Indirect Taxes Introduction of Goods and service tax-munotes

Page 1

1 1
GST – AN OVERVIEW
Unit Structure :
1.0 Introduction and Objective
1.1 Direct vs Indirect Taxes
1.2 Pre-GST Indirect Tax Structure
1.3 Historical Background of GST in India
1.4 Indian GST vis -à-vis GST in Other Countries
1.5 Concept of GST
1.6 Need fo r GST in India
1.7 Indirect taxes Subsumed in GST
1.8 Framework of GSTin India
1.9 Benefits of GST
1.10 GST council
1.11 Goods and services tax network (GSTN)
1.12 Self-Examination Questions
1.0 INTRODUCTI ON AND OBJECTIVE
The lesson explains the concept and basic feature of direct and indirect
taxes, the differences between the two types of taxes and principal direct
and indirect taxes levied in India.
The lesson further explains the concept, need and objectiveof Goods and
Service Tax (GST) in India, itsframework, the roadmap for its
implementation, benefits accruing from implementation of GST and other
incidental matters.
1.1 DIRECT VS INDIRECT TAXES
1.1.1 Tax
‘Tax” isthe moneypeople payto Government. It is a forced paymen t- not
something that people are willing to pay voluntarily. “Tax” is the price of
civilization people pay to the Government to raise its funds for
governance, defence, development, creation of infrastructure, maintenance
of law and order and provision of various services to the citizens such as
healthcare, education, sanitaryand welfare services. In the modern munotes.in

Page 2

Indirect Tax - Introduction Of Goods And Service Tax
2 times,taxationhas increasingly become a powerful toolor a catalyst
forstimulating economic growth of the nation and pursues socio -economic
goals of the government.
1.1.2. Types of taxes
1.1.2.1. Broadly, the taxes are of two types namely the direct tax and the
indirect taxes.
1.1.2.2. Direct Tax
A direct tax is a personal taxdirectlypaid by a taxpayer to the government.
A direct tax is paid by the person on whom it is imposed.He can not
shiftthe tax burden on a third party. Income tax,wealth tax, estate duty and
gift tax are some examples of direct taxes. In India,lately, wealth tax and
estate duty have been abolished and gift tax has beenmerged w ith income
tax.
1.1.2.3. Indirect Tax
An indirect tax is a tax paid by one person but borne by another
person.Effectively, the taxpayer that is the manufacturer of goods, the
trader or dealer in goods or the service provider acts only as an agent or
an intermediary between the government and the consumer.
In the first instance,the taxpayerpays the tax to the government. Then the
taxpayers adds the amounts of tax so paid to the priceof the goods and/or
services provided and recovers the same from to th e end -user or
consumer of the goods or services.
As a result, an indirect tax is a destination -based tax on consumption of
goods and /or services, burden of which is ultimately shifted on and borne
by the end -user or consumer of the goods or services.
Excise duty, Customs Duty, Service tax, Central Sales Tax (CST), Value
Added Tax (VAT), Entry Tax, Purchase Tax, Entertainment Tax, Tax on
Lottery, Betting and Gambling, Luxury Tax, Tax on Advertisements are
some examples of the indirect taxes.
With effect fr om 1 July 2017, various indirect taxes have been merged
into one single uniform tax called Goods and Service Tax (GST) subject to
some exceptions such as Property Tax, Stamp Duty, Customs Dutyetc.
1.1.2.4. Direct V/s indirect Taxes
1.1.2.4.1.Progressive a nd Regressive Taxes
A direct tax is imposed on an actual taxpayer based on his capacity to pay
the tax. Thus, a person with higher income paysmore taxes than a person
with lower income. Therefore, direct taxes are consideredprogressive
taxes. munotes.in

Page 3

GST – An Overview
3 In contrast , indirect taxes are uniformly collected from all consumers of
goods and/or services regardless of their capacity to pay. Hence, the
indirect taxes areconsidered regressive taxes.
1.1.2.4.2. Larger Tax Base
Direct taxes are imposed directly on the actual taxpayers only while the
indirect taxesare uniformly spread over all the sections of the population
based on the value of goods and/or services consumed by them. Hence,the
indirect taxesdo not directly affect the actual taxpayers and createa larger
tax ba se to providethe Government with a major source of revenue.
1.1.2.4.3. Inflationary Impact
As the indirect taxes are ultimately added paid to thepricesof goods and
services consumed, they have an inflationary impact on the prices of
goods and/or services.
1.1.2.4.4. Socio -economic Goals
Indirect taxes act as the catalyst or tool for achieving the socio -economic
goals of the Government. For instance, most governments impose steep
taxes on luxury goods and services, “Sin Goods” or harmful goods such as
tobacco, alcohol with the object of serving the twin goals of augmentation
of revenue coupled with control on the consumption of such goods and
services.
1.2 PRE -GST INDIRECT TAX STRUCTURE
1.2.1. Seventh schedule to the Constitution of Indiadivides the legisl ative
powers into three lists viz.
 List I -the Union List,
 List II - the State List, and
 List III the Concurrent List.
1.2.2. The Union List contains most direct taxes viz. Income Tax, Tax on
Capital Gains and Corporate tax, which are in the domain of the C entre.
However, the right to levy Agricultural Income tax is vested in the States
as per the State List
The constitution provides two -tiered structure forlevy of indirect taxes
having the following features: -
i. Union List authorizes the Centre to levy the following taxes: -
a. Excise or tax on manufacture of goods except alcoholic liquor for
human consumption, opium, narcotics etc.
b. Service Tax on the value of all taxable services provided or to be
provided.
ii. The State List authorizesthe States tolevy taxes on intra -state sale or
consumption of goods. The taxes included VAT Excise on liquor,
Luxury Tax etc. munotes.in

Page 4

Indirect Tax - Introduction Of Goods And Service Tax
4 iii. The Concurrent List authorizes both the Centre and the States to levy
taxes concurrently on some items. However, residual powers remain ed
with the Centre.
iv. Inter-State Salesattracted both the Excise Dutyand Central Sales Tax.
v. Central Sales Tax was levied by the Centre but it was collected and
retained entirely by the Originating States;
1.2.3 The indirect taxes were not mutually e xclusive. The goods sold in
the course of Intra -State Sale attracted VATon the gross value of the
goods, which included the Basic Value, the ExciseDuty charged by
manufacturer and the profit by dealer. No set off or rebate was available in
respect of the c redit of one tax against liability for another tax or
viceversa. This was due to the following reasons :-
a) Excise and Service Tax were Central taxes on manufacture of goodsor
theservices provided or to be provided.
b) VAT was a State tax on sale of goods
c) A se ller of goods could not set off excise on manufacture of goods
and/or service tax on the service component of those goods paid to the
Centre against the liability to pay VAT to the state.
d) Conversely, a manufacturer or a service provider could not avail
credit for VAT on purchase of inputs paid to the state against the tax
liability for central taxes.
1.2.4.A service provider or a manufacturer could avail credit for the
Service Taxor the Excise Dutypaid on the inputs for providing taxable
service or for m anufacturing excisable goods, integrated at the central
level both being the Central taxes. No such credit was, however allowed
for VAT paid on the inputs to the State Governments
1.2.5. Pre-GST Sales Tax regime was a combination of -
a. An origin -based Central Sales Tax levied in the Statefrom where the
goods originated, and
b. Destination based multipoint Value Added Tax levied in the Statewhere
the goods were consumed.
1.2.6. Thus, the pre -GST multi -tier indirect tax regime presented complex
cobweb of rules and regulations in different parts of the country having
cascading tax effect as it comprised of overlapping taxes levied by
different authorities at different levels of the tax pyramid that denied credit
or set off for the taxes paid at the prev ious stages.
The Credit for the VAT paid on the inputs was denied to the manufacturer
and the service provider and the credit for the Excise Duty or the Service
Tax paid was denied to the selleronly because the Excise Duty and the
Service Tax wer e the Central taxes, but the VAT was a State Tax.
The flaws in the indirect tax structure created the need for a uniform,
integrated central tax with lower tax rates; efficient implementation and
free credit across the board for various taxes paid and re duce the cascading
effect of multiple taxes. munotes.in

Page 5

GST – An Overview
5 1.3 HISTORICAL BACKGROUND OF GST IN INDIA
1.3.1. In 2004, Kelkar Task Force recommended the idea of a fully
integrated Goods and Services Tax (GST) on national basis. The
Governmentacceptedthe recommendation of the Task force and fixed 1
April 2010 as the date for implementation of GST in India in the Union
Budget for 2007 -08. Thereafter, no significant progress was made due to
lack of consensus among the stakeholder states. Ultimately, on 19
December 2014,the Co nstitution (122nd Amendment) Bill, 2014 on GST
was tabled in the parliament.
1.3.2. Lok Sabhapassedthe bill on 6May 2015 and Rajya Sabha on
3August 2016. The President of accorded his assenton 8 September 2016
after more than half of the stakeholder sta tes had ratified the bill which
became theConstitution (101st Amendment) Act, 2016 , clearing the decks
for introduction of GST in India.
1.3.3. After several post -amendment meetingsamong the States and the
Centre, four Central GST legislationsthe Central Goods and Services Tax
(CGST) Bill, 2017, Integrated Goods and Services Tax (IGST) Bill, 2017,
Union Territory Goods and Services Tax (UTGST) Bill, 2017 and Goods
and Services Tax (Compensation to States) Bill, 2017were introduced in
the parliament on 27 M arch 2017 and promptly passed on 29March 2017.
The bills received the President’s assent on 12 April 2017resulting into
enactment of the respective four Acts.Meanwhile,Telangana, Rajasthan,
Chhattisgarh, Punjab, Goa and Bihar States passed their respective State
GST laws
1.3.4 Finally, at the stroke of midnight on 1 July 2017, at a special session
of the Parliament,India rolledout GST as its path breaking indirect tax
reform on the principle of one nation -one tax.

1.4 INDIAN GST VIS-À-VIS GST IN OTHER
COUNTRIES
1.4.1.India is one of the 160 countries across the world to
implementunified tax to adopt a unified GST model for the entire country.
For record, France was the first country to implement GST in 1954 more
than six decades ago. The United States does not have a unified tax model
as the states have their own taxes.
1.4.2. Most countries have adopted a uniform GST subsuming all indirect
taxes, grouped under one umbrella with the exception of Brazil and
Canada, which opted for a dual -GST model. The G ST in India under its
common umbrella subsumes multiple indirect taxes such as Excise Duty,
Service Tax, VAT, CST, Luxury Tax, Entertainment Tax, Entry Tax, etc.
India followed the dual model having inbuilt concepts of UGST, SGST,
CGST and IGST separately for central, state and Union territories and for
inter-state sales.
munotes.in

Page 6

Indirect Tax - Introduction Of Goods And Service Tax
6 1.4.3. The new GST regime professes to create a pan -Indian common
national market, facilitate Indian businesses to become globally
competitive bycreatingan efficient, corruption -free andt ransparent tax
regime with minimum bureaucratic red -tape facilitating the ease of
business and making inter -state movement of goodseasier.
1.4.4. Efficient implementation of a simple lower tax rate to yield higher
revenue is the underlying principle of an efficient GST regime globally.
Singapore and Malaysia have moderate GST rates at 8% and 6%
respectively. Canada has a dual system of GST with Harmonized Sales
Tax (HSN) with tax rates of 0%, 5% and 15%. GST in UK is at 20% with
provision for lower rate, ze ro rate and exemptions. Different countries
have different exemptions and threshold limits for liability for GST.
1.4.5. Indian GST is one of the most complex and intricate tax regime in
the world with a four -tier tax structurewith different State and Cen tral
levy- i.e. CGST, SGST, UTGST, and IGST levied on supply of goods
and/or services.
The threshold limit of Rs 40 lakh (Rs 20 lakh in case of a service provider)
to attract GST liability in India is among the lowest in the world.
However it makes no dif ference between goods and services and both are
treated at par and taxed at a single rate presently pegged at 5%, 12%, 18%
& 28%. Besides, diamonds are taxable at 5% and bullion at 3%. There are
some items of supply with zero rate or which are exempted sup ply.
Besides, TDS and TCS at 2% and 1% respectively are payable in some
cases such e -commerce.
Indian GST provides option of composition to small taxpayers to pay tax
at lower or nominal rates such as 1.5% or 5% or 6% on their
turnoverwithout claiming in put tax credit and some restriction on issue of
taxable invoices etc.
In case of goods and/or service provided by a class of suppliers, the
recipient thereof is liable to pay GST under Reverse Tax Mechanism
(RTM) instead of the supplier.
1.4.6. Following Singapore and many other countries, GST regime has
initiated anti -profiteering laws at the retail level to protect consumers
fromprice rise and profiteeringand price swindling.
1.4.7. Unlik e other countries, alcohol and petroleum productsare kept
outside t he purview of GST in India, with each state free to set its own
rates.Input credit will not be available to the manufacturers using alcohol
and petroleum products thus increasing the costs for the end
consumer.This is due to States’ refusal forego their ri ghts to levy tax on
these products constitute about 40% of a States’ revenues.

munotes.in

Page 7

GST – An Overview
7 1.5 CONCEPT OF GST
1.5.1. GST is a multi -point tax levied only on the value added at each stage
of supply chain, which comprisesof manufacture, sale and consumption of
taxab le goods and/or services. Further, the GST inherently provides for a
comprehensive and continuous chain of tax credits beginning from the
manufacture or production of goods and/or provision of service up to the
retailer or consumer to ensure that:
(a) the tax is levied only on the value added at each stage of supply and
(b) there is no cascading effect by levying tax on tax at each stage and
1.5.2. At each stage of supply, a supplier can avail input credit for the tax
paid(ITC)on the purchase of goods and /or services at the previous stage
and set off this credit against the GST payable on the supply of goods and
services be made by him to the next stage.
1.5.3. The final consumerof goods and/or services the GST charged by the
last supplier in the supply cha in, with set -off benefits at all the previous
stages.
Illustrations
(a) A supplies goods to B for Rs 25,000. B supplies these goods to the
final consumer C for Rs 28,000 with value addition of 20%. Rate of tax is
6% each CGST/ STGST. Taxposition will be as follows:
Particulars A to B B to C Addition Price charged for supply of goods/
services 25000 28,000 3,000 CGST @ 6% 1500 1680 180 SGST @ 6% 1500 1680 180 Total CGST+ SGST 3000 3360 360 Total price charged 28,000 31360 3,160
Notes
1. A will pay Rs 3000(1500 each CGST & STGST) without ITC as the
goods originated from him in the supply chain.

2. B’s gross liability is Rs 3,360 (1680 each CGST & STGST).
B is entitled to avail ITC for tax of Rs 3,000 paid to A (1500 each
CGST & STGST)
B is l iable to pays only Rs 360 (Rs 180 each CGST & STGST)

3. Government gets total GST of Rs 3360 – 1500X2 from A and 180X2
from B
munotes.in

Page 8

Indirect Tax - Introduction Of Goods And Service Tax
8 4. But for the ITC, the liability would be Rs. 3,360 due to cascading effect
of tax.

5. C, the final consumer being last in the supply c hain will have to bear
the full GST of Rs 3360 without any ITC.
(b) A and B belong to different states, then A will charge IGST of Rs 3000
(12%) and B will get ITC of RS 3000 against IGST and pay the balance
just as before. This is an example of seamless credit flow.
1.6 NEED FOR GST IN INDIA
The main flaw of the pre -GST tax regime was the existence of multiple
taxes at both the central and state level without having an across the board
credit system for taxes paid earlier. This imposed hindrance in smoo th
movements of goods across the country besides creating scope for
arbitrage of rates at different places, interstate smuggling and grey markets
for goods and services. India needed a uniform tax regime with lower rates
and stringent implementation. Some other reasons are as under: -
a. Integration of different taxes such as Excise Duty, VAT, Luxury Tax,
Entertainment Tax, Octroi and CST so as to avoid multiple taxation of
a transaction as both goods and services;
b. Replacement of multiple tax levies by a u niform tax regime in respect
of goods and services both;
c. Abatement of the cascading tax burden of tax on tax at different levels;
d. Introduction of an indirect, comprehensive, broad -based consumption
tax for any product or service throughout India;
e. Provision for a continuous chain of credits from the original producer
or service provider to the retaileror end consumer for taxes paid at
earlier stages i.e. input credit to ensure the removal of cascading effect
of multiple taxes;
f. Imposition of tax only on the v alue added at every stage in the supply
chain instead of tax on origin or manufacture of goods;
g. Setting up an efficient tax regime free of corruption and bureaucratic
red-tape to enable simplified tax compliance;
h. Creation of a national market for goods and services and
i. Safeguarding the interests of the states by opting for a dual - model
GST with inbuilt provisions for CGST, SGST, UGST and IGST.

1.7 INDIRECT TAXES SUBSUMED IN GST
1.7.1. The principle objective of the GST is to reduce the complexities,
remove the effects of cascading tax burden by introducing a new broad
based tax regime which subsumes all the taxes levied on the sale of goods
and/or provision of services by both the centre and the states and provide a
larger pull for set off of taxes.

munotes.in

Page 9

GST – An Overview
9 1.7.2. Principles of subsuming taxes
Following principles were applied to identify the indirect taxes levied on
supply of goods or services to be subsumed: -
a. Only indirect taxes on goods and/orservices were subsumed.
b. The taxes were part of the supply chain i.e. manufacturer, service
provider or retailer or consumer,
c. The taxes resulted in free flow of tax credits in intra and inter -State
levels.
d. The taxes such as Stamp Duty, Municipal Taxes which were
specifically unrelated to supply of goods or services,we re not
subsumed; and
e. The subsuming of the taxes maintained revenue neutrality and fairness
between the Central and the States.

1.7.3. Taxes subsumed or absorbed in GST
Based on the above principles, following taxes have been subsumed in
GST.
Taxes subsum ed or absorbed in GST
Central Taxes State Taxes
Central Excise Duty (CENVAT)
Additional Excise Duties VAT / Sales Tax
Excise Duty under the Medicinal and
Toiletries Preparations (Excise Duties)
Act 1955 Entertainment Tax except
levied by the Local Bo dies)
Service Tax Luxury Tax
Additional Customs Duty, commonly
known as Countervailing Duty (CVD) Taxes on Lottery, Betting and
Gambling
Special Additional Duty of Customs –
4% (SAD) State Cesses and Surcharges wherever they relate to supply
of goods a nd services Surcharges and Cesses levied by Centre wherever they are in the nature of taxes
on goods or services e.g. cess on rubber,
tea, coffee, national calamity contingent
duty etc. Octroi and Entry Tax
Central Sales Tax phased out Purchase Tax




munotes.in

Page 10

Indirect Tax - Introduction Of Goods And Service Tax
10 1.7.4. Taxes not subsumed
Following taxeswere not subsumed in GST:
1) Basic Customs Dutylevied on Import of goods into India.
2) Exports Dutyimposed on export of goods are not available in India in
abundance,
3) Road and Passenger Tax ,
4) Toll Tax
5) Property Tax
6) Stamp Duty
7) Electricity Duty

1.7.5. Treatment of Specific goods
a) The Alcoholic Liquor for Human Consumption
Under clause 12 A of Article 366, of the Constitution the supply of
alcoholic liquor for human consumption is outside the ambit of GST.The
State s will continue to impose tax on it. Moreover, CST on inter -state
sales of alcohol products would also continue.
a) Tobacco Products
Tobacco and tobaccoproducts being “SinGoods”will be subjected to GST
subject to a separate excise duty by the Centre.
b) Petroleu m,Crude, High Speed Diesel (HSD) , Motor Spirit,
Natural Gas and Aviation Turbine Fuel(ATF)
The states will continue to levy VATon intra-state sales of petroleum
products. Inter -state sales would continue to attract Central Sales Tax
(CST). However, these products may be transitioned into the GST regime
on a future date to be notified by the GST Council. Moreover, these
products are also subject to levy ofexcise duty imposed by the Centre in
addition to the VAT or GST.
c) Newspapersand newspaper advertiseme nts
There is no GST on newspaper but advertisements are subject to levy of
GST.





munotes.in

Page 11

GST – An Overview
11 1.8 FRAMEWORK OF GST IN INDIA
1.8.1. Subject to the prescribed exceptions,GST is a destination -based tax
applicable on all transactions involving supply of goods and/or se rvices
for a consideration.It extends to whole of India including the Union
Territories of Jammu and Kashmir and Ladakh.
1.8.2. India has followed the dual GST model like Canada and
Brazil.Under this model, both the Centre and the States may concurrently
levy GST on intra -State taxable supply of goods or services or both
1.8.3. The dual model of GST adopted in India comprises of the following
components: -
a) Central Goods and Service Tax (CGST)levied and collected by the
Centre,
b) State Goods and Service Tax ( SGST)levied and collected by the States
or
Union Territory Goods and Service Tax (UTGST) levied and collected by
the
Union Territories with legislatures or
UTGST levied and collected by Union Territories without State
Legislatures,
1.8.4. The Centre is empowered to levy Integrated Goods and Service Tax
(IGST) on all the inter -state supply of taxable goods or service or both.
IGST is almost equal to the sum total of CGST and SGST/UTGST.
1.8.5. Legislative Framework
Legislative formwork for levy and colle ction of GST is as under:
Type of GST Legislation Levied and collected by
CGST CGST Act, 2017 Central Government
UTGST UTGST Act, 2017Union territories without legislatures viz.
Andaman and Nicobar Islands,
Lakshadweep, Dadra and Nagar Haveli,
Daman and Diu and Chandigarh, Ladakh
SGST SGST Acts Respective States and Union Territories
with their own legislatures viz. Delhi and
Puducherry, Jammu & Kashmir

Different State Laws providing for levy of SGST and CGST Act are by
and large uniformin resp ect of the basic features of the tax,chargeability,
taxable event, taxable person, classification and valuation of goods and
services, procedure for collection and levy of tax etc. to keep the concept
to of dual GST in harmony. munotes.in

Page 12

Indirect Tax - Introduction Of Goods And Service Tax
12 1.9 BENEFITS OF GST
GST w ill be beneficial for the economic growth of the country and all the
stakeholders in the following ways: -
1.9.1 Common National Market
GST has removed economic barriers and created an integrated economy
with a unified common national market with harmon ised laws, common
tax rates and procedures.

1.9.2. Single Tax
GST subsumes most of the central and state taxes into a single tax and
provides for a seamless credit scheme in the supply chain. Elimination of
multiple taxes and double taxation will remove t he effect of cascading.

1.9.3 Competitive prices
As a result of mitigation of ill effects of cascading, average tax burden is
likely to come down, which is expected to bring down the prices of goods
and services and make them market friendly and competiti ve.

1.9.4 Make in India
a) GST will give a major boost to the ‘Make in India' initiative of the
Government of India by making goods and services produced in India
competitive in the national as well as international market giving rise to
the exports and al so demand for goods and services in domestic
markets.
b) More consumption and higher exports will result in higher production
and manufacturing activities leading the growth of the industries to turn
India into a “Manufacturing hub”.
c) Increased manufacturing will create additional job opportunities in
industry and service sectors

1.9.5 Foreign Investment
Unified common national market will attract Foreign Direct investment
necessary for the “Make in India” campaign.
1.9.6 Ease of Doing Business
a) Mitigation of double taxation will make doing business easier and also
reduce litigation and disputes relating to double taxation of a
transaction as both goods and services

b) GST is a simple tax regime with fewer exemptions.

c) It will reduce multiple taxes leading to sim plification and uniformity
and the need for multiple records keeping for a variety of taxes saving
cost of compliance.

d) GST envisages simplified and automated procedures for various
processes such as registration, returns, refunds, tax payments, etc.
munotes.in

Page 13

GST – An Overview
13 e) GST prescribes common procedures for registration, refund, filing of
returns, classification of goods, etc. will make the taxation system more
certain

f) Public interface between the taxpayer and the tax administration will be
considerably reduced as interactio n will be through the common GSTN
portal.

g) GST regime will improve environment of compliance with online filing
of returns, verification of input credits and encourage more paper trail
of transactions.

h) Electronic matching of input tax credits all -across India thus making
the process more transparent and accountable

i) Timelines are prescribed for obtaining registration, refunds, etc.;

j) GST will help in improving liquidity of the business.

1.9.7 Economic growth and Tax compliance
a) GST will widen the tax b ase, improve compliance by the taxpayers,and
increase the tax revenues of the government.

b) A cumulative effect of high production, export etc. will Improve the
overall investment climate in the country and be helpful in growth in
economic activities, incr ease the GDP , boost economic growth and
remove poverty.

c) Uniform GST rates across the country will reducetax avoidance or
evasion by eliminating rate arbitrage between different stage or intra
and inter -State sales.

1.9.8 Consumers
a) Final price of goods is expected to be lower due to seamless flow of
input tax credit between the manufacturer, retailer and service supplier;

b) A large number of small retailers with turnover of supply of goods up
to Rs 40 lakh( 20 lakh in case of suppliers of services) are e xempted
from tax and those having turnoversupply of goods up to Rs 1.5 Crore
will be covered under a composition scheme with low to moderate tax
rates. This will mean purchases from such retailers at relatively lower
prices giving quantum increase to consu mption of goods.

1.9.9 Uniformity in tax rates , nomenclature and interpretation
GST will ensure uniformity in rates of tax and
interpretation.“Goods”include “all materials, commodities, and articles”
and “service” includes“anything done for considerati on which is not
goods”. This will encompass all goods and services in its scope. Further
the classification of goods and services is done as per HSN or
Harmonised System of Nomenclature). A new scheme for classification
of services has been devised und er various sections, headings and groups. munotes.in

Page 14

Indirect Tax - Introduction Of Goods And Service Tax
14 1.10 GST COUNCIL
1.10.1. Under the newly inserted Article 279A,the President of India is
vested with the power to constitute a joint forum of the Centre and States
Goods & Services Tax Council (GST Council). These provisions came
into force on 12th September 2016 . Soon thereafter, the President
constituted the GST Council on 15th September 2016.
1.10.2. The composition of the GST Council is as under: -
i) Chairperson - Union Finance Minister

ii. Vice Chairperson – Chosen from amongst the Finance Ministers of the
State Governments

iii. Ex-Officio Secretary -The Secretary (Revenue) ( as per the decision of
the Union cabinet on 12 September 2016.

iv. Members

a. Union Minister of State (Finance)/Revenue

b. All Minister s of Finance / Taxation of each State or any other Minister
nominated by the States or Union Territories with legislatures

v. Permanent invitee ( non -voting) -Chairperson, Central Board of Excise
and Customs (CBEC)

vi. GST Council Secretariat
The GST Cou ncil is managed by the GST Council Secretariat) comprising
of the officers taken on deputation from both the States and the Centre.
Funds for running the Secretariat will beamed available and borne by the
Centre. The government has appointed one Additi onal Secretary and four
Commissioners to the Secretariat.
1.10.3 The functions of the Council
The GST Council shall perform the following functions, viz. : -
a. To make recommendations to the Union and the States oneverything
related to GST including laws, rules and tax rates, exemptions,
threshold limits, dispute resolution etc.

b. To recommend the date on which GST be levied on petroleum crude,
high speed diesel, motor spirit, natural gas and aviation turbine fuel.
1.10.4. Decision making at the Council
a. Every decision of the council shall be taken in a meeting.

b. Quorum for every such meeting shall be not less than 50% of total
members.
munotes.in

Page 15

GST – An Overview
15 c. Every decision of the GST Council is taken by a majority of not less
than three -fourths (75%) of the weighted votes of the members present
and voting.

d. Vote of the Centre has a weightage ofone -third of total votes cast.

e. Votes of all the State Governments taken together has a weightage of
two-thirds of the total votes cast, in that meeting.

Example:
At a meeting of the Coun cil, 24members are present, of which 23
members are from the states and one represents the Centre.
The weightage of votes will work as under:
 Total votes cast 24
 Weightage of centre -1/3 of 24 = 8 votes
 Weightage of the 23 members of the States taken together - 16 votes
i.e. or 0.6956votes each member.
 Votes required passing a resolution - ¾ of 24 = 18
 Weightage of Central Government -1/3 of 24 = 8
 Votes required from the States 18 -8 =10=
 States required to support to take decision : 10/ 0.695 6 = 14.387 or 15
Interestingly in the above case no decision can be taken without the
support of the Central Government even if all the states present in above
case concur as ¾ majorities will fall short.
1.10.5. Decision not to be invalid
Any defect in procedures adopted or appointment of members or in
constitution of the council or non - filling up of any vacancy shall not
render the decision making by the Council invalid.
1.10.6. The GST Council has held as many as 47 meetings 29th of June
2022 and ha s taken several decision such as simplification of procedures ,
composition , e - way bills , threshold limit for registration, periodicity of
returns to be filed, IGST credit and measures for removal of difficulties
including revision of GST rates.



munotes.in

Page 16

Indirect Tax - Introduction Of Goods And Service Tax
16 1.11 GOODS AND SERVICES TAX NETWORK (GSTN)
1.11.1. GST regime primarily relies upon technology -based compliances.
Hence, a Company Goods and Service Network (GSTN) was incorporated
as a special purpose vehicle as a non –profit organisation under the
provisions of section 8 of the Companies Act, 2013 with the initial capital
of Rs 10 Crore. The Government of India holds 24.5% equity in GSTN
and all States including Delhi and Puducherry, and the Empowered
Committee of State Finance Ministers (EC), together hold another 24.5%.
Balance 51% equity is with non -Government financial institutions.
1.11.2. The company set up a single portal www.gst.gov.in to provide IT
infrastructure and all GST related services to the Central and Sta te
Governments, taxpayers and other stakeholders for implementation of the
Goods and Services Tax (GST).
1.11.3. The portal also aims to establish a uniform interface linkage for the
taxpayer and a common and shared IT infrastructure between the Centre,
Union Territories and theStates.The portal is accessible over Internet by
taxpayers and tax professionals like Chartered Accountants, Tax
Advocates,Banks, accounting and tax authorities and other
stakeholdersand Intranet by Tax Officials etc.
1.11.4. The fu nctions of the GSTN
Primarily, GSTN provides three front end services to the taxpayers namely
registration, payment and return through GST Common Portal. Its main
functions are as under: -
a) To facilitate Registration of the taxpayer with the help of IT, IT eS and
financial technology companies called GST Suvidha providers(GSP),
who provide mechanism to receive GST returns from the tax payers
and forwarding the returns to Central and State authorities,
b) To develop with the help of GSPs ,applications to be used by taxpayers
for interacting with the GSTN and facilitate the tax payers in uploading
invoices as well as filing of returns and act as a single stop shop for
GST related services
c) To customize products that address the needs of different segment of
users. GSPs may take the help of Application Service Providers (ASPs)
who act as a link between taxpayers and GSPs.
d) To compute and settle IGST with the concerned states/UT,
e) To match payment of tax by the tax payers with the banking network; munotes.in

Page 17

GST – An Overview
17 f) To generate MIS reports from the information furnished by the
taxpayers in the GST returns information and provide such reports to
the Centre and States ,
g) To analyse and provide analysis of taxpayers' profile;
h) To match reversal and reclaim of input tax credit.
i) To ensure data privacy and protection along with developing data
retrieval and audit trails and other value added service.

1.12 SELF -EXAMINATION QUESTIONS

1) Explain the concept of GST.
2) List the Central and State levies which will be subsumed in GST in
India.
3) What are the taxes not subsumed in GST
4) Enumerate and explain the principles for subsuming taxes in GST.
5) What is GST Council? How decisions are made by the GST Council?
6) Explain the benefits and need for GST.
7) What were the problems in pre -GST tax regime? How does GST
resolve them?
8) Discuss the dual GST model to be introduced in India.
9) Explain salient features of indirect taxes and differentiate direct and
indirect taxes.
10) Enumerate different types of direct and indirect taxes.
11) Write a short not e on various Lists under VII Schedule to the
Constitution of India.
12) If A sells a product at a MRP of 20,000 rupees with GST rate of 10%.
Determine the GST payable. Will it make any difference if A has
purchased this product for Rs 15,000?
( Ans. GST -20,000 X 10/110 Rs 1818 , Input credit 15,000X10/110=
Rs 1364 , payable Rs 1818 -1364 = Rs 454
13) Multiple Choice questions ;
A. Which of the following taxes have been subsumed in GST?
(a) Central Sales Tax (b) Central Excise Duty (c) VAT (d) All of the
above munotes.in

Page 18

Indirect Tax - Introduction Of Goods And Service Tax
18 B. List I is the -(a) Union List (b) State List (c) Concurrent list (d) None
of above

C. List II is the -(a) Union List (b) State List (c) Concurrent list(d) None
of above

D. List III is the (a) Union List (b) State List (c) Concurrent list (d) None
of ab ove

E. Union list provides taxes levied by
a) Centre (b) states (c) Union territories (d) None of above
F. State list lists taxes levied by
a) Centre (b) states (c) both centre and states (d) None of above

G. Concurrent list gives items in the domain o f
a) Centre (b) states (c) both centre and states (d) None of above
H. Weightage of Central Govt. in GST Council is a) 1/4(b) 1/3 (c) 2/3
(d) 3/4

I. GST council takes decisions with majority of a) 1/4(b) 1/3 (c) 2/3 (d)
¾

J. The functions of Goods and Services Network (GSTN) include:
(a) facilitating registration (b) forwarding the returns to Central and
State authorities (c) computation and settlement of IGST (d) All of the
above
K. GST is levied on supply of all goods and services except:
(a) Alcoholi c liquor for human consumption (b) Tobacco (c) Health
care services (d) All of the above
L. On Petroleum Crude, High Speed Diesel, Motor Spirit (Petrol),
Natural Gas and Aviation Turbine Fuel:
(a) GST is not levied (b) GST to be levied from a notified dat e
decided by GST Council (c) GST is levied, but exempt (d) None of the
above
(Answers : (A) c(B) a (C) b (D)c (E) (a) (F) b. (G (c),H (d), I(d),J (d),K
(a), L(d))



munotes.in

Page 19

19 2
REGISTRATION UNDER GST
Unit Structure :
2.0 Introduction and Objectives
2.1 Need and Advantages of Registration
2.2 Liability for Registration
2.3 Registration Procedures
2.4 Self- Examination Questions
2.0 INTRODUCTION AND OBJECTIVES
The GST isa des tination based tax on the consumer of the goods and
services or both. Actual taxpayer, (the consumer) is different from the
factual one (the supplier). Registration is the process to establish a chain
between the Government vis -à-vis the supplier and the c onsumer.
Registration helps the Government to identify taxpayers on the one hand
and enables the taxpayerstocollect tax from the consumers on the other
besides establishing a seamless flow for claiming credit of tax paid on
inputs (ITC).
This lesson ta kes a detailed look at the provisions relating to Registration,
its need,advantages, liability for registration, exemption from registration,
procedural aspect for registration and its modification orcancellation etc.
2.1 NEED AND ADVANTAGES OF REGISTRATIO N
Registrationis the process forobtaining a unique number from the
Government by a supplier of goods or service or both. Registration
authorizes the supplier to collect tax on behalf of the Government. It also
enables the supplier to avail Input tax credit (ITC) for the taxes paid on his
inward supplies. Without registration, a person can neither collect tax from
his customers nor claim any input tax credit of tax paid by him.
Registration confers the following advantages to a taxpayer:
 Registration is an o fficial recognition to a person as the supplier of
goods or services or both.
 A registered supplier is authorised to collect tax from the consumers.
 The supplier may pass on credit of the taxes paid on the goods or
services or both, supplied to the consum ers. munotes.in

Page 20

Indirect Tax - Introduction Of Goods And
Service Tax
20  The supplier may claim and utilise input tax credit of taxes paid
towards the discharge of his liability for taxes due on supply of goods
or services or both.
 Registration acts as a catalyst in establishing a supply chain at the
national levelwith a seamless flow of Input Tax Credit from suppliers
to the consumers.

2.2 LIABILITY FOR REGISTRATION
Liability for payment of GST arises on happening of the taxable event i.e .
the “supply”of goods or service or both by a supplier thereof . Liability for
registration is co -extensive with the liability to pay GST.
A supplier is liable for registration in four ways, viz.: -
a. Migration of the existing taxpayer from the old law to the GST,
b. Registration based on minimum turnover of supply of goods or servi ces
or both,
c. Compulsory registration irrespective of the turnover limit, and
d. Voluntary registration irrespective of the turnover limit.
2.2.1. Migration of the existing taxpayer from the old law to the GST
Section 22(2) of the CGST Act, 2017 made t ransitory provisions on
implementation of the GST on 1st July 2017, called the “appointed
day”.Under the section every existing taxpayer, who was registered or
holding alicense under the existing laws e.g. MVAT was required too
migrate to the GST by 30th J une 2017 i.e. a day preceding the appointed
day and obtain provisional registration under the GST law.
The provisional registration was subject to final registration after
submitting the documents and information required for registration.
Elaborate provi sionsere made for declaration of stocks and unavailed input
credit on 30th June 2017 to facilitate smooth transition to the new regime.
This being only a transitory provision is not discussed in detail.
2.2.2 Registration based on Turnover of taxable supp ly
2.2.2.1.Section 22 of the CGST Act, 2017 provides that
(A) In case of any person engaged in making taxable supply of goods or
services or both shall be liable for Registration under GST
whose aggregate turnover in a financial year exceeds:

 Ten lakh rupe esofsupplies from any of the Special Category
States EXCEPT the State of Assam and Union territories of Jammu &
Kashmir & Ladakh munotes.in

Page 21

Registration Under GST
21  Twenty lakh rupees of supplies from in all the other states& UTs and

(B) In case of the supplier engaged exclusively in the supply of goods,
the turnover limit will be
 Twenty lakh of supplies made fromany of the Special Category
States

 Forty lakh rupees of supplies made from in all the other states& UT.
The liability for Registration arises when the turnover exceeds the
applicable threshold limit 40 lakh /20 lakh/10 lakh rupees. Hence,
effective threshold limit for Registration isRupees 40,00,001/
20,00,001/10,00,001 onwards.
2.2.2.2. Special Category States are 11 in number, which include:

 Seven North Eastern States (S even Sisters)Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Tripura,

 Three hilly StatesSikkim, Himachal Pradesh, Uttarakhand, and

 Jammu & Kashmir (UT) and Ladakh (UT)(including Kargil and
Leh)after bifurcation of the erstwhileState of Jammu & Kashmir on 05
August 2019

 The State of Assam, Union Territories of Jammu & Kashmirand
Ladakh have opted for threshold limit of 40 lakh/20 lakh rupees

2.2.2.3. Aggregate turnover

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

B. Aggregate turnover of supply of goods or services or both is
computed : -
a. for a supplier having the same Perman ent Account Number, on the
principle of one PAN - one person,
b. for the whole of India taken together,
c. with reference to a financial year i.e. April to March



munotes.in

Page 22

Indirect Tax - Introduction Of Goods And
Service Tax
22 C. The value of aggregate turnover excludes:-
a. Central tax, State tax, Union territory ta x, Integrated tax and Cess;
b. The value of inward supplies on which tax is payable by a person 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 ; or
b. supplies made on behalf of all his principals; or
c. in case of a principal, the supply of goodsby a registered job worker
after completion of job -work,
2.2.2.4. Persons not liable for registration -Section 23
Following persons are not liable for re gistration vide Section 23: -
A Any person engaged exclusively in the business of supplying goods or
services or both, which are
i. not liable to tax or
ii. wholly exempt from tax under the CGST Act or under the IGST Act;

B An agriculturist, 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 this
sectionto :
a) Individual advocates including senior adv ocates ,
b) Individual sponsorship service providers including players ,
c) Suppliers, whose all supplies are taxable under reverse charge.

2.2.2.4. Some relevant points
a. The liability for registration is on “every supplier”.

b. The supplier should make a taxable supply of (i) goods or (ii) services
or (iii) both over the threshold limit of 10 lakh/20 lakh /30 lakh rupees.

c. Under section 22 read with section 23, asupplier of only tax -free
supplies is not liable for registration

d. If a supplier makes some tax able supply in addition totax -free supplies,
thenall supplies, whether taxable or tax -free in the course of export or
inter-State supply, will be considered in aggregate turnover.
munotes.in

Page 23

Registration Under GST
23 e. Registration will in the State or Union Territory, from where the
supplie r makes the taxable supply of goods or services or both.

f. An agriculturist is specifically exempted from registration to the extent
of supply of produce out of cultivation of landeven if it exceeds the
threshold limit.

g. A supplierof only supplies taxable u nder reverse charge, is also
exempted from registration under CBIC notification.

h. All supplies made by a taxable person will be included in his aggregate
turnover whether made

 on his own account;or

 as an agent on behalf of all his principals; or
 in ca se of a principal, the supply of goods, after completion of job -
work, by a registered job worker.

i. 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 on ly one person should be liable for accounting the turnover of
supply.
2.2.2.5. Illustrations :
1. Ashok, aChartered Accountant providestaxable services from
Agartala. Since the taxable services are provided from the State of
Tripura, a Special Category State , liability for Registration will arise
under section 22 of the CGST Act ,2017, when the aggregate when
the value of services provided by him exceeds 10 lakh rupees.
2. Bose is a Kolkata based wholesaler in tea. Bose will be liable for
registration, when the aggregate turnover or supply of tea (sales)
exceeds Rs 20 lakh.
3. Suresh of Surat supplies (sells) taxable goods worth Rs 38 lakh on his
account and Rs 3 lakh as an agent acting for his principal Tope. Suresh
will be liable for registration, when the turno ver exceeds 40 lakh
rupeesinclusive of supply made on his account and made on Tope’s
account.
4. Dilip is a diamond merchant based in Mumbai. His turnover is of
rupees 15 lakh. He also sends goods on job work to the registered
artisan, who completes the job w ork and sends back to Dilip goods
valued at Rs 28 lakh.
Dilip will be liable for registration on his own turnover and the goods
received from the job worker, when the aggregate turnover exceeds the
threshold limit of Rs 40 lakh. However, the turnover of Rs 28 lakh
will be excluded from the turnover of the job worker. munotes.in

Page 24

Indirect Tax - Introduction Of Goods And
Service Tax
24 5. An educational institution provides tax - free education services valued
at Rs 50 lakh. Assuming that there are no other taxable supplies, the
institution will not be liable for registration under section 23 because it
does not make supply of any taxable services.
6. A hospital provides tax -free medical services of Rs 18 lakh and
taxable services of Rs 4 lakh. In this case the aggregate turnover will
include both tax -free and taxable services. T he hospital will
accordingly be liable for registration when its aggregate turnover
exceeds Rs 20 lakh.
7. A makes export of taxable goods for Rs 100 lakh. A will be liable for
registration, although his tax liability will be nil.
8. Anuj of Akola is engaged ex clusively in supplying tax -free goods. He
is not liable for registration under this clause even of the turnover
exceed the limit of Rs 40 lakh.
9. Turnover of Bopanna of Bengaluru fromsupplying exempted goods is
Rs 50 lakh and taxable goods are Rs 25 lakh. Bo panna will be liable
for registration from the date on which the aggregate turnover of
supply of goods exceeds Rs 40 lakhs.
2.2.3. Compulsory registration
Under section 24 of the CGST Act, 2017, following classes of persons are
liable for compulsory regis tration irrespective of the amount of turnover: -

(i) Inter -State Suppliers
Persons making any inter -State taxable supply of goods (e.g. from
Mumbai to Goa) is required to be registered under GST irrespective of
turnover limit.
Exceptions :
(a) Persons making in ter-state supplies of taxable services and 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, Ladakh or Assam) are exempted from obtainin g
registration vide Notification No. 10/2017 -Integrated Tax dated
13.10.2017.

(b) Persons engaged in supply of handicraft goods making inter -state
supply are exempt from GST registration, if the aggregate value of all
their supplies on all India bases is less than Rs 20 lakhs/10 lakhs per
annum.

(c) A job worker with turnover less than 20/10 lakhs is exempt from
registration, even if he makes inter -State supplies to registered person.
This exemption is not available to Jewellery, goldsmiths’ and
silversmiths’ war es and other articles manufactured on job work basis –
(Notification No. 7/2017 -IT dated 14 -9-2017as amended on 29 -1-
2019). munotes.in

Page 25

Registration Under GST
25 (ii) Casual taxable persons
A casual taxable person is one who has a registered business in a different
State and wants to effect taxable supplies from some other State or Union
Territory where he is not having any fixed place of business. Such persons
are liable for registration in the State from where they seek to effect a
taxable supply as a casual taxable person.
An exception is made in case of casual taxable persons making supplies of
specifiedhandicraft goods , whowill be entitled to the thresholdexemption
of Rs. 20 Lakh/10 lakh and thus need not take compulsory registration.
(iii) Non-Resident Taxable Persons
Non-resident taxable persons i.e. a foreigners not having fixed place of
business in Indiahas to compulsorily apply for registration if they desire to
make any taxable supplyany State in Indiaat least five days in advance of
making such supply and alsomake advance deposit of the estimated tax
liability. Registrationis gran ted to the non -resident taxable persons only
for a specified period only, but the period may be extended on making
application.
(iv) Payers of tax under reverse charge
The persons who are required to pay tax under reverse charge on the
supplies received by the m. E.g.clients of advocates, those receiving
transport services from a goods transport agency etc.
(v) E-Commerce Operators
E-commerce operators, notified as liable for GST payment under
section 9(5) of the CGST Act, 2017.

(vi) Tax Deductor ;
Persons required dedu ctingtax under section 51, whether or not separately
registered under this Act;
(vii) Agents
Persons making taxable supply of goods or services or both on behalf of
other taxable persons whether as an agent or otherwise;
(viii) Input Service Distributors ,whether or no t separately registered
under this Act;

(ix) Suppliers through E -Commerce Operator subject to TCS
Persons who supplygoods or services or both, other than supplies specified
under section 9(5) through such E - Commerce Operator who are required
to collect tax a t source (TCS) under section 52;
(x) Supplier through E - Commerce Operatorssubject to TDS
Suppliersof goods who supply through such E -Commerce Operators,who
are liable to collect tax at source. However , suppliers of taxable service munotes.in

Page 26

Indirect Tax - Introduction Of Goods And
Service Tax
26 through e -commerce operato rs 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 Operators , 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.
2.2.4. Voluntary r egistration
Any person having turnover below the threshold limit may opt apply for
voluntary registration. However, such a person will not get the benefit of
the threshold limit of Rs 20 lakh /10 lakh and his entire turno ver will be
subject to GST from the day of registration. Further, voluntary registration
will not be cancelled until one year from the date of registration.
2.3 REGISTRATIONPROCEDURES
There are different procedures for registration for a non -resident taxa ble
person,casual taxable persons, deductors of tax, collectors of tax and
supplier of Online Information Database Access and Retrieval
(OIDAR)services and other suppliers. Some relevant provisions have been
dealt with separately at the appropriate places. For all other suppliers the
following will be the procedure for registration .
2.3.1. Nature of Registration
(i) Registrationis not tax specific but common for all the taxes i.e. CGST,
SGST/UTGST, IGST and Cesses.

(ii) Registration is PAN based and State specific . A given PAN based
legal entity would have one GSTIN per State. It would mean: -

a. A taxable person is required to register in each State or Union territory
from where he effects supply.

b. An entity having branches in multiple States will have to take separa te
State wise registration for the branches in different States.

c. If the branches of the entity are within one State or Union territory, it
can have single registrationdeclaring one place as the principal place of
business and other as the branches as additional place of business.

d. The above rule subject to the following three exceptions , where
separate registration is required even within a state : - munotes.in

Page 27

Registration Under GST
27 a) a unit in SEZ; or

b) a SEZ developer;or

c) Each of business verticals separately of business entity within a State
or Unit Territory.
As per Section 2(18) of CGTS Act, 2017“ business vertical 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 sub ject 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 products or provide the services; and
(e) if applicable, the nature of the regulatory environment, for example,
banking, in surance, or public utilities.”
(iii) Upon registration each supplier is allotted 15 -digit ‘Goods and
Service Tax Identification Number or “GSTIN” comprising of the first
2 digits for the State code followed by 10 digits PAN of the legal
entity, 2 digits for t he entity code and the last digit for check number.

(iv) A centralised unique identification number (UIN) is issued in respect
of supplies to some notified agencies of United Nations organisation,
multinational financial institutions and other organisations.

(v) Upon Registration a certificate of registration incorporating the
GSTIN is issued to the taxpayer and the GSTIN is made available to
the applicant on the GSTN common portal.

2.3.2. Standardisation of procedures for Registration
The GST registration r ules 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, cancell ation,
amendment, field visit report etc., This is to ensureuniformity of the
process all over the country and speeding up the decision making process.
Further, the rules stipulate strict timelines for completion of different
stages of registration process . The standardized process for Registration is
given below.
munotes.in

Page 28

Indirect Tax - Introduction Of Goods And
Service Tax
28 I. Procedure for RegistrationRegular Taxpayers
A. Submission of Application for Registration
 Every taxable person, who is not a non -resident, deductor of tax and
collector of tax is required to submi t an application for Registration
within thirty days from the date when liability to register arose

 The application is to be submitted online in form G ST REG -01through
the common portal (GSTN) or the Facilitation Centre .

 Form for GST REG -01 contains tw o parts A & B

(i) Part A contains the applicant entity’s name PAN, Mobile, email etc.
and
(ii) Part B shows application reference no. given in acknowledgment in
GST -REG -02

B. Documents required for GST registration

(i) PAN of the applicant

(ii) Identify and address proof of the promotors

(iii) Proof of registration of business e.g. partnership Deed , Registration
Certificate, Certificate of Incorporation etc.

(iv) Address proof for place of business such as Rent receipt, electricity
bill , Municipal certi ficate etc.

(v) Bank account proof

(vi) Digital Signature.

C. Acknowledgment

On submission of the application, PAN of the applicant is verified through
GST portal Mobile no. and PAN through One Time Password (OTP) and
if these documents are found to be in order, an acknowledgment will be
issued in Form GST -REG -02 electronically.

D. Verification process

(i) The application is forwarded to the Proper Officer of the respective
State or the Central Government, who shall examine the application
and the accompanied documents.

(ii) After the verification, t he Proper Officer shall approve and grant the
registration within three working days.

(iii) Wherethe Proper Officer finds the application to be deficient for any
reason or requires any further clarification, he shall intimat e to the
applicant in form GST -REG -03.
munotes.in

Page 29

Registration Under GST
29 (iv) The applicant shall submit the reply with clarificationin form GST -
REG -04within seven working days starting from the fourth day of
filing the original 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.

E. Grant or Refusal of Registration

(i) The proper officer would have to grant the application for registration
within seven work ing days thereafter and

a) issue Registration Certificate in form GST -REG -06 ; or

b) reject the application in form GST -REG -05.

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

F. Physical verification in connection with registration
Since the basic premise of the GST is toevolve a technology based tax
regime to reduce physical interface, ordinarily, physical verification is
avoided. However, where the Proper Officer is satisfied and deems
necessity or desirable, may carry out physical verification only after
granting the Registration.Within fifteen working days of the verification
the Pro per Officer is required upload the verification report along with the
supporting documents and photographs on the common portal.
II. Registration procedure for Casual Taxable Persons
(i) Registration under GST is compulsory for the Casual Taxable Persons
regardless of the annual aggregate turnover.
For this purpose “A Casual Taxable Person is defined as a person who
occasionally undertakes transactions involving supply of goods or services
or both in the course or furtherance of business, whether as princ ipal,
agent or in any other capacity, in a State or a Union territory or both where
he has no fixed place of business unlike the regular taxable person.
Persons running temporary businesses like event management,
businessfairs, exhibitions or other seaso nal businesses examples of Casual
Taxable Persons under the GST.
(i) 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.

(ii) Deposit for GST Registration
A Casual Taxa ble person is not allowed to opt for composition scheme.
Instead, he will have to deposit an amount equivalent to the expected
tax liability during the validity period of GST registration in advance munotes.in

Page 30

Indirect Tax - Introduction Of Goods And
Service Tax
30 for GST registration. For this purpose, a temporary refe rence number
is generated for payment of GST deposit.
(iii) 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 90
days, whichever is earlier.

(iv) The period of Registration 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 amount of additional
tax lia bility during the extended period will have to be made . Other
procedures will be similar as those applicable mutatis mutandis to
regular taxable persons

(v) Filing of returns :
A registered a casual taxable person has to file the following
monthly retu rns
 Form GSTR -1 on or before the 10th of the following month
givingdetail 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 .

(iv) Refund of Tax
After filing all the returns for the registration period, a refund may be
claimed in GSTR3 and allowed in respect of the excess tax paid by
the Causal Taxable Person.
II. Registration procedure for Non - Resident Taxable Persons

(i) A Non -Resident Taxable Person means a ny person, business or Not -
For-Profit Organisation who occasionally undertakes transactions
involving supply of goods or services or both, whether as principal or
agent or in any other capacity, but who has no fixed place of business
or residence in India . Foreigners and foreign entities supplying goods
or services to India would be Non -Resident Taxable Persons as per
the GST.
munotes.in

Page 31

Registration Under GST
31 (ii) Registration under GST is compulsory for the Non -Resident Taxable
Person irrespective of the annual aggregate turnoveror any othe r
criteria.

(iii) A Non -Resident Taxable person shall identify a person in India to act
as its authorised representative who shall be a person resident in India
having a valid PAN.

(iv) Application for registration shall be submitted
 at least 5 days prior to th e commencement of business in India ,
 shall bein form GST REG -09,and
 signed by his authorized signatory having a valid PAN in India

(v) the non -resident taxable person during the GST registration process
must file the following documents :
 Documents showi ng proof of Principal Place of Business (Rent
receipt agreement, electricity bill or consent letter from the owner of
the premises etc.

 Identity proof of the non -resident taxable person - Passport , Visa
etc.

 Tax identification number or unique number on the basis of which
the entity is identified by the Government of that country or its PAN,
if available.

 Authorisation for Authorised Representative in India along with the
copy of the resolution of the board of directors granting such
Authorisation, i f any,

 Certificate of Incorporation of the Company .

 License issued by foreign country, if any,

 Clearance certificate issued by Government of India, if any,

 Bank Account Proof with IFC Code MICR etc.

(vi) GST Deposit for Non -Resident Taxable Persons
Like the Casual Taxable Persons, Non -Resident Taxable Personsare also
required to remit in advance a deposit equivalent to the expected tax
liability during the validity of the registration for GST registration, where
upon the Registration Certificate will be issued. Similar process is to be
followed for extension of restoration period and additional deposit will be
required to be made equivalent to the estimated tax liability for the
extended period. An application reference number would be generated for
paym ent of advance tax for obtaining GST registration and an allocation
will have to be filed for extension of registra tion Period in for GST -REG -
11.
(vii) For final registration, an application is required to be submitted in
form GST REG -26 electronically wit hin a period of 3 months from the munotes.in

Page 32

Indirect Tax - Introduction Of Goods And
Service Tax
32 provisional registration Other provisions are similar to those applicable on
the regular taxable persons in regard to the final registration

(viii) The Proper Officer, after verification shall issueregistration in form
GST R EG-06.

(ix) If The Proper Officer shall issue a Show Cause Notice to the
applicant in Form GST REG -27 if he is not satisfied with the correctness
or completeness of the information submitted or needs additional
information.

(x) If the reply is satisfactory, the ShowCause Notice may be cancelled
by issuing an order in Form GST REG -20,and if the reply is not
satisfactory, then the officer after giving opportunity of being heard to
the applicant may pass an order for cancellation of the provisional
registratio n granted to the applicant in Form GST REG -28.
(xi) The rules for filing of returns, refunds etc. are similar to those
applicable to the casual taxable persons.

III. Registration Procedure for OIDAR Service Providers
Ataxable person supplying online informat ion and data base access or
retrieval (OIDAR) services to a non -taxable online recipient shall file
theapplication for registration in FormGST REG -10 electronically and
follow the procedure applicable to non - taxable persons.
IV. Registration Procedure for 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 exce pt that application for registration shall be submitted
electronically in Form GST REG -7
V. Registration Procedure for Special agency like United Nation
Organization etc .
Unite Nations and other connected specified agencies are not liable to GST
under the i nternational protocol, but registration will still be required to
claim refund of taxes paid on inward supply of goods or service or both by
making application Form GST -REG -13.
VI. Succession or Transfer of Business
On succession or transfer of business as going concern as a result of
amalgamation, merger, demerger, or change in constitution etc., liability to
obtain registrationfrom the date of transfer or succession of such business
is on the transferee thereof by following the applicable procedure as
above.

munotes.in

Page 33

Registration Under GST
33 2.3.3 Amendment of Registration
Amendment in particulars of registration may be for the three reasons: -
(i) Change in Core field
Under Rule 12, a taxable person may make an applicationfor
amendment in Form GST -REG -14within 15 days of thefollowing
changes, which do not require cancellation under section 29 of CGST
Act,: (i) legal name of the business, or
(ii) the State of place of business or
(iii) additional place of business., or
(iv) names of the functionaries – like partners, directorsetc.
The proper officer, shall, after making necessary inquiry, approve the
amendment electronically i n form GST -REG -15within next 15 days from
the date of application.
(ii) Change in Non - Core field
A taxable person suo motu (on his own motion)without seekingapproval of
the Proper Officer, may effect the change on the common portal all the
other corrections amendments or change in the particulars of registration
the change in Non - Core Field. This change includes a change in the name
of the authorised signatory by adding another name of signatory. Any
change is not so effected on the common portal 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 issued.
(iv) Eligible persons
A taxpayer may also change the particula rs of the following categories of
persons:
(i) ApplicantTaxable person
(ii) Person holding UIN Card or other notified person for registration
under TDS/TCS U. N. bodies category,
(iii) Non-Resident taxpayer
(iv) GST Practitioner , and
(v) Online applica tion and retrieval service provider.

(v) Fields , which cannot be changed
GST is State specific PAN based tax. Hence, the following changes which
have the effect of changing these particulars are notallowed:
a. PAN details,

b. Change in constitution of business, munotes.in

Page 34

Indirect Tax - Introduction Of Goods And
Service Tax
34 c. Modification of place of business from one state to another,
In these cases, a fresh registration will have to be obtained after cancelling
the existing registration. The amendments will come into effect from the
date of application for amendment.However,t he Commissionermay allow
the amendments with retrospective effect.
2.3.4. Cancellation of Registration
2.3.4.1 Under section 29(1), registration can be cancelled only in two
circumstances : -
(i) Voluntary cancellation when a taxable person no more re quires it or
(ii) the Proper Officer considers the registration is liable to be cancelled
due to some specific defaults.
2.3.4.2. Voluntary Cancellation
a) Cancellation of Registration of Migrated Taxpayers:
An existing taxpayer, who has migrated f rom old tax to GST, may opt for
cancellationonly for the following reasons if his -
a) Turnover is below the threshold limit or
b) Supply is in exempted category.
Such option may be exercised: -
a) onlineon GSTN portal, the taxpayer has not issued any tax invo ice, or
b) in Form GST - REG - 16 if he has issued any tax invoice.

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

(ii) Other taxpayersmay opt for cancellation anytime as the condition of
one year does not apply to them.

B Reasons for cancellation
The cancellation of Registration ma y be for the following reasons: -
a) the business of the taxpayer has been discontinued ; or

b) the business has been sold or transferred to some other entity and that
other entity needs to register under GST; or

c) turnover is below the threshold limit; or

d) the supply is in exempted category.

munotes.in

Page 35

Registration Under GST
35 C 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: -

(i) Amount of payments due,

(ii) Particulars of credit reversal, and

(iii) Particulars of payments made towards discharge of such liabilities.

D On rec eipt 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 repli ed in in Form GST -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.
D. Suo-motu cancellation by the Officer
The Proper Officer may issue a Show Cause Noticein Form GST -REG -
16to a registered person and call for information.
The Proper Officer after considering such information and hearing the
taxpayer, may cancel the registration by passing an order in Form GST -
REG -19, if he is satisfied that the registered person has:
(i) contrav ened the provision of the Act and the Rules;
(ii) not 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 no t commenced business within
six months of registration;
(ii) obtained registration by means of fraud, wilful misstatement or
suppression of facts;
(iii) discontinued business from the registered place of business;
(iv) been issuing tax invoice without making the supply of goods or
services; or
(v) committedsuch other defaults as may be specified. munotes.in

Page 36

Indirect Tax - Introduction Of Goods And
Service Tax
36 2.3.5. 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 theProper
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 regi stration was
cancelled by the officer.
On receipt of the application , the Proper Officer, if satisfied, may either
revoke the cancellation earlier ordered by him or reject the request for
revocation of cancellation, after observing the principle of na tural justice
by way of issuing notice to the person and hearing him on the issue.
2.3.6. Cancellation not to affect pending tax lability :
Cancellation of Registration will not affect the liability of taxes prior to
cancellation. Further, the taxpayer w ill have to pay his due taxes by
reversing the input credit in in stock (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.
2.4 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 f ollowing are true or false:
a) A migrated person 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 lif e-saving surgery 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 turnover of Rs 15 lakh not liable for
registration . munotes.in

Page 37

Registration Under GST
37
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 can not be revoked.
( False a, b, d, e, f and j , True c, g, h, i )


munotes.in

Page 38

38 3
COLLECTION OF TAXES UNDER IGST, ACT, 2017
Unit Structure :
3.0 Introduction and Objectives
3.1 Cross -Utilisation of Credit
3.2 Nature and Place of Supply
3.3 Self-Examination Questions
3.0 INTRODUCTION AND OBJECTIVES
1. Under the pre- GST tax regime, States and Union Territories collected
local sales tax or VAT on Intrastate sales of goods within the State /
UT. The Central Sales Tax Act, 1956(CST) regulated the interstate
trade or commerce. Although, the CST Act is a central law, the levy
and collection of taxes on sales of goods in the course of inter -State
trade is delegated entirely to the states of origin of goods taking place
in the course of interstate trade or commerce.
2. The tax regime suffered from several flaws, name ly:-
(i) The state of origin of goods collected and retained the CST instead of
the destinationstate having jurisdiction over the consumer. This was
contrary to the cardinal principle of taxation that incidence of any
indirect tax being a consumption t ax should be borne by the
consumer.
(ii) Input Tax Credit (ITC) of CST was not allowed to the buyer resulting
in cascading of tax (tax on tax) in the supply chain.
(iii) CST had its own protocol for compliance and different forms
required to be filed v iz., C Form, E1, E2, F, I, J Forms etc. which
increased the compliance cost of the business and impeded the free
flow of trade.
(iv) The CST provided opportunity for “arbitrage” because of the huge
difference between tax rates under VAT and CST levied on intrastate
sales and interstate sales respectively.
2. The Goods and Services Tax (GST) replaced themultiple taxes levied
and collected by the Centre and the States. The GST is one multistage
value added tax levied on the consumption of goods or services or
both. Having regard to its federal character,Indiaadopted a “Dual
GST” model, enabling the Centre and States /Union Territoriesto munotes.in

Page 39

Collection Of Taxes Under
IGST, ACT, 2017
39 simultaneously levy GST on every supply of goods or services or
both, whichtakes place within a State or Union Territory i.e.:-
(i) CGST is levied and collected under the authority of CGST Act, 2017
passed by the Parliament,
(ii) (SGST) / UTGST levied and collected under the authority of SGST/
UTGST Acts passed by theStates or the Union Territories having
legislatures
3. In addition, the parliament passed the Integrated Goods and Services
Tax (IGST) Act, 2017 to provide a mechanismto -
a) monitor the interstate trade of goods and services,
b) maintain the integrity of ITC chain in interstate supplies, and
c) ensure that the SGST component accrues to the consumer State.
4. Under the Act, the Central Government levies and collects IGST on all
interstate transactions of taxable goods or services, which is broadly
equal to CGST rate plus SGST rate.For instance, CGST rate on
intrast ate sales of goods is say 5%,then SGST/UGSTrate will also be
5%. Total tax on the product will be 10%. The IGST rate on interstate
taxable supply of these goods will be 10%. This may be clear from
the following figure: -
IGST Rate on Interstate Sales (10% )
(Sales from one state/UT to another state/ UT) CGST Rate (5%) SGST Rate(5%)
(Intrastate sales within same State/UT)
This lesson will discuss all these aspects with reference to cross utilization
of credits of different taxes against one another and ot her relevant r
matters.
3.1 CROSS -UTILISATION OF CREDIT
Input tax credit can be utilised in the following manner : -
1. The supplier will transfer funds to IGST account in the state of origin.
The IGST may be paid by utilising the ITC

2. The buyer in the de stination state can utilise IGST credit for payment
of CGST and SGST by the transfer of funds from IGST account.

3. The amount of ITC on account of IGST is allowed to be utilised
towards the payment in the following order , viz: -
a. IGST
b. CGST
c. SGST.


munotes.in

Page 40

Indirect Tax - Introduction Of Goods And
Service Tax
40 4. The amount of ITC on account of CGST is allowed to be utilised
towards the payment in the following order , viz: -
a. CGST
b. IGST

5. The amount of ITC on account of SGST is allowed to be utilised
towards the payment in the following order , viz: -
a. SGST,
b. IGST.

6. Input tax credit of CGST and SGST cannot be cross utilised.

7. Set off of ITC not available to a person under composition scheme.
Following chart summarises the position
SET OFF OF INPUT CREDIT
Input Credit UTILISATION OF INPUT CREDIT
First utilisa tion 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 - utilised

Following illustrations will explain the position;
Illustration -1
A of Akola se lls goods of Rs 10,000 to G of Goa. The CGST /SGST rate
is 5%each and IGST rate is 10% integrating the CGST and SGST. G
sells these goods in Goa for Rs 12,000.
(a) This is a case of interstate supply of goods involving movement of
goods between tw o different states viz. Maharashtra and Goa liable
to IGST. Hence , A will have to transfer Rs 1000 to IGST account. A
can transfer this amount by paying cash or by utilising any ITC due to
him.
(b) (i) For G, it will an intrastate supply within the stat e of Goa. Hence, G
is liable for,
 5% or Rs 600 towards CGST and
 5% or Rs 600 towards Goa SGST.
(ii) G can avail credit of ITC in respect of IGST of Rs 1000 in the
following manner:
 Firstly Rs 600 towards the CGST and
 Balance Rs 400 towards t he Goa SGST.
G will have to transfer the balance of Rs 200 towards the Goa SGST.
munotes.in

Page 41

Collection Of Taxes Under
IGST, ACT, 2017
41 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 35,000 18000
CGST 10,000 15000
SGST 10,000 15000

The tax payable will be calculated as follows:
Tax Output tax
Liability Input Tax Credit Cash Payment
Balance IGST CGST SGST Rupees
IGST 35,000 18000 5,000 5000 7000 CGST 10,000 NA 10,000 NA 0 SGST 10,000 NA NA 10000 0 Total 55000 18000 15000 15000 7000
Illustration -3
Following is the summary of GST payable and input credit available to
Avesh :
Tax Output tax Liability Input Tax Credit ( ITC)
Rupees
IGST 15,000 54000 CGST 36,000 12000 SGST 36,000 12000
The tax payable will be calculated as follows:

Tax Output tax
Liability Input Tax Credit Payment
Balance
IGST CGST SGST
Rupees
IGST 15,000 15,000 NIL NIL 0 CGST 36,000 24,000 12,000 NA 0 SGST 36,000 15,000 NA 12,000 9,000 Total 87,000 54,000 12,000 12,000 9,000 munotes.in

Page 42

Indirect Tax - Introduction Of Goods And
Service Tax
42 3.2 NATURE AND PLACE OF SUPPLY
It is very important to determine the nature of supplywhether it is inter -
State or intra -state, as the kind of tax to be paid (IGST or CGST+SGST)
depends on the nature of s upply
1. Inter -State Supply:
Subject to the place of supply provisions, where the location of the
supplier and the place of supply are in:
(a) Two different States;
(b) Two different Union territories; or
(c) A State and a Union Territory.
Such supplie s shall be treated as the supply of goods or services in the
course of inter -State trade or commerce.
Any supply of goods or services in the taxable territory, not being an intra -
State supply, shall be deemed to be a supply of goods or services in the
course of inter -State trade or commerce. Supplies to or by SEZs are
defined as inter -State supply.
Further, the supply of goods imported into the territory of India till they
cross the customs frontiers of India or the supply of services imported into
the te rritory of India shall be treated as supplies in the course of inter -State
trade or commerce.
Also, the supplies to international tourists are to be treated as inter -State
supplies.
2. Intra -State supply:
Intra -State supply has been defined as any supply where the location of
the supplier and the place of supply are in the same State or Union
Territory. In other words
Intra - State supply means
 Supply of goods within the same State or Union Territory.

 Supply of services within the same State or Union Terr itory

 Supply of goods from one State or Union Territory to another State or
Union Territory • Supply of services from one State or Union Territory
to another State or Union Territory • Import of goods till they the cross
customs frontier

 Import of servi ces

 Export of goods or services

 Supply of goods/services to/by SEZ

 Supplies to international tourists munotes.in

Page 43

Collection Of Taxes Under
IGST, ACT, 2017
43
 Any other supply in the taxable territory which is not intra -state supply
Thus, the nature of the supply depends on the location of the supplier a nd
the place of supply. Both these terms have been defined in the IGST Act.
3. Location of Supplier

Broadly, it is the registered place of business or the fixed establishment of
the supplier from where the supply is made. Sometimes, a service provider
has to go to a client’s location for providing service. Such place would
not be considered as the location of the supplier. It has to be either a
regular place of business or a fixed establishment, which is having
sufficient degree of permanence and suitable structure in terms of human
and technical resources.

4. Place of supply
(i) Places of supply provisions have been framed for goods and services,
keeping in mind the destination/consumption principle. In other words,
the place of supply is based on the place of consumption of goods or
services. As goods are tangible, the determination of their place of
supply, based on the consumption principle, is not difficult.
Generally, the place of delivery of goods becomes the place of supply .
However, the service s being intangible in nature, it is not easy to
determine the exact place where services are acquired, enjoyed and
consumed. In respect of certain categories of services, the place of supply
is determined with reference to a proxy.
(ii) A distinction has been made between
 B2B (Business to Business) and
 B2C (Business to Consumer) transactions,
B2B transactions are wash transactions since the ITC is availed by the
registered person (recipient) and no real revenue accrues to the
Government.
(iii) Separat e provisions for the determination of the place of supply in
respect of domestic supplies and cross border supplies have been
framed.






munotes.in

Page 44

Indirect Tax - Introduction Of Goods And
Service Tax
44 A. Place of supply of goods other than import and export [Section -10]
Nature of supply Place of supply
1. Where th e supply involves the
movement of goods, whether by
the supplier, recipient or by any
other person the Location of the goods at the
time at which, the movement of
goods terminates for delivery
to the recipient
2. Where the goods are delivered to
the recipie nt or any person on the
direction of the third person by way
of transfer of title or otherwise, it
shall be deemed it shall be deemed
that the third person has received
the goods. The principal place of business
of such person
3. Where there is no movement o f
goods either by supplier or
recipient Location of such goods at the
time of delivery to the recipient
4. Where goods are assembled or
installed at site The place where the goods are
assembled or installed
5. Where the goods are supplied on -
board a conveyanc e like a vessel,
aircraft, train or motor vehicle The place where such goods are
taken on -board the conveyance
6. Where the place of supply of goods
cannot be determined in terms of
subsections (2), (3), (4) and (5) It shall be determined in such
manner as m ay be prescribed

B. Place of supply of goods in case of Import & Export [Section -11]
Nature of supply Place of supply
1. Import Location of importer
2. Export Location outside India
C. Place of supply of services in case of Domestic Supplies [Section 12 ]
Where the location of supplier of services and the location of the recipient
of services is in India) (i) In respect of the following 12 categories of
services, the place of supply is determined with reference to a proxy. Rest
of the services are govern ed by a default provision.

munotes.in

Page 45

Collection Of Taxes Under
IGST, ACT, 2017
45 Nature of supply Place of supply
1. Immovable property related
to services, including hotel
accommodation Location at which the immovable
property or boat or vessel is located or
intended to be located
If Located outside Ind ia- Location of the
recipient
2. Restaurant and catering
services, personal grooming,
fitness, beauty treatment and
health service Location where the services are
actually performed

3.Training and performance
appraisal B2B: Location of such Register ed
Person
B2C: Location where the services are
actually performed
4. Admission to an event or
amusement park Place where the event is actually held or
where the park or the other place is
located
5.Organisation of an event B2B: Location of such Registe red person B2C: Location where the event is
actually held
If the event is held outside India:
Location of the recipient .
6. Transportation of goods,
including mails B2B: Location of such Registered
Person
B2C: Location at which such goods are
handed ove r for their transportation
7. Passenger transportation B2B: Location of such Registered
Person
B2C: Place where the passenger embarks
on the conveyance for a continuous
journey
8. Services on board a
conveyance Location of the first scheduled point of
departure of that conveyance for the
journey
9. Banking and other financial
services Location of the recipient of services on
the records of the supplier
Location of the supplier of services if the
location of the recipient of services is not
available munotes.in

Page 46

Indirect Tax - Introduction Of Goods And
Service Tax
46
10. Insurance services B2B: Location of such Registered
Person
B2C: Location of the recipient of
services on the records of the supplier
11. Advertisement services to
the Government The place of supply shall be taken as
located in each of such States
Proportionate value in case of multiple
States
12. Telecommunication
services  involving fixed line,
circuits, dish etc. The Location of such fixed equipment  Mobile/ Internet post -paid
services, the location of billing address of the
recipient  Sale of p re-paid voucher the place of sale of such voucher  In other cases, the address of the recipient in records

(ii) For the rest of the services other than those specified above, a default
provision has been prescribed as under:
Nature of supply Place of s upply
 B2B Location of such Registered Person  B2C
Location of the recipient where the address on
record exists,
in other cases Location of the supplier of
services

D. Place of supply of services in case of cross -border supplies:
(Section 13)
Where the location of the supplier of services or the location of the
recipient of services is outside India(i) In respect of the following
categories of services, the place of supply is determined with reference to
a proxy.Rest of the services aregoverned by a default provision.


munotes.in

Page 47

Collection Of Taxes Under
IGST, ACT, 2017
47 Sr. No. Nature of supply Place of supply
1. Services supplied for
goods that are required to
be made physically
available from a remote
location by way of
electronic means.  The location where the services
are actually performed,
 The location where the goods are
situated.
Not applicable in case of goods that are temporarily imported
into India for repairs and exported
2. Services supplied to an
individual and requiring
the physical presence of
the receiver The location where the services are
actually performed
3. Immovable property -
related services,
including hotel
accommodation Location at which the immovable
property is located
4. Admission to or
organisation of an event The place where the event is
actually held
5. If the A BOVE services are supplied at more than one locations.
i.e.,
(i) Goods & individual related
(ii) Immovable property -related
(iii) Event related
IAt more than one
location, including a
location in the taxable
territory the location in the taxable terri tory
where the greatest proportion of the
service is provided
IIIn more than one State each such State in proportion to the
value of services provided in each
State
6. Banking, financial
institutions, NBFC
Intermediary services,
hiring of vehicles’
services etc. Location of the supplier of service

7. Transportation of goods The place of destination of the
goods
8. Passenger transportation Place where the passenger embarks
on the conveyance for a continuous
journey munotes.in

Page 48

Indirect Tax - Introduction Of Goods And
Service Tax
48
9. Services on -board a
conveyance The first scheduled point of
departure of that conveyance for the
journey
10. Online information and
database access or
retrieval services The location of recipient of service

11. Default Rule for the
cross border supply of
services other than THE
ABOVE nine specified
services  Any Location of the recipient of
service
 If not available in the ordinary
course of business: The location
of the supplier of service
12. Supplies in territorial
waters Where the location of the supplier is
in the territorial waters, the location
of such supplier, or where the place
of supply is in the territorial waters,
the place of supply is deemed to be
in the coastal State or Union
Territory where the nearest point of
the appropriate baseline is located.
13. Export/Imp ort of Service A supply would be treated as import
or export, if certain conditions are
satisfied. These conditions are as
under
Export
Export of services Means the supply
of any service, where
a) the supplier of service is located
in India,
(b) the recipient of service is located
outside India,
(c) the place of supply of service is
outside India,
(d) the payment for such service has
been received by the supplier of
service in convertible foreign
exchange, and
(e) the supplier of service and the
recipient of service are not merely
establishments of a distinct person
in accordance with explanation 1 of
section 8 munotes.in

Page 49

Collection Of Taxes Under
IGST, ACT, 2017
49 Import Import of services means the supply
of any service, where (a) the
supplier of service is located outside
India,
(b) the recipient of service is located
in India, and
(c) the place of supply of service is
in India
14 Zero rated supply Exports and supplies to SEZs are
considered as ‘zero rated supply’ on
which no tax is payable. However,
ITC is allowed, subject to such
conditions, safeguards and
procedure as may be prescribed, and
refunds in respect of such supplies
may be claimed by following either
of these options:
(i) Supply made without the
payment of IGST under Bond and
claim refund of unutilised ITC or
(ii) Supply made on p ayment of
IGST and claim refund of the same
15. Refund of integrated tax
paid on supply of goods
to tourist leaving India -
Section 15 of the IGST
Act Refund of IGST paid to an
international tourist leaving India on
goods being taken outside India,
subject to such conditions and
safeguards as may be prescribed. An
international tourist has been
defined as a non -resident of India
who enters India for a stay of less
than 6 months. IGST would be
charged on such supplies as the
same in the course of export .

3.3 SELF -EXAMINATION QUESTIONS
1. Collection of IGST is part of the GST regime , explain ?
2. What are rules of cross utilization of credit of one tax against another?
3. How does the nature of supply and place of supply affect collection of
taxes?
4. What are the limitation of cross - utilization of taxes?
 munotes.in

Page 50

50 4
PLACE OF SUPPLY UNDER IGST
Unit Structure :
4.0 Introduction and Objective

4.1 Inter -State Vs. Intra -State Supply

4.2 Location of the Recipient of services

4.3 Location of the Supplier of services

4.4 Place of supply in respect of goods and service s

4.5 Place of supply in respect of goods

4.6 place of supply in case of supply of services, when location of the
supplier and recipient is in India

4.7 place of supply in case of supply of services, when location of the
supplier and recipient is in India

4.8 Self- Examination Questions
4.0 INTRODUCTION AND OBJECTIVE
Determination of the place of supply of goods and/or services is of great
importance as theGST being a destination based tax is levied at the place,
where the goods and/or services ar e consumed, not at the place of origin.
Accordingly, each transaction has to pass though the test of the place of
supply todetermine: -
a. whether tax is to be levied on a particular cross -border transaction;
b. whether a particular transaction it is an Inter -state supply or Intra -state
supply;
c. who will collect the tax on such transaction; and
d. type of the tax is be levied; IGST, CGST, or SGST/UTGST, on that
transaction.
Further, the Place of supply depends upon the location of the recipient of
services and the l ocation of the supplier of services. This lesson will deal
with the provisions relating to the place of supply of goods and their
implication


munotes.in

Page 51

Place o f Supply Under IGST
51 4.1 INTER -STATE SUPPLY VS INTRA -STATE SUPPLY
4.1.1. Broadly, the transactions may fall in two categories: -
A. International or cross border transactions : -
a. Imports of goods into India; or
b. Export of goods outside India, and
B. Domestic transactions : -
a. Inter -state supply
b. intra-state supply
4.1.2. Inter-state supply is when “location of supplier” and “place of
supply” a re in different States or Union Territories (section 7 of the IGST
Act).
In contrast, intra -state supply is when “location of supplier” and “place of
supply” are in the same state or same union territory (section 8 of the
IGST Act).
Examples
1. A supplier in Gujarat sells good in Gujarat. It is intra -state supply,
liable to CGST and SGST as location of the supplier and the place of
supply are within the same State (Gujarat).
2. The supplier in Gujarat sells goods in Goa. itis an inter -state supply
attracting IGST as the location of the supplier and the place of supply
fall in different states.
Section 2(70) and 2(71) of CGST Act define“location of the recipient of
services” and “location of the supplier of services” respectively but the
Act does not define “l ocation of the recipient of goods” and “location of
the supplier of goods” at any place.
4.2 “LOCATION OF THE RECIPIENT OF SERVICES
As per section, 2(70) of CGST Act,2017, “location of the recipient of
services” means, —
(a) where a supply is received at a place of business 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
elsewher e), the location of such fixed establishment;
(c) where a supply is received at more than one establishment, whether
the place of business or fixed establishment, the location of the munotes.in

Page 52

Indirect Tax - Introduction Of Goods And
Service Tax
52 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 Recipient’s Registered Office;
Place being a fixed establishment
other than the place of business for
which Registration has been
obtained, 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
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, has head office a t Dadar and branches at Thane
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 office, if A does not have registration at fort; or
3. Most connected office at T hane (in absence of fort and Dadar
offices, and
4. Residence at Juhu, in absence of any of the above.
4.3 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 f rom a place of business for which the
registration has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business
for which registration has been obtained (a fixed establishment
elsewher e), the location of such fixed establishment; munotes.in

Page 53

Place o f Supply Under IGST
53 (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; a nd
(d) in absence of such places, the location of the usual place of residence
of the supplier;
The yardstick foe determining the location of the provider or supplier of
service are more or less similar to those applicable on location of the
receiver o f the supply.
Supply made from Location of Supplier of Service
Place of business for which the
registration has been obtained Recipient’s Registered Office
Place being a fixed
establishmentother than the place of
business for which registration has
been obtained, 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 locati on of the usual place of
residence of thesupplier

Illustration
Goods are supplied to Jamnagar Branch of Reliance Industries Limited.
Its registered office is in Surat and the corporate office is in Mumbai.
Place of supply will be Surat,Mumbai and Jamna gar in that order.
4.4 PLACE OF SUPPLY OF GOODS AND SERVICES
Section 10 and section 12 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 s ervices where location of both 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.


munotes.in

Page 54

Indirect Tax - Introduction Of Goods And
Service Tax
54 4.5 PLACE OF SUPPLY IN RESPECT OF GOODS
Section 10 of the IGST, Act, 2 017, lays down the following principles to
determine place of service of goods
4.5.1 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 reci pient 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.
Illustrations
1. Ashok of Akola sells 100 cotton bales to Dharmesh of Dhule . The place
of sup ply is Dhule in Maharashtra, where the movement of goods is
terminated. Both Akola and Dhule being in the same state Maharashtra,
it is intra -State sales liable to CGST &(MAH) SGST.
2. If Ashok sells goods to Bhavin of Bhopal in M.P., the place of supply
will be in Bhopal M. P. M.P. and Maharashtra being different states; it
will be inter -state sales attracting IGST.
3. Pravin of Pune places an order to Reliance, Surat (Gujarat) for purchase
of mobile phones goods ex-factory .
Surat will be the place of supply as the goods are delivered in Surat (ex -
factory ) there. Hence, the place of supply and location of the supplier
being in same State Gujarat, it will be intra -State sales chargeable to
CGST and (GUJ) SGST.
It is immaterial that Pravin after collecting goods from the factory of
Reliance Surat transports the goods to his place of business in Pune or
anywhere else.
B. 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 buy er before or during 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.
Illustrations
1. Rakesh of Ra nchi buys umbrellas from Mahesh of Mysuru to be
delivered to his father Manilalin Mumbai.
When Mahesh of Mysuru delivers umbrellas to Manilal in Mumbaias per
the instructions of the buyer Rakesh of Ranchi, it will be assumed that
Rakesh has received the goodsat his principal place in Ranchi. munotes.in

Page 55

Place o f Supply Under IGST
55 Place of supply Ranchi (Jharkhand) andMysuru (Karnataka) being in
different States, it will be inter -State sale Chargeable to I GST.
2. Raju of Mumbai places an order for a watch on Snapdeal (an e -
commerce operator) manufactured by Foss Ltd., Bengaluru (registered
with Snapdeal) to be delivered to Rakhi, his sister in Delhi.
This is again a case of delivery of third party. Delivery of watch to Rakhi
in Delhi will be assumed to be delivery to Raju at his principal plac e in
Mumbai by the Supplier Foss, Bengaluru Karnataka. Hence, Mumbai will
be the place of supply andas inter -State sales,IGST will be chargeable.
4.5.2 When there is no movement of goods
A. Where supply does not involve movement of goods, the place of
delive ry of goods will be the place of supply.
Illustrations
1. A of Mumbai has goods stored in B’s godown in Pune. A sell these
goods to B.
Place of supply will be in Pune, when B appropriates the goods
althoughthere is no physical movement of goods.This bein g intra - state as
the supplier and the place of supply both are in the same stateCGST and
SGST will be charged.
2. If A of Mumbai sells good lying in Jaipur to B of Jaipur,the place of
delivery will be Jaipur. The place of supply Jaipur and the location of
the supplier A (Mumbai) being in different states, IGST will be
charged.
3. Bhansali, a Mumbai based film producer purchases astudio in
Ramojirao Complex in Hyderabad with pre -installed audi -visual
equipments. The p lace of supply is Hyderabad being the locatio n of
equipments at the time of delivery along with the studio building,
which is same as the location of the supplier. Hence, CGST and SGST
will be charged as intra -State sale. There is no GST on sale of building
being a capital asset.
B. The goods assemble d or installed at site
Wheregoods are assembled or installed at the site of the buyer, site will be
the place of supply.
Illustration
L &T Ltd., Mumbai fabricates oil storage tank at a Refinery in Odisha.
The place of supply is Odisha, where the oil stora ge tank is installed or
fabricated. This being an inter -State sale from Mumbai (Maharashtra) to
Odisha, IGST will be charged. However, L &T may apply for registration
as Casual Taxable Person in Odisha and pay CGST & SGST.
munotes.in

Page 56

Indirect Tax - Introduction Of Goods And
Service Tax
56 C. Goods Supplied on a Vessel/Conve yance
Where the goods are supplied on board a conveyance including any vessel,
aircraft, train or a motor vehicle, place of supply is the location where
such goods are taken(loaded) on board.

Illustrations
1. A buys food articles on board whiletravelling fro m Mumbai to Delhi
by air.
Mumbai is the place of supply since the food items are loaded into the
plane in Mumbai. If the Airline is registered in Mumbai, CGST& SGST
will be charged. But if the Airline is registered in Delhi, IGST will be
charged. (Ordin arily CGST/SGST is charged as most Airlines are
registered across the country).
2. Kamal, a consultant for JW Ltd, Delhi buys food articles on board,
while flying from Chennai to Bengaluru.
CGST & SGST will be charged as inter - State sales in Chennai being t he
place of supply, where the food articles were loaded.
3. Vinod is travelling from Bhopal (M. P.) to Kolkata by Gitnajali Express
starting from Mumbai. Vinod buys lunch on board at Raipur in
Chhattisgarh. The Lunch was loaded by the IRCTC in Nagpur
(Maha rashtra).
The food items were loaded in Nagpur, hence place of supply is Nagpur.
Since IRCTC is registered throughout India, CGST &SGST will be
charged
D. Where place of supply can not be determined, Parliament will make
rule on the recommendation of GST Cou ncil.
E. Where, supply is by transfer of documents, place of supply will be the
principal place of business of the person receiving the supply.

Illustration
A. of Delhi sells goods by endorsing airways bill for goods lying in
Mumbai, from where the buyer ta kes the delivery of the goods. The place
of supply is in Mumbai by a supplier in Delhi. It will be inter -state sales
and CGST and SGST will be charged.

F. In case of import of goods into India, place of supply is location of the
importer and IGST will be cha rged.
Illustration
A toy dealer having his principal office in Pune imports Chines toys in
Mumbai port.
Place of supply is Pune and IGST will be charged on the value of imports munotes.in

Page 57

Place o f Supply Under IGST
57 G. In case of export of goods outside India, place of supply is outside
India. E xports are exempt from GST.

Illustration
A of Allahabad exports garments to R of Rome in Italy from Kolkata port.
The Place of supplywill be outside India in Rome, Italy. This being export
of goods will be exempt from GST.
4.6 PLACE OF SUPPLY IN RESPECT OF SERVICES
WHEN LOCATION OF THE SUPPLIER AND
RECIPIENT IS IN INDIA
Section 12 of the IGST Act spells out the principles for determination of
place of supply in case of supply of services, when location of the supplier
and recipient is in India, which ar e as under: -
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.
Illustration
A computer mechanic provides services to a Chartered Accountant
regis tered in Mumbai. Place of service will be in Mumbai.
2. Where the recipient is not registered, place of supply is address on
record of the recipient.
3. Illustration
A computer mechanic provides services to a Chartered Accountant in
Mumbai, who is not registered and his address on record is at Pune
Place of service will be at Pune being the address on record.
4. In other cases, it is location of supplier of services.
5. Immovable Properties -Architects, surveyor etc.
Place of supply of services in case of services re lated to immovable
property like architects, interior decorators, property agents, surveyors,
engineers, hotels, inns, guest houses, lodges, club, banquet halls etc. shall
be the location of the immovable property.
Illustration
An U.S. Architectmakes desig ns and plans for Trump Tower in Pune.
Place of service shall be Pune as the service is related to immovable
property located in Pune
munotes.in

Page 58

Indirect Tax - Introduction Of Goods And
Service Tax
58 6. Performance based service
In case of restaurant and catering, personal grooming services like beauty
treatment, health, fi tness etc. shall be the place of performance of these
services.
Illustration
A bridal makeup artist of Mumbai goes to provide service in wedding in
Delhi. Place of service will be Delhi, where the grooming service was
provided.
7. 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.

8. Banking Services
In case of banking services, place of supply is location of the recipient on
record.
9. Telecommunication services
In case of telecommunication services involving fixed line, circuits, dish
etc., place of supply is location of such fixed equipment.
Illustration
In respect of set top box fixed at the homes of viewers, place of service
will be at the place where such box is installed.
10. Mobile / Internet Services
For mobile/ internet Services: place od service will be -
 The location of billing address of the recipient in case of Post -paid
services,
 The place of sale of pre -paid voucher, and
 The address of the recipient in recordsIn other cases.
Illustrations
1. Billing Address for mobile phone of X a resident of Thane is his Pune
address. Place of service shall be Pune.
2. Y has purchased an Airtel prepaid talk -time voucher in Delhi. Place of
service shall be Delhi even if he is resident of Chandigarh.
munotes.in

Page 59

Place o f Supply Under IGST
59 4.7 PLACE OF SUPPLY OF SERVICES WHEN
LOCATION OF EITHER THE SUPPLIER OR THE
RECIPIENT IS OUTSIDE INDIA – SECTION 13
International Transactions
The Transactions, in which both the recipient of service as well as
provider of service are outside India will not be taxable in India.
Conversely, the transactions between the recipient of service and the
provider of service both located in India will be subject to GST per the
above rules.
The transact ions where either the service recipient or the service provider
is located outside India, the place of service will be determined as per
section 13 of IGST, Act, 2017. The section provides several principles for
determination of place of service as given b elow.
A. General Rule
As a general rule, transactions treated as international transactions, the
place of supply of services shall bethe location of recipient of service.
Illustration
A consultant provides service to his U.S. counterpart, this being an
international transaction, where the recipient of service is outside India,
section 13 comes into focus, under which the place of supply shall be U.S.
B. Non- availability of the location of service recipient
Where the location of service recipient is not availa ble, the place of supply
shall be location of the supplier of services.
Illustration
A Consultant provides service to a person outside India, whose location
is not known, the place of service shall be India being the location of the
supplier of service s
C. Services involving actual performance
Services involving actual performance, place of actual performance of
services will be location of service.
Illustration
An Indian singer performs in a concert in Sydney. Place of service shall
be Sydney.


munotes.in

Page 60

Indirect Tax - Introduction Of Goods And
Service Tax
60 D. Proces sing of goods
When supply of service involves doing some activity on some goods,
place of supply is location of goods.
Illustration
If packing of goods imported is to be done in London, the place of service
shall be London for providing packing service.
E. Services related to immovable property
Services related to immovable property, place of supply of services is
location of immovable property.
Illustration
An Engineer in India makes structural plans for a tower in Dubai. The
place of service will be Dubai, not India.
F. 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.
Illustration
1. A decorator organises a business fair in Paris, the place of service will
be Paris.
2. An American Event manager organises AIFA 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.
G. Services of Banking companies, transport 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.
Illustrations
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 London bank, the place of service will be
London.
H. Transportation of goods
Place of supply in case of tra nsportation of goods shall be place of
destination of such goods.
munotes.in

Page 61

Place o f Supply Under IGST
61 Illustrations
1. A freight of 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.
I. Transpo rtation of passengers
In case of transportation of passengers, place where the passenger embarks
on the conveyance.
Illustration
A travel agent carries passengers from Lucknow to Mansrovar in China;
the place of service shall be Lucknow.
J. Online data inform ation
Place of supply of services in case of online information and database
access, place of recipient of services.
Illustration
Charges paid to Google or Facebook for making available or data
information in India, the place of service shall be India.
Although, the syllabus covers sections 10 and 12 only. But in the context
of other topics, itis important to determine whether any supply is import of
service attracting IGST on import of services or export of services
exempted from GST if the place of suppl y is outside India. Hence,
provisions of section 13 are discussed, as the provisions are both
overlapping and relevant.
4.8 SELF - EXAMINATION QUESTIONS
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 determination of place of service is important.
6. What are the types of taxes,, How the will be affected by the place of
service.


munotes.in

Page 62

62 5
PAYMENTS OF GST
Unit Structure :
5.0 Introduction
5.1 Recording / Maintenance of Register/Ledgers
5.2 Interest on Delayed Payment
5.3 Payment of GST
5.4 Tax Deduction at Source (TDS)
5.5 Collection of tax AT Source (TCS)
5.6 Unique Identificat ion Number (UIN)
5.7 Discrepancy
5.8 Self- Examination Questions
5.0 INTRODUCTION
This Lesson deals with provisionsfor paymentof GST contained in section
49 of the CGST Act, 2017 and the Payment of Tax Rules. Main thrust of
the provisions is on payment of tax, interest, penalty and other amounts
payable under the Act through electronic mode.
“Over The Counter Payments” have been permitted by cash / cheque/
DD etc. subject to a limit of Rs. 10,000 per challan per tax period. Further,
the provisions also provide for maintenance of Electronic Cash Ledger,
Electronic Credit Ledger in the Electronic Liability Register and payment
of adjustment of Input Credit though these electronically maintained
registers.
5.1 RECORDING / MAINTENANCE OF REGISTER/
LEDGERS
5.1.1 Recording and maintenance of register / ledgers on the common
portal :-
Following types of Register/Ledgers are maintained on the common
portal :
i. Electronic Liability Register
ii. Electronic Credit Ledger
iii. Electronic Cash Ledger.

munotes.in

Page 63

Payments o f GS T
63 5.1.2. Electronic Liabi lity Register
Under section 49(7) of the CGST Act, 2017 read with Rule 1 of Payment
of Tax Rules, all liabilities of a taxable person under this Act shall be
recorded and maintained in an Electronic Liability Register in Form GST
PMT -01. The Register shall contain the debit and credit entries therein as
per the following details.
A. Debit Entries
All amounts payable shall be debited to this Register: -
i. Tax and other dues as per return;
ii. Tax and other dues determined by Proper Officer;
iii. Tax & interest due to mi smatch;
iv. Any interest chargeable for delayed payment or late fling of return .

B. Credit Entries
Correspondingly, all credits will be made by debiting Electronic Cash
Ledger or Credit Ledger.
C. Sequence of discharging tax and other dues :
Following shall be the chronological order of discharge of tax and other
dues
i. Previous tax period
ii. Current tax period
iii. Any other amount payable under this Act.
Illustration:
The Electronic Liabilities Register shows the following liability
 Tax for July ,2022 R s 25,000
 Assessed Tax for May,2022 Rs 17,000
 Interest for the month of May,2022 Rs 15,000
 Late filing fees Rs 3000 for July 2022.
Assuming the tax credit in the month of July, 2020 at Rs 40,000, the
liabilities shall be settled as under: -
Liabilities Previous tax
Period(May) Current tax period
(July) Any other
amount Total
Balance 17000+ 15,000 25000+3000 NIL 60,000 Credit used 32000 8000 NIL 40,000 Balance NIL 20,000 NIL 20,000
munotes.in

Page 64

Indirect Tax - Introduction Of Goods And
Service Tax
64 5.1.3. Electronic Credit Ledger
Under section 49(2) of the CGST Act , 2017 read with Rule 2 of Payment
of Tax Rules, Electronic Credit Ledger shall be to be maintained in Form
GST PMT -02 for a registered person and the Ledger shall contain debit
and credit entries therein as per the following details: -
A. Credit Entries
i. Input Tax Credit (ITC) self assessed as per the return as per Section 41
read with Section 49(2) shall be credited to the ledger.
ii. In case, where the refund is rejected, then ledger shall be re -credited by
Proper Officer by order in Form GST PMT -03.
B. Debit Entries
i. Utilization of the ITC towards output tax shall be debited to the ledger.

ii. Unutilized amount in the Electronic Credit Ledger after payment of tax
and other dues can be claimed as refund subject to the provisions of
Section 54 of CGST Act, 2017 read with Refund Rules and the Ledger
shall be debited accordingly.

C. Sequence and restriction for the utilization of Input Tax Credit(ITC): -
i. Credit of any tax will be first credited against the liability of that tax
only i.e.

a. Central tax against Central Tax,

b. State/UT tax against State/UTTax and

c. IGST against IGST.

ii. Balance, if any, of both Central and State/UT Tax Credits can be
adjusted against the IGST;

iii. IGST credit can be adjusted against Central Tax and State Tax in that
order.

iv. Cross utilizat ion of SGST & CGST & UTGST is not permissible.
In other words :
a) CGST will be first utilised against CGST, then against IGST.

b) SGST will be first utilised against SGST, then against IGST.

c) UTGST will be first utilised against UTGST,then against IGST.

d) IGST will be first utilised against IGST, then against CGST and
thereafter against SGST/UTGST.

e) Cross utilization of SGST & CGST & UTGST is not permissible
munotes.in

Page 65

Payments o f GS T
65 This is given in the following table:

Input Tax Credit Can be utilized against Order of utilization
CGST CGST & IGST 1. CGST 2. IGST
SGST SGST & IGST 1. SGST 2. IGST
UTGST UTGST & IGST 1. UTGST 2. IGST
IGST IGST, CGST,
SGST & UTGST 1. IGST
2. CGST then
3. SGST/UTGST
Cross utilization of SGST & CGST & UTGST is not permissible

Illustration
ITC a vailable – CGST Rs 20,000, SGST Rs 15,000 IGST Rs 14,000
Outstanding liabilities - CGST 22,000, SGST Rs 18,000, IGST 11,000
The utilization will be as under : -
Liability IGST CGST SGST
Liabilities Outstanding 11,000 22,000 18,000 Less ITC credits avail able under same head 14,000 20,000 15,000 Balance Liability / Credit -3000 2,000 3,000 IGST used first against CGST Balance against SGST -3000 2,000 1,000 Balance payable/ Credit available NIL NIL 2,000
5.1.4. Electronic Cash Ledger
5.1.4.1. Under section 49(1) of the CGST Act, 2017 read with Rule 3 of
Payment of Tax Rules, every deposit made towards tax, interest, penalty,
fee or any other amount by a person shall be credited to the Electronic
Cash Ledger to be maintained in Form GST PMT -05.Following
transactions shall have an effect on the Electronic Cash Ledger and shall
be debited/ credited accordingly: -
A. Entries credited to the Electronic Cash Ledger

a. Self-payment
b. Tax Deducted at Source (TDS) under section 51 in deductee’s ledger
c. Tax Collection at Source (TCS) under section 52 in the ledger of the
person from whom the tax was collected
d. Refund of balance in the Ledger after paying taxes interest, if rejected,
shall be re -credited by Proper Officer by order in Form GST PMT -03;
This is because the amount of refund is debited in the Ledger, hence for
any rejection of claim, the entry will be will be reversed. munotes.in

Page 66

Indirect Tax - Introduction Of Goods And
Service Tax
66 B. Entries debited to the Electronic Cash Ledger
a. Any tax, interest, penalty, fee or any other amount payable by the
registered t axpayer,
b. Any amount of refund claimed and granted as per rules, of the balance
in Electronic Cash Ledger after payment of tax and other dues,
c. Interest on delayed payment
ii. Levy of TDS, TCS, tax under reverse charge and tax in case of
composition, can be mad e by debiting Electronic Cash Ledger only.
5.2 INTEREST ON DELAYED PAYMENT
When a register tax payer does not pay the tax on time , interest is payable
on such delayed payment under section 50 and the interest so payable
shall be debited to the Ledger. The rate of interest is as under : -
a) 18% per annum in case of delayed payment

b) 24% for excess claim of ITC

c) 24% for excessivereduction in output tax liability.

5.3 PAYMENT OF GST
5.3.1. Mode of payment
Payment of GST by the taxpayer can be made by two modes, viz.: -
a) Online banking;
i. Internet banking
ii. Debit card/Credit card
iii. National Electronic Funds Transfer (NEFT)
iv. Real Time Gross Settlement (RTGS)

b) Over the counter (OTC)
Permitted up to Rs 10,000 per Challan per tax period by following
modes :
i. Cash
ii. Cheque
iii.Demand Draft or Banker’ Cheque munotes.in

Page 67

Payments o f GS T
67 5.3.2.Payment procedure:
i. Challan isgenerated in Form GST PMT –06 for the tax, interest, etc. to
be deposited and such challan shall remain valid for 15 days.
ii. Payment by Non -Registered Person(e. g – Casual or Non - Resident
Taxable Person) shall be made by generating a temporary identification
number.
5.3.3. Mandate form in case of NEFT and RTGS :
Where the payment is made by way of NEFT or RTGS mode, the
mandate form shall be generated along with the challan on the Common
Portal and the same shall be submitted to the bank from where the
payment is to be made . The mandate form will be valid for 15 days from
the date of generation of challan.
5.3.4. Challan Identification Number (CIN)
On successful payment, a Challan Identification Number (CIN) will be
generated and indicated in the challan. On receipt of CIN from the
authorised Bank, the amount paid shall be credited to the Electronic Cash
Ledger. In case theCIN is not generated or not communicat ed, the
taxpayer may represent in Form GST PMT –07 to bank/electronic gateway.
5.4 TAX DEDUCTION AT SOURCE (TDS)
5.4.1. Section 51 of the CGST, Act, 2017 provides for
a) Deduction of tax at source(TDS)@ 1% from the payment made or
credited to the supplier of taxable goods or services or both in respect
of the of the value of the supply;
b) The value of supply excludes GST i.e. CGST/ SGST/ UTGST/ IGST
and cess indicated in the invoice;
c) TDS applicable to the supply made to:
i) a department or establishment of t he Central Government or State
Government; or
ii. Local Authority; or
iii. Governmental Agencies; or
iv. other persons or category of persons notified by the Government on
the recommendations of the Council. and
d) Total value of such supply, under a contract exceeds rupees 2,50,000.
5.4.2. The supplier or the receiver of payment is called “the deductee” and
the person deducting the tax is called “the deductor”.
5.4.3. Tax will not to be deducted if the location of the supplier and the
place of supp ly is in a State / UT different fromthe State /UT of
registration of the recipient.

munotes.in

Page 68

Indirect Tax - Introduction Of Goods And
Service Tax
68 5.4.4. Procedural provisions
a) Deductor is required to
i. Pay the tax deducted to the Government within 10 days of the end
of the month of deduction. E.g. Tax deducted fo r the month of July,
shall be paid on or before 10th August and
ii. Issue a TDS certificate to the deductee mentioning the contract
value, rate of deduction, amount deducted and paid to the
Government and such other prescribed particulars within five days
of crediting the amount so deducted to the Government . For delay
beyond 5 days, a late fee of 100 rupees per day will be levied till the
certificate is issued subject to a maximum of 5,000 rupees

b) Effect of TDS will be that :
i. The deductee shall claim credi t, in his Electronic Cash Ledger, of the
tax deducted and reflected in the return of the deductor furnished
under section 39(3).
ii. Correspondingly, no refund to the deductor shall be granted, if the
amount deducted has been credited to the Electronic Cash Ledger of
the deductee.
c) In case of failure to pay the tax,
i. Interest under section50(1) in addition to the amount of tax deducted
will be payable by the deductor; and.
ii. Amount of unpaidTDS shall be deemed to be the amount in default
under section73/74 for i ssuing show cause notice.
d) The refund to the deductor or the deductee arising on account of excess
or erroneous deduction shall be dealt as per section 54:

5.5 COLLECTION OF TAX AT SOURCE (TCS)
5.5.1. Under section 52, an Electronic Commerce operator, n ot being an
agent is required to collecttax at source at prescribed rate not exceeding
1% of the net value of taxable supplies made by other suppliersthrough
suchoperator if the consideration with respect to such supplies is to be
collected by it.
Net val ue of taxable supplies” means :
 the aggregate value of taxable supplies of goods or services or both,
 made during any month by all registered persons through the operator,
 reduced by the aggregate value of taxable supplies returned to the
suppliers duri ng the said month.
 Supply shall not include the services notified under section 9(5)
Illustration
During July 2022, different suppliers sold taxable goods valued at Rs 50
lakh through Amazon, an E -Commerce Operator, out of which goods
worth rupees 10 lakh were returned. Amazon collected payment of 30
lakh rupees as supplier for 10 lakh rupees were using their own payment munotes.in

Page 69

Payments o f GS T
69 gateway. Amazon shall collect tax at source @ 1% on 30 lakh or 30,000
rupees from the supplier from the payment received.
5.5.2. Procedural Provisions
1. The operator is required to
a) pay the tax deducted to the Government by the next 10th from the
end of the month of deduction, and

b) furnish a statement, electronically, containing the details of outward
supplies of goods or se rvices or both effected through it, including
the supplies of goods or services or both returned through it, and the
amount collected during a month, in prescribed form and manner
by that date.

c) furnish an annual statement in prescribed from electronic ally,
containing the details of outward supplies of goods or services or
both effected through it, including the supplies of goods or services
or both returned through it, and the amount collected during the
financial year before the thirty first day of De cember following the
end of such financial year .

Example –
i. Monthly statement for January ,2023 should be filed by 10
February, 2023 .

ii. Annual statement for F. Y. 2021 -228 shouldbe filed before 31
December, 2022.

iii. The monthly statement filed as above may be rectified for any
omission or incorrect particulars therein, other than as a result of
scrutiny, audit, inspection or enforcement activity by the tax
authorities, subject to payment of interest under section 50. Time limit
for such rectification is

 the due date for furnishing of statement for the month of September
following the end of the financial year, or

 the actual date of furnishing of the relevant annual statement,
whichever is earlier.

2. The supplier of the goods or services or both through the operator shall
claim credit, in his Electronic Cash Ledger, of the amount collected and
reflected in the statement of the operator furnished .

3. The statement filed by the operator shall be matched with the
corresponding details of outward s upplies furnished by the concerned
supplier.

munotes.in

Page 70

Indirect Tax - Introduction Of Goods And
Service Tax
70 4. In case of a mismatch between the two statements, the discrepancy
shall be communicated to both persons in the prescribed time.

5. If the discrepancy so communicated is not rectified by the supplier in
his v alid return or the operator in his statement for the month in which
discrepancy is communicated, shall be added to the output tax liability
of the said supplier.If the value of outward supplies furnished by the
operator is more than the value of outward su pplies furnished by the
supplier, in his return for the month succeeding the month in which the
discrepancy is communicated.

6. The concerned supplier, in whose output tax liability any amount has
been added shall pay the tax payable in respect of such sup ply along
with interest, under section 50(1) on the amount so added from the
date such tax was due till the date of its payment.

7. Any authority not below the rank of Deputy Commissioner may serve a
notice, either before or during the course of any proceed ings under this
Act, requiring the operator to furnish such details relating to ‘

(a) supplies of goods or services or both effected through such operator
during any period; or

(b) stock of goods held by the suppliers making supplies through such
operator in t he godowns or warehouses, managed by such operator and
declared as additional places of business by such suppliers, specified in
the notice.

8. Every operator on whom a notice has been served shall furnish the
required information within fifteen working day s of the date of service
of such notice. Failure will invite a penalty up to25,000 rupees in
addition to any action under section 122.

9. The power to collect the amount shall be without prejudice to any other
mode of recovery from the operator.

5.6 UNIQ UE IDENTIFICATION NUMBER (UIN)
A Unique Identification Number (UIN) shall be generated , whenany
payment is made through electronic cash or credit ledger, orany other
amount is debited or credited in the said ledgers. The UIN relating to
discharge of any liability shall be indicated in the corresponding entry in
the Electronic Liability Register.



munotes.in

Page 71

Payments o f GS T
71 5.7 DISCREPANCY
Any discrepancy in Electronic Liability Register, Electronic Credit or
Cash Ledger is required to be communicated to the proper officer i n
FORM GST PMT -04.
5.8 SELF - EXAMINATION QUESTIONS
1. List out various forms in connection with payment of GST.
2. What is Electronic Lability Register
Explain the contents of Electronic Credit or Cash Ledger
4. What is rate of interest of delayed paymen t /
5. What are the provisions regarding TDS.
6. Discuss the responsibility of an e - commerce operator for collection of
tax.



munotes.in