explain theseprovisions in particular regard to
 Who can orcannot claim theIT C,
 The supplies of goods and/or service in respect of which the ITC is
allowable or not allowable,
 Conditions and procedures for claiming ITCcross utilization of credits
of different taxes against one another and other relevant matters.

4.2 INPUT TAX CREDI T (ITC)
Input Tax Credit (ITC)
As per section 2(63) Input Tax Credit (ITC) means ‘the credit of input
tax”
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55 Input Tax
Input Tax is defined in section 2(62). Input Tax in relation a registered
person means: -
“the central tax, state tax, integrat ed tax or union territory tax charged on
any supply of goods or services or both made to him and includes” —
4.3 the integrated goods and services tax charged on import of goods;
4.4 the tax payable under sections 9(3) and 9(4) of CGST Act
4.5 the tax payable under se ctions 5(3) and 5(4) of the IGST Act
4.6 the tax payable under sections 9(3) and 9(4) of the SGST Acts
4.7 the tax payable under sections 7(3) and 7(4) of UTGST Act
but does not include the tax paid under the composition levy.
Input
As per section 2(59) Input means” any good other than capital goods used
or intended to be used by supplier in the course or furtherance of
business”.
Input services
As per section 2(60) Input services means any service used or intended
to be used in the course of furtherance of bu siness.
Capital goods
As per section 22 (19) Capital good s means “goods, the value of which is
capitalised in the books of accounts of the person claiming the ITC and
which are used or intended to be used in the course of business”
From the above definit ions read collectively, ITC under GST shall be
available in respect of taxes paid by way of CGST/IGST/UGST and IGST
including taxes paid under the Reverse Tax Mechanism (RCM) by the
recipient of goods and / or services.
1. On Supply of Inputs or Input Servic es or both
2. On Capital goods
3. On Import of Goods or Services
4. Under RCM Advertisement
5. Input Service Distributor (ISD)
6. Deemed supply In the course and furtherance of business:
Input Service Distributor (ISD) means an office of the supplier of goods or
servi ces or both which receives tax invoices towards receipt of input
services and issues a prescribed document for the purposes of distributing
the credit of central tax (CGST), State tax (SGST)/ Union territory tax
(UTGST) or integrated tax


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56 4.3 ELIGIBILITY TO CLAIM INPUT TAX CREDIT

3.1. Section16, states that every registered person shall be entitled take
credit of input tax charged on any supply of goods or services or both,
which areused or intended to be used in the course or furtherance of his
business on ly if he satisfies all the conditions as prescribed in section
16(1) and 16(2).
3.2. Who can avail ITC ?
As per Section 16 every registered person is eligible to avail ITC except
the followi ng persons:
1. Composition dealer
A person registered under composition scheme in GST is not eligible to
claim ITC although the goods or services received by him are used in
furtherance of his business
2. Supplier engaged in supply of exempted or Nil rated good s
3. Unregistered person.
Registered person as per section 2(94) of CGST Actmeans a person who
is registered under section 25 but does not include a person having a
Unique Identity Number as a registered person
3.3. Basic conditions for claiming ITC
1. The g oods and /or services have been received by the person or his
agent whether physically or by transfer of documents.
2. The person should be in possession of proper documentary evidence
to avail ITC viz. a tax invoice, debit note or other prescribed
document i ssued by a registered supplier under Rule 36 mentioning
following particulars:
a. Taxable value
b. Tax Rate
c. Description of goods or services
d. GSTIN of supplier and Recipient and
e. Place of supply in case of inter -State supply
3. The tax charged on such supply sho uld have been paid to the
government by the suppliereither in cash or through utilisation of
ITC admissible in respect of the said supply.
4. The person has furnished the returnunder section 39 within specified
timein respect of such supply .
5. The ITC is credit ed to the Electronic Credit Ledger of such person
provided in Common portal.
6. When goods are received in instalments or lots, ITC can be claimed
only when the last lot / instalment is received.
7. The ITC is admissible only in respect of taxable goods and/or
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Input Tax Credit
57 4.4 RESTRICTIONS ON AVAILMENT OF INPUT TAX
CREDIT

4.1. General Restrictions

1. ITC shall not be allowed in respect of :

(a) Supplies related to Non Business Purpose
(b) Exempted Supplies
(c) Supplies on which tax has been pa id under Composition schemeunder
section 10
(d) Goods and/or Services used for personal consumption.
(e) tax component of any capital goods on which depreciation has been
claimed
(f) Supplies for which ITC is specifically not available
(g) Membership of a club, health an d fitness centre.
(h) Travel benefits extended to employees on vacation such as leave or
home travel concession.
(i) Goods and/or services received by a taxable person for construction
including, re -construction, renovation, additions or alterations or
repairs)of an immovable property (other than plant or machinery) even
if used in furtherance of business.
(j) Goods lost, stolen, destroyed, written off or disposed of by way of gift
or free samples.
However, ITC will be admissible for making zero -rated supplies
although such supply may be an exempt supply.
Zero rated supplies mean: -
(a) export of goods or services or both or
(b) suppliesof goods or services or both made to a SEZ developer or a SEZ
Unit

2. ITC will be allowed only in respect of :

a. Goods imported by hima Non -Resident Taxable Person, not on
domestic goods or services.

b. The supply of Motor vehicles and other conveyances with 13 or more
persons capacity (including the driver) ONLY when they are used for
making taxable supplies, namely: -
(i) Further supply of such vehicl es or conveyances; or
(ii) Transportation of passengers; or
(iii)Imparting training on driving; flying, navigating such vehicles or
conveyance;

c. The following supplies only where same category of goods or services
is used for making outward supply or an element of M ixed or
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58 i. Food and beverages services.
ii. Outdoor catering services.
iii. Beauty treatment services.
iv. Health services.
v. Cosmetic and plastic surgery.

d. The following supplies ONLY IF notified by the Government as
obligatory to provide such se rvice by employer to employee or where
same category of goods or services is used for making outward supply or
an element of mixed or composite supply namely: -
i. Rent -a-cab services,
ii. Life insurance services,
iii. Health insurance services.

e. Works contract servic es when supplied for constructionincluding re -
construction, renovation, additions or alterations or repairs of an
immovable property (other than plant and machinery) ONLY IF it is an
input service for further supply of works contract service.

“Plant and m achinery “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: -
(a) land, building o r any other civil structure;
(b) telecommunication towers; and
(c) Pipelineslaid outside the factory premises.

3. Apportionment of credit and blocked credits:
Availment of the ITC is subject to following additional restrictions:
(1) No credit shall be availed in re spect of any tax paid :

a. in pursuance of any order where any demand on account of non -levy,
short levy due to suppression of facts, any fraud, wilful misstatement
recovered by the department under section 74.

b. in connection with any detention or seizure of goods, release of goods,
confiscation of goods in transit under section 130.

(2) The amount of credit shall be restricted to so much of the input tax as is
attributable to
a. the purposes of his business, wherethe goods and/or services are used
by the registe red person partly for business and partly for other
purposes.

b. the taxable supplies including Zero -Rated Supplies, where the goods
and/or services are used by the registered person partly for taxable
supplies including Zero -Rated Supplies and partly for Ex empt Supplies
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59
4.5 DOCUMENTS REQUIRED FOR CLAIMING INPUT
TAX CREDIT
Under Rule 36 of the CGST Rules,a Registered Person including the Input
Service Distributor (ISD) may avail ITC on the basis proper documentary
evidence. The Rule gives a list the following documents:
1. Tax invoice issued by the supplier of goods or services or both;
2. Debit note issued by a supplier;
3. Bill of entry under the Customs Act, 1962 or rules made thereunder for
the assessment of integrated tax on imports.
4. Tax invoice issued under reverse charge payment of tax;
5. Tax Invoice or credit note issued by an Input Service Distributor.

The rule further provides that such documents issued by the supplier must
mention the following particulars:
a. Taxable value
b. Tax Rat e
c. Description of goods or services
d. GSTIN of supplier and Recipient and
e. Place of supply in case of inter -State supply

4.6 REVERSAL OF INPUT TAX CREDIT
Rule 37 of the CGST Rules provides for reversal of ITC availed by a
registered person in the following c ases:
(1) Credit on stocks on the relevant date, when a registered person :
a. opts to go out from normal scheme to composition scheme,
b. surrenders his Registration due to closure of business.
(2) When capital goods on which credit has been taken, have been
removed b y the registered person after they have been put in use,
putting into use.
(3) When consideration for supplies is not paid within 180 days of issuance
of invoice.
(4) When there is a mismatch of returns of supplier and recipient.
(5) When credit has been availed twice against single document.
(6) When credit has been availed on common inputs, reversal of credit to
the extent of credit relating to exempted supplies or supplies for non -
business purpose.

4.7 UTILISATION OF INPUT TAX CREDIT (ITC)
OF CREDIT ON UTILIZATION FROM FIRST OPTION SECOND
OPTION THIRD OPTION 1 IGST IGST CGST SGST/UGST 2 CGST
CGST IGST – 3 SGST/UGST SGST/UGST IGST – Thus, Inter - sectoral
credit is not allowed for CGST and SGST/UGST Refund: Section 54 deals
with Refund. An eligible person or supplier can c laim refund provided that
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60 Refund should be claimed before the expiry of 2 years from the relevant
date 2. No refund shall be allowed on capital goods 3. Return under
section 39 should b e filed 4. No refund shall be available in case of a. zero
rated supplies made without payment of taxes b. where the credit consists
of rate of tax on inputs is higher than that of output supplies 5. Minimum
amount to be refunded is Rs. 1,000/ -
Input tax c redit can be utilised in the following manner: -
A. The ITC availed by the registered person is credited to his electronic
Credit ledger. The balance in the electronic ledger can be utilised to
pay off his output liability.

B. The supplier in The State of Orig in may utilise ITC for transfer of
funds towards payment of CGST, UTGST/SGST or IGST.

C. The buyer in the destination State/UT may utilise IGST credit for
payment of CGST and SGST by the transfer of funds from IGST
account.

D. The amount of ITC on account of I GST is allowed to be utilised
towards the payment (a) IGST, (b) CGST and (c) SGST/UTGST in
that order.

E. The amount of ITC on account of CGST is allowed to be utilised
towards the payment of(a) CGST and (b) IGST in that order.

F. The amount of ITC on account of SGST/UTGST is allowed to be
utilised towards the payment a) SGST/UTGST and (b) IGST in that
order.

G. Input tax credit of CGST and SGST cannot be cross utilised i.e. CGST
cannot be used to pay off SGST and vice versa
.
H. Set off of ITC not available to a person under composition scheme.
The manner of availment and utilisation of Input Tax credit of CGST,
SGST, IGST and UTGST is given in the following Table.
SET OFF OF INPUT CREDIT
Input Credit UTILISATION OF INPUT CREDIT
First utilisation Second
Utilisation Balance
CGST CGST IGST No
SGST/UTGST SGST/UTGST IGST No
IGST IGST CGST SGST/UTGST Input tax credit of CGST and SGST cannot be cross - utilisedi.e. Credit of CGST cannot be used for payment of SGST / UTGST and Credit of SGST / UTGST cannot be utilized for payment of CGST. munotes.in

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61
Illustration -1
Ashok of Aundh, Pune sells goods of Rs 10,000 to Ganesh of Goa. The
CGST /SGST rate is 6% each andIGST rateis 12%. Ganesh sells these
goods in Goa for Rs 12,000.
(a) This is the case of interstate supply of goods involving movement of
goods between two different states Maharashtra and Goa liable to IGST@
12%. Ashok may transfer Rs 1200 to IGSTaccount by paying cash or by
utilising ITC due to him, if any. This credit will be available to Ganesh on
account of IGST of Rs 1200.
(b) (i) For Ganesh, this is an intra -state supply within the state of Goa. He
is liable to pay Rs 720 each towards CGST and GOA -SGST @ 6% on Rs
12,000.
(ii) From the creditof IGST of Rs 1200available, Ganesh can transfer
 Firstly, Rs 720 towards the CGST and
 The Balance Rs 480 towards the Goa -SGST.
(iii) Ganesh will transfer the balance of Rs 240 towards the Goa -SGST in
cash.
Illustration -2
Following is the summary of GST payable and input credit available to
Ashok:
Tax Output tax Liability Input Tax Credit ( ITC)
Rupees
IGST 40,000 20,000
CGST 12,000 15000
SGST 12,000 15000









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62 The tax payable will be calculated as follows:
Tax Output tax Liability Input Tax
Credit
Cash
Payment Balance IGST CGST SGST Rupee s
IGST 40,000 20,000 3,000 3,000 14,000
CGST 12,000 0 12,000 0 0
SGST 12,000 0 0 12,000 0
Total 64,000 20,000 15,000 15,000 14,000

Illustration -3
Following is the summary of GST payable and input credit available to
Ashok :
Tax Output tax Liability Input Tax Credit ( ITC)
Rupees
IGST 25,000 50,000
CGST 30,000 10,000
SGST 30,000 10,000

The tax payable will be calculated as follows:
Tax Output tax Liability Input Tax Credit
Cash
Payment Balance IGST CGST SGST Rupees
IGST 25,000 25,000 NIL NIL 0
CGST 30,000 20,000* 10,000 NA 0
SGST 30,000 5,000 NA 10,000 15,000
Total 85,000 50,000 10,000 10,000
*30,000 -10,000 CGST
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63 4.8 MATCHING OF ITC
The final ITC would be allowed only when details of supplies made by
supplier m atch with the recipient’s return of availing credit. The matching
has to be done in respect of GSTIN of Supplier and GSTIN of recipient in
respect of each supply and recipient, Invoice number, Debit Note number,
Credit Note number, Taxable Value and Tax am ount involved.
An intimation of acceptance of credit would be sent to recipient in FORM
GST MIS -I if the details match or the return filed by supplier is accepted
by the recipient.
In case of mismatch of details, the discrepancy would be communicated to
the concerned that is both the supplier and recipient, if the fault is that of
supplier or only to the recipient, if fault is that of recipient.
Mismatch of ITC
The discrepancies could be –
I availing credit in excess of the tax declared by the supplier, or
II the outward supply is not declared by the supplier, or
III there is a second time claim of ITC by the recipient.
Where the discrepancy is due to -
 differences of figures of amount of supplier and recipient, or
 non-declaration of outward supply by supplier,
the supplier would be asked to rectify the discrepancy in the return of
month in which discrepancy is informed to him.
If the supplier fails to rectify the discrepancy, excess credit will be added
to the output tax liability of recipient next month and th e recipient will be
liable to pay an interest @18% on the amount added to the output tax
liability from the date of availing the ITC till the discrepancy is reflected
in returns.
Re-Claim of ITC on subsequent matching
The recipient may re -claim the credit, if after reversal of credit by
recipient,the supplier rectifies the discrepancies. Interest paid, if any will
also be refundable by crediting the amount to the recipient’s Electronic
Cash Ledger.
4.9 CONDITIONS FOR AVAILING ITC

A. Transitional Provisions of Inp ut Tax Credit
The Registrants under Central Excise, Service Tax and VAT, who have
migrated to GST were entitled to claim the credits available under the old
law in Electronic Credit Register, if such credits are covered under the
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64 composition scheme and who have filed declaration in FORM GST TRAN
-1 within 90 days from appointed date, specifying amount of credit
claimed and admissible as per earlier credit Rules. This was subject to the
followi ng two conditions:
1. The amount of Cenvat credit on inputs, capital goods and input
serviceswere carried forward in the last return filed under the old laws.
2. Such credit is unavailed credit in respect of capital goods, i.e. the
balance amount of credit tha t remains after subtracting the credit already
availed.

B. Conditions for availing ITC by new registrant
New Registrantsfrom 01 -07-2017 onwards are eligible to claim Input tax
credit only, if: -
(i) Goods on which input tax credit is claimed are not unconditiona lly
exempt from the whole of the duty of excise or not nil rated.
(ii) The document for procurement of such goods is available with the
Registered Person.
(iii) Where these documents are not available, input tax credit shall be
allowed after the GST has been paid o n such supplies at: -
 60% (30% in case of IGST) for goods with CGST rate of 9% and
more
 40% (20% in case of IGST) in case of other goods.

(iv) The registered person who avails this scheme and furnishes the
details of stock, must submit a statement in FORM GST TRAN -2 at
the end of each of the six tax periods during which the scheme is in
operation indicating the details of supplies of such goods effected
during the tax period.
(v) The amount of credit allowed shall be credited to the electronic credit
ledger of the applicant maintained in FORM GST PMT -2 on the
common portal.
(vi) The stock of goods on which the credit is availed should be identified
by the registered person.

C. Transfer of credit on sale / merger/ amalgamation/ lease/
transfer etc.
A registered person may transfer his unavailed ( unutilised) credit inthe
event of sale, merger, de -merger, amalgamation, lease or transfer or
change in the ownership of business for any reason subject to the
following : -
(1) The registered personfurnishes the details 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
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65 (2) In case of demerger, the Input Tax Credit shall be apportioned in the
ratio of th e value of assets of the new units as specified in the
demerger scheme.
(3) 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, l ease or transfer of business
has been done with a specific provision for the transfer of liabilities.
(4) The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the unutilised
credit specifi ed in FORM GST ITC -02 shall be credited to his
Electronic Credit Ledger.
(5) The inputs and capital goods so transferred shall be duly accounted for
by the transferee in his books of account.
4.10 REVERSAL OF CREDIT UNDER SPECIAL
CIRCUMSTANCES
Rule 44(1) of CGS T Rules provides for reversal of credit for CGST/
SGST/UGST and IGST relating to inputs held in stock of raw material
semi -finished goods, finished goods or capital goods.
The credit so reversed shall be determinedseparately for each tax in the
following manner: -
1. For inputs held in stock, the 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.

2. For capital goods held in stock, the credit inv olved in the remaining
useful life in months shall be computed on pro -rata basis, taking the
useful life as five years.

3. Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount based on
the prevailing market price of the goods on the effective date of the
occurrence of any of the events.

4. The credit so determined shall form part of the output tax liability of
the registered person and the details thereof shall be furnished in
 FORM GST IT C-03, in case the credit relates to any event and
 FORM GSTR -10, where the credit relates to the cancellation of
registration.

5. The details furnished shall be duly certified by a practicing Chartered
Accountant or Cost Accountant .

6. The amount of credit for the purposes relating to capital goods shall
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66 be determined separately for input tax credit of
CGST/SGST/UTGST/IGST.

7. Where the amount so determined is more than the tax determined on
the t ransaction 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.

4.13 ITC ON CAPITAL GOODS AND IMPORTS
11.1. ITC on Capital Goods in GST
(a) ITC would be available in full with out restriction where capital goods
have been used for effecting taxable supplies and business activity.
(b) No credit will be admissible capital goods used exclusively for
effecting exempt supplies or non -business or personal activity.
(c) Credit to extent of de preciation under Income Tax Act is not
admissible.
(d) Capital goods after taking credit can be sent to job -worker without
reversing credit. The capital goods so sent to job -worker are to be
returned within three years and otherwise the principal shall be liab le
to pay the tax along with applicable interest.

11.2. Input Tax Credit for importers

(a) Integrated Tax (IGST) paid on imports is entitled for Input Tax Credit
in terms of the bill of entry or any similar document prescribed under
the Customs Act. However, the credit of Basic Customs Duty (BCD)
would not be available.
(b) In case of goods imported by a unit or a developer of SEZ, for
authorised operations are exempted from the whole of the IGST.
(c) Export Oriented Units (EOU), Electronic Hardware Technology Park,
(EHTP),Software Technology Parks (STP) who are be eligible for
BCD exemption, shall to pay IGST on imports but the credit of the
IGST so paid shall be eligible for ITC. This credit can be utilized
towards payment of CGST on Domestic Tariff Unit(DTA) clearance
or refund can be claimed on accumulation of the IGST.

4.13 OTHER PTOVISIONS
12.1. Offences and penalties
a. Demand/ Penalty on registered person for violation of ITC
provisions
Under section 73/74 the proper officer is authorised to issue demand
notic es to recover the credit wrongfully availed and also impose a penalty
upto 100% of such credit from a Registered Person for violation of the
ITC provisions.
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67 b. Issuing false invoice
A person, who issues invoice without supplying goods and thereby
enables t he recipient to take credit without possession of goods, shall be
liable to a penalty equal to amount of ITC involved or Rs.1000/ -
whichever is higher.
c. Prosecution
Prosecution can be initiated for the default, which is punishable for fine
and imprisonment of one year upto five years depending upon amount of
ITC involved.
12.2. Refunds
As per section 54 an eligible person or supplier can claim refund provided
that ITC is excess of his outward liability.
Conditions to claim refund :
1. Refund should be claime d before the expiry of 2 years from the
relevant date.
2. No refund shall be allowed on capital goods
3. Return under section 39 should be filed
4. No refund shall be available
a. in case of zero rated supplies made without payment of taxes
b. where the credit consist s of rate of tax on inputs is higher than that
of output supplies
5. Minimum amount to be refunded is Rs. 1,000

12.3 Miscellaneous Provisions
(1) The value of exempt supply shall be calculated in terms of formula
prescribed in rules and shall include supplies on which the recipient is
liable to pay tax on Reverse Charge basis, transactions in securities, sale of
land and sale of building.

(2) A banking company or a financial institution including a non -banking
financial company, engaged in supplying services by wa y of accepting
deposits, extending loans or advances shall have the option to either
comply with the provisions of formula so prescribed or avail of, every
month, an amount equal to 50% of the eligible input tax credit on inputs,
capital goods and input se rvices in that month and the rest shall lapse.

(3) Amount of ITC already claimed with interest will be added to the
output tax liability unless the payment for supplies received has been
made within a maximum period of 180 days.

(4) ITC is not admissibleto that extent of depreciation on capital
goodsclaimed.
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68 (5) A Registered person shall not be allowed to take ITC, if the same has
not been credited within 1 year from the date of issue of tax invoice
relating to such supply of goods or services or both.

(6) ITC would a lso not be permissible if invoice or debit note is received
after due date of filing return for September of next financial year or filing
annual return whichever is later.

4.14 SELF -EXAMINATION QUESTIONS

1. What is Input tax?
2. Explain the concept of Input credit .
3. Who are eligible for claiming ITC?
4. Enumerate the supplies not eligible for ITC
5. When can the ITC be reversed ?
6. Explain the utilistaion of ITC.
7. What are the conditions for claiming ITC?
8. Can a person claim ITC who has not filedreturns ?


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69 5
LEVY AND COLLECTION OF GST
Unit Structure
5.1 Introduction and Objective
5.2 Scope of Supply
5.3 Composite and Mixed Supplies
5.4 Import of Supply
5.5 Supply without Consideration – Schedule -I
5.6 Activities treated as Supply of goods / services -Schedul e – II
5.7 Activities neither Supply of Goods nor Services - Schedule -III
5.8 Non- taxable & Non - GST Supplies
5.9 Composition Levy
5.10 Levy and Collection of Tax
5.11 Exemption from Tax
5.13 Self-ExaminationQuestions
5.1 INTRODUCTION AND OBJECTIVES
The GST is a tax ontaxable supply of goods or services or both. Hence,
levy and collection of the GST largely depends upon the nature of supply
whether it is Taxable Supply, Exempt Supply, Nil -Rated Supply or Zero -
Rated Supply.
The lesson explains all these concep ts along with the concept of
composition scheme for Small Taxable Persons.
5.2 SCOPE OF SUPPLY
1.1. Meaning and Scope of Supply
As per Article 366 (12A) of the Constitution of India “Goods and Services
Tax” means “any tax on supply of goods or services or both e xcept tax on
supply of alcoholic liquor for human consumption”.
The definition uses the term “supply”, which is wider than “sale”. This has
the effect of including stock transfer or branch transfer with in the ambit
of GST.
The taxable event is the supply of goods and/or services, occurrence of
which gives rise to levy and collection of GST.
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70 As per Section 7 of CGST Act, the term ‘Supply’ includes:
(a) all forms of supply of goods or services or both such as sale, transfer,
barter, exchange, licence, rental, lease or disposal lease or disposal of
goods and/or services
 made or agreed to be made by a person
 for a consideration
 in the course or furtherance of business;
(b) Import of services whether or not in the course or furtherance of
business
(c) the activities spe cified in Schedule I, made or agreed to be made
without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as
referred to in Schedule II.
Exceptions:
As per section 7(2), following shall be treated neither as a s upply of
goods nor a supply of services.
(a) activities or transactions specified in Schedule III;
(b) notifiedactivities or transactions undertaken by the Central
Government, a State Government or any local authority in which they
are engaged as public authori tieson the recommendations of the
Council.
Further, section 7(3) states that theGovernment may, on the
recommendations of the GST Council, specifyby 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.
5.3 COMPOSITE AND MIXED SUPPLY
1.2. Composite Supply
As per Section 2(30) of CGST Act, “Composite Supply” means a supply
made by a taxable person to a recipient consisting of two or more taxable
suppli es 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.
Further as per section 8(a) of CGST Act, Composite Supply comprising
two or more supplies, one of which is a principal supply, shall be treated
as a supply of such Principal Supply. The tax rate applicable on the
Principal Supplywill be applicable on the other supplies also.
From the above, it emerges th at
(a) Ordinary course of businessis to makePrincipal Supply.
(b) The Principal Supply consists oftwo or more taxable supplies of
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71 (c) All the supplies are naturally bundled and made in conjunction with
each oth er.
Illustrations
(1) Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite
supply and supply of goods is a principal supply;
(2) An air ticket includes cost of meals and free airport transfer. These
services are bundled together. The Principal Supply will be
transportation of passengers .
(3) School Bus Services provided as part of included in school fee has been
held to be a composite supply. The Principal Supply will be imparting
educati on.

1.3. Mixed Supply
As per section 2(74) “Mixed Supply” means two or more individual
supplies of goods or services, or any combination thereof, made in
conjunction with each other by a taxable person for a single price where
such supply does not constitute a Composite Supply. Mixed Supplies are
not naturally bundled and made in conjunction with each other .
Section 8(a) of CGST Act states that a Mixed Supply comprising two or
more supplies shall be treated as a supply of that particular supply which
attracts t he highest rate of tax. However, if the supplies are made
separately and not dependent on any other, it shall not be a Mixed Supply.
Mixed Supply and Composite Supply both refer to supply of more than
one goods and/or services. When the different products are naturally
bundled to the Principal Supply e.g. Gillette Razor with inbuilt bladea
book with a plastic cover, it will be a case of Composite Supply but when
the supplies are unrelated and not dependent such as different sweets, dry
fruits or Diwali Po ojaarticles it will be mixed supply.
Composite Supply will be taxable at the rate applicable to Principal
Supply butMixed Supply will be taxable at the highest rate applicable to
any of the goods/services in the bundle.
Illustrations
(1) A gift box contains di fferent products having different rates, will be
liable to highest rate of tax applicable to any of the items contained
therein.
(2) A package contains canned foods, sweets, chocolates, cakes, dry
fruits, aerated drinks and fruit juices. When supplied for a single
price, this will be a Mixed Supply. Assuming the different product
carry tax rate from zero to 28%, the package will be taxable at the
highest rate 28%.
(3) A hotel provides a package inclusive of meals and sightseeing.
Sightseeing in not natural bundl ing with accommodation. Hence, the
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72 (4) A combo - pack is available for Rs 1000 comprising of a key chain,
wallet and a belt. This is a Mixed Supply as the articles are not
naturally bundled.
5.4 IMPORT OF SUP PLY
Supply includes import. Import irrespective of the nature or use of
good/services imported whether for personal consumption or commercial
use will be liable to GST under Reverse Charge Mechanism (RCM). A
service will deemed to be Import of Service i ffollowing conditions are
fulfilled: - -
a) Supplier of service is located outside India,
b) Recipient of service is located in India and
c) Place of supply of service is in India.
Example
Rahul pays fees for online coaching for MBA from a coaching
institu tion in New York. Coaching is imparted online in India.The
Coaching fee will be liable to GST although it is personal,not for business
or in furtherance of business.
5.5 SUPPLY WITHOUT CONSIDERATION -
SCHEDULE -I
Supply includes the followingactivities specifi ed in Schedule Imade or
agreed to be made without a consideration :
1. Permanent transfer or disposal of business assets where input tax credit
has been availed on such assets.
Examples: Transfer of plant to another unit located in another state.
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 except gifts not exceeding fifty thousand
rupees in value in a financial year by an employer to an employee

Examples
i. The transaction of providing corporate guarantee by a holding
company to its subsidiary or vice versa in respect of loan raised from
banks will be considered as supply although there may be no
consideration for providing the guarantee.
ii. Stock transfer made to a unit outside the state or to a different
business vertical of the same assessee will be regarded assupply.
iii. Any supply of goods or services by employer to employee free of cost
will be a supply. Subject to exemption of gift up Rs 50000 by the
employer to employee in a financial year.
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73

3. Supply of goodsby: -
i. A principal to his agent where the agent undertakes to supply such
goods on behalf of the principal; or
ii. An agent to his principal where the agent undertakes to receive su ch
goods on behalf of the principal.
4. Import of services by a taxable person from a related person or from
any of his other establishments outside India, in the course or
furtherance of business.
5.5 ACTIVITIES TREATED AS SUPPLY OF GOODS /
SERVICES -SCHEDUL E-II
Schedule III lists out the following activities, which are treated as Supply
of Goods / Services : -
Transfer of goods
1) Transfer of the title in goods;
2) Transfer of right in goods or of undivided share in goods without the
transfer of title thereof, e.g. hiring out machinery, rent a cab etc.
3) Transfer of title in goods under an agreement, whereby property in
goods shall pass at a future date upon payment of full consideration as
agreed, e.g. hire purchase agreement.

Lease and tenancy
4) Lease, tenancy, ea sement, licence to occupy land;
5) Lease or letting outwholly or partly, of a building,a commercial,
industrial or residential complex for business or commerce.

Business assets
6) Treatment or process applied to another person's goods e.g. job work,
process ing charges, jewellery making dyeing f textile fabrics etc.
7) Transfer of business assets transferred or disposed of whether or not
for a consideration, e.g. disposal of old furniture, office machines.
8) Transfer of business assets to put to any private use or are usedor
made available to any person for use, for any purpose other than a
purpose of the business, whether or not for a consideration, e.g. using
business vehicles for personal use by the proprietor / partners or
employee, or giving company auditorium to employee for personal
functions etc.

9) Any goods forming part of the assets of any business immediately
before the taxable person ceases to be a taxable person, unless —
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed
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74 10) Renting of immovable property e.g. renting an office or factory;

11) Construction includingadditions, alterations, replacements or
remodelling of any existing civil structure, of commercial or residential
complex including a complex or building intended for sale to a buyer,
except where the entire consideration has been received after issuance of
completion certificate by the competent authority , or an Architect,
Chartered Engineer or a Licensed Surveyor, if there is no competent
authority where required, or before its first occupation, whichever is
earlier.

12) Temporary transfer or permitting the use or enjoyment of any
intellectual property right e.g. f ranchise.

13) Development, design, programming, customisation, adaptation,
upgradation, enhancement, implementation of information technology
softwaree.g. Programming or development of IT software;

14) Agreeing to the obligation to refrain from an act, t olerate an act or a
situation, or to do an act e.g. d amages for inefficient services, p enalty
imposed for late completion of agreed contract, etc.

15) Transfer of the right to use any goods for any purpose (whether or not
for a specified period) for cash, def erred payment or other valuable
consideration.

16) Composite Supplies by way of or as part of a works contract or 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, e.g. catering service
Restaurant service.

17) Supply of goods by any unincorporated association or body of persons
to a member thereof f or cash, deferred payment or other valuable
consideration, e.g. Supply of food, gaming tools, books etc. by any club to
its members .
5.6 ACTIVITIES NEITHER SUPPLY OF GOODS NOR
SERVICES - SCHEDULE -III
Following activities are considered neither supply of goods not of services
as per Schedule III :
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 including a D istrict Court, High
Courtor Supreme Court established under any law for the time being in
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75 3. The functions performed by the Members of Parliament (MPs) ,
Members of State Legislature (MLAs), Members of Panchayats,
Municipalities and other local authorities;
b. The duties performed by any person who holds any post in pursuan ce of
the provisions of the Constitution in that capacity; or
c. The duties performed by any person as a Chairperson, a Member or a
Director in a body established by the Central Government , a State
Government or local authority and who is not deemed as an employee;
4. Sale of land /Building (subject to building under construction as per
schedule II.
5. Actionable claims, other than lottery, betting and gambling.
6. Services of funeral, burial, crematorium or mortuary including
transportation of the decease d.
Exemption granted to these services which were excluded from the
definition of “service” or were in Negative List under the Service Tax
regime, is continues under the new GST regime. .
Other points
Mutuality and absence of Profit motive are not releva nt considerations
to hold whether any services are or are not taxable.
Accordingly,Clubs or Societies catering to their members on a no profit no
loss basis will still be liable to GST subject to other exemptions available,
if any.
5.7 NON TAXABLE SUPPLY AND EXEMPT SUPPLY
Non-Taxable Supply
As per section 2(78) of the Act “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.
Exempt Supply
As per section 2(47) of the Act “Exempt Supply” means a supply of 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.
Zero Rated Supply
Under section 16 of IGST Act Zero Rated Supply means taxable supply
by way of export of goods or supp ly of services to SEZ / SEZ Developer
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76 Credit of Input Tax Credit (ITC) will be available to a person making Zero
Rated Supply , who will be eligible to claim refund of unutilised ITC or
IGSTpaid on such exports, if not under Letter of Undertaking - LUT or
Bond.
Non-Taxable, Exempt, Nil Rated Supply and Non - GST Supply
On a plain reading of sections 2(47) and 2(78) which define Exempt
Supply and Non -Taxable Supply respectively together with section 7,
which defines “supply”, it follows that there must be an activity, which
can be called as “supply” with reference to Schedule III , which gives the
list neither of activities which are treated neither as Supply of Goods nor
of Services.
Since such activities or transaction slisted in schedule -III are not “Supply”,
they cannot be said to be either Non -Taxable Supply or Exempt Supply.
They along with the activities or transactions undertaken by Government
and Local Authority as Public Authorities are sometimes referred to a s
Non-GST Supplies although no such term is defined in law.
Non-Taxable Supply
a. If no tax is be leviable on any supply either under CGST, UTGST/
SGST or IGST, it will be “Non -Taxable Supply”.

b. Supply of alcoholic liquor for human consumption, petroleum cru de,
high speed diesel, motor spirit, natural gases and aviation turbine fuel
are “Supply” on which no tax is levied, will be ‘Non -Taxable Supply”.

Nil-Rated, Zero Rated or Exempt Supply
If the supply is wholly exempt or attractsNil rate of tax, it will be called
Nil-Rated, Zero Rated or Exempt Supply. This term is again referred to in
connection with refunds as “Zero Rated Supplies made without payment
of tax”.
Nil- Rated supply of goods has not been defined anywhere in CGST Act.
Since, In case of NIL rat ed supply, the tariff rate is NIL , there will be no
GST without the exemption notification.
Support services to agriculture, forestry, fishing and animal husbandry, is
the lone service notified as Nil Rated Supply of Service.
In case of Exempt Supply, th e tariff is higher than 0% but there is no tax
payable due to exemption notification.
As per IGST Act, Exports and service to SEZ developers are considered as
Zero -Rated Supplies
The Central Government has issued two notifications No. 02/2017 and
12/2017 to exempt a number of services under section 11. As a result of
the notifications the supply otherwise taxable will attract No Tax or Zero
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77 Some of the Services which are exempt from Tax are given below.
(a) Services by a charitable trusts regis tered u/s 12AA of the Income Tax
Act.
(b) Services by way of transfer of a going concern.
(c) Services provided to Government with certain conditions.
(d) Service by way of renting of residential dwelling for residential
purposes.
(e) Intra - state supply of goods and/or services received by a Registered
Person from an Unregistered Person where the value of such goods
are not above Rs 7,500 per day as per section 9(4)currentlykept in
abeyance),
(f) Service imported by a SEZ Unit or SEZ developer.
5.8 EXEMPTION FROM TAX
Section 1 1(1)empowers the Government to grantgeneral exemption
 on the recommendations of the GST Council
 by notification issued in public interestfrom the date specified therein.
The exemption can be granted only to goods and/or services of any
specified descript ionnot to any specific person from payment of the whole
or any part of the tax leviable thereon unconditionally or subject to such
conditions as may be specified.
Section 11(1) empowers the Government to grantby special order in each
case under circumstan ces of an exceptional nature to be stated in such
order, exemption from payment of tax to any goods and/or serviceson
which tax is leviable.
Section11(3) empowers the Government the power to insert within one
year, an explanation to the notification.
Further, the registered person supplying such goods or services or both
shall not collect the tax, in excess of the effective rate, on such supply of
goods or services or both.
The Government has issued several notifications granting total or partial
exemptio n in some cases as given below: -
A. Absolute exemption granted to following classes of supplies: -
a. Transmission or distribution of electricity.
b. Renting of residential dwelling for use as residence.
c. Services by Reserve Bank of India.
d. Services by a veterinary clinic in relation to health care of animals or
birds
e. Electricity, Salt, fresh fruits, potato, tomato, onion, plastic bangles,
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78 B. Conditional exemption granted to following classes of supplies: -
a. Exemption from pa yment of tax under reverse charge basis granted to
intra- state supply received by
 a deductor under section 51 from Unregistered Person, who is
otherwise not required to registered under GST,
 a Registered Person from Unregistered Person dealing in buying a nd
selling of second hand goods and who pays the central tax on the value
of outward supply,
b. aRegistered Person from Unregistered Person,the aggregate value of
such supplies received by a registered person from all or any of the
suppliers does not exceed R s. 7500 in a day. (Currently the tax is kept
in abeyance)
c. Services by a hotel, inn, guest house, club or campsite, by whatever
name called, for residential or lodging purposes, having declared tariff
of a unit of accommodation less than Rs. 1000/ - per day
d. Concession rate of 2.5% to specified goods required in connection
with various kinds of petroleum operations undertaken
e. Supplies by CSD to unit run canteens and supplies by CSD / unit run
canteens to authorised customers
f. Supply of 81 services under CGST Act which were exempted under
old service tax law.
g. Intra -state supply of heavy water and nuclear fuels by the Department
of Atomic Energy to the Nuclear Power Corporation of India Ltd.
h. services provided by fair price shops to Government and those
provid ed by and to FIFA for FIFA U -17
i. right to admission to the events at under FIFA U -17 World Cup 2017
5.8 COMPOSITION LEVY - SECTION 10
Meaning of Composition Scheme :
Section 10 of the CGST provides for an optional simplified composition
scheme for the benefit of small dealers and small manufacturersand by
reducing their burden of compliances. Such as reducing number returns to
be filed, maintenance of books and records as compared to general
dealeretc.
Eligibility
The scheme is available only to taxable persons being
 manufacturers of goods,
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79  restaurants (not serving alcohol) having aggregate turnover of Rs 1
Crore during the preceding financial year.
Turnover Limit is Rs. 75 lakhs for Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Rs 1 crore for the rest of India including the states of Uttarakhand UT of
Jammu& Kashmir and Ladakh
Ineligibility
Composition option cannot be exercised in the following specific cases:
1. Supply of services (including g oods treated as supply of services by
Schedule II) except the services covered under Schedule II, Paragraph
6(b) such as restaurants .
2. Supply of goods viz.
 Non-taxable goods
 Inter -State outward supplies
 Through e -commerce operators required to collect tax at source/s 52.
 Notified goods manufactured by the supplier
3. Manufacture of:
 Ice cream and other edible ice, whether or not containing cocoa
 Pan masala
 All goods, i.e. Tobacco and manufactured tobacco substitutes
Aggregate turnover
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 ba sis),
 Exempt supplies(including non -taxable supplies),
 Exports of goods or services or both and
 Inter -state supplies of persons having the same Permanent Account
Number, to be computed on all India basis but excludes central tax,
State tax, Union territory tax, integrated tax and cess. [Section 2 (6)]
The definition of Aggregate Turnover is very wide and includes every
supply whether covered under GST or not, namely,Taxable Supplies,
Exempt Supplies, Non -Taxable Supplies, Export Suppliesand Inter -State
Supplies. Further, the Aggregate Turnover is for all business registered
under single PAN across India.
Rate of tax
Under the scheme, the registered person whose aggregate turnover in the
preceding financial year does not exceed Rupees 75,00,000/ I Cr, as t he
case may be; may opt to pay, in lieu of the tax payable by him, an amount
calculated at such rate prescribed in the Rules 7 of the GST Rules as
mentioned below:
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80 Type of Business CGST SGST/
UTGST Total Manufactures and traders of
goods 0.5% 0.5% 1%
Restaurants (not serving
alcohol) 2.5% 2.5% 5%
Other service providers NA NA NA

Notes
(a) Other service providers not allowed to opt for composition scheme.
(b) Different rate may be for manufacturers of notified goods.
(c) For restaurants, the composite suppl y shall be treated as supply of
service where the supply, by wayof or as a 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 consumptio n), wheresupply or service is for cash,
deferred payment or other valuable consideration.
(d) Thecomposition rate cannot be applied in case of inter -state supplies
as the composition scheme is not available when the inter -state
supply is made by the supplier .
(e) If aggregate turnover on all India basisof preceding financial year
exceeds Rs 1 Crore/ 75 lakh during this financial year, the supplier is
required to pay tax as normal dealerfrom the following day.
Impact of becoming a normal dealer from composition de aler
If during the current year turnover exceeds Rs. 75 Lakh then this case the
composition supplier is required to file a FORM GST CMP -04 within 7
days.
Details of stock and capital goods, as on the day when composition dealer
is becoming as normal dealer , are required to file in FORM GST ITC -
01 within 30 days to take the credit of input on the same.
Terms and Conditions to opt for composition
1. A supplier will have to opt composition scheme for all businesses
registered under one PAN.
2. After,opting for compo sition is prohibited from -
a) makinginterstate outward supply (sale of goods in other states).
b) making supply of tax -free or exempted goods,
c) makingsupply through e commerce operator.
d) getting registration as Casual Taxable Person, or Non -resident
Taxable Pers on for making supply in places where he is not registered.
e) Manufacturing goods notified under section 10(2)(e).
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81 a) mention “Composition Taxable person not eligible to collect tax on
supplies” on the Invoice,
b) mention “Composition Taxable Person” on every notice, signboard
displayed at all place of business.
c) pay tax on reverse charge basis as provided in Section 9(3) i.e. Inward
Supplies from notified persons and section 9(4) i.e. Inward Supplies
from Unregistered Person.
d) show tha t stock as on appointed day have not been purchased in the
course of
 Inter State Trade or commerce
 Imported from a place outside India
 received from his branch situated outside the state
 received from his agent or principal outside the state
e) pay tax on sto ck on appointed day, under reverse chargeunder
sections 9(3)/9(4). Otherwise hewill lose his right to opt composition
scheme.
4. A composition supplier should file quarterly return in GSTR -4 before
the 18th of the following month after end of the quarter and also
annual return in GSTR -9A.
5. Transitory provisions for a dealer migrating to GST on the appointed
day 01 July 2017 included fling duly signed application for
Composition Scheme in FORM GST CMP -01 by 31 July 2017 and
furnishing the details of stock, in cluding the inward supply of goods
received from unregistered Persons, held by him on the day preceding
the date from which he opts for composition, electronically in FORM
GST CMP -03 within 60 days of the date from which composition
scheme is opted. The op tion exercised under section 10 was to remain
valid so long the conditions mentioned in section 10 and Composition
Rules were satisfied.

Procedure for composition
6. Any Registered Person i.e. normal dealer desirous of opting for
Composition Scheme shall
a) Electronically file intimation in FORM GST CMP -02 prior to the
commencement of financial year,
b) Submit FORM GST ITC -3 within 60 days from the commencement
of the relevant financial year.
c) 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
i. inputs held in stock
ii. inputs contained in semi -finished goods
iii. inputs contained finished goods held in stock and
iv. capital goods, asreduced by such percentage points as prescrib ed in
ITC rules on the day immediately preceding the date of exercising
such option.
7. Any intimation for opting composition scheme for any place of
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82 8. After opting for composition scheme, the supplier cannot collect tax
from the recipients of supply, but he shall issue bill of supply for
supplies made thereafter.
9. No credit will be available to a registered taxable person on the
invoice of a composition taxable person. Hence, composition scheme
is not viable on B to B basis.
10. IGST dealer are not eligible to take the benefit of composition
scheme.
11. A normal dealer, who opts for composition, all credit in his ledger
will lapse and included in the cost of goodsunder section 18(4).
12. A composition taxable person will not be entitled to claim for Input
Tax credit. product. Such credit will become his cost of goods.
13. A taxable person may opt out from the composition scheme by filing
an application in FORM GST CMP -04, electronically before the date
of such wit hdrawal.
Examples:
1. Akash owns a restaurant and a grocery shop having turnover of Rs 15
lakh and Rs 90 lakh respectively.
Akash is eligible for composition restaurant services are eligible and
the turnover does not exceed Rs 100 lakh during the financial year.
2. Amit had during the financial year 2021 -22 had the following
turnover:

Exempted goods Rs 60 lakh
Non- taxable goods Rs 25 lakh
Taxable goods Rs 20 lakh

Aggregate Turnover of all type of supplies registered under single
PANexceeds Rs. 100 lakh. Further Amit also supplies non -taxable
goods. Amit is not eligible for composition Scheme.
3. Anuj is an architect running a consulting and a ceramics
shopregistered in the same PANhaving receipt of Rs 25 lakh and
turnover of Rs 85 lakh respectively dur ing the financial year 2021 -22.
Consultancy services are not eligible for composition scheme. Hence Anuj
is not eligible for composition scheme both in respect of his
consultancy and his shop.
4. Anuj wants to opt for composition only in respect of his shop.
He cannot do so as all the business including the consultancy under
one PAN have to be taken together.
5. Anuj, instead of consultancy owns a shop in building material having
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Levy and Collection of GST
83 Although the businesse s are eligible, turnover during the previous
year exceeds Rs 100 lakh, hence not eligible for composition scheme.
6. Anuj has only one shop of Ceramics and no consultancy business.
He is eligible to opt for composition scheme as turnover is below Rs
100 la kh.
7. M purchases goods in Mumbai (Maharashtra) sells in Panaji, Goa.
His turnover during the financial year 2021 -22is Rs 69 lakh.
Mis not eligible for composition her turnover is of interstate outward
supply.
8. Assuming, M purchases goods from Panaji and sells in Mumbai, the
she may go for composition as there is restriction on outward
interstate supply not on inward interstate supply.
9. Sushil sells his goods through Amazon, an E -Commerce Operator.
Turnover of preceding financial year is Rs. 65 lakh.
Sushil is not eligible for composition schemehe sells goods through an
E Commerce Operator.
10. Rogers of Imphal obtains registration as a Casual Taxable Personin
Kohima, Nagaland and records a turnover of Rs 42 lakh.
Roger being a Casual Taxable per son has been specifically excluded
from the composition scheme.
11. Turnover of Tony, who has opted for composition, exceeds Rs 100
lakh on 15 -04-2022. Tony will lose his option for composition from
16-04--2022. He has to file FORM GST CMP -04 within 7 days i. e.
before 23 -04- 2022, FORM GST ITC -01 within 30 days i.e. before 15
-05-2022giving details of stock and capital goods, as on 22 -04-2022to
claim ITC.
5.9 LEVY AND COLLECTION OF TAX
5.10 Section 9 of the CGST Act, 2017, which is the charging section,
provides th at for all intra state supplies of taxable goods or services or
both, there shall be levied a tax called Central Goods and Services
Tax(CGST) on the value as determined under section 15 of theAct at such
rates, not exceeding 20%, as may be notified by the G overnment on the
recommendation of the Council.The section excludes from its ambitthe
supply of alcoholic liquor for human consumption.
Example:
Jugal of Panaji in Goa supplies goods to D’sa in Vasco (Goa). The tax will
be levied in Goa because goods will be consumed in Goa. Jugal will
Charge CGST + Goa -SGST from D’sa
5.11 From the above it follows that for levy and collection of CGST
following conditions must be satisfied: -
1. GST is levied on taxable intrastate supply of goods or services or both. munotes.in

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84 “Goods' mea ns 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;
'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 separ ate consideration is
charged.
2. The supply must be capable of being valued under section 15.
3. The tax shall be levied /collected on the basis of the value so
determined.
4. The rate of tax shall be at the prescribed rates not exceeding 20%.
GST rates has bee n announced on various goods/ services in 4 slabs at 5%,
12%, 18% and 28% apart from the Nil rate and 0.25% on diamonds and
3% for bullion. The maximum rate of GST is 28% (i.e. 14% CGST+14%
SGST). It can be increased maximum up to 40% (i.e. 20% CGST + 20%
SGST)before cess on demerit items.
5. If the supply is not capable of being categorised under any of the
prescribed rates category then tax cannot be levied on the same.
6. The CGST shall be levied and collected by the Central Government in
the manner as prescri bed GST - Payment of Taxes Rules, 2017.
7. The tax shall be payable by the Taxable Person. “Taxable Person”
means a person who is registered or liable to be registered under section
22 or section 24 of the Act”.
8. Taxable Person may not necessarily be the pers on who supplies the
goods.Foe instance, the recipient of the service under the Reverse Tax
Mechanism (RCM), E - Commerce Operator and Registered Taxable
Person In respect of supplies received from an Unregistered Person are
liable to pay tax, not the suppli er.
9. Tax cannot be collectedfrom aperson, who does not fall within the
ambit of the definition of Taxable Person.
10. The section excludes from its ambit the supply of alcoholic liquor for
human consumption.
11. CGST on crude oil, high speed diesel, aviation turb ine, motor
spirit(petrol), shall be levied with effect from the date to be notified by
the Government on the recommendations of Council . - Section 9(2) .
Council means the Goods and Service Tax Council established under
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85 12. GST may be levied in three case under reverse tax mechanism
(RCM), where the tax shall be paid on reverse charge basis by the
recipient of such goods or services or both. All the provisions of this
Act shall apply to the recipient as if he i s the person liable for paying
the tax. no reverse charge shall be applicable in case of exempt
supply or non -taxable supply
a. The supplyof notified goods or services or both,under section 9(3).
While as many as 12 services have been notified, good have not been
notified under this section.
b. The supply of goods or services or both by Unregistered Person to a
registered person under section 9(4). Presently, the provision has been
postponed.
c. Intra -state supply of specific services supplied through the Electronic
Commerce Operator under section 9(5)/ or its representative (to be
mandatorily appointed) if such operator has no physical presence in
the taxable territory.
5.12 In the following cases tax will be payable by the recipient of the
goods and/or service or the el ectronic commerce operator.
1. Goods Transport Agency(GTA)for service provided to Casual Taxable
Person, body corporate, partnership firm, any society, factory, any
person registered under CGST, SGST, UTGST Act.
2. Recovery agent for a banking company, NBFC or a ny financial
institution
3. A director of a company or a body corporate.
4. An individual advocate or firm of advocates, an arbitral tribunal
providing representational services to any business entity.
5. Taxi driver or Rent a cab operator working through e -commer ce
operator ;
6. An insurance agent of an insurer.
7. Sponsorship received by a body corporate or partnership firm.
8. Importer receiving supply from non -taxable territory;
9. Copyright sold by an author or music composer, photographer, artist,
to a publisher, m usic company, producer,
10. Any person who is located in a non -taxable territory to any person
located in the taxable territory other than non -assessee online recipient
(Business Recipient) Service recipient.
Values of taxable supply under section 15, Reverse Charge Mechanism
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86 5.10 SELF -EXAMINATION QUESTION S
1. What is meant by supply?
2. What is difference between naturally bundles and not so bundled supply
and its impact on tax rare
3. Container sol d with a vacuum flask is missed supply or composite
supply, state with reason
4. What is composition scheme?
What are the advantages and disadvantages?
5. A German publisher takes Registration as a non -resident taxable person
and he wants to opt for compo sition scheme. State with reason if he can
do so?
6. What is exemption from tax?

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