Taxation IV-munotes

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INTRODUCTION TO INDIRECT
TAXATION AND GST
Unit Structure
1.1 Introduction
1.2 Difference Between Direct Tax and Indirect Tax
1.3 Features of Indirect Taxation
1.4 Advantage and Disadvantage of Indirect Taxation
1.5 Authority of Taxes in India ( Article 246 of the Indian Co nstitution)
1.6 Introduction to GST
1.7 Meaning of GST
1.8 Benefits of GST
1.9 Categories/ Types of GST
1.10 Import of Goods or Services under GST
1.11 Export of Goods or Services under GST
1.12 Taxes subsumed and not subsumed under GST
1.13 GST Council, their functions /responsibilities
1.14 GST N, their functions /responsibilities
1.15 Definitions under CGST Act
1.16 Exercise
1.1 INTRODUCTION Indirect taxation refers to the taxation of goods and services where the tax
burden is passed on from the supplier to the consumer. Unlike direct taxes,
which are dir ectly imposed on individuals or entities (like income tax or
property tax), indirect taxes are levied on transactions and consumption.
1.2 DIFFERENCE BETW EEN DIRECT TAX AND INDIRECT TAX Direct Tax Indirect Tax 1. Incidence Direct taxes are paid directly by the individuals or entities on whom the tax liability falls. The burden of the tax cannot be shifted to someone else. The person or entity responsible for paying the tax is also Indirect taxes are levied on goods and services, but the burden of the tax is ultimately borne by the consumer. The entities collecting the tax (like businesses) act as intermediaries between the munotes.in

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Taxation - IV (Indirect Taxes - II)
2 the one who bears its economic impact. government and the consumer, passing on the tax to the final consumer through the pricing of goods and services. 2. Impact Direct taxes directly impact the income, wealth, or assets of the taxpayer. These taxes are often linked to a person's ability to pay, as they are based on an individual's income or property. Indirect taxes do not directly target an individual's income or wealth. Instead, they affect consumption. The more a person consumes, the more indirect taxes they end up paying. 3. Examples Income tax, property tax, wealth tax, capital gains tax, and corporate tax are examples of direct taxes. For example, when individuals file their income tax returns, they are directly paying a portion of their income to the government. Value Added Tax (VAT), sales tax, excise tax, customs duty, and goods and services tax (GST) are examples of indirect taxes. For instance, when you purchase a product, the price you pay includes the indirect tax imposed by the government. 4. Progressiveness / Regressiveness Direct taxes are usually considered more progressive, as they can be structured to have higher rates for higher income or wealth levels. This allows governments to redistribute wealth and promote social equity. Indirect taxes are often considered regressive, as they tend to have a greater impact on lower-income individuals, who spend a larger portion of their income on essential goods and services. 5. Compliance Direct taxes often require detailed record-keeping and reporting by individuals and businesses. Taxpayers need to accurately report their income, deductions, and other financial information. Indirect taxes are usually easier to collect and administer than direct taxes. Businesses collect the tax at the point of sale and then remit it to the government.
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3 1.3 FEATURES OF INDIRECT TAXATION i. Indirect Tax Burden:
Indirect taxes are typically collect ed from the sellers or producers of goods
and services, but the burden of the tax is ultimately borne by the
consumers. The taxes are usually added to the price of the goods or
services, thus increasing their cost.
ii. Consumer Payment:
Consumers pay the indirect taxes without directly interacting with tax
authorities. They pay the taxes along with the purchase price when buying
goods or services.
iii. Variety of Taxes:
Indirect taxes encompass various types, such as sales tax, value -added tax
(VAT), goods and services tax (GST), excise duty, customs duty, and
more. These taxes can be imposed at different stages of the supply chain.
iv. Revenue Generation:
Indirect taxes contribute significantly to government revenue. They are
often used to fund public serv ices, infrastructure development, and other
government expenditures.
v. Regulation of Consumption:
Indirect taxes can be used to influence consumer behavior and market
dynamics. For instance, governments may impose higher taxes on certain
luxury goods to discourage their consumption.
vi. Inclusiveness:
Indirect taxes tend to affect all consumers, regardless of their income
levels. This can lead to a more inclusive tax base, as compared to direct
taxes that might target specific income brackets.
vii. Ease o f Collection:
Indirect taxes are often easier to collect and administer than direct taxes.
They can be collected at various points in the supply chain, reducing the
chances of tax evasion.
viii. Inflation Impact:
Changes in indirect taxes can influence the overall price level and
contribute to inflation. If taxes are increased, businesses might pass on the
higher costs to consumers, leading to higher prices for goods and services.

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4 ix. Tax Cascading:
One potential drawback of some indirect tax systems is t he possibility of
"tax cascading." This occurs when taxes are levied at multiple stages of
production and distribution, leading to taxes being applied to taxes. This
can result in a higher tax burden and inefficiencies in the market.
x. International Trade :
Indirect taxes like customs duties play a significant role in international
trade. They affect the cost and competitiveness of imported and exported
goods.
xi. Simplicity and Transparency:
Some indirect tax systems, like the GST, aim to simplify the tax structure
by replacing multiple taxes with a single unified tax. This can enhance
transparency and reduce complexities in the taxation system.
1.4 ADVANTAGE AND DI SADVANTAGE OF INDIRECT TAXATION Indirect taxation has both advantages and disadvantages in t he context of
India's economy. Here are some of the key advantages and disadvantages:
Advantages of Indirect Taxation in India:
i) Broad Tax Base:
Indirect taxes in India, such as the Goods and Services Tax (GST), have
helped broaden the tax base by bringi ng various sectors and transactions
under the tax net. This has the potential to increase government revenue.
ii) Simplicity and Unification:
The implementation of GST replaced multiple indirect taxes, creating a
more simplified and unified tax structure. This has reduced complexities,
compliance costs, and administrative burdens.
iii) Reduced Tax Evasion:
Indirect taxes are generally easier to collect and monitor, reducing
opportunities for tax evasion and fraud. The introduction of technology -
driven proce sses under GST has further enhanced transparency and
compliance.
iv) Promotion of Formal Economy:
Indirect taxation encourages businesses to operate within the formal
economy to claim input tax credits. This can lead to increased
transparency, accountabili ty, and overall economic growth.
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5 v) Efficiency and Competitiveness:
The elimination of cascading taxes (tax on tax) through GST has made
Indian goods more competitive in the international market. It has also
enhanced the efficiency of the supply chain by allowing seamless credit
flow.
vi) Uniform Taxation:
GST has brought uniformity in taxation rates and procedures across states,
promoting a common market within India and facilitating interstate trade.
Disadvantages of Indirect Taxation in India:
i) Impact on Lower Income Groups:
Indirect taxes can disproportionately affect lower -income groups, as they
spend a larger proportion of their income on essential goods and services.
This can lead to regressive taxation, where the tax burden is higher for
those wit h lower incomes.
ii) Inflationary Pressure:
Changes in indirect taxes, especially those affecting essential goods, can
lead to increased prices and inflationary pressures. This can impact the
cost of living for consumers.
iii) Complexity and Compliance:
While GST aimed to simplify the tax structure, it still involves complex
compliance procedures for businesses. Smaller businesses, in particular,
may face challenges in adapting to the new system.
iv) Sectoral Impact:
Some sectors that were previously exemp t or had lower tax rates might
face higher taxation under GST, affecting their competitiveness and
viability.
v) Transition Challenges:
The transition from the old tax regime to GST posed challenges for
businesses in terms of understanding new regulations, updating IT
systems, and managing cash flows during the transitional period.
vi) Administrative Hurdles:
The decentralized nature of GST administration across states can
sometimes result in differing interpretations and implementation issues,
leading to a dministrative hurdles for businesses operating in multiple
states.
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6 1.5 AUTHORITY OF TAXES IN INDIA (ARTICLE 246 OF THE INDIAN CONSTITUTION) Article 246 of the Indian Constitution outlines the distribution of
legislative powers between the central governme nt and the state
governments with respect to the authority to levy and collect taxes. This
article plays a pivotal role in establishing the framework for taxation in
India.
Article 246 of the Indian Constitution:
"Subject -matter of laws made by Parliament and by the Legislatures of
States
(1) Notwithstanding anything in clauses (2) and (3), Parliament has
exclusive power to make laws with respect to any of the matters
enumerated in List I in the Seventh Schedule (in this Constitution
referred to as the 'U nion List').
(2) Notwithstanding anything in clause (3), Parliament, and, subject to
clause (1), the Legislature of any State also, have power to make laws
with respect to any of the matters enumerated in List III in the
Seventh Schedule (in this Constitu tion referred to as the 'Concurrent
List').
(3) Subject to clauses (1) and (2), the Legislature of any State has
exclusive power to make laws for such State or any part thereof with
respect to any of the matters enumerated in List II in the Seventh
Schedu le (in this Constitution referred to as the 'State List')."
1.6 INTRODUCTION TO GST GST is known as the Goods and Services Tax. It is an indirect tax which
has replaced many indirect taxes in India such as the excise duty, VAT,
services tax, etc. The Goods and Service Tax Act was passed in the
Parliament on 29th March 2017 and came into effect on 1st July 2017.
In other words, Goods and Service Tax (GST) is levied on the supply of
goods and services. Goods and Services Tax Law in India is a
comprehensive, m ulti-stage, destination -based tax that is levied on every
value addition. GST is a single domestic indirect tax law for the entire
country.
1.7 MEANING OF GST As per Article 366 (12A) of the Constitution of India, Goods and Services
Tax means a tax on supp ly of goods or services, or both, except taxes on
supply of alcoholic liquor for human consumption. For the time being,
GST is not levied on petroleum products.
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7 It is an indirect tax levied on supply of goods and services, except on
exempted goods and ser vices. The word used in Article 366(12A) is
‘supply’ and not ‘sale’. Thus, stock transfers, branch transfers will also get
covered under GST net.
GST is a consumption or destination based tax. It is payable in the State in
which goods and services are fina lly consumed. Most of the indirect taxes
have merged into Goods and Services Tax.
States can levy tax on sale, within the state of alcoholic liquor for human
consumption and on petroleum products.
Every registered person/tax payer who makes supply of goods or services
or both which were leviable to tax and his aggregate turnover in a
financial year exceeds the prescribed limit is required to register himself in
the State or Union Territory where he makes a taxable supply.
Goods and Service Tax is chargeable by a registered person/tax payer at
the prescribed rates until goods and/or services reach their final
destination, i.e. the consumer. After reaching the final destination, i.e., the
consumer, they are not further supplied.
1.8 BENEFITS OF GST The impleme ntation of the Goods and Services Tax (GST) brings several
benefits under the GST Act. These benefits vary from country to country,
but here are some common advantages associated with GST:
i) Simplified Tax Structure:
GST replaces multiple indirect taxes, such as sales tax, excise duty,
service tax, etc., with a single comprehensive tax. This simplifies the tax
structure and reduces the complexity of compliance for businesses.
ii) Elimination of Cascading Effect:
The input tax credit mechanism under GST ens ures that taxes paid on
inputs and input services can be offset against the tax liability on the final
product or service. This eliminates the cascading effect of taxes, where
taxes are levied on top of other taxes, reducing the overall tax burden.
iii) Wider Tax Base:
GST expands the tax base by including a broader range of goods and
services. This can help increase government revenue and reduce the
reliance on a limited number of tax sources.
iv) Transparency and Accountability:
GST requires businesses to maintain proper records and adhere to specific
reporting requirements. This promotes transparency and accountability in
the taxation system.
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8 v) Uniform Tax Rates:
GST aims to bring uniformity in tax rates across the country, reducing tax
rate disparities between states and promoting a more consistent business
environment.
vi) Promotion of Digital Transactions:
GST encourages digital transactions and online filing of tax returns,
leading to a more efficient and streamlined tax administration process.
vii) Ease of Doing Business:
With a simplified tax structure, reduced compliance burden, and
elimination of multiple checkpoints, GST makes it easier for businesses to
operate across state boundaries.
viii) Reduction in Tax Evasion:
The transparency and traceab ility of transactions under GST make it
harder for businesses to evade taxes. This helps in reducing tax evasion
and increasing government revenue.
ix) Efficient Supply Chain:
GST facilitates a seamless flow of goods and services across states by
eliminati ng entry taxes and other barriers. This can lead to a more efficient
supply chain and reduced transportation costs.
x) Boost to Manufacturing and Exports:
The input tax credit mechanism benefits manufacturers by allowing them
to claim credit for taxes paid on raw materials and other inputs. This
reduces the cost of production and boosts exports.
xi) Stimulating Investment:
A simplified tax regime and improved ease of doing business can attract
both domestic and foreign investment, fostering economic growth.
xii) Reduced Compliance Costs:
Businesses benefit from reduced compliance costs due to the streamlined
and standardized tax processes introduced by GST.
xiii) Lesser Tax Disputes:
With a simplified tax structure and clear rules, the likelihood of tax
disputes and litigation is reduced, providing a more stable and predictable
business environment.
1.9 CATEGORIES/ TYPES OF GST Goods and Services Tax (GST) is a value -added tax levied on the supply
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9 categories of GST can vary depending on the country's tax structure and
regulations. Here are some common types of GST:
i) Central GST (CGST):
This is the component of GST that is collected by the central government
of a country. It applies to int ra-state supplies of goods and services.
ii) State GST (SGST):
This is the component of GST that is collected by the state governments. It
also applies to intra -state supplies of goods and services. The rates of
CGST and SGST are often equal and together m ake up the total GST rate
for intra -state transactions.
iii) Integrated GST (IGST):
This type of GST applies to inter -state supplies of goods and services. It is
collected by the central government but is shared between the central and
state governments ba sed on a pre -determined mechanism. IGST eliminates
the need for businesses to separately pay CGST and SGST when dealing
with transactions that involve movement of goods across state borders.
iv) Union Territory GST (UTGST):
In some countries, separate prov isions might exist for Union Territories,
and UTGST is applicable in such cases. It follows a structure similar to
SGST and is collected by the respective Union Territory governments.
v) Dual GST:
Some countries adopt a dual GST model where both the centra l
government and state governments have the authority to levy and collect
GST. This results in the presence of CGST, SGST, and IGST components.
vi) Composite or Mixed GST:
In certain scenarios, a composite or mixed GST structure might exist. This
involves a combination of multiple tax rates. For example, there might be
a standard GST rate for most goods and services, and a lower rate for
essential items, while some luxury goods might attract a higher rate.
vii) Zero -Rated GST:
Some countries offer a zero -rated GST for certain types of goods and
services, which means that no GST is levied on these supplies, but
businesses can claim input tax credits on related expenses.
viii) Exempt GST:
Certain goods and services might be fully exempt from GST, meaning
they are not subject to any GST tax liability.
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10 ix) Multiple Slab GST:
In some cases, GST might be levied at different rates for different
categories of goods and services. For instance, there could be a lower rate
for essential items and a higher rate for luxu ry items.
x) Special Rates:
Occasionally, special rates might be applied to specific goods or services
due to their unique nature or for regulatory purposes. For instance,
petroleum products and alcoholic beverages might have separate tax
regulations.
1.10 IMPORT OF GOOD S OR SERVICES UNDER GST Under the Goods and Services Tax (GST) regime in India, both goods and
services are subject to taxation. GST is a comprehensive indirect tax that
replaces various indirect taxes levied by the central and state governm ents.
Here's how the import of goods and services is treated under GST:
1. Import of Goods:
When goods are imported into India, they are treated as inter -state
supplies. The integrated Goods and Services Tax (IGST) is applicable on
the value of imported go ods, which includes the customs value of the
goods, any customs duty payable, and the IGST itself. The IGST is
collected by the Central Government at the time of customs clearance.
Importers can claim input tax credit (ITC) of the IGST paid on imports to
offset against their output GST liability.
2. Import of Services:
Import of services refers to services received by a person in India from a
supplier located outside India. These services are also subject to GST.
However, there's a reverse charge mechanism in place. This means that the
recipient of the service is liable to pay GST instead of the supplier. The
recipient must account for and pay GST on the imported service in their
GST return. Input tax credit can be claimed on the GST paid on imported
service s, subject to certain conditions.
1.11 EXPORT OF GOODS OR SERVICES UNDER GST: Under the Goods and Services Tax (GST) regime in India, the export of
goods and services is treated as follows:
1. Export of Goods:
The export of goods from India is considered a s a "zero -rated supply"
under GST. This means that GST is not levied on the exported goods.
However, the exporter can claim a refund of the input tax credit (ITC) that
was utilized in the production or procurement of the exported goods. The
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11 to the tax authorities. Exporters need to comply with specific
documentation and procedural requirements to claim these benefits.
2. Export of Services:
Similar to goods, the export of services is also treated as a "zero -rated
supply" under GST. This means that no GST is levied on the export of
services. The exporter can claim a refund of the input tax credit that was
used to provide the exported services. The refund process for input tax
credit on services follows a similar procedure to that of goods, requiring
proper documentation and compliance with the relevant regulations.
1.12 TAXES SUBSUMED AND NOT SUBSUMED UNDER GST Goods and Services Tax (GST) is a consumption -based tax system that
aims t o streamline and simplify the indirect taxation structure in a country.
Under GST, various taxes that were previously levied separately are
subsumed into a single tax. However, not all taxes are subsumed under
GST. Here's a breakdown of some of the taxes t hat are subsumed and not
subsumed under GST:
Taxes Subsumed under GST:
1. Central Excise Duty
2. Service Tax
3. Value Added Tax (VAT)
4. Central Sales Tax (CST)
5. Additional Customs Duty (Countervailing Duty)
6. Special Additional Duty of Customs
7. Entertainment Tax (except those levied by local bodies)
8. Entry Tax
9. Octroi and Local Body Taxes
10. Luxury Tax
11. Taxes on lottery, betting, and gambling
Taxes Not Subsumed under GST:
1. Income Tax
2. Corporate Tax
3. Customs Duty (except for certain specified customs duties)
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12 5. Property Tax (levied by local bodies)
6. Stamp Duty and Registration Charges
7. Professional Tax
8. Capital Gains Tax
9. Dividend Distribution Tax
10. Securities T ransaction Tax (STT)
11. State -specific taxes and levies on alcohol for human consumption
1.13 GST COUNCIL THEIR FUNCTIONS AND RESPONSIBILITIES The GST Council is a constitutional body in India responsible for making
decisions related to the Goods and Ser vices Tax (GST). GST is a
comprehensive indirect tax that was introduced in India on July 1, 2017,
replacing a complex system of multiple indirect taxes levied by the central
and state governments.
The GST Council is chaired by the Union Finance Minister o f India and
includes the finance ministers or ministers in charge of taxation from all
the states and union territories of India. Its primary purpose is to ensure
cooperation and coordination between the central and state governments
on all matters related to the GST.
Key functions and responsibilities of the GST Council include:
i) Rate Determination:
The council decides on the tax rates applicable to various goods and
services under different tax slabs, such as 5%, 12%, 18%, and 28%. It also
determines th e items that are exempted from GST and those subject to a
cess.
ii) Tax Structure and Policies:
The council formulates policies and guidelines related to the
administration and implementation of GST. It can recommend changes to
the GST law, procedures, and rules.
iii) Threshold Limits:
The council decides the threshold limits for registration under GST for
businesses. Small businesses with turnover below a certain threshold are
exempt from GST registration.
iv) Compensation to States:
The council oversees t he compensation mechanism for states to make up
for any revenue losses due to the implementation of GST in the initial
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13 v) Dispute Resolution:
The council acts as a platform for resolving disputes between the central
and state governments regarding G ST implementation or any other issues
related to GST.
vi) IGST Distribution:
The council determines the mechanism for distributing the Integrated
Goods and Services Tax (IGST) collected on inter -state transactions
between the center and the states.
vii) Review and Changes:
The council periodically reviews the impact of GST on the economy,
businesses, and consumers and makes necessary adjustments to improve
the tax system.
viii) Decisions:
Decisions of the GST Council are taken by a three -fourth majority of the
votes cast by the members present. The center has one -third of the total
votes, and the states collectively hold the remaining two -thirds.
1.14 GST NETWORK THEIR FUNCTIONS AND RESPONSIBILITIES The Goods and Services Tax Network (GSTN) is a non -profit o rganization
that serves as the technological backbone of the Goods and Services Tax
(GST) regime in India. It provides the IT infrastructure and services
necessary for the implementation and functioning of the GST system.
GSTN was established to facilitate the smooth and efficient administration
of GST through the use of technology.
Key functions and responsibilities of the GSTN include:
i) IT Infrastructure:
GSTN develops and maintains the IT infrastructure required for taxpayers
to register, file returns, pay taxes, and avail various services related to
GST. This includes the GST portal, which serves as the online platform
for taxpayers to interact with the tax authorities.
ii) Taxpayer Registration:
GSTN manages the registration process for taxpayers unde r GST.
Businesses and individuals can register on the GST portal and obtain a
unique Goods and Services Tax Identification Number (GSTIN).
iii) Return Filing:
GSTN enables taxpayers to file their GST returns online through the GST
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14 taxpayers, such as regular taxpayers, composition scheme taxpayers, and
non-resident taxpayers.
iv) Tax Payment:
Taxpayers can make their GST payments electronically through the GST
portal. GSTN ensures that the tax payments are accurately recorded and
reconciled.
v) Input Tax Credit Matching:
GSTN facilitates the matching of input tax credits claimed by buyers with
the output tax reported by suppliers. This helps in preventing tax evasion
and ensuring the acc uracy of input tax credit claims.
vi) IT Ecosystem:
GSTN collaborates with various stakeholders, including tax authorities,
taxpayers, GST Suvidha Providers (GSPs), and Application Service
Providers (ASPs), to create a robust IT ecosystem that supports GST
compliance and reporting.
vii) Data Analytics:
GSTN uses data analytics to identify potential tax evasion, discrepancies,
and trends. This helps tax authorities in targeted enforcement actions and
policy decision -making.
viii) Training and Support:
GSTN p rovides training and support to taxpayers and professionals
regarding the usage of the GST portal, compliance requirements, and other
aspects of GST administration.
ix) Security and Data Privacy:
GSTN ensures the security and confidentiality of the data su bmitted by
taxpayers on the portal, following strict data privacy and cybersecurity
protocols.
1.15 DEFINITIONS UNDER CGST ACT The Central Goods and Services Tax (CGST) Act is a crucial piece of
legislation in India that governs the levy and collection of Goods and
Services Tax (GST) at the central level. It defines various terms and
provisions related to the taxation of goods and services. Here are some key
definitions under the CGST Act:
1. Assessment:
Means determination of tax liability under this Act a nd includes self -
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15 2. Goods:
Goods are defined as every kind of movable property other than money
and securities but includes actionable claims, growing crops , grass and
things attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply.
3. Services:
Services include anything other than goods, money, and securities but
includes activities relating to the u se of money or its conversion by cash or
by any other mode, from one form, currency or denomination, to another
form, currency or denomination, for which a separate consideration is
charged.
4. India:
means the territory of India as referred to in Article 1 of the Constitution,
its territorial waters, seabed and sub -soil underlying such waters,
continental shelf, exclusive economic zone or any other maritime zone as
referred to in the Territorial Waters, Continental Shelf, Exclusive
Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the
air space above its territory and territorial waters;
5. Person :
Includes -
 an individual;
 a Hindu Undivided Family;
 a company;
 a firm;
 an Limited Liability Partnership;
 an association of persons or a body of individuals, whether
incorporated or not, in India or outside India;
 any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in clause (45) of
section 2 of the Companies Act, 2013 (18 of 2013) ; [which read as
follows - “Government company” means any company in which not
less than fifty -one per cent of the paid -up share capital is held by the
Central Government, or by any State Government or Governments, or
partly by the Central Government and p artly by one or more State
Governments, and includes a company which is a subsidiary company
of such a Government company;]
 any body corporate incorporated by or under the laws of a country
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16  a co -operative society registered under any law rel ating to co -
operative societies;
 a local authority
 Central Government or a State Government;
 society as defined under the Societies Registration Act, 1860 (21 of
1860);
 trust; and
 every artificial juridical person, not falling within any of the above
6. Recipient :
Recipient of supply of g oods or services or both, means -
where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration;
where no consideration is payable for the supply of goods, the person to
whom the goods are delivered or made available, or to whom possession
or use of the goods is given or made available; and
where no consideration is payable for the supply of a service, the person to
whom the service is rendered,
and any refer ence to a person to whom a supply is made shall be construed
as a reference to the recipient of the supply and shall include an agent
acting as such on behalf of the recipient in relation to the goods or services
or both supplied;
7. Supplier:
In relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent
acting as such on behalf of such supplier in relation to the goods or
services or both supplied;
8. Union Territorymeans the ter ritory of -
the Andaman and Nicobar Islands;
Lakshadweep;
Dadra and Nagar Haveli and Daman and Diu;
Ladakh
Chandigarh; and
Other territory.
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17 Explanation:
For the purposes of this Act, each of the territories specified in sub -clauses
(a) to (f) shall be co nsidered to be a separate Union Territory;
1.16 EXERCISE Multiple Choice Questions:
1. What is the full form of GST?
A) Goods and Supply Tax
B) Goods and Services Tax
C) General Sales Tax
D) Government Sales Tax
2. GST was implemented in India from
A) 1st January 2017
B) 1st April 2017
C) 1st March 2017
D) 1st July 2017
3. In India, the GST is based on the dual model GST adopted in:
A) UK
B) Canada
C) USA
D) Japan
4. GST is a consumption of goods and service tax based on
A) Development
B) Dividend
C) D estiny
D) Destination
5. The number of structures in India’s GST model is?
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C) 3
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18 6. The maximum rate for CGST is?
A) 28
B) 12
C) 18
D) 20
7. The maximum rate applicable for SGST/UTGST is?
A) 28
B) 14
C) 20
D) 30
8. GST rates applicable on goods and services are:
A) 0% 5% 12% 18% 26%
B) 0% 6% 12% 18% 28%
C) 0% 5% 12% 18% 28%
D) 0% 5% 12% 16% 28%
9. Taxes that are levied on any Intra -State purchase are?
A. IGST
B. CGST and SGST
C. SGST
D. SGST
10. What does “I” in IGST stands stand for?
A) Internal
B) Integrated
C) Internal
D) Intra

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Introduction to indirect taxation and GST
19 Subjective Questions:
1. Explain GST and its benefits
2. Distinguish between Direct Tax and Indirect Tax
3. Explain GST Council and their functions
4. Explain GSTN and their functions
5. Meaning of Indirect Tax. Explain Adva ntage and Disadvantage of
Indirect taxes

*****

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20 2
LEVY AND COLLECTION OF GST
Unit Structure
2.1 Introduction and Objective
2.2 Scope of Supply
2.3 Composite and Mixed Supplies
2.4 Import of Supply
2.5 Supply without Consideration – Schedule -I
2.6 Activities treated as Supply of goods / services -Schedule – II
2.7 Activities neither Supply of Goods nor Services - Schedule -III
2.8 Non- taxable & Non - GST Supplies
2.9 Exemption from Tax
2.10 Composition Levy
2.11 Levy and Collection of Tax
2.12 Self-Examination Questions
2.1 INTRODUCTION AND OBJE CTIVES The GST is a tax ontaxable supply of goods or services or both. Hence,
levy and collection of the GST largely depends upon the nature of supply
whether it is Taxable Supply, Exempt Supply, Nil -Rated Supply or Zero -
Rated Supply.
The lesson explain s all these concepts along with the concept of
composition scheme for Small Taxable Persons.
2.2 SCOPE OF SUPPLY Meaning and Scope of Supply :
As per Article 366 (12A) of the Constitution of India “Goods and Services
Tax” means “any tax on supply of goods or services or both except tax on
supply of alcoholic liquor for human consumption”.
The definition uses the term “supply”, which is wider than “sale”. This has
the effect of including stock transfer or branch transfer with in the ambit
of GST.
The taxab le event is the supply of goods and/or services, occurrence of
which gives rise to levy and collection of GST.
As per Section 7 of CGST Act, the term ‘Supply’ includes:
(a) all forms of supply of goods or services or both such as sale, transfer,
barter, ex change, licence, rental, lease or disposal lease or di sposal of
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Levy and collection of GST
21  made or agreed to be made by a person
 for a consideration
 in the course or furtherance of business;
(b) Import of services whether or not in the course or furtherance o f
business .
(c) the activities specified in Schedule I, made or agreed to be made
without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as
referred to in Schedule II.
Exceptions:
As per section 7(2), foll owing shall be treated neither as a supply of goods
nor a supply of services.
(a) activities or transactions specified in Schedule III;
(b) notifiedactivities or transactions undertaken by the Central
Government, a State Government or any local authorit y in which they
are engaged as public authoritieson the recommendations of the
Council.
Further, section 7(3) states that theGovernment may, on the
recommendations of the GST Council, specifyby notification, the
transactions that are to be treated as
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
2.3 COMPOSITE AND MIXED SUPPLY 2.3.1 Composite Supply:
As per Section 2(30) of CGST Act, “Composite Supply” means a supply
made by a taxable pe rson to a recipient consisting of two or more taxable
supplies of goods or services or both, or any combination thereof, which
are naturally bundled and supplied in conjunction with each other in the
ordinary course of business, one of which is a Principal Supply.
Further as per section 8(a) of CGST Act, Composite Supply comprising
two or more supplies, one of which is a principal supply, shall be treated
as a supply of such Principal Supply. The tax rate applicable on the
Principal Supply will be applicabl e on the other supplies also.
From the above, it emerges that
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Taxation - IV (Indirect Taxes - II)
22 (b) The Principal Supply consists of two or more taxable supplies of
goods or services or both, or any combination thereof.
All th e supplies are naturally bundled and made in conjunction with each
other.
Illustrations :
(1) Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite
supply and supply of goods is a p rincipal supply;
(2) An air ticket includes cost of meals and free airport transfer. These
services are bundled together. The Principal Supply will be
transportation of passengers .
(3) School Bus Services provided as part of included in school fee has
been held t o be a composite supply. The Principal Supply will be
imparting education.
2.3.2 Mixed Supply:
As per section 2(74) “Mixed Supply” means two or more individual
supplies of goods or services, or any combination thereof, made in
conjunction with each other b y a taxable person for a single price where
such supply does not constitute a Composite Supply. Mixed Supplies are
not naturally bundled and made in conjunction with each other .
Section 8(a) of CGST Act states that a Mixed Supply comprising two or
more supp lies shall be treated as a supply of that particular supply which
attracts the highest rate of tax. However, if the supplies are made
separately and not dependent on any other, it shall not be a Mixed Supply.
Mixed Supply and Composite Supply both refer t o supply of more than
one goods and/or services. When the different products are naturally
bundled to the Principal Supply e.g. Gillette Razor with inbuilt bladea
book with a plastic cover, it will be a case of Composite Supply but when
the supplies are u nrelated and not dependent such as different sweets, dry
fruits or Diwali Poojaarticles it will be mixed supply.
Composite Supply will be taxable at the rate applicable to Principal
Supply butMixed Supply will be taxable at the highest rate applicable to
any of the goods/services in the bundle.
Illustrations :
(1) A gift box contains different products having different rates, will be
liable to highest rate of tax applicable to any of the items contained
therein.
(2) A package contains canned foods, sweets, chocola tes, cakes, dry
fruits, aerated drinks and fruit juices. When supplied for a single
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Levy and collection of GST
23 carry tax rate from zero to 28%, the package will be taxable at the
highest rate 28%.
(3) A hotel provides a package inclusive of meals and sightseeing.
Sightseeing in not natural bundling with accommodation. Hence, the
package will be a Mixed Supply not Composite Supply.
(4) A combo - pack is available for Rs 1000 comprising of a key chain,
wallet and a belt. This i s a Mixed Supply as the articles are not
naturally bundled.
2.4 IMPORT OF SUPPLY Supply includes import. Import irrespective of the nature or use of
good/services imported whether for personal consumption or commercial
use will be liable to GST under Reve rse Charge Mechanism (RCM). A
service will deemed to be Import of Service if follow ing conditions are
fulfilled: -
a) Supplier of service is located outside India,
b) Recipient of service is located in India and
c) Place of supply of service is in India .
Example :
Rahul pays fees for online coaching for MBA from a coaching institution
in New York. Coaching is imparted online in India.The Coaching fee will
be liable to GST although it is personal,not for business or in furtherance
of business.
2.5 SUPPLY WITHOUT CONSIDERATION - SCHEDULE - I Supply includes the following activities specified in Schedule Imade or
agreed to be made without a consideration:
1. Permanent transfer or disposal of business assets where input tax
credit has been availed on su ch assets.
Examples:
Transfer of plant to another unit located in another state.
2. Supply of goods or services or both between related persons or
between distinct persons as specified in section 25, when made in the
course or furtherance of business except gifts not exceeding fifty
thousand rupees in value in a financial year by an employer to an
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Taxation - IV (Indirect Taxes - II)
24 Examples:
i. The transaction of providing corporate guarantee by a holding
company to its subsidiary or vice versain respect of loan raised from
banks will be considered as supply although there may be no
consideration for providing the guarantee.
ii. Stock transfer made to a unit outside the state or to a different
business vertical of the same assessee will be regarded assupply.
iii. Any supply of goo ds or services by employer to employee free of cost
will be a supply. Subject to exemption of gift up Rs 50000 by the
employer to employee in a financial year.
3. Supply of goods by:
i. A principal to his agent where the agent undertakes to supply such
goods on behalf of the principal; or
ii. An agent to his principal where the agent undertakes to receive such
goods on behalf of the principal.
4. Import of services by a taxable person from a related person or from
any of his other establishments outsi de India, in the course or
furtherance of business.
2.6 ACTIVITIES TREATED AS SUPPLY OF GOODS / SERVICES – SCHEDULE - II Schedule III lists out the following activities, which are treated as Supply
of Goods / Services :
Transfer of goods :
1) Transfer of the t itle in goods;
2) Transfer of right in goods or of undivided share in goods without the
transfer of title thereof, e.g. hiring out machinery, rent a cab etc.
3) Transfer of title in goods under an agreement, whereby property in
goods shall pass at a future dat e upon payment of full consideration as
agreed, e.g. hire purchase agreement.
Lease and tenancy:
1) Lease, tenancy, easement, licence to occupy land;
2) Lease or letting out wholly or partly, of a building, a commercial,
industrial or residential complex for business or commerce.
Business assets:
1) Treatment or process applied to another person's goods e.g. job work,
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Levy and collection of GST
25 2) Transfer of business assets transferred or disposed of whether or not
for a consideration, e.g. disposal of old furniture, office machines.
3) Transfer of business assets to put to any private use or are usedor
made available to any person for use, for any purpose other than a
purpose of the business, whether or not for a c onsideration, e.g. using
business vehicles for personal use by the proprietor / partners or
employee, or giving company auditorium to employee for personal
functions etc.
4) Any goods forming part of the assets of any business immediately
before the taxabl e person ceases to be a taxable person, unless —
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed
to be a taxable person, e.g. dissolution of firm,
5) Renting of immovable property e.g. renting an office or factory;
6) Construction including additions, alterations, replacements or
remodelling of any existing civil structure, of commercial or
residential complex including a complex or building intended for sale
to a buyer, except where the entire consideration has been received
after issuance of completion certificate by the competent authority, or
an Architect, Chartered Engineer or a Licensed Surveyor, if there is
no competent authority where required, or before its first occupation,
whichever is earlier.
7) Temporary transfer or permitting the use or enjoyment of any
intellectual property right e.g. franchise.
8) Development, design, programming, customisation, adaptation,
upgradation, enhancement, implem entation of information technology
software e.g. Programming or development of IT software;
9) Agreeing to the obligation to refrain from an act, tolerate an act or a
situation, or to do an act e.g. damages for inefficient services, penalty
imposed for la te completion of agreed contract, etc.
10) Transfer of the right to use any goods for any purpose (whether or not
for a specified period) for cash, deferred payment or other valuable
consideration.
11) Composite Supplies by way of or as part of a works con tract or any
service or in any other manner whatsoever, of goods, being food or
any other article for human consumption or any drink other than
alcoholic liquor for human consumption, where such supply or service
is for cash, deferred payment or other valu able consideration, e.g.
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Taxation - IV (Indirect Taxes - II)
26 12) Supply of goods by any unincorporated association or body of persons
to a member thereof for cash, deferred payment or other valuable
consideration, e.g. Supply of food, gaming tools, books etc. by any
club to its members.
2.7 ACTIVITIES NEITHER SUPPLY OF GOODS NOR SERVICES – SCHEDULE - III Following activities are considered neither supply of goods not of services
as per Schedule III :
1. Services by an employee to the employer in the cour se of or in
relation to his employment.
2. Services by any court or tribunal including a District Court, High
Court or Supreme Court established under any law for the time being
in force.
3. The functions performed by the Members of Parliament (MPs) ,
Mem bers of State Legislature (MLAs), Members of Panchayats,
Municipalities and other local authorities;
b) The duties performed by any person who holds any post in pursuance
of the provisions of the Constitution in that capacity; or
c) The duties performed b y any person as a Chairperson, a Member or a
Director in a body established by the Central Government , a State
Government or local authority and who is not deemed as an
employee;
4. Sale of land /Building (subject to building under construction as per
schedule II.
5. Actionable claims, other than lottery, betting and gambling.
6. Services of funeral, burial, crematorium or mortuary including
transportation of the deceased.
Exemption granted to these services which were excluded from the
definition of “service” or were in Negative List under the Service Tax
regime, is continues under the new GST regime. .
Other points :
Mutuality and absence of Profit motive are not relevant considerations
to hold whether any services are or are not taxable.
Accordingl y, Clubs or Societies catering to their members on a no profit
no loss basis will still be liable to GST subject to other exemptions
available, if any.
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Levy and collection of GST
27 2.8 NON TAXABLE SUPPLY AND EXEMPT SUPPLY Non-Taxable Supply:
As per section 2(78) of the Act “Non -Taxa ble Supply” means a supply of
goods or services or both which is not leviable to tax under this Act or
under the Integrated Goo ds and Services Tax Act.
Exempt Supply :
As per section 2(47) of the Act “Exempt Supply” means a supply of goods
or services or both which attracts Nil rate of tax or which may be wholly
exempt from tax under section 11, or under section 6 of the Integrate d
Goods and Services Tax Act and includes Non -Taxable Supply.
Zero Rated Supply :
Under section 16 of IGST Act Zero Rated Supply means taxable supply
by way of export of goods or supply of services to SEZ / SEZ Developer
on which rate of tax is zero .
Credit of Input Tax Credit (ITC) will be available to a p erson making Zero
Rated Supply , who will be eligible to claim refund of unutilised ITC or
IGST paid on such exports, if not under Letter of Undertaking - LUT or
Bond.
Non-Taxable, Exempt, Nil Rated Supply a nd Non - GST Supply :
On a plain reading of sections 2(47) and 2(78) which define Exempt
Supply and Non -Taxable Supply respectively together with section 7,
which defines “supply”, it follows that there must be an activity, which
can be called as “supply” wi th reference to Schedule III, which gives the
list neither of activities which are treated neither as Supply of Goods nor
of Services.
Since such activities or transactions listed in schedule -III are not
“Supply”, they cannot be said to be either Non -Taxable Supply or Exempt
Supply. They along with the activities or transactions undertaken by
Government and Local Authority as Public Authorities are sometimes
referred to as Non -GST Supplies although no such term is defined in law.
Non-Taxable Supply :
a. If no tax is be leviable on any supply either under CGST, UTGST/
SGST or IGST, it will be “Non -Taxable Supply”.
b. Supply of alcoholic liquor for human consumption, petroleum crude,
high speed diesel, motor spirit, natural gases and aviation turbine fuel
are “Supply” on which no tax is levied, will be ‘Non -Taxable
Supply”.

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Taxation - IV (Indirect Taxes - II)
28 Nil-Rated, Zero Rated or Exempt Supply :
If the supply is wholly exempt or attracts Nil rate of tax, it will be called
Nil-Rated, Zero Rated or Exempt Supply. This term is again referred to i n
connection with refunds as “Zero Rated Supplies made without payment
of tax”.
Nil- Rated supply of goods has not been defined anywhere in CGST Act.
Since, In case of NIL rated supply, the tariff rate is NIL , there will be no
GST without the exemption no tification.
Support services to agriculture, forestry, fishing and animal husbandry, is
the lone service notified as Nil Rated Supply of Service.
In case of Exempt Supply, the tariff is higher than 0% but there is no tax
payable due to exemption notificati on.
As per IGST Act, Exports and service to SEZ developers are considered as
Zero -Rated Supplies
The Central Government has issued two notifications No. 02/2017 and
12/2017 to exempt a number of services under section 11. As a result of
the notification s the supply otherwise taxable will attract No Tax or Zero
-Tax Rate.
Some of the Services which are exempt from Tax are given below :
(a) Services by a charitable trusts registered u/s 12AA of the Income Tax
Act.
(b) Services by way of transfer of a go ing concern.
(c) Services provided to Government with certain conditions.
(d) Service by way of renting of residential dwelling for residential
purposes.
(e) Intra - state supply of goods and/or services received by a Registered
Person from an Unregistered Person where the value of such goods
are not above Rs 7,500 per day as per section 9(4)currentlykept in
abeyance),
(f) Service imported by a SEZ Unit or SEZ developer.
2.9 EXEMPTION FROM TAX Section 11(1) empowers the Government to grant general exemption :
 on the recommendations of the GST Council
 by notification issued in public interest from the date specified
therein.
The exemption can be granted only to goods and/or services of any
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Levy and collection of GST
29 or any part of the tax leviable thereon unconditionally or subject to such
conditions as may be specified.
Section 11(1) empowers the Government to grant by special order in each
case under circumstances of an exceptional nature to be stated in such
order, exemption from payment of tax to any goods and/or services on
which tax is leviable.
Section 11(3) empowers the Government the power to insert within one
year, an explanation to the notification.
Further, the registered person supplying such good s or services or both
shall not collect the tax, in excess of the effective rate, on such supply of
goods or services or both.
The Government has issued several notifications granting total or
partial exemptio n in some cases as given below:
(A) Absolute ex emption granted to f ollowing classes of supplies:
a. Transmission or distribution of electricity.
b. Renting of residential dwelling for use as residence.
c. Services by Reserve Bank of India.
d. Services by a veterinary clinic in relation to health care of animals or
birds
e. Electricity, Salt, fresh fruits, potato, tomato, onion, plastic bangles,
passenger baggage etc. (149 items of goods)
(B) Conditional exemption granted to following classes of supplies:
a. Exemption from payment of tax under reverse charge basis granted to
intra - state supply received by
 a deductor under section 51 from Unregistered Person, who is
otherwise not required to registered under GST,
 a Registered Person from Unregistered Person dealing in buying and
selling of second hand goods and who pays the central tax on the
value of outward supply,
b. a Registered Person from Unregistered Person, the aggregate value of
such supplies received by a registered person from all or any of the
suppliers does not exceed Rs. 7500 in a day. (C urrently the tax is kept
in abeyance)
c. Services by a hotel, inn, guest house, club or campsite, by whatever
name called, for residential or lodging purposes, having declared tariff
of a unit of accommodation less than Rs. 1000/ - per day
d. Concession ra te of 2.5% to specified goods required in connection
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Taxation - IV (Indirect Taxes - II)
30 e. Supplies by CSD to unit run canteens and supplies by CSD / unit run
canteens to authorised customers
f. Supply of 81 services under CGST Act whic h were exempted under
old service tax law.
g. Intra -state supply of heavy water and nuclear fuels by the Department
of Atomic Energy to the Nuclear Power Corporation of India Ltd.
h. services provided by fair price shops to Government and those
provided by and to FIFA for FIFA U -17
i. right to admission to the events at under FIFA U -17 World Cup 2017
2.10 COMPOSITION LEVY - SECTION 10 Meaning of Composition Scheme :
Section 10 of the CGST provides for an optional simplified composition
scheme for the bene fit of small dealers and small manufacturers and by
reducing their burden of compliances. Such as reducing number returns to
be filed, maintenance of books and records as compared to general dealer
etc.
Eligibility :
The scheme is available only to taxable persons being :
 manufacturers of goods,
 dealers, and
 restaurants (not serving alcohol) having aggregate turnover of Rs 1
Crore during the preceding financial year.
Turnover Limit is Rs. 75 lakhs for Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Na galand, Sikkim, Tripura, Himachal Pradesh and
Rs. 1 crore for the rest of India including the states of Uttarakhand UT of
Jammu& Kashmir and Ladakh
Ineligibility :
Composition option cannot be exercised in the following specific cases:
1. Supply of services (i ncluding goods treated as supply of services by
Schedule II) except the services covered under Schedule II, Paragraph
6(b) such as restaurants .
2. Supply of goods viz.
 Non-taxable goods
 Inter -State outward supplies
 Through e -commerce operators required to c ollect tax at source/s 52.
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Levy and collection of GST
31 3. Manufacture of:
 Ice cream and other edible ice, whether or not containing cocoa
 Pan masala
 All goods, i.e. Tobacco and manufactured tobacco substitutes
Aggregate turnover :
Aggregate Turnover means the aggregate value of :
 All taxable supplies (excluding the value of inward supplies on which
tax is payable by a person on rever se charge basis),
 Exempt supplies(including non -taxable supplies),
 Exports of goods or services or both and
 Inter -state supplies of persons having the same Permanent Account
Number, to be computed on all India basis but excludes central tax,
State tax, Uni on territory tax, integrated tax and cess. [Section 2 (6)]
The definition of Aggregate Turnover is very wide and includes every
supply whether covered under GST or not, namely, Taxable Supplies,
Exempt Supplies, Non -Taxable Supplies, Export Supplies and In ter-State
Supplies. Further, the Aggregate Turnover is for all business registered
under single PAN across India.
Rate of tax :
Under the scheme, the registered person whose aggregate turnover in the
preceding financial year does not exceed Rupees 75,00,0 00/ I Cr, as the
case may be; may opt to pay, in lieu of the tax payable by him, an amount
calculated at such rate prescribed in the Rules 7 of the GST Rules as
mentioned below: Type of Business CGST SGST/ UTGST Total Manufactures and traders of goods 0.5% 0.5% 1% Restaurants (not serving alcohol) 2.5% 2.5% 5% Other service providers NA NA NA
Notes:
(a) Other service providers not allowed to opt for composition scheme.
(b) Different rate may be for manufacturers of notified goods.
(c) For restauran ts, the composite supply shall be treated as supply of
service where the supply, by way of or as a part of any service or in
any other manner whatsoever, of goods, being food or any other
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Taxation - IV (Indirect Taxes - II)
32 liquor for human consumption), where supply or service is for cash,
deferred payment or other valuable consideration.
(d) The composition rate cannot be applied in case of inter -state supplies
as the composition scheme is not available when the inter -state su pply
is made by the supplier.
(e) If aggregate turnover on all India basis of preceding financial year
exceeds Rs. 1 Crore / 75 lakh during this financial year, the supplier is
required to pay tax as normal dealer from the following day.
Impact of becomin g a normal dealer from composition dealer :
If during the current year turnover exceeds Rs. 75 Lakh then this case the
composition supplier is required to file a FORM GST CMP -04 within 7
days.
Details of stock and capital goods, as on the day when compositi on dealer
is becoming as normal dealer, are required to file in FORM GST ITC -
01 within 30 days to take the credit of input on the same.
Terms and Conditions to opt for composition :
1. A supplier will have to opt composition scheme for all businesses
regist ered under one PAN.
2. After, opting for composition is prohibited from:
a) Making interstate outward supply (sale of goods in other states).
b) making supply of tax -free or exempted goods,
c) making supply through e commerce operator.
d) getting registr ation as Casual Taxable Person, or Non -resident
Taxable Person for making supply in places where he is not
registered.
e) Manufacturing goods notified under section 10(2)(e).
3. The supplier is required to:
a) mention “Composition Taxable person not elig ible to collect tax on
supplies” on the Invoice,
b) mention “Composition Taxable Person” on every notice, signboard
displayed at all place of business.
c) pay tax on reverse charge basis as provided in Section 9(3) i.e. Inward
Supplies from notified person s and section 9(4) i.e. Inward Supplies
from Unregistered Person.
d) show that stock as on appointed day have not been purchased in the
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Levy and collection of GST
33  Inter State Trade or commerce
 Imported from a place outside India
 received from his branch situated outside th e state
 received from his agent or principal outside the state
e) pay tax on stock on appointed day, under reverse charge under
sections 9(3)/9(4). Otherwise he will lose his right to opt composition
scheme.
4. A composition supplier should file quarterly return in GSTR -4 before
the 18th of the following month after end of the quarter and also
annual return in GSTR -9A.
5. Transitory provisions for a dealer migrating to GST on the appointed
day 01 July 2017 included fling duly signed application for Compos ition
Scheme in FORM GST CMP -01 by 31 July 2017 and furnishing the
details of stock, including the inward supply of goods received from
unregistered Persons, held by him on the day preceding the date from
which he opts for composition, electronically in FO RM GST CMP -03
within 60 days of the date from which composition scheme is opted. The
option exercised under section 10 was to remain valid so long the
conditions mentioned in section 10 and Composition Rules were satisfied.
Procedure for composition :
1. Any Registered Person i.e. normal dealer desirous of opting for
Composition Scheme shall
a) Electronically file intimation in FORM GST CMP -02 prior to the
commencement of financial year,
b) Submit FORM GST ITC -3 within 60 days from the commencement
of the relevant financial year.
c) shall pay an amount, by way of debit in the Electronic Credit Ledger
or Electronic Cash Ledger, equivalent to the credit of input tax in
respect of
i. inputs held in stock
ii. inputs contained in semi -finished goods
iii. inputs contained finished goods held in stock and
iv. capital goods, asreduced by such percentage points as prescribed in
ITC rules on the day immediately preceding the date of exercising
such option.
2. Any intimation for opting composition scheme for any p lace of
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Taxation - IV (Indirect Taxes - II)
34 3. After opting for composition scheme, the supplier cannot collect tax
from the recipients of supply, but he shall issue bill of supply for
supplies made thereafter.
4. No credit will be a vailable to a registered taxable person on the
invoice of a composition taxable person. Hence, composition scheme
is not viable on B to B basis.
5. IGST dealer are not eligible to take the benefit of composition
scheme.
6. A normal dealer, who opts for co mposition, all credit in his ledger
will lapse and included in the cost of goods under section 18(4).
7. A composition taxable person will not be entitled to claim for Input
Tax credit. product. Such credit will become his cost of goods.
A taxable person may opt out from the composition scheme by filing an
application in FORM GST CMP -04, electronically before the date of such
withdrawal.
Examples:
1. Akash owns a restaurant and a grocery shop having turnover of Rs 15
lakh and Rs 90 lakh respectively.
Akash is eligible for composition restaurant services are eligible and the
turnover does not exceed Rs 100 lakh during the financial year.
2. Amit had during the financial year 2021 -22 had the following
turnover: Exempted goods Rs 60 lakh Non- taxable goods Rs 25 lakh Taxable goods Rs 20 lakh
Aggregate Turnover of all type of supplies registered under single PAN
exceeds Rs. 100 lakh. Further Amit also supplies non -taxable goods. Amit
is not eligible for composition Scheme.
3. Anuj is an architect running a con sulting and a ceramics shop
registered in the same PAN having receipt of Rs 25 lakh and turnover
of Rs 85 lakh respectively during the financial year 2021 -22.
Consultancy services are not eligible for composition scheme. Hence Anuj
is not eligible for comp osition scheme both in respect of his consultancy
and his shop.
4. Anuj wants to opt for composition only in respect of his shop.
He cannot do so as all the business including the consultancy under one
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Levy and collection of GST
35 5. Anuj, instead of consulta ncy owns a shop in building material having
turnover of Rs 25 lakh during the financial year 2021 -22.
Although the businesses are eligible, turnover during the previous year
exceeds Rs 100 lakh, hence not eligible for composition scheme.
6. Anuj has only one shop of Ceramics and no consultancy business.
He is eligible to opt for composition scheme as turnover is below Rs 100
lakh.
7. M purchases goods in Mumbai (Maharashtra) sells in Panaji, Goa.
His turnover during the financial year 2021 -22is Rs 69 lakh.
Mis not eligible for composition her turnover is of interstate outward
supply.
8. Assuming, M purchases goods from Panaji and sells in Mumbai, the
she may go for composition as there is restriction on outward
interstate supply not on inward interstate supply.
9. Sushil sells his goods through Amazon, an E -Commerce Operator.
Turnover of preceding financial year is Rs. 65 lakh.
Sushil is not eligible for composition scheme he sells goods through an E
Commerce Operator.
10. Rogers of Imphal obtains registration as a Casual Taxable Person in
Kohima, Nagaland and records a turnover of Rs 42 lakh.
Roger being a Casual Taxable person has been specifically excluded from
the composition scheme.
11. Turnover of Tony, who has opted for composition, exceeds Rs 100
lakh on 15 -04-2022. T ony will lose his option for composition from
16-04--2022. He has to file FORM GST CMP -04 within 7 days i.e.
before 23 -04- 2022, FORM GST ITC -01 within 30 days i.e. before 15
-05-2022giving details of stock and capital goods, as on 22 -04-2022to
claim ITC.
2.11 LEVY AND COLLECTION OF TAX Section 9 of the CGST Act, 2017, which is the charging section, provides
that for all intra state supplies of taxable goods or services or both, there
shall be levied a tax called Central Goods and Services Tax (CGST) on the
value as determined under section15 of the Act at such rates, not
exceeding 20%, as may be notified by the Government on the
recommendation of the Council. The section excludes from its ambitthe
supply of alcoholic liquor for human consumption.

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36 Examp le:
Jugal of Panaji in Goa supplies goods to D’sa in Vasco (Goa). The tax will
be levied in Goa because goods will be consumed in Goa. Jugal will
Charge CGST + Goa -SGST from D’sa
From the above it follows that for levy and collection of CGST
following conditions must be satisfied:
1. GST is levied on taxable intrastate supply of goods or services or
both.
“Goods' means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to o r forming part of the land which are agreed to be severed
before supply or under a contract of supply;
'Services' means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash or
by an y other mode, from one form, currency or denomination, to another
form, currency or denomination for which a separate consideration is
charged.
2. The supply must be capable of being valued under section 15.
3. The tax shall be levied /collected on the basis o f the value so
determined.
4. The rate of tax shall be at the prescribed rates not exceeding 20%.
GST rates has been announced on various goods/ services in 4 slabs at 5%,
12%, 18% and 28% apart from the Nil rate and 0.25% on diamonds and
3% for bullion. Th e maximum rate of GST is 28% (i.e. 14% CGST+14%
SGST). It can be increased maximum up to 40% (i.e. 20% CGST + 20%
SGST) before cess on demerit items.
5. If the supply is not capable of being categorised under any of the
prescribed rates category then tax cann ot be levied on the same.
6. The CGST shall be levied and collected by the Central Government in
the manner as prescribed GST - Payment of Taxes Rules, 2017.
7. The tax shall be payable by the Taxable Person. “Taxable Person”
means a person who is registered or liable to be registered under
section 22 or section 24 of the Act”.
8. Taxable Person may not necessarily be the person who supplies the
goods. For instance, the recipient of the service under the Reverse Tax
Mechanism (RCM), E - Commerce Operator and Registe red Taxable
Person In respect of supplies received from an Unregistered Person
are liable to pay tax, not the supplier.
9. Tax cannot be collected from a person, who does not fall within the
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Levy and collection of GST
37 10. The section excludes fr om its ambit the supply of alcoholic liquor for
human consumption.
11. CGST on crude oil, high speed diesel, aviation turbine, motor spirit
(petrol), shall be levied with effect from the date to be notified by the
Government on the recommendations of Council . - Section 9(2).
Council means the Goods and Service Tax Council established under
Article 279 -A of the Constitution” - Section 2(36)
12. GST may be levied in three case under reverse tax mechanism
(RCM), where the tax shall be paid on reverse charge basis by the
recipient of such goods or services or both. All the provisions of this
Act shall apply to the recipient as if he is the person liable for paying
the tax. no reverse charge shall be applicable in case of exempt supply
or non -taxable supply
a. The supply of notified goods or services or both, under section 9(3).
While as many as 12 services have been notified, good have not been
notified under this section.
b. The supply of goods or services or both by Unregistered Person to a
registered person under section 9( 4). Presently, the provision has been
postponed.
c. Intra -state supply of specific services supplied through the Electronic
Commerce Operator under section 9(5) / or its representative (to be
mandatorily appointed) if such operator has no physical presence in
the taxable territory.
In the following cases tax will be payable by the recipient of the goods
and/or service or the electronic commerce operator.
1. Goods Transport Agency (GTA) for service provided to Casual
Taxable Person, body corporate, partnership fir m, any society,
factory, any person registered under CGST, SGST, UTGST Act.
2. Recovery agent for a banking company, NBFC or any financial
institution
3. A director of a company or a body corporate.
4. An individual advocate or firm of advocates, an arbitral tribun al
providing representational services to any business entity.
5. Taxi driver or Rent a cab operator working through e -commerce
operator ;
6. An insurance agent of an insurer.
7. Sponsorship received by a body corporate or partnership firm.
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Taxation - IV (Indirect Taxes - II)
38 9. Copyright sold by an author or music composer, photographer, artist,
to a publisher, music company, producer,
10. Any person who is located in a non -taxable territory to any person
located in the taxable territory other than n on-asses see online
recipient (Business Recipient) Service recipient.
Values of taxable supply under section 15, Reverse Charge Mechanism
(RCM) have been taken up separately in their appropriate place.
2.12 SELF -EXAMINATION QUESTION S Multiple Choice Quest ions:
1. A supply comprising of two or more supplies shall be treated as the
supply of that particular supply that attracts highest rate of tax.
a) Composite b) Mixed
c) Both (a) and (b) d) None of the above
2. What are the taxes levied on an intra -State supply?
(a) CGST (b) SGST
(c) CGST and SGST (d) IGST
3. Which of the following taxes will be levied on imports?
(a) CGST (b) SGST
(c) IGST (d) CGST and SGST
4. Who will notify the rate of tax to be levied under CGST Act?
(a) Central Governmen t
(b) State Government
(c) GST Council
(d) Central Government as per the recommendations of the GST
Council
5. Aggregate turnover does not include -
(a) Inward supplies on which tax is payable on reverse charge basis
(b) Exempt supplies
(c) Export of goods or services or both
(d) Inter -State supplies of persons having the same PAN number

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Levy and collection of GST
39 Self examination questions:
1. What is meant by supply?
2. What is difference between naturally bundles and not so bundled
supply and its impact on tax rare ?
3. Conta iner sold with a vacuum flask is missed supply or composite
supply, state with reason ?
4. What is composition scheme?
What are the advantages and disadvantages?
5. A German publisher takes Registration as a non -resident taxable
person and he wants to op t for composition scheme. State with reason
if he can do so?
6. What is exemption from tax?


*****
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40 3
TIME, PLACE AND VALUE OF SUPPLY
Unit Structure
3.1 Introduction and Objective
3.2 Time of Supply
3.3 Inter -State Vs. Intra -State Supply
3.4 Location of the Recipient of services
3.5 Location of the Supplier of services
3.6 Place of supply in respect of goods and services
3.7 Place of supply in respect of goods
3.8 place of supply in case of supply of services, when location of the
supplier and recipient is in India
3.9 Place of supply of services when location of either the supplier o r
the recipient is outside India – Section 13
3.10 Value of supply of goods or services - Section 15
3.11 Self- Examination Questions
3.1 INTRODUCTION AND OBJECTIVE This lesson will explain the provisions relating to the determination of the
time, place and value of supply of goods and their implications with
reference to the location of the recipient of services and the location of the
supplier of services.
For every transaction, t he time, place and value of supply of goods and/ or
services are important factors which determine the incidence of the GST.
Each transactio n passes through the threefold test time, place and value of
supply of goods and/ or services to ascertain:
(a) The point in time in which supply of goods or services has taken
place;
(b) The place where supply of goods or services has taken place,
(c) The value of goods or services supplied;
(d) The nature of the transaction whether Inter -State Supply Or Intra -
State Supply;
(e) Whether the transaction attracts GST;
(f) Type of the tax be levied, viz. IGST, CGST, SGST/UTGST on that
transaction;
(g) The amount of tax payable;
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Time, place and value of supply
41 (i) The due date for depositing tax with the government and for filing
returns Etc.
3.2 TIME OF SUPPLY Time of supply in relation to the supply of good and/or services means the
point in time, when such supply takes place. Time of supply is the vital
factor with reference to which the time when the tax liability arises, the
type of tax payable i.e. IGST/ CGST, SGST/UTGST, the rate of tax and
other incidental matters such as due dat e for payment of tax, filing of
returns are determined.
There are separate criteria to identify the time of supply for goods and
services.
A) Time of supply of goods:
Time of supply of goods will be the earliest of the following: -
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of payment / Advance.
Illustrations :
(1) From the following data determine the time of supply : Date of sales of goods 1 January,2022 Date of issuing invoice 15January, 2022 Date of receipt of payment 25 January, 2022 The date of delivery of goods 20 January, 2022 Solution :
The time of supply will be 15 January, 2022 being the earliest of the
following: - Date of issue of invoice 15 January, 2022 Last date on which invoice should have been issued 20 January, 2022 Date of receipt of payment 25 January, 2022
(2) Assuming that 50% payment is received in advance on 01 January,
2022, the time of supply will be
a. 01 January, 2022 for advance amount (50%)since the date of receipt
of advance is before the date of issuing invoice, and
b. 15 January, 2022 for the balance 50%.
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Taxation - IV (Indirect Taxes - II)
42 B) Time of supply for services :
Time of supply of goods will be the earliest of the following: -
a. Date of issue of invoice (if issued within the prescribed time)
b. Date of provision of services (if invoice is not issued within
prescribed time.
c. Date of receipt of payment /advance.
Illustrations :
(1) From the following data determine the time of supply Date of providing service 15 June 2022 Date of issuing invoice 30 June,2022 Date of receipt of payment 20 July, 2022 The time of supplyof will be 30 June, 2022 being earliest of the following: Date of issue of invoice 30 June2022 Last day for issue of invoice (30 days from the date of provision Of Service15 June 2022)) 15 July 2022 Date of payment 20 July 2022 (2) Assuming the invoice was issued on 19July2022 after the prescribed
time of 30 days on 15 July 2022, then the time of supply of services
will be 15 June2022 being the dat e of providing service.
A. Time of supply of goods under Reverse Charge :
Time of supply of goods for the recipient of the service will be 30 days
from date of issue of invoice for goods.
B. Time of supply of services under Reverse Charge :
Time of supply o f goods for the recipient of the service will be 60 days
from date of issue of invoice for goods.
a. Date of payment:
b. 60 days from date of issue of invoice for services
Illustrations :
(1) A lawyer raised invoice on 1 June 2022 to a company to represent it
before the ITAT on 15 May2022. The company made the payment on
1 July 2022.
Lawyer’s fees are covered under the Reverse Charge. Hence, the time of
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Time, place and value of supply
43 1. Date of payment1 July 2022
2. 60 days from d ate of date of invoice:31 July 2022
(2) If the above was a case of supply of goods, then the time of supply of
goods is 30 days from the date of invoice i.e. 1 July 2022.
Please note in RCM cases date of invoice is important not date of supply
of goods or services.
3.3 INTER -STATE SUPPLY VS. INTRA -STATE SUPPLY 3.3.1 Broadly, transa ctions fall in two categories:
A) International or cross border transactions, viz.:
a. Imports of goods into India; or
b. Export of goods outside India, and
B) Domestic transact ions, viz:
a. Inter -state supply
b. intra-state supply
3.2. As per section 7 of the IGST Act, 2017 Inter -State Supply is when
“location of supplier” and “place of supply” are in different States or
Union Territories.
In contrast, as per section 8 of the IG ST Act, 2017 Intra -State Supply is
when “location of supplier” and “place of supply” are in the same State or
same Union Territory.
Examples :
1. A supplier in Panji, Goasells good in Margaon, Goa. It is intra -state
supply, liable to CGST and Goa -SGST as loc ation of the supplier and
the place of supply are within the same state (Goa).
2. The supplier in Daman (UT) sells goods inPanji Goa. itis an inter -
state supply attracting IGST as the location of the supplier and the
place of supply fall in different States/ UT.
Interestingly the CGST Act vide sections 2(70) and 2(71) defines
“location of the recipient of services” and “location of the supplier of
services” respectively but it does not define “location of the recipient of
goods” and “location of the supplier of goods” at any place.
3.4 LOCATION OF THE RECIPIENT OF SERVICES As per section 2(70) of CGST Act “location of the recipient of services”
means: —
(a) where a supply is received at a place of business for which the
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Taxation - IV (Indirect Taxes - II)
44 (b) where a supply is received at a place other than the place of business
for which registration has been obtained (a fixed establishment
elsewhere), the location of such fixed establishment;
(c) where a supply is rece ived at more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the receipt of the supply;
and
(d) in absence of such places, the location of the usual place of res idence
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 other than the place of business for which registration has been obtained, a fixed establishment Recipient’s fixed establishment at more than one establishment, whether the place of business or fixed establishment The location of the establishment most directly concerned with the receipt of the supply In absence of such places The location of the usual place of residence of the recipient;
Illustration:
A is registered at Fort with head office at Dadar and branches at Thane
and Borivali.His residence is in Juhu.
For any suppl y received in Thane office, the place of recipient will be at:
1. Registered office atfort,
2. Dadar officeif A does not have registration at Fort;
3. Most connected office at Thane in absence of Fort and Dadar offices.
4. Residence at Juhu, in absence of any of the a bove.
3.5 “LOCATION OF THE SUPPLIER OF SERVICES As per section 2(71)of the CGST Act, “location of the supplier of
services” means: —
(a) where a supply is made from a place of business for which the
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Time, place and value of supply
45 (b) where a supply is made from a place other than the place of business
for which registration has been obtained (a fixed establishment
elsewhere), the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the provisions of the
supply; and
(d) in absence of such places, the location of the usual place of residence
of the suppl ier;.
The yardstick for determining the location of the provider or supplier of
service is more or less similar to those applicable on location of the
receiver of the supply. Supply made from Location of Supplier of
Service Place of business for which the registration has been obtained Recipient’s Registered Office; Place other than the place of business for which registration has been obtained, a fixed establishment Recipient’s fixed
establishment at more than one establishment, whether the place of business or fixed establishment The location of the establishment most directly concerned with the provision of the supply in absence of such places The location of the usual place of residence of the supplier
Example:
XYZ Limited is a company having reg istered office at Vashi, corporate
office at Mumbai and branches all over the country. Goods are supplied to
Surat Branch of XYZ Limited. Place of supply will be Recipient’s
Registered Office at Vashi, fixed establishment at Mumbai and Surat in
that order.
3.6 PLACE OF SUPPLY OF GOODS AND SERVICES Sections 10, 12and 13 of the IGST Act, 2017 lay down the principles for
determination of place of supply broadly in three categories viz.: - Section 10 Supply of goods Section 12 Supply of services where location ofboth the supplier and the recipient is in India; Section 13 Supply of services, where location of either the supplier or the recipient is outside India. munotes.in

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Taxation - IV (Indirect Taxes - II)
46 3.7 PLACE OF SUPPLY IN RESPECT OF GOODS Section 10 of the IGST, Act, 2017 lays down the followi ng principles to
determine place of service of goods
When there is movement of goods :
When there is movement of goods, there may be two situations: -
A. Where supply involves movement of goods whether by the supplier or
the recipient or by any other person , place of supply is the place
where the movement terminates i.e. where the goods are delivered or
the ownership in goods is transferred.
Examples :
1. Paresh of Pali sells 100 cotton bales to Suresh of Satara. The place of
supply is Satara in Maharashtra, where the movement of goods is
terminated. Both Pali and Satara are in the state of Maharashtra, it is
intra-State sales liable to CGST & SGST.
2. If Paresh sells goods to Bhupat of Bhopal in M.P., the place of supply
will be in Bhopal M. P. M.P. and Maharashtra be ing different states, it
will be inter -state sales attracting IGST.
3. Manoj of Mumbai places an order to Nokia’s Chennai plant for
purchase of mobile phones goods ex -factory. In this case the goods
are delivered at Chennai; hence, Chennai will be the place o f supply.
Both, the place of supply and location of the supplier being in same State
Tamil Nadu, it will be intra -State sales chargeable to CGST and TN
SGST.
Once place of supply has been determined at Chennai, subsequent
transport of goods to his place o f business in Mumbai or anywhere else is
not relevant.
Delivery to a third party as per instructions :
When goods are delivered by a seller to the recipient (whether agent or
not) on the direction of a buyer before or during the movement of goods,
by way o f transfer of document of title to the goods or otherwise, the p lace
of supply will be the principal place of the buyer on the assumption that the
buyer has received the goods.
Examples :
1. Jatin of Jodhpur buys umbrellas from Mahesh of Mumbai to be
delivered to his Mithun living in Mumbai.
This is a case of third party delivery. Hence, delivery of umbrellas by
Mahesh to the third party i.e. Mithun in Mumbai will be treated as
delivery to Jatin at his principal place in Jodhpur. Hence, Place of supply
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Time, place and value of supply
47 Rajasthan and Maharashtra being different states, it will be inter -State sale
chargeable to I GST.
2. Mayank of Mumbai places an order for two watches on Snap deal (an
E-Commerce Operator) Manufactured by Foss Ltd., Bengaluru
(register ed with Snap deal) to be delivered to his sister Hema in
Hubli.
This is again a case of third party delivery. Delivery of watch to Hema in
Hubli will be assumed to be delivery to Raju at his principal place in
Mumbai by the Supplier Foss Ltd.(Bengaluru Kar nataka). Hence, Mumbai
will be the place of supply. Karnataka and Maharashtra being different
states, it will be inter -State sale chargeable to I GST .
Whe n there is no movement of goods:
A. Where supply does not involve movement of goods, the place of
delivery of goods will be the place of supply.
Examples :
1. Alok of Ahmedabad has his goods lying in Punit’s godown in Pune.
Punit offers to buy those goods and Alok agrees to sell these goods to
Punit.
In this case, there is no physical movement of goods. Deliver y of goods is
effected when Punit appropriates the goods. Place of supply will be Pune.
This being intra - state as the supplier and the place of supply both are in
the same state CGST and MH SGST will be charged.
2. In the above example, if Alok sells goods t o Ramesh in Pune, who
takes the delivery from Punit; the place of supply will be Pune. Pune
and Ahmedabad being in different states, IGST will be charged.
3. Johor, a Mumbai based film producer purchases a studio in Kolkata
with pre -installed audio -visual eq uipments. The p lace of supply is
Kolkata being the location of equipments at the time of delivery along
with the studio building, which is same as the location of the supplier.
Hence, CGST and WB SGST will be charged as intra -State sale.
There will be no GST on sale of building being a capital asset.
B. The goods assembled or installed at site :
Where, goods are assembled or installed at the site of the buyer, site will
be the place of supply.
Example :
Infosys Ltd., Bengaluru installs a sophisticated intern et-server for MTNL
in Mumbai.
In this case, the place of supply will be Mumbai being the buyer’s place or
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Taxation - IV (Indirect Taxes - II)
48 This will be inter -State supply from Bengaluru (Karnataka) to Mumbai
(Maharashtra) subject to levy of IGST.
However, Infosys may apply for registration as Casual Taxable Person in
Mumbai and pay CGST & MH SGST.
C. Goods Supplied on a Vessel/Conveyance :
Where the goods are supplied on board a conveyance including any vessel,
aircraft, train or a motor vehicle, place of suppl y is the location where
such goods are taken (loaded) on board.
Examples :
1. A buys food articles on board while travelling from Kolkata to
Guwahati by air.
The food items are loaded into the plane at Kolkata. Hence, Kolkata will
be the place of supply. If t he Airline is registered in Kolkata, CGST&WB
SGST will be charged. But if the Airline is registered in other state e.g.
Mumbai (Maharashtra), IGST will be charged. In practice, most airlines
are registered across the country and charge CGST/SGST.
2. Kamal, a consultant for JW Ltd, Indore buys food articles on board,
while flying from Patna to Lucknow.
CGST &MP SGST will be charged as inter - State sales in Indore (M.P.)
being the place of supply, where the food articles were loaded and the
Airline is registere d in MP. But if the Airline is registered in other state
IGST will be charged.
3. Kutty is travelling from Jaipur (Rajasthan) to Kochi (Kerala) by
Himgiri express starting from New Delhi (NCR).He buys lunch on
board at Wadi in Andhra. The lunch was loaded by the IRCTC in
Sholapur (Maharashtra).
The food items were loaded in Sholapur, hence place of supply is
Sholapur (Maharashtra). Since IRCTC is registered throughout India,
CGST &SGST will be charged.
D. Where place of supply cannot be determined, the Parliam ent will
make ruleson the recommendation of GST Council .
E. Where, supply is by transfer of documents, place of supply will be the
principal place of business of the person receiving the supply.
Example :
Dilip of Dehradun (Uttarakhand) sells goods by endorsi ng airways bill for
goods lying in Mumbai, from where the buyer takes the delivery of the
goods. The place of supply is in Mumbai (Maharashtra) being the
principal place of business of the person receiving the supply. It will be
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Time, place and value of supply
49 F. In case of import of goods into India, place of supply is location of the
importer and IGST will be charged.
Example :
A toy dealer having his principal office in Puri (Odisha) imports Chinese
toys in Mumbai port. Place of supply is Puri. IGST will be charged on the
value of imports
G. In case of export of goods outside India, place of supply is outside
India. Exports are exempt from GST.
Example :
A of Patna exports garments to San Francisco, U.S. from Kolkata airport.
Place of supply will be in San Francisco. Exports are exempt from GST.
3.8 PLACE OF SUPPLY IN RESPECT OF SERVICES WHEN LOCATION OF THE SUPPLIER AND
RECIPIENT IS IN INDIA Section 12 of the IGST Act lays down the following principles for
determination of place of supply in c ase of supply of services, when
location of the supplier and recipient is in India: -
1. General Rule :
Where the services are provided to a registered person, place of supply of
services is place of location of the registered recipient of services.
Exampl e:
A computer mechanic provides services to a Chartered Accountant
registered in Thane. Place of service will be in Thane.
2. Where, the recipient is not registered, place of supply is the address
on record of the recipient.
Example :
In the above illustra tion, the Chartered Accountant is not registered and
his address on record is at Pune.Place of service will be at the address on
record (i.e. Pune)
3. In other cases, it is location of supplier of services.
4. Immovable Prope rties -Architects, surveyor e tc.:
Place of supply of services in case of services related to immovable
property like architects, interior decorator, property agents, surveyors,
engineers, hotels, inns, guest houses, lodges, club, banquet halls etc. shall
be the location of the immovab le property.
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Taxation - IV (Indirect Taxes - II)
50 Example :
An U.S. Architect makes designs and plans for Trump Tower in Mumbai.
Place of service shall be Mumbai as the service is related to immovable
property located in Mumbai.
5. Performance based service :
In case of restaurant and caterin g, personal grooming services like beauty
treatment, health, fitness etc. shall be the place of performance of these
services.
Example :
A bridal makeup artist of Mumbai goes to provide service in wedding in
Delhi. Place of service will be Delhi, where the grooming service was
provided.
6. Transport & Insurance etc.:
Several services such as transportation of goods, transportation of
passengers, Insurance etc., place of supply shall be the location of
registered person.
7. Banking Services :
In case of b anking, place of supply is location of the recipient on record.
8. Telecommunication services :
In case of telecommunication services involving fixed line, circuits, dish
etc., place of supply is location of such fixed equipment.
Example :
In respect of set top box fixed at the homes of viewers, place of service
will be at the place where such box is installed.
9. Mobile / Internet Services :
In case of post -paid services, place of service is location of billing address
of the recipient and In case of sale of pre-paid voucher, place of supply is
place of sale of such vouchers. In other cases, it is address of the recipient
in records.
Examples :
1. Billing Address for mobile phone of Rajua resident of Thane is at his
Chandigarh home address. Place of service shal l be Chandigarh.
2. Yashvant, resident of Chandigarh purchasesaJIO prepaid talk -time
voucher in Raipur, place of service shall be Raipur. munotes.in

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51 3.9 PLACE OF SUPPLY OF SERVICES WHEN LOCATION OF EITHER THE SUPPLIER OR THE
RECIPIENT IS OUTSIDE INDIA – SECTION 13 International transactionswhere both the recipient and the provider of
service are outside India are not covered under GST in India.International
transactions, where either of the service recipient or the service provider is
outside India, place of service wil l be determined as per the principles laid
down in section 13 of IGST, Act, viz:
3.9.1 General Rule:
In international transactions,place of supply of services shall bethe
location of recipient of service.
Example:
A Chartered Accountantprovides service to his counterpart in London,
U.K. As per section 13 of the IGST Act, place of supply shall be London,
U.K. being the location of the recipient of service.
3.9.2 Non- availability of the location of service recipient:
Where the location of service recipi ent is not available, the place of supply
shall be location of the supplier of services.
Example:
A Chartered Accountant provides consultancy services to a person outside
India, whose location is not known, the place of service shall be India
being the loc ation of the supplier of services.
3.9.3 Services involving actual performance:
Services involving actual performance, place of actual performance of
services will be location of service.
Example:
Sonu Nigam performs at IAFA awards ceremony in Macau, the p lace of
service shall be Macau, China.
3.9.4 Processing of goods:
When supply of service involves doing some activity on some goods,
place of supply is location of goods.
Example:
If packing of goods imported is to be done in London, the place of service
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52 3.9.5 Services related to immovable property:
Services related to immovable property, place of supply of services is
location of immovable property.
Example:
An Engineer in India makes structural plans for a tower in Dubai. The
place of service will be Dubai, not India
3.9.6 Event based Services:
Place of supply with respect to event based services like exhibition,
conference, fair etc. shall be place where such events are held.
Examples:
1. A decorator organi ses a business fair in Rome, the place of service
will be Rome.
2. A Hollywood based American event manager organises Oscar award
ceremony in Mumbai. The place of service shall be Mumbai. The
event manager will have to take registration as a Non -Resident
Taxable Person at least five days advance of the event.
3.9.7 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.
Example:
1. A German company gives buses on rent to an Indian troupe visiting
Berlin and charters a plane for returning to Mumbai. Place of service
will be the location of supplier in Germany.
2. Bank charges payable to a Swiss bank in Geneva, the place of service
will be Geneva, Switzerland.
3.9.8 Transportation of goods:
Place of supply in case of transportation shall be place of destination of
such goods.
Example:
1. For a truck carrying goods to Nepal, the place of service shall be
Nepal.
2. All ocean going ships or air crafts, place of service will be the
destination port.
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53 3.9.9 Transportation of passengers:
In case of transportation of passengers, place where the passenger embarks
on the conveyance.
Example:
A travel agent carries passeng ers from Hardwar to Mansrovar in China,
the place of service shall be Hardwar.
3.9.1 0 Online data information:
Place of supply of services in case of online information and database
access, place of recipient of services.
Example:
Charges paid to google o r Facebook for making available or data
information in India, the place of service shall be India.
3.10 VALUE OF SUPPLY OF GOODS OR SERVICES - SECTION 15 The tax liability by way of CGST / SGST / UTGST or IGST is calculated
ad valorem with reference to the value of the taxable supply of goods
and/or services
As per section 15 (1), “value of taxable supply” will be the transaction
value and “transaction value” means the price paid or payable for supply
of goods and/ or services if: -
(i) The supplier and the re cipient are not related; and
(ii) price is the sole consideration for the supply.
Transactional value is the value at which unrelated parties would transact
in the normal course of business at normal price being the sole
consideration. Hence in cases, where the parties are related (e.g., sister
concerns) and a reasonable value may not be charged, or transaction may
take place as a barter or exchange; the Act provides for determination of
the transactional value’.
The phrase “price is the sole consideration for s upply” implies that
 value of any additional consideration received, whether monetary or
non-monetary, and
 payment made directly or indirectly by the recipient to the supplier
will constitute the price actually paid or payable and shall be added to
the co nsideration to arrive at the transaction value.

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54 Illustration:
Ashok sells a computer to Babu for Rs 50,000 payable in cash subject to
the condition that Babu shall waive an old loan of Rs 50,000 due to him by
Ashok. In this case the price of Rs.50,000 is not the sole consideration for
sale. The loan of Rs 50,000 written off will also be the part of the
consideration for supply of goods. The value of the transaction will be Rs
one lakh not.
Under section 15(2) Transaction value will include:
(a) any taxes, duties, cesses, fees & charges levied under any statute, if
charged separately by the supplier to the recipient. Municipaltaxes,
import duty are the examples of such taxes. However, taxes under this
Act i.e. CGST/IGST/ SGST/ UTGST/ Cess etc will not be in cluded in
transaction value.
(b) any amount that the supplier is liable to pay in relation to the supply,
but which has been incurred by the recipient of the supply and not
included in the price actually paid or payable for the goods and/ or
services. In o ther words, where the supplier is under an obligation for
which receiver has made the payment, such payment in connection
with the supply i.e. Transportation will form part of transaction value.
Illustration:
A purchases a computer on onsite installation basis from B. A collects the
computer from B and pays freight and installation charges. This expenses
as per the original contract are to be incurred by B, will be included in the
transaction value of the computer.
(c) Incidental expenses:
Any incidental e xpenses, such as commission and packing, charged by the
supplier to the recipient of a supply, including any amount charged for
anything done by the supplier in respect of the supply of goods and /or
services at the time of, or before delivery of the goods or supply of the
services;
Illustrations:
(1) A buys ice cream from Naturals and pays Rs 50 for special dry -
packing for home delivery. Cost of such packing will be included in
the value of ice cream even if it is separately paid by the recipient.
(2) A suppliers supplies a diary of Rs 500 and asks the recipient to pay Rs
50 as the commission to the agent appointed by the supplier to
procure the orders and remit the balance Rs 450. Transaction value
will be Rs 500 inclusive of commission.
(d) Interest or Late Fees:
Interest or Late fee or penalty for delayed payment of any consideration
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Time, place and value of supply
55 Illustration:
MTNL raises a telephone bill of Rs 500 payable within 15 days and Rs
600 if paid after 15 days. The interest or penalty of R s100 will form part
of the transaction value.
(e) Subsidies:
Any subsidies directly linked to the price will form part of transaction
value, unless such subsidies are provided by the Central or State
Governments e.g. subsidy on gas cylinder, fertilisers o r export subsides.
Illustration:
A Temple Trust grants subsidy linked to the price of household products
like honey etc. produced by the members of its clan, the such subsidy will
be included in the price.
Exclusions from the Transaction Value - Section 1 5 (3)
Discount will be excluded from the transactional value in the following
cases
(a) If discount is given before or at the time of the supply and such
discount has been duly recorded in the invoice issued in respect of
such supply;
(b) If the discount is given after the supply has been affected, in terms of
an agreement entered into at or before the time of such supply and
(i) such discount is specifically linked to relevant invoice;
(ii) Input credit attributable to the discount has been reversed by the
recipient.
Illustrations:
(1) Under a sales promotion scheme, Maruti offers 5% discount to the
dealer who achieves a certain volume of turnover. Maruti Ltd. sells a
car of Rs 10 lakh for Rs 9.50 lakh to the dealer indicating 5% discount
in the invoi ce, the transaction value will be Rs. 9.50 lakh.
(2) X purchases from Y goods for Rs 25,000 on 1 January 2022 on credit
of one month. On 15January 2022, Y gives a discount of Rs 3,000 and
X pays Rs 22000 to settles his account. Transaction value will be Rs
25,000 as discount is not known before or at the time of supply.
(3) In the above illustration if the invoice mentions that discount of Rs
3,000 will be allowed if the payment is made before the due date, the
transactional value will be Rs 22,000.
Value of supply not determinable - Sections 15(4)&15(5)
As per section 15(4),where the value of supply of goods or services cannot
be determined under section 15(1), the same shall be determined in the
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56 Further as per section 15(5), the value of supplies by the Central or a State
Government, on the recommendation of the GST council, shall be
determined in prescribed. Manner. In this regard following rules have
been framed.
1. Rule 1 . Where, the consideration is not wholly in money, the value
will be the open market value of such supply, and if there is no open
market, the sum total of consideration in money and any such further
consideration not in money if such amount is known at the time of
supply. If the value of supply is not determinable, value of like kind
and quality of goods or services or as per Rules 4 &5.
Illustrations:
(1) A washing machine under an exchange offer is available for Rs.
10,000 and Rs 12,000 without exchange. Open market value of the
new machine will be Rs. 12000.
(2) A desktop is exchanged for a laptop costing Rs 25,000. Cost of the
desktop is not known, then the value of desktop will be Rs 25,000.
2. Rule 2. Value of a supply between distinct or related person, will be
the open market value of such supply, and if the re is no open market,
the sum total of consideration in money and any such further
consideration not in money if such amount is known at the time of
supply.
If the value of supply is not determinable, value of like kind and quality of
goods or services or as per rules 4 &5 or where the recipient is eligible for
full input tax credit, the value declared in the invoice shall be deemed to
be the open market value of goods or services”
3. Rule 3. Value of supply of goods made or received through an agent
will be the -
 open market value of goods supplied, or
 at the option of the supplier, 90% of the price charged for the supply
of goods of like kind and quality by the recipient to his customer not
being a related person, where the goods are intended for further
supply by said recipient.
If the value of supply is not determinable, value of like kind and quality of
goods or services or as per Rules 4 &5.
Illustration:
X supplies goods to his agent Y. Y sells like kind and quantity for Rs
10,000. Z , another supplie r gives like kind and quantity to Z for Rs.
8,000. Value of the supply goods will be Rs 8,000 or at the option of X
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57 4. Rule 4. Where the value of a supply of goods/ services is not
determinable by any of the preceding rules, the value of supply shall
be 110% of the following
(a) cost of production/ manufacture or
(b) cost of acquisition of such goods or
(c) cost of provision of such services.
5. Rule 5. Where the value of supply of goods or services or both cannot
be determine d under rules 1 to 4, the same shall be determined using
reasonable meansconsistent with the principles & general provisions
of section 15 and these rules. A supplier of services may opt for this
rule, disregarding Rule 4”
6. Rule 6. Value of other supplie s:
(a) Money changing:
Value of service for purchase or sale of foreign currency or money
changing in Indian rupee (INR) will be the buying rate or selling rate less
RBI reference rate and if there is no RBI reference rate,1% of the gross
amount of Indian Rupees received or given by changing of money. RBI
reference rate is available for USD, British pound, Euro and Yen only.
When neither of the currencies exchanged is Indian Rupee, the value of
service will be equal to 1% of lesser of the two amounts, the p erson
changing the money would have received by converting any of the two
currencies at RBI reference rate.
Illustration:
A changes US $ 100 for Rs 69.72 against the RBI reference rate of Rs
69.45. Value of service - Rs 0.27 X $100 = Rs. 27. If RBI refence rate is
not there, the value of service will be 1% of Rs 69.72=X $100= Rs 69.72.
(b) booking of air tickets:
Value of services on booking of air tickets will be 5% of basic fare for
domestic bookings, and 10 % of basic fare for International booking.
Basic Fare Means the part of ait fare on which commission is normally
paid to the air travel agent by the airline
(c) Life insurance agents:
Value of service will be the gross amount charged to the policyholder
reduced by the amount allocated for investment on behalf of the
policyholder, if such amount is intimated to the policy holder at the time
of supply of service and 10% of the premium, in case of single premium
annuity policies. For policies towards risk coverage only, the value will be
tank at Nil.
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58 (d) B uying and sellingof second hand goods:
Value of supply shall be the difference between the selling price and
purchase price, and if the value of supply is negative it shall be ignored.
However this subject to the condition that used goods are sold as such or
after such minor processing which does not change the nature of the
goods, and no input tax credit has been availed on purchase of such goods
(e) Token / Voucher / Coupon / Stamp:
Value of Token / Voucher/ Coupon/ Stamp etc. Will be equal be equal to
the money value of the goods or services or both redeemable against such
token, voucher, coupon, or stamp.
7. Rule 7. The expenditure or costs incurred by the supplier as a pure
agent of the recipient of supply of services shall be excluded from the
value of supply on fulfilment of certain conditions. Example
demurrage charges paid by customs house agent for their client’s or
property taxes paid by a housing society on behalf of the flat owners
will be decocted if the same are paid as pure agent.
Meaning of Certainterms:
(a) open market value :
A supply of goods or services or both means the full value in money,
excluding the integrated tax, central tax, state tax, union territory tax and
the cess payable by a person in a transaction, where the supplier and the
recipient of the supply are not related and price is the sole consideration,
to obtain such supply at the same time when the supply being valued is
made.
(b) Supply of goods or services or both of like kind & quality :
Any other supply of goods or serv ices or both made under similar
circumstances that, in respect of the characteristics, quality, quantity,
functional components, materials, and reputation of the goods or services
or both first mentioned, is the same as, or closely or substantially
resembl es, that supply of goods or services or both.
(c) Related person :
 Officers or directors of one another’s businesses
 legally recognised partners in business
 Employer and employee
 Any person who directly or indirectly owns, controls or holds 5% or
more of t he outstanding voting stock or shares of both of them
 One of them directly or indirectly controls the other
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Time, place and value of supply
59  Together they directly or indirectly control a third person
 Members of the sam e family
3.11 SELF - EXAMINATION QUESTIONS Multiple choice questions:
1. What is time of supply of goods, in case of forward charge?
(a) Date of issue of invoice
(b) Due date of issue of invoice
(c) Date of receipt of consideration by the supplier
(d) Ear lier of (a) & (b)
2. What is the time of supply of vouchers when the supply with respect
to the voucher is identifiable?
(a) Date of issue of voucher
(b) Date of redemption of voucher
(c) Earlier of (a) & (b)
(d) (a) & (b) whichever is later
3. What is t he time of supply of vouchers when the supply with respect
to the voucher is not identifiable?
(a) Date of issue of voucher
(b) Date of redemption of voucher
(c) Earlier of (a) & (b)
(d) (a) & (b) whichever is later
4. What is the time of supply of servic e if the invoice is issued within 30
days from the date of provision of service?
a) Date of issue of invoice
b) Date on which the supplier receives payment
c) Date of provision of service
d) Earlier of (a) & (b)
5. The value of supply should include:
a) A ny non -GST taxes, duties, cesses, fees charged separately by
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60 b) Interest, late fee or penalty for delayed payment of any
consideration for any supply
c) Subsidies directly linked to the price except subsidies provided by
the Central and State Gov ernments
d) All of the above
6. Which of the following forms part of transaction value?
1) GST compensation cess
2) Payments made to third parties by the recipient on behalf of the
supplier in relation to the supply
3) Entertainment tax levied by local au thority
4) Commission paid to an agent and recovered from the recipient
5) Inspection charges at recipient’s site
6) Charges for delay in payment waived off by supplier
State the correct answer from the options given below :
a. 1, 2, 3, 4 & 5
b. 2, 3, 4, 5 & 6
c. 2, 3, 4 & 5
e. All of the above
7. When can the transaction value be rejected for computation of value
of supply
(a) When the buyer and seller are related and price is not the sole
consideration
(b) When the buyer and seller are unrelated or pric e is not the sole
consideration
(c) It can never be rejected
(d) When the goods are sold at very low margins
8. What deductions are allowed from the transaction value
(a) Discounts offered to customers, subject to conditions
(b) Packing Charges, subje ct to conditions
(c) Amount paid by customer on behalf of the supplier, subject to
conditions
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61 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.
7. How the value of service will be determined?


*****

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62 4
DOCUMENTATION
Unit Structure
4.1 Introduction and Objectives
4.2 GST Registration Certificate
4.3 Tax Invoice
4.4 Bill of Supply
4.5 Credit/debit notes
4.6 Advance Payment receipt
4.7 Purchase Invoice
4.8 Export/Import Documentation
4.9 E-way bil l
4.10 Input Tax Credit records
4.11 Returns and Challans
4.12 Stock records
4.13 Contracts and Agreements
4.14 Books of Accounts
4.15 What Records Must Be Maintained Under GST
4.16 Electronic Cash and Credit Ledger \
4.17 Period for retention of ac counts under GST
4.18 Consequences of not maintaining proper records
4.19 GST registration documents Check List
4.20 Self-Examination Questions
4.1 INTRODUCTION AND OBJECTIVES Every registered person is required to maintain certain documents
prescribed under GST law. Some of the important and common
documents include tax invoices, bills of supply, debit and credit notes,
receipt, payment and refund vouchers.
4.2 GST REGISTRATION CERTIFICATE This is the official document issued by the tax authorities af ter successful
GST registration. It contains the GSTIN (Goods and Services Tax
Identification Number) of the business.
4.3 TAX INVOICE Tax invoices are issued by registered suppliers when they make a sale.
These invoices must contain specific information , such as the supplier's
and recipient's details, GSTIN, description of goods/services, quantity,
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63 4.4 BILL OF SUPPLY In cases where a registered supplier is selling exempted goods or services,
they issue a Bill of Supply instead of a tax invoice. This document doesn't
include any tax amounts.
4.5 CREDIT/DEBIT NOTES These are issued when there is a change in the original invoice value or
details. Credit notes are issued for reductions, while debit notes are issued
for increases in value.
4.6 ADVANCE PAYMENT RECEIPT If a supplier receives an advance payment for goods or services, they need
to issue a receipt. The tax liability arises when the advance payment is
accounted for in the invoice.
4.7 PURCHASE INVOICE Registered businesse s need to maintain invoices received from their
suppliers for the purchases they make. These invoices support the input
tax credit claim.
4.8 EXPORT /IMPORT DOCUMENTATION In case of international transactions, businesses need to maintain
documentation rela ted to exports and imports, such as shipping bills,
export invoices, import invoices, and customs documentation.
4.9 E -WAY BILL For the movement of goods worth a certain value, an e -way bill needs to
be generated. This bill includes details like the consig nor, consignee,
goods, and transportation details.
4.10 INPUT TAX CREDIT RECORDS Businesses need to maintain records of input tax credit claimed on their
purchases, which should match with the supplier's tax invoices.
4.11 RETURNS AND CHALLANS Businesses n eed to file regular GST returns, like GSTR -1 (outward
supplies), GSTR -3B (summary return), and others, depending on the
country's regulations. Challans are used for making tax payments.
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64 4.12 STOCK RECORDS Businesses should maintain accurate records of the ir stock, including
opening stock, purchases, sales, and closing stock, as these impact the
calculation of taxes.
4.13 CONTRACTS AND AGREEMENTS Any contracts, agreements, or terms and conditions related to the supply
of goods or services should be document ed.
4.14 BOOKS OF ACCOUNTS Proper books of accounts, including ledgers, sales registers, purchase
registers, cash books, etc., should be maintained.
4.15 WHAT RECORDS MUST BE MAINTAINED UNDER GST Every registered person must maintain records of:
 Production or manufacture of goods
 Inward and outward supply of goods or services or both
 Stock of goods
 Input tax credit availed
 Output tax payable and paid and
 Other particulars as may be prescribed
4.16 ELECTRONIC CASH AND CREDIT LEDGER Every registered taxpayer will have 3 ledgers under GST which will be
generated automatically at the time of registration and will be maintained
electronically.
Electronic Cash Ledger:
This ledger will serve as an electronic wallet. The taxpayer will have to
deposit money into his cash ledger (add money to the wallet). The money
will be utilized to make the payment.
Electronic Credit Ledger:
The input tax credit on purchases will be reflected here under three
categories i.e IGST, CGST & SGST. The taxpayer will be able to utilize
the balance shown in this account only for payment of tax (not for interest,
penalty etc.)
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65 E-Liability Ledger:
This ledger will show the total tax liability of a taxpayer after netting off
for the particular month. This ledger will be auto -populated.
4.17 PERIOD FOR RETENTION OF ACCOUNTS UNDER GST As per the GST Act, every registered taxable person must maintain the
accounts books and records for at least 72 months (6 years). The period
will be counted from the last date of filing of Annual Return for that year.
The last date of filing the Annual return is 31st December of the following
year.
For example:
For the year 2017 -2018, the due date of filing the annual return is
31.12.2018. The books & records of 2017 -2018 must be maintained for 6
years, i.e., 31.1 2.2023
If the taxpayer is a part of any proceedings before any authority (First
Appellate) or is under investigation then he must maintain the books for 1
year after the order of such proceedings/appeal has been passed.
4.18 CONSEQUENCES OF NOT MAINTAINING PROPER RECORDS If the taxpayer fails to maintain proper records in respect of
goods/services, then the proper officer shall treat such unaccounted
goods/services as if the taxpayer had supplied them. The officer will
determine the tax liability on such un accounted goods.
The taxable person will be required to pay the tax liability calculated along
with penalty.
4.19 GST REGISTRATION DOCUMENTS CHECKLIST Nature of GST Registration Purpose of Registration Documents to be Uploaded Normal taxpayer registration (including composition dealer, government departments and ISD registrations) For undertaking a taxable supply of goods/ services  PAN card of Company (only in case of company)  Certificate of incorporation given by Ministry of Corporate Affairs / Proof of constitution of business munotes.in

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66  Memorandum of Association / Articles of Association (only in case of company)  PAN card and Aadhaar card of authorised signatory. Authorised signatory must be an Indian even in case of foreign companies / branch registration  PAN card and address proof of all directors of the Company (partners in case of firm)  Photograph of all directors and authorised signatory (in JPG format, maximum size – 100 KB)  Board resolution appointing authorised signatory / Any other proof of appointment of authorised signatory (in JPEG format / PDF format, maximum size – 100 KB)  Bank account details*  Address proof of principal place of business** GST practitioner For enrolling as GST practitioner  Photo of the applicant (in JPG format, maximum size – 100 KB)  Address proof of place where professional practice takes place  Proof of qualifying degree (Degree certificate)  Pension certificate (only in case of retired Government officials) TDS registration For deducting tax at source  Photo of drawing and disbursing officer (in JPG format, maximum size – 100 KB) munotes.in

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67  PAN and TAN number of the person being registered  Photo of authorised signatory (in JPG format, maximum size – 100 KB)  Proof of appointment of authorised signatory  Address proof of tax deductor** TCS registration For collecting tax
at source
(E-commerce
operators)  PAN number of the
person being registered  Photo of authorised
signatory (in JPG format,
maximum size – 100 KB)  Proof of appoint ment of
authorised signatory  Address proof of tax
collector ** A non-resident OIDAR service provider For online service providers not having any place of business in India  Photo of authorised signatory (in JPG format, maximum size – 100 KB)  Proof of appointment of authorised signatory  Bank account in India*  Proof of non-resident online service provider (eg: Clearance certificate issued by Government of India, License issued by original country or certificate of incorporation issued in India or any other foreign country) Non-resident taxable person (NRTP) For non-residents occasionally undertaking taxable supply of  Photo and Proof for the appointment of an Indian authorised signatory munotes.in

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68 goods / or services in India  In case of individuals, scanned copy of the passport of NRTP with VISA details. In case of business entity incorporated outside India, unique number on the basis of which the Country is identified by the Government of that country.  Bank account in India*  Address proof** Casual taxable person For non-registered domestic persons occasionally undertaking taxable supply of goods / or services in India  Photo and Proof for the appointment of an Indian authorised signatory  Proof of constitution of business  Bank account in India*  Address proof** UN bodies/embassy For obtaining Unique Identification Number to claim the refund of taxes paid on goods/services  Photo of authorised signatory  Proof of appointment of authorised signatory  Bank account in India*
*Ban k account details:
For bank account details, a copy of cancelled cheque or extract of
passbook/bank statement (containing the first and last page) must be
uploaded. (in JPEG format / PDF format, maximum size – 100 KB)
**Address proof:
Anyone of the f ollowing documents must be uploaded:
Property tax receipt
Municipal khata copy
Electricity bill copy
Apart from the above, the following may apply on a case -to-case basis:
Ownership deed/document (only in case of owned property) munotes.in

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69 Lease / Rental Agreement (i n case of leased / rented property) – To be
submitted along with (1), (2) or (3)
Consent letter/NOC from the owner (in case of consent arrangement or
shared property) – To be submitted along with (1), (2) or (3)
Sure, here are some multiple -choice question s (MCQs) related to
documentation under the Goods and Services Tax (GST) system:
4.20 SELF EXAMINATION QUESTIONS Multiple Choice Question :
1. Which document is issued by registered suppliers for a sale of goods
or services under GST?
a) Bill of Supply
b) Purchase Invoice
c) Credit Note
d) E-way Bill
2. What is the primary purpose of an E -way Bill under GST?
a) It serves as a tax invoice for goods transported within a state.
b) It is a document for claiming input tax credit.
c) It is required f or the movement of goods worth a certain value
between states.
d) It is a type of debit note for reducing tax liability.
3. What information should be included in a GST Tax Invoice?
a) Supplier's details, description of goods, and recipient's details
b) Only the recipient's GSTIN
c) Total value of goods, but no need to specify description
d) Supplier's PAN, but not the GSTIN
4. In which scenario would a business issue a Credit Note under GST?
a) When the recipient pays the invoice amount on time.
b) When there is a change in the original invoice value or details.
c) When the goods are sold within the same state.
d) When claiming input tax credit on purchases.
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70 5. Which document is issued by registered businesses when they sell
exempted goods or services?
a) E-way Bill
b) Bill of Supply
c) Tax Invoice
d) Credit Note
6. What is the purpose of maintaining accurate stock records under
GST?
a) To calculate the income tax liability of the business.
b) To determine the closing stock value for balance sheet
purposes.
c) To keep track of employee salaries.
d) To calculate the liability for customs duties.
7. Which return under GST includes details of outward supplies made by
a registered business?
a) GSTR -1
b) GSTR -3B
c) GSTR -2A
d) GSTR -9
8. What is the purpose of maintaining proper books of accounts under
GST?
a) To showcase the business's wealth to potential investors.
b) To calculate the total employee salaries for the year.
c) To determine the eligibility for government gr ants.
d) To keep track of financial transactions for GST compliance.
Self examination question :
1. What are the documents required under GST for GST Registraton
2. Documents required to maintain books of accounts
3. Expain Period for preventrion aacount under GS T

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71 5
INPUT TAX CREDIT
Unit Structure
5.1 Introduction and Objectives
5.2 Input Tax Credit (ITC)
5.3 Eligibility to claim input credit
5.4 Restrictions on Availment of Input Tax Credit
5.5 Documents required for claiming input tax credit
5.6 Reversal of Input credit
5.7 Utilisation of input credit
5.8 Matching of ITC
5.9 Conditions for availing ITC
5.10 Reversal of credit
5.11 ITC on Capital Goods and Imports
5.12 Other provisions
5.13 Self-Examination Questions
5.1 INTRODUCTION AND OBJECTIVES The GST was introduced to establish a pan -Indian supply chain from the
manufacturer of the goods to the end consumer and to devise a seamless
flow of input tax credit (ITC) across the chain.
Indeed, the GST laws and rules made thereunder make elaborate
provisions to attain this objective.
This lesson seeks to explain th ese provisions in particular regard to
 Who can or cannot claim the ITC,
 The supplies of goods and/or service in respect of which the ITC is
allowable or not allowable,
 Conditions and procedures for claiming ITCcross utilization of credits
of different tax es against one another and other relevant matters.
5.2 INPUT TAX CREDIT (ITC) Input Tax Credit (ITC) :
As per section 2(63) Input Tax Credit (ITC) means ‘the credit of input
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72 Input Tax :
Input Tax is defined in section 2(62 ). Input Tax in rela tion a registered
person means:
“the central tax, state tax, integrated tax or union territory tax charged on
any supply of goods or services or both made to him and includes” —
4.1 the integrated goods and services tax charged on import of goods;
4.2 the tax payable und er sections 9(3) and 9(4) of CGST Act
4.3 the tax payable under sections 5(3) and 5(4) of the IGST Act
4.4 the tax payable under sections 9(3) and 9(4) of the SGST Acts
4.5 the tax payable under sections 7(3) and 7(4) of UTGST Act
but does not include the tax paid u nder the composition levy.
Input :
As per section 2(59) Input means” any good other than capital goods
used or intended to be used by supplier in the course or furtherance of
business”.
Input services:
As per section 2(60) Input services means any service used or intended to
be used in the course of furtherance of business.
Capital goods:
As per section 22 (19) Capital good s means “goods, the value of which is
capitalised in the books of accounts of the person claiming the ITC and
which are used or intended to be used in the course of business”
From the above definitions read collectively, ITC under GST shall be
available in respect of taxes paid by way of CGST/IGST/UGST and IGST
including taxes paid under the Reverse Tax Mechanism (RCM) by the
recipient of goods and / or services.
1. On Supply of Inputs or Input Services or both
2. On Capital goods
3. On Import of Goods or Services
4. Under RCM Advertisement
5. Input Service Distributor (ISD)
6. Deemed supply In the course and furtherance of business:
Input Service Distri butor (ISD) means an office of the supplier of goods or
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Input tax credit
73 services and issues a prescribed document for the purposes of distributing
the credit of central tax (CGST), State tax (SGST)/ Uni on territory tax
(UTGST) or integrated tax
5.3 ELIGIBILITY TO CLAIM INPUT TAX CREDIT Section16, states that every registered person shall be entitled take credit
of input tax charged on any supply of goods or services or both, which
areused or intended to be used in the course or furtherance of his business
only if he satisfies all the conditions as prescribed in section 16(1) and
16(2).
5.3.1 Who can avail ITC?
As per Section 16 every regist ered person is eligible to avail ITC except
the following persons:
1. Composition dealer
A person registered under composition scheme in GST is not eligible to
claim ITC although the goods or services received by him are used in
furtherance of his business
2. Supplier engaged in supply of exempted or Nil rated goods
3. Unregistered person.
Registered person as per section 2(94) of CGST Actmeans a person who is
registered under section 25 but does not include a person having a Unique
Identity Number as a registered person
5.3.2 Basic conditions for claiming ITC :
1. The goods and /or services have been received by the person or his
agent whether physically or by transfer of documents.
2. The person should be in possession of proper documentary evidence
to avail ITC viz. a tax invoice, debit note or other prescribed
document issued by a registered supplier under Rule 36 mentioning
following particulars:
a. Taxable value
b. Tax Rate
c. Description of goods or services
d. GSTIN of supplier and Recipient and
e. Place of supply in case o f inter -State supply
3. The tax charged on such supply should have been paid to the
government by the supplier either in cash or through utilisation of ITC
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74 4. The person has furnished the return under section 39 within s pecified
time in respect of such supply .
5. The ITC is credited to the Electronic Credit Ledger of such person
provided in Common portal.
6. When goods are received in instalments or lots, ITC can be claimed
only when the last lot / instalment is received.
7. The I TC is admissible only in respect of taxable goods and/or service
used in further hence of business.
5.4 RESTRICTIONS ON AVAILMENT OF INPUT TAX CREDIT 5.4.1 General Restrictions :
1. ITC shal l not be allowed in respect of :
(a) Supplies related to Non Busi ness Purpose
(b) Exempted Supplies
(c) Supplies on which tax has been paid under Composition schemeunder
section 10
(d) Goods and/or Services used for personal consumption.
(e) tax component of any capital goods on which depreciation has been
claimed
(f) Supplies for which ITC is specifically not available
(g) Membership of a club, health and fitness centre.
(h) Travel benefits extended to employees on vacation such as leave or
home travel concession.
(i) Goods and/or services received by a taxable perso n for construction
including, re -construction, renovation, additions or alterations or
repairs)of an immovable property (other than plant or machinery)
even if used in furtherance of business.
(j) Goods lost, stolen, destroyed, written off or disposed of b y way of gift
or free samples.
However, ITC will be admissible for making zero -rated supplies although
such supply may be an exempt supply.
Zero rated supplies mean: -
(a) export of goods or services or both or
(b) suppliesof goods or services or both m ade to a SEZ developer or a
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75 2. ITC will be allowedonly in respect of :
a. Goods imported by hima Non -Resident Taxable Person, not on
domestic goods or services.
b. The supply of Motor vehicles and other conveyances with 13 or more
persons capacity (including the driver) ONLY when they are used for
making taxable supplies, namely: -
(i) Further supply of such vehicles or conveyances; or
(ii) Transportation of passengers; or
(iii) Imparting training on driving; flying, navigating such vehicles or
conveyance;
c. The following supplies only where same category of goods or services
is used for making outward supply or an element of Mixed or
Composite Supply namely:
i. Food and beverages services.
ii. Outdoor catering services.
iii. Beauty treatment serv ices.
iv. Health services.
v. Cosmetic and plastic surgery.
d. The following supplies ONLY IF notified by the Government as
obligatory to provide such service by employer to employee or where
same category of goods or services is used for making outward s upply
or an element of mixed or composite supply namely: -
i. Rent -a-cab services,
ii. Life insurance services,
iii. Health insurance services.
e. Works contract services when supplied for constructionincluding re -
construction, renovation, additions or alt erations or repairs of an
immovable property (other than plant and machinery) ONLY IF it is an
input service for further supply of works contract service.
“Plant and machinery “means apparatus, equipment, and machinery fixed
to earth by foundation or struc tural support that are used for making
outward supply of goods or services or both and includes such foundation
and structural supports but excludes: -
(a) land, building or any other civil structure;
(b) telecommunication towers; and
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76 3. Apportionment of credit and blocked credits:
Availment of the ITC is subject to following additional restrictions:
(1) No credit shall be availed in respect of any tax paid :
a. in pursuance of any order where any demand on acc ount of non -levy,
short levy due to suppression of facts, any fraud, wilful misstatement
recovered by the department under section 74.
b. in connection with any detention or seizure of goods, release of
goods, confiscation of goods in transit under section 130.
(2) The amount of credit shall be restricted to so much of the input tax as
is attributable to
a. the purposes of his business, wherethe goods and/or services are used
by the registered person partly for business and partly for other
purposes.
The taxable supplies including Zero -Rated Supplies, where the goods
and/or services are used by the registered person partly for taxable
supplies including Zero -Rated Supplies and partly for Exempt Supplies
under the CGST /IGST Acts.
5.5 DOCUMENTS REQUIRED F OR CLAIMING INPUT TAX CREDIT Under Rule 36 of the CGST Rules, a Registered Person including the
Input Service Distributor (ISD) may avail ITC on the basis proper
documentary evidence. The Rule gives a list the following documents:
1. Tax invoice issued by t he supplier of goods or services or both;
2. Debit note issued by a supplier;
3. Bill of entry under the Customs Act, 1962 or rules made thereunder
for the assessment of integrated tax on imports.
4. Tax invoice issued under reverse charge payment of tax;
5. Tax Invo ice or credit note issued by an Input Service Distributor.
The rule further provides that such documents issued by the supplier must
mention the following particulars:
a. Taxable value
b. Tax Rate
c. Description of goods or services
d. GSTIN of supplier and Recip ient and
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77 5.6 REVERSAL OF INPUT TAX CREDIT Rule 37 of the CGST Rules provides for reversal of ITC availed by a
registered person in the following cases:
(1) Credit on stocks on the relevant date, when a registered person :
a. opts to go out from normal scheme to composition scheme,
b. surrenders his Registration due to closure of business.
(2) When capital goods on which credit has been taken, have been
removed by the registered person after they have been put in use,
putting into use.
(3) When consideration for supplies is not paid within 180 days of
issuance of invoice.
(4) When there is a mismatch of returns of supplier and recipient.
(5) When credit has been availed twice against single document.
(6) When credit has been availed on comm on inputs, reversal of credit to
the extent of credit relating to exempted supplies or supplies for non -
business purpose.
5.7 UTILISATION OF INPUT TAX CREDIT (ITC) OF CREDIT ON UTILIZATION FROM FIRST OPTION SECOND
OPTION THIRD OPTION 1 IGST IGST CGST SGST/ UGST 2 CGST
CGST IGST – 3 SGST/UGST SGST/UGST IGST – Thus, Inter - sectoral
credit is not allowed for CGST and SGST/UGST Refund: Section 54 deals
with Refund. An eligible person or supplier can claim refund provided that
ITC is excess of his outward liabili ty. Conditions to claim refund: 1.
Refund should be claimed before the expiry of 2 years from the relevant
date 2. No refund shall be allowed on capital goods 3. Return under
section 39 should be filed 4. No refund shall be available in case of a. zero
rated supplies made without payment of taxes b. where the credit consists
of rate of tax on inputs is higher than that of output supplies 5. Minimum
amount to be refunded is Rs. 1,000/ -
Input tax credit can be uti lised in the following manner:
A. The ITC avail ed by the registered person is credited to his electronic
Credit ledger. The balance in the electronic ledger can be utilised to
pay off his output liability.
B. The supplier in The State of Origin may utilise ITC for transfer of
funds towards payment of CGST , UTGST/SGST or IGST.
C. The buyer in the destination State/UT may utilise IGST credit for
payment of CGST and SGST by the transfer of funds from IGST
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78 D. The amount of ITC on account of IGST is allowed to be utilised
towards the payment (a) IGST, (b) CG ST and (c) SGST/UTGST in
that order.
E. The amount of ITC on account of CGST is allowed to be utilised
towards the payment of(a) CGST and (b) IGST in that order.
F. The amount of ITC on account of SGST/UTGST is allowed to be
utilised towards the payment a) SGST/ UTGST and (b) IGST in that
order.
G. Input tax credit of CGST and SGST cannot be cross utilised i.e.
CGST cannot be used to pay off SGST and vice versa
H. Set off of ITC not available to a person under composition scheme.
The manner of availment and utilisation of Input Tax credit of CGST,
SGST, IGST and UTGST is given in the following Table. SET OFF OF INPUT CREDIT Input Credit UTILISATION OF INPUT CREDIT First utilisation Second Utilisation Balance CGST CGST IGST No SGST/UTGST SGST/UTGST IGST No IGST IGST CGST SGST / UTGST Input tax credit of CGST and SGST cannot be cross- utilisedi.e. Credit of CGST cannot be used for payment of SGST / UTGST and Credit of SGST / UTGST cannot be utilized for payment of CGST.
Illustration -1:
Ashok of Aundh, Pune sells goods of Rs 10,000 to Ganesh of Goa. The
CGST /SGST rate is 6% each and IGST rateis 12%. Ganesh sells these
goods in Goa for Rs 12,000.
(a) This is the case of interstate supply of goods involving movement of
goods between two different states Maharashtr a and Goa liable to
IGST@ 12%. Ashok may transfer Rs 1200 to IGST account by
paying cash or by utilising ITC due to him, if any. This credit will be
available to Ganesh on account of IGST of Rs 1200.
(b) (i) For Ganesh, this is an intra -state supply withi n the state of Goa. He
is liable to pay Rs 720 each towards CGST and GOA -SGST @
6% on Rs 12,000.
(ii) From the creditof IGST of Rs 1200available, Ganesh can transfer
 Firstly, Rs 720 towards the CGST and munotes.in

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79  The Balance Rs 480 towards the Goa -SGST.
(iii) Ganesh will transfer the balance of Rs 240 towards the Goa -SGST in
cash.
Illustration -2:
Following is the summary of GST payable and input credit available to
Ashok: Tax Output tax Liability Input Tax Credit ( ITC) Rupees IGST 40,000 20,000 CGST 12,00 0 15000 SGST 12,000 15000
The tax payable will be calculated as follows: Tax Output tax Liability Input Tax Credit Cash Payment Balance IGST CGST SGST Rupees IGST 40,000 20,000 3,000 3,000 14,000 CGST 12,000 0 12,000 0 0 SGST 12,000 0 0 12,000 0 Total 64,000 20,000 15,000 15,000 14,000
Illustration -3:
Following is the summary of GST payable and input credit available to
Ashok : Tax Output tax Liability Input Tax Credit ( ITC) Rupees IGST 25,000 50,000 CGST 30,000 10,000 SGST 30,000 10,000
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80 The tax payable will be calculated as follows: Tax Output tax Liability Input Tax Credit Cash Payment Balance IGST CGST SGST Rupees IGST 25,000 25,000 NIL NIL 0 CGST 30,000 20,000* 10,000 NA 0 SGST 30,000 5,000 NA 10,000 15,000 Total 85,000 50,000 10,000 10,000
*30,000 -10,000 CGST
5.8 MATCHING OF ITC The final ITC would be allowed only when details of supplies made by
supplier match with the recipient’s return of availing credit. The matching
has to be done in respect of GSTIN of Suppl ier and GSTIN of recipient in
respect of each supply and recipient, Invoice number, Debit Note number,
Credit Note number, Taxable Value and Tax amount involved.
An intimation of acceptance of credit would be sent to recipient in FORM
GST MIS -I if the det ails match or the return filed by supplier is accepted
by the recipient.
In case of mismatch of details, the discrepancy would be communicated to
the concerned that is both the supplier and recipient, if the fault is that of
supplier or only to the recipi ent, if fault is that of recipient.
Mismatch of ITC :
The discrepancies could be –
(i) availing credit in excess of the tax declared by the supplier, or
(ii) the outward supply is not declared by the supplier, or
(iii) there is a second time claim of ITC by the recipient .
Where the discrepancy is due to -
 differences of figures of amount of supplier and recipient, or
 non-declaration of outward supply by supplier,
the supplier would be asked to rectify the discrepancy in the return of
month in which discrepancy is inform ed to him.
If the supplier fails to rectify the discrepancy, excess credit will be added
to the output tax liability of recipient next month and the recipient will be
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Input tax credit
81 liability from the date of availing the ITC till the discrepancy is reflected
in returns.
Re-Claim of ITC on subsequent matching :
The recipient may re -claim the credit, if after reversal of credit by
recipient, the supplier rectifies the discrepancies. Interest paid, if any will
also be refundable by crediting the amount to the recipient’s Electronic
Cash Ledger.
5.9 CONDITIONS FOR AVAILING ITC A. Transitional Provisions of Input Tax Credit :
The Registrants under Central Excise, Service Tax and VAT, who have
migrated to GST w ere entitled to claim the credits available under the old
law in Electronic Credit Register, if such credits are covered under the
GST law and the Registered person has not opted to pay tax under
composition scheme and who have filed declaration in FORM GS T TRAN
-1 within 90 days from appointed date, specifying amount of credit
claimed and admissible as per earlier credit Rules. This was subject to the
following two conditions:
1. The amount of Cenvat credit on inputs, capital goods and input
serviceswere car ried forward in the last return filed under the old
laws.
2. Such credit is unavailed credit in respect of capital goods, i.e. the
balance amount of credit that remains after subtracting the credit
already availed.
B. Conditions for availing ITC by new regis trant :
New Registrantsfrom 01 -07-2017 onwards are eligible to claim Input tax
credit only, if: -
(i) Goods on which input tax credit is claimed are not unconditionally
exempt from the whole of the duty of excise or not nil rated.
(ii) The document for procurement o f such goods is available with the
Registered Person.
(iii) Where these documents are not available, input tax credit shall be
allowed after the GST has been paid on such supplies at: -
 60% (30% in case of IGST) for goods with CGST rate of 9% and
more
 40% (20% in case of IGST) in case of other goods.
(iv) The registered person who avails this scheme and furnishes the details
of stock, must submit a statement in FORM GST TRAN -2 at the end
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82 indicati ng the details of supplies of such goods effected during the tax
period.
(v) The amount of credit allowed shall be credited to the electronic credit
ledger of the applicant maintained in FORM GST PMT -2 on the
common portal.
(vi) The stock of goods on which the cred it is availed should be identified
by the registered person.
C. Transfer of credit on sale / merger/ amalgamation/ lease/ transfer
etc.
A registered person may transfer his unavailed ( unutilised) credit inthe
event of sale, merger, de -merger, amalgamatio n, lease or transfer or
change in the ownership of business for any reason subject to the
following : -
(1) The registered personfurnishes the details in FORM GST ITC -02,
electronically on the common portal along with a request for transfer
of unutilized Input Tax Credit lying in his Electronic Credit Ledger to
the transferee.
(2) In case of demerger, the Input Tax Credit shall be apportioned in the
ratio of the value of assets of the new units as specified in the
demerger scheme.
(3) The transferor shal l also submit a copy of a certificate issued by a
practicing Chartered Accountant or Cost Accountant certifying that
the sale, merger, de -merger, amalgamation, lease or transfer of
business has been done with a specific provision for the transfer of
liabil ities.
(4) The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the unutilised
credit specified in FORM GST ITC -02 shall be credited to his
Electronic Credit Ledger.
(5) The inputs and c apital goods so transferred shall be duly accounted
for by the transferee in his books of account.
5.10 REVERSAL OF CREDIT UNDER SPECIAL CIRCUMSTANCES Rule 44(1) of CGST Rules provides for reversal of credit for CGST/
SGST/UGST and IGST relating to inputs held in stock of raw material
semi -finished goods, finished goods or capital goods.
The credit so reversed shall be determined separately for each tax in the
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Input tax credit
83 1. For inputs held in stock, the credit shall be calculated proportionately
on th e basis of the corresponding invoices on which credit had been
availed by the registered taxable person on such inputs.
2. For capital goods held in stock, the credit involved in the remaining
useful life in months shall be computed on pro -rata basis, taking the
useful life as five years.
3. Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount based on the
prevailing market price of the goods on the effective date of the
occurrence of any o f the events.
4. The credit so determined shall form part of the output tax liability of
the registered person and the details thereof shall be furnished in
 FORM GST ITC -03, in case the credit relates to any event and
 FORM GSTR -10, where the credit relates to the cancellation of
registration.
5. The details furnished shall be duly certified by a practicing Chartered
Accountant or Cost Accountant .
6. The amount of credit for the purposes relating to capital goods shall
be determined in the same manner as specified and the amount shall
be determined separately for input tax credit of
CGST/SGST/UTGST/IGST.
7. Where the amount so determined is more than the tax determined on
the transaction value of the capital goods, the amount determined
shall form part of the output ta x liability and the same shall be
furnished in FORM GSTR -1.
5.11 ITC ON CAPITAL GOODS AND IMPORTS 5.11.1 ITC on Capital Goods in GST :
(a) ITC would be available in full without restriction where capital goods
have been used for effecting taxable supplies and b usiness activity.
(b) No credit will be admissible capital goods used exclusively for
effecting exempt supplies or non -business or personal activity.
(c) Credit to extent of depreciation under Income Tax Act is not
admissible.
(d) Capital goods after taking credit ca n be sent to job -worker without
reversing credit. The capital goods so sent to job -worker are to be
returned within three years and otherwise the principal shall be liable
to pay the tax along with applicable interest.
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84 5.11.2 Input Tax Credit for importer s:
(a) Integrated Tax (IGST) paid on imports is entitled for Input Tax Credit
in terms of the bill of entry or any similar document prescribed under
the Customs Act. However, the credit of Basic Customs Duty (BCD)
would not be available.
(b) In case of goods impor ted by a unit or a developer of SEZ, for
authorised operations are exempted from the whole of the IGST.
(c) Export Oriented Units (EOU), Electronic Hardware Technology Park,
(EHTP),Software Technology Parks (STP) who are be eligible for
BCD exemption, shall to pay IGST on imports but the credit of the
IGST so paid shall be eligible for ITC. This credit can be utilized
towards payment of CGST on Domestic Tariff Unit(DTA) clearance
or refund can be claimed on accumulation of the IGST.
5.12 OTHER PTOVISIONS 5.12.1. Offences and penalties :
a. Demand/ Penalty on registered person for violation of ITC
provisions :
Under section 73/74 the proper officer is authorised to issue demand
notices to recover the credit wrongfully availed and also impose a penalty
upto 100% of such credit from a Registered Person for violation of the
ITC provisions.
b. Issuing false invoice:
A person, who issues invoice without supplying goods and thereby
enables the recipient to take credit without possession of goods, shall be
liable to a pe nalty equal to amount of ITC involved or Rs.1000/ -
whichever is higher.
c. Prosecution :
Prosecution can be initiated for the default, which is punishable for fine
and imprisonment of one year upto five years depending upon amount of
ITC involved.
5.12.2 Refun ds:
As per section 54 an eligible person or supplier can claim refund provided
that ITC is excess of his outward liability.
Conditions to claim refund :
1. Refund should be claimed before the expiry of 2 years from the
relevant date.
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85 3. Return under section 39 should be filed
4. No refund shall be available
a. in case of zero rated supplies made without payment of taxes
b. where the credit consists of rate of tax on inputs is higher than that of
output supplies
5. Minimum amou nt to be refunded is Rs. 1,000
5.12.3 Miscellaneous Provisions :
(1) The value of exempt supply shall be calculated in terms of formula
prescribed in rules and shall include supplies on which the recipient is
liable to pay tax on Reverse Charge basis, transacti ons in securities,
sale of land and sale of building.
(2) A banking company or a financial institution including a non -banking
financial company, engaged in supplying services by way of
accepting deposits, extending loans or advances shall have the option
to either comply with the provisions of formula so prescribed or avail
of, every month, an amount equal to 50% of the eligible input tax
credit on inputs, capital goods and input services in that month and
the rest shall lapse.
(3) Amount of ITC already claimed wi th interest will be added to the
output tax liability unless the payment for supplies received has been
made within a maximum period of 180 days.
(4) ITC is not admissible to that extent of depreciation on capital goods
claimed.
(5) A Registered person shall not b e allowed to take ITC, if the same has
not been credited within 1 year from the date of issue of tax invoice
relating to such supply of goods or services or both.
(6) ITC would also not be permissible if invoice or debit note is received
after due date of fili ng return for September of next financial year or
filing annual return whichever is later.
5.13 SELF -EXAMINATION QUESTIONS Multiple Choice Question:
1. Input Tax Credit is the credit available of taxes paid on
________________.
a) Inward supply
b) Outward supply
c) Export of Goods & Services
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86 2. Input Tax Credit is to be availed only if ____________________.
a) The person is a registered supplier
b) There is a proper tax invoice
c) Both (a) & (b)
d) None of the above
3. Input Tax Credi t cannot be availed against :
a) CGST
b) SGST
c) IGST
d) Composition tax paid by supplier
4. Input Tax Credit should be reversed if
a) The relevant invoice is not paid within 180 days
b) The relevant goods are destroyed by fire
c) The relevant goods are d estroyed by natural calamity
d) All of the above
5. Input Tax Credit with respect to these items is not available .
a) Personal purchases
b) Food & Beverages purchases
c) LIC premium
d) All of the above
6. Maximum time limit to claim input tax credit is
a) Till the date of filing annual return
b) 30th September following the relevant financial year
c) Earlier of a) and b)
d) Later of a) and b)
Self Examination Questions:
1. What is Input tax?
2. Explain the concept of Input credit.
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87 4. Enumerate the supplies not eligible for ITC
5. When can the ITC be reversed ?
6. Explain the utilistaion of ITC.
7. What are the conditions for claiming ITC?
8. Can a person claim ITC who has not filedreturns ?


*****
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88 6
REGISTRATION UNDER GST
Unit Structure
6.1 Introduction and Objectives
6.2 Need and Advantages of Registration
6.3 Liability for Registration
6.4 Registration Procedures
6.5 Amendment of Registration
6.6 Cancellation of Registration
6.7 Self- Examination Questions
6.1 INTRODUCTION A ND OBJECTIVES GST is a destination -based tax which is levied at each stage of supply
chain comprising of manufacturer, distributor, retailer and consumer.
Liability for payment of tax to the Government is on the supplier of goods
or service at each stage.
At each stage of the supply chain, the supplier of goods or services or both
can claim credit for tax paid on inputs (ITC) at the previous stage. The
credit for tax paid can be claimed only against his liability for payment of
tax to the government at tha t stage.
The actual consumer is the final destination of goods, services or both.
Obviously, the actual consumer can not claim credit for tax paid by him as
he has no liability of making payment to the government. Hence, the
actual consumer has to bear th e burden of GST. Thus, actual and factual
taxpayers are different persons.
Registration establishes the chain between the government and the
consumer. The registration of suppliers not only helps the government to
identify the taxpayers but also enables the tax payers to collect tax from
the consumers. Further, it establishes a seamless flow for claiming credit
of tax paid on inputs (ITC).
This lesson takes a detailed look at the provisions relating to Registration,
its need, advantages, liability for re gistration, exemption from registration,
procedural aspect for registration and its modification or cancellation etc.
6.2 NEED AND ADVANTAGES OF REGISTRATION Registration is a process for obtaining a unique number from the
Government by a supplier of goods or service or both. It enables or
authorizes the supplier to collect tax from the consumer of goods or
services or both on behalf of the Government and avail Input tax credit for
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89 Without registration, a supplier cannot coll ect tax from his customers nor
can he claim any input tax credit of tax paid by him.
Registration confers the following advantages on a taxpayer: -
a. Registration grants official recognition to a person as the supplier of
goods or services or both.
b. Only a registered supplier is authorised to collect tax from the
consumers.
c. The supplier may pass on credit in respect of the taxes paid on the
goods or services or both supplied to the consumer.
d. The supplier may claim and utilise input tax credit of taxes paid
towards the discharge of his liability for taxes due on supply of goods
or services or both.
e. Registration establishes a supply chain at the national level with a
seamless fl ow of Input tax credit from the suppliers to the consumers.
6.3 LIABILITY FOR REGISTRA TION 6.3.1 Liability for Registration by a supplier of goods and/o r services
in four ways, viz.:
a. Registration on Migration of existing tax payers from the old law to
the GST,
b. Registration based on minimum turnover of supply of goods and/or
services,
c. Com pulsory Registration irrespective of the turnover limit and
d. Voluntary Registration irrespective of the turnover limit.
6.3.2 Migration of the existing taxpayers from the old law to the GST :
When the GST came in to force on 01 July, 2017, as a transitory measure
all the existing suppliers/ dealers who were registered or holding a license
under any of the existing laws such as central excise, service tax or VAT
etc. were required to migrate to GST and obtain Provisional Registration
under the GST latest by 30th June 2017 vide s ection 22(2) of the CGST
Act, 2017 and submit declaration of stocks and unavailed input credit on
30th June 2017 to facilitate smooth transition to the new regime.
The Provisional Registration was subject to final registration upon
submission of requisite documents and information.
6.3.3 Registration based on turnover of taxable supply :
6.3.3.1 As per section 22(1) of the CGST Act, 2017, every supplier whose
aggregate turnover of taxable supply of goods or services or both exceeds
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Taxation - IV (Indirect Taxes - II)
90 State or Union Territory, from where he makes a taxable supply of goods
or services or both.
6.3.3.2 The threshold or the specified limit of aggregate turnover: Threshold Turnover limits for Registration Type of Supplier Special Category States except UT of Jammu & Kashmir, Ladakh and Assam ) Non-Special Category States, (except Puducherry) For any taxable person engaged in supply of goods only Twenty lakh rupees Forty lakh rupees For any taxable person engaged in supply of goods or services or both Ten lakh rupees Twenty lakh rupees
Notes:
1. Special Category States include States of Arunachal Pradesh,
Assam,Manipur, Meghalaya, Mizoram Nagaland and Tripura and
Himachal Pra desh, Sikkim and Uttarakhand and UTs of Jammu &
Kashmir& Ladakh
2. After 05 -08 2019 State of Jammu & Kashmir have been reorganized
into the Union Territories of Jammu & Kashmir and Union Territory
of Ladakh. Both the UTs fall in Special Category State butit h asopted
for threshold limit of Rs 40 lakh not 20 lakh.
3. Among the Non -Special Category States, State of Puducherry opted
for threshold limit of Rs.20 lakh in respect of goods NOT Rs.40 lakh.
4. As per proviso to section 22(1)of the CGST Actthe threshold limit of
turnover for a taxable person in a Non -Special Category State, having
a branch in Special Category State will be Rupees 20 lakh, not Rupees
40 lakh.
6.3.3.3 Meaning of Aggregate turnover :
A. “Aggregate turnover” as per section 2(6), means the aggregate value
of-
i. all taxable supplies,
ii. exempt supplies,
iii. exports of goods or services or both, and
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91 B. Aggregate turnover of supply of goods or services or both is
computed
a. for a supplier having the same Permanent Account N umberon the
principle of one PAN - one person,
b. for the whole of India taken together,
c. with reference to the financial year i.e. April to March
C. The value of aggregate turnover excludes :-
a. Central tax, State tax, Union territory tax, Integrated tax and Cess ;
b. The value of inward supplies on which tax is payable by a 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 ;
b. supplies made on behalf of al l his principals; or
c. in case of a principal, the supply of goodsby a registered job worker
after Completion of job -work.
6.3.3.4 Persons not liable for Registration -Section 23 :
A. Any person engaged exclusively in the business of supplying goods or
services o r both, which are not liable to tax or 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
section, to :
(i) Individual advocates including senior advocates ,
(ii) Individual sponsorship service providers including players ,
(iii) Suppliers, whose all supplies are taxable under Rever se Charge (vide
Notification No. 5/2017 -Central Tax dated 19.06.2017).
6.3.3.5 Some relevant points :
As per rule 18, every registered person shall display his certificate of
registration in a prominent place at his principal place of business and at
every additional place or places of business.
Every registered person shall display his goods and services tax
identification number (GSTIN) on the name board exhibited at the entry of
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92 6.3.3.6 at every additional place or pla ces of business. :
(i) The liability for registration is on “every supplier”.
(ii) 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
rupees.
(iii) Under section 22 read with section 23, asuppli er of only tax -free
supplies is not liable for registration.
(iv) An agriculturist is specifically exempted from registration to the
extent of supply of produce out of cultivation of land.
(v) A supplier having tax -free supplies also has some taxable supply,
then, all supplies, whether taxable or tax -free in the course of export
or inter -State supply, will be considered in aggregate turnover.
(vi) A supplierof only supplies taxable under reverse charge e.g. a
transporter or lawyer is exempted from registration vide Not ification
No. 5/2017 -Central Tax dated 19.06.2017.
(vii) All supplies 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 case of a principal, the supply of goods , after completion of job -
work, by a registered job worker.
(viii) The value of the supply considered in the account of the principal,
shall not be included in the aggregate turnover of the registered job
worker because only one person should be liable for acc ounting the
turnover of supply.
(ix) Registration shall be taken in the state or union territoryfrom where
the supplier makes the taxable supply of goods or services or both.
6.3.3.7 Illustrations:
1. Ashok supplies taxable goods from Imphal (Manipur) of Rs 21 l akh.
A is liable for registration as the value of supplies provided by him
exceeds Rs 20 lakh Manipur being a special category state.
2. Babu, who is a Kolkata based wholesaler in tea provides supplies in
Panaji (Goa). B will be liable for registration in Pa naji when the
aggregate turnover or supply (sales) exceeds Rs 40 lakh.
3. Anil supplies (sells) taxable goods of Rs 35 lakh on his personal
account and Rs 7lakh on his principal B’s Account, for whom he acts
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93 supply made on his account and on B’s account. A will be liable for
registration, when the turnover exceeds Rs 20 lakh
4. X jewellers Pune sends goods on job work to Y a registered artisan. Y
completes the job work and sends goods to X valued at Rs 24 lakh.
X’s own turnover is of Rs 20 lakh. Xwill be liable for registration
when his own turnover together with the goods received from Y
exceeds the threshold limit of Rs 40 lakh. However, then the turnover
of Rs 20lakh will be excluded from the turnover of the job worker.
5. University of Mumbai provides only tax - free education services
valued at Rs 50 lakh is not liable for registration because it does not
provide any taxable supply.
6. The Bombay Hospital provides tax -free medical services of Rs 1 8
lakh and taxable services of Rs 4 lakh. It will be liable for registration
as its aggregate turnover exceeds Rs 20 lakh.
7. Ashok makes export of taxable goods for Rs 100 lakh. Ashok will be
liable for registration, although his tax liability will be Nil.
8. Maheshis engaged exclusively in supplying tax -free goods. He will
not be liable for registration although the turnover may be in excess of
the threshold limit of Rs 40 lakh.
9. Babu supplies taxable goods worth Rs 50 lakh and tax able services of
Rs 25 lakh. He will be liable for registration from the date on which
the aggregate turnover of supply of goods/ services exceeds Rs 20
lakhs.
10. R has Turnover of supplies of goods and services Rs 16 lakh in
Maharashtra and Rs 8 lakh in Gujarat. His turnover from suppl ies of
goods and services is Rs 24 lakh which exceeds the threshold of Rs
20 lakh. Hence R is required to obtain Registration in both the States
Compulsory registration – Section 24 :
As per Section 24 of the CGST Act, 2017, following categories of persons
are liable for compulsory registration irrespective of the amount of
turnover: -
(i) Inter -State Suppliers :
Persons making any inter -State taxable supply (e.g. from Chennai to
Pune); However, vide Notification No. 10/2017 -Integrated Tax dated
13.10.2017, the benefit of threshold limit of 10 /20 lakhs has been
extended to persons making inter -State supplies of taxable services,
having an aggregate turnover, to be computed on all India basis, not
exceeding an amount of twenty lakh rupees (ten lakh rupees for spe cial
category States except J & K) and such persons will be exempted from
obtaining registration
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94 (ii) Casual taxable person :
A casual taxable person means a person,
 who has a registered business in one state or union territory and
 wants to effect taxable supplies from some other state or union
territory
 where he is not having any fixed place of business.
A casual taxable person will be liable for registration in the state from
where he seeks to effect taxable supply.
Example:
A Kanpur (UP) based supplier of shoes wants to effect supply from
Mumba i, he will have to obtain registration as casual taxable person in
Mumbai.
A casual taxable person has to apply for registration at least five days in
advance of making such supply and make advance deposit of the
estimated tax liability.
Such registration is grantedfor a specified period onlynot exceeding 90
days but the period may be extended on making application.
Exception:
A casual taxable person making supplies of specifiedhandicraft goodsneed
not take compulsory registration, if his turnover does no t exceed the
thresholdexemption of Rs. 20 Lakh/10 lakh.
(iii) Non-Resident Taxable Person :
A Non -resident taxable person means
 a foreignernot having fixed place of business in India and
 who desires to make any taxable supply any State in India.
A Non -residen t taxable person has to apply for registration at least five
days in advance of making such supply and make advance deposit of the
estimated tax liability
Registrationis granted to the non -resident taxable persons only for a
specified period only, but the period may be extended on making
application.
(iv) Payer of tax under reverse charge :
Any persons required to pay tax under reverse charge mechanism (RCM)
on the supplies received by him such as client of advocates, receiver of
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95 (v) E-Commerce Operator :
E-commerce operatornotified as liable for payment of GST undersection
9(5) of the CGST Act, 2017.
(vi) Tax Deductor :
Persons required to deduct tax under section 51, whether or not separately
registered under this Ac t.
(vii) Agent :
Any Person making taxable supply of goods or services or both on behalf
of other taxable persons whether as an agent or otherwise;
(viii) Input Service Distributor whether or not separately registered
under this Act;
(ix) Supplier through E -Commerce Operato r subject to TCS :
Any person, who supplies goods or services or both, other than supplies
specified under section 9(5) through any E - Commerce Operator, who is
required to collect tax at source (TCS) under section 52.
(x) Supplier through E - Commerce Operator subject to TDS :
Any person, who supplies goodsor services or both through any E -
Commerce Operators,who is required to collect tax at source.
However , suppliers of taxable servicesthrough e -commerce operators
need not take compulsory registration and are entitled to avail the
threshold exemption of Rs. 20 lakh/10 lakh(Notification No. 65/2017 -
Central tax dt. 15.11.2017)
(xi) E-commerce Operator , who provideplatform to the suppliers to
make supply through them.
(xii) Every person supplying Online Information and Datab ase Access or
Retrieval Services (OIDAR) from a place outside India to an
unregistered person in India;
(xiii) Such other person or class of persons as may be notified by the
Government on the recommendations of the Council.
11. Voluntary r egistration :
Any person ha ving turnover below the threshold limit Rs. 20 lakh/10
lakhmay opt for voluntary registration. Entire turnover of such supplier
will be subject to GST from the day of registration without the benefit of
the threshold limit of Rs 20 lakh /10 lakh. Voluntar y registration will not
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96 6.4 REGISTRATION PROCEDURES 6.4.1 Nature of Registration and salient features :
Different procedures have been prescribed for registration of different
classes of suppliers, name ly non-resident taxable person, casual taxable
person, deductor of tax, collector of tax, supplier of Online Information
Database Access and Retrieval (OIDAR) services and other suppliers.
These provisions have been dealt with separately at the appropriate places.
Salient features for registration procedures applicable to all other suppliers
are summarized below.
(i) Registration not tax specific but common registration for all the taxes
i.e. CGST, SGST/UTGST, IGST and Cesses.
(ii) GST Registration PAN based and St ate/UT specific. A given PAN
based legal entity would have one GSTIN per State/UT.
(iii) A taxable person required to register in each State or Union territory
from where he effects supply.
(iv) An entity having branches in multiple States will have to take separate
registration for the branches in different States/UTs.
(v) An entity having branches within one State or Union territory, may
obtain single registration declaring one place as the principal place of
business and the other branches as additional places of business.This
rule is subject to 3 exceptions, where separate registration is required
even within a state, namely : -
i. a unit in SEZ ; or
ii. a SEZ developer; or
iii. Each of business verticals separately of business entity within a State
or Unit Terr itory.
“business vertical” as per Section 2(18) of CGTS Act, 2017 means “a
distinguishable component of an enterprise that is engaged in supplying an
individual product or service or a group of related products or services and
that is subject to risks and returns that are different from those of other
business verticals;
Explanation: Factors that should be considered in determining whether
products or services are related include:
(a) the nature of the products or services;
(b) the nature of the producti on 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;
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97 (e) if applicable, the nature of the regulatory environment, for example,
banking, insurance, or p ublic utilities.”
(vi) Upon registration:
a) 15-digit ‘Goods and Service Tax Identification Number or “GSTIN”
is allotted to the supplier. GSTIN comprising of
(i) the first 2 digits forthe State code followed by
(ii) 10 digits PAN of the legal entity,
(iii) 2 digits for the e ntity code and t
(iv) the last digit for check number.
b) Certificate of Registration incorporating the GSTIN is issued to the
taxpayer,
c) The GSTIN is made available to the applicant on the GSTN common
portal.
d) Centralised Unique Identification Number (UIN) is issue d in respect
of supplies to some notified agencies of United Nations organisation,
multinational financial institutions and other organisations.
6.4.2 Standardisation of procedures for Registration:
To ensureuniformity of the process all over the country and speeding up
the decision making process, GST Registration Rules prescribe as many as
30 standardforms / formats to be used for every process in the registration
chain such as application for registration, acknowledgment, query,
rejection, registration certificate, show cause notice for cancellation, reply,
cancellation, amendment, field visit report etc.
The rules also stipulate strict timelines for completion of different stages
of registration process. The standardized process for Registration is give n
below.
6.4.3 Procedure for Re gistration for Regular Taxpayers:
Submission of application for registration:
(i) Every taxable person, who is not a non -resident, deductor of tax and
collector of tax has to submit application for registration online
through th e common portal (GSTN) or the Facilitation Centrein form
GST REG -01.
(ii) Time limit for submission of application is within thirty days from
the date when liability to register arises.
(iii) Form for GST REG -01 is in two part – Part A and part B
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Taxation - IV (Indirect Taxes - II)
98  Part -B gives the application reference no. given in acknowledgment
in GST -REG -02
(iv) Documents required for Registration
1) PAN of the applicant
2) Identify and address proof of the promotors
3) Proof of registratio n of business, e.g. partnership deed, registration
certificate, certificate of incorporation etc.
4) Address proof for place of business such as Rent receipt, electricity
bill , Municipal certificate etc.
5) Bank account proof
6) Digital Signature
(v) On submission o f the application, PAN of the applicant is verified
through GST portal through One Time Password (OTP) on Mobile
no.
(vi) After verification If the documents are found to be in order, an
acknowledgment is issued electronically in Form GST -REG -02.
(vii) Verification p rocess
1. The application is then forwarded to the proper officer of the
respective State or the Central Government.
2. The Proper Officer examines the application and the accompanied
documents and upon the verification finds the same in order, shall
approve an d grant the registration within three working days.
3. In case, where the proper officer finds the application to be deficient
for any reason or requires any further clarification, he shall intimate to
the applicant in form GST -REG -03.
4. The applicant shall su bmit the reply with clarification in 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
corre ction of particulars declared in the application for registration.
(viii) Grant or refusal of registration
The proper officer shall grant the application for registration within seven
working days thereafter and issue Registration Certificate in form GST -
REG -06 or reject the application in form GST -REG -05.
(ix) If the proper officer does not respond within 3 working days of receipt
of application or within 7 working days from receipt of clarification,
then application under this Act shall be deemed to have been
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99 (x) Physical verification in connection with registration
Since, the basic premise on which GST is based is evolution of a
technology based tax regime reducing physical interface, physical
verification is avoided to the extent possible.
However, where t he proper officer is satisfied and deems necessity or
desirable to carry out physical verification, he may do so only after
granting the registration.
After the verification, the Proper Officer shall upload the verification
report along with the supportin g documents and photographs on the
common portal within fifteen working days.
6.4.4 Registration procedure for Casual Taxable Person :
A Casual Taxable Person is a person who occasionally undertakes
transactions involving supply of goods or services or both in the course or
furtherance of business, whether as principal, agent or in any other
capacity, in a State or a Union territory where he has no fixed place of
business.
Generally, Casual Taxable Persons, unlike the regular suppliers do not
have a fixed p lace of business located in a State or Union Territory where
they supply goods or services or both.
Persons running temporary businesses like event management, business
fairs or exhibitions or other seasonal businesses fall under casual taxable
persons und er GST.
Following provisions are applicable on a Casual Taxable Person: -
(i) Registration under GST is compulsory for casual taxable person
irrespective of the annual aggregate turnover.
(ii) A Casual Taxable Person shall make the application for GST
registration inform GST REG -01 at least 5 days prior to the
commencement of business.
(iii) Deposit for GST Registration
Nor only a Casual Taxable Person cannot opt for composition scheme but
is required to deposit in advance an amount equivalent to the expected tax
liabilit y during the validity period of registration. For this purpose, a
temporary reference number is generated for payment of GST deposit.
(iv) On paying the GST deposit, the Electronic Cash Ledger of the
taxpayer is credited, and GST Registration Certificate is re leased,
which will be valid initially for a period specified in the application or
90 days, whichever is earlier.
(v) The period of extension may be extended for a further period of 90
days on making application in form GST -REG -11 before the expiry of
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Taxation - IV (Indirect Taxes - II)
100 equivalent to additional tax liability during the extended period. Other
procedures will be similar as those applicable mutatis mutandis to
regular taxable persons
(vi) Filing of returns :
A registered a casual taxable person has to file the following monthly
returns
 Form GSTR -1 on or before the 10th of the following month giving
detail of the outward supplies of goods or service made by him
 Form GSTR -2after the 10th but on or before the 15th of t he 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 an nual re turn by a casual taxable
person .
(vii) Refund of Tax :
After filing all the returns for the registration period, a Causal Taxable
Person may claim refund in From GSTR3 in respect of the excess tax paid
by him.
6.4.5 Registration procedure for Non - Resident Taxable Person :
A Non -Resident Taxable Person means any person or business or not -for-
profit organisation, who occasionally undertakes 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 under the GST law.
The procedure for registration by a Non -Resident Taxable Person is as
follows:
(i) Registration under GST is compulsory for the Non -Resident Taxable
Person irrespective of the annual aggregate turnover or any other
criteria.
(ii) A Non -Resident Taxable Person shall identify a person resident in
India having a valid PAN in India t o act as its authorised
representative in India.
(iii) Application for registration shall be submitted
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101 2. shall be in form GST REG -09,and
3. signed by his authorized signatory having a valid PAN in India
(iv) A Non -Resident Taxable Person is required to file the following
documents for GST registration :
1. Documents showing proof of -
i) Principal place of business such as rent receipt agreement, electricity
bill or consent letter from the owner of the premi ses.
ii) Identity such as passport visa. etc.
iii) Bank account with IFC Code MICR etc.
2. Tax identification number or unique number, PAN on the basis of
which the entity is identified by the foreign government, if available.
3. Authorisation for authorised representa tive in India along with the
copy of the resolution of the board of directors granting such
Authorisation , if any
4. Certificate of incorporation of the company ;
5. License issued by foreign country, if any;
6. Clearance certificate issued by Government of Ind ia, if any;
(v) GST Deposit for Non-Resident Taxable Person
Non-Resident Taxable persons are also required to make deposit of an
amount equivalent to the expected tax liability during the validity of the
registration for GST registration, where upon the Regist ration Certificate
will be issued.
(vi) An application reference number would be generated for payment
of advance tax for obtaining GST registration.
(vii) For final registration, an application is required to be submitted in
form GST REG -26 electronically within a period of 3 months from
the provisional registration.
(viii) The proper officer, after verification shall issue registration in form
GST REG -06.
(ix) If the officer is not satisfied with the correctness or completeness
of the information submitted or needs addit ional information, he
shall issue a show cause notice to the applicant in Form GST REG -
27.
(x) If the reply to the show cause is satisfactory, the show cause notice
may be cancelled by issuing an order in Form GST REG -20,and if it
is not satisfactory , then the officer after giving opportunity of
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Taxation - IV (Indirect Taxes - II)
102 the provisional registration granted to the applicant in Form GST
REG -28.
(xi) After expiry of the period of the Registration Certificate, an
applicati on may be filed for extension of registration Period in form
GST -REG -11. Also deposit will be required to be made equivalent
to the estimated tax liability for the extended period.
(xii) Other provisions are similar to those applicable on the regular
taxable pe rsons in regard to the final registration.
(xiii) The rules for filing of returns, refunds etc. are similar to those
applicable to the casual taxable persons.
6.4.6 OIDAR Service Provider :
A taxable person, who supplies Online Information and Data base Access
or Retrieval (OIDAR) Services to a non -taxable online recipient is
required to file the application for registration in Form GST REG -10
electronically and follow the procedure applicable to non - taxable persons.
6.4.7 Deductor or collector of GST :
A person who is liable to deduct GST at source or collect GST e.g. e -
commerce operator will have to follow the normal procedure as
applicable except that application for registration shall be submitted
electronically in Form GST REG -7
6.4.8 Special agency like un ited nation organization etc. :
United Nations and other connected specified agencies are not liable to
GST under the international protocols. However they are required to
obtain Registration by making an application in Form GST -REG -
13.Registration is requi red to claim refund of taxes paid on inward supply
of goods or service or both.
6.4.9 Succession or transfer of business :
On succession or transfer of a business as result of amalgamation, merger,
demerger or change in constitution etc., the transferee o f a business as
going concern is liable for registration within30 days from the date of
transfer or succession and the transferee has to follow the applicable
procedure as above.
6.5 AMENDMENT OF REGISTRATION Procedure for amendment in particulars of regist ration varies according to
the nature of amendments ought, which may be of the following three
types:
(i) Changes in core field, which do not require cancellation of
Registration under section 29 of CGST Act :
Under Rule 12, a taxable person may make an appl ication for amendment
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103 (i) Legal name of the business, or
(ii) State of place of business or
(iii) Additional place of business., or
(iv) Names of the functionaries – like partners, directors, etc.
The Proper Offi cer shall after making necessary inquiry, approve the
amendment electronically in form GST -REG -15within next 15 days from
the date of application.
(ii) Change in Non - Core field :
All the other corrections amendments or change in the particulars of
registrati on are called the change in non - core field. This change includes
a change in the name of the authorised signatory by adding another name
of signatory A taxable person suo motu (on his own) may effect such
changes on the common portal without seeking approval of the Proper
Officer. Otherwise the change will not be effective.
(iii) Change in Mobile , email etc. :
Change in e -mail, or mobile numbers may be effected in the common
portal by the taxable person after an online verification through one time
password (OT P) is issued.
Eligible persons :
Change in the particulars can be effected by the following categories of
persons, viz:
1. Applicant or Taxable person
2. Person holding UIN Card or other notified person for registration
under TDS/TCS U. N. bodies category,
3. Non-Resident taxpayer
4. GST Practitioner , and
5. Online application and retrieval service provider.
(iv) Fields, which cannot be changed :
The following changes which have the effect of changing theState specific
PAN based incidence of GST are not allowed:
a. Change i n constitution of business ,
b. Modification of place of business from one state to another.
c. In these cases, a fresh registration will have to be obtained after
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104 The amendments will come into effect from the date of applic ation for
amendment.
However, the Commissioner may allow the amendments with
retrospective effect.
6.6 CANCELLATION OF REGISTRATION 6.6.1 Under section 29(1), Registration can be cancelled only in two
circumstances: -
(i) Voluntarily when a taxable person no more requires it , or
(ii) Suo motu by the Proper Officer, when he considers the registration
liable due to some specific defaults
6.6.2 Voluntary Cancellation :
6.6.2.1 Cancellation of Registratio n of migrated taxpayers :
An existing taxpayer, who has migrated from old tax regime to GST, may
opt for cancellation of Registration online on GSTN portal, if he has not
issued any tax invoice or in Form GST - REG - 16 if he has issued any tax
invoice.
In either case, cancellation is allowed only if his: -
(I.) Turnover is bel ow the threshold limit , or
(II.) Supply is in exempted category.
6.6.2.2 Cancellation of registration of other taxpayers :
1. Time condition:
(i) Where a taxable person not being liable for obtaining registration, has
taken voluntary registration , cancellation of reg istration is not
allowed until expiry of one year from the effective date of
registration.
(ii) Other taxpayer may opt for cancellation anytime as the condition of
one year does not apply on them.
2. Reasons for cancellation :
The cancellation may be for the foll owing reason: -
a) the business of the taxpayer has been discontinued ;
b) the business has been sold or transferred to some other entity and that
other entity needs to register under GST;
c) turnover is below the threshold limit; or
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105 6.6.2.3 Procedure for cancellation:
A taxable person desirous of cancellation of registration may apply on the
common portal within 30 days of event warranting cancellation in Form
GST -REG -16. Such person is required to
a) declare in the application the stock held on the date with effect from
which he seeks cancellation ,
b) work out and declare
 the quantum of dues of payments,
 credit reversal, and
 the particulars of payments made towards discharge of such liabilities.
On receipt of the application t he Proper officer shall cancel the
registration within 30 days from the date of application or receipt of
explanations or clarifications in response to his notice issued by him in
Form GST -REG -16 , if any. The notice has to be replied in in Form GST -
REG -18 within seven days. The order of cancellation will be in Form
GST -REG -19.Revocation of notice will be in in Form GST -REG -20.
6.6.3 Suo-motu cancellation by the Officer :
6.6.3.1 The Proper Officer may issue a show cause notice in Form GST -
REG -16to a regis tered person and call for information. After considering
the information and hearing the taxpayer, the Proper Officer may cancel
the registration by passing an order in Form GST -REG -19, if he is
satisfied that the registered person has :
(i) contravened the p rovision of the Act and the Rules;
(ii) furnished returns for -
a) three consecutive tax periods in case of a composition taxpayer, or
b) Continuous period of six month in case of a regular taxpayer ;
(iii) obtained voluntary registration but not commenced business wit hin
six months of registration;
(iv) obtained registration by means of fraud, willful misstatement or
suppression of facts;
(v) discontinued business from the registered place of business;
(vi) been issuing tax invoice without making the supply of goods or
services; o r
(vii) Committed such other defaults as may be specified.
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106 6.6.3.2 Revocation of Cancellation :
Where registration is cancelled suo motu, the taxable person, within a
period of 30 days the service of cancellation order, may apply to the
proper officer for revok ing 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 registration was
cance lled by the officer.
On receipt of the application, th e Proper Officer, if satisfied, may either
revoke the cancellation earlier ordered by him or reject the request f or
revocation of cancellation, after observing the principle of natural justice
by way o f issuing notice to the person and hearing him on the issue.
6.6.3.3 Cancellation not to affect pending tax lability :
Cancellation of registration will not affect the liability of taxes prior to
cancellation. Further, the taxpayer will have to pay his due taxes by
reversing the input credit in stock of raw materials, finished or semi -
finished goods or make payment, whichever is higher. Similarly, input
credit on capital goods also will have to be reversed or the payment will
have to be made.
6.7 SELF -EXAMINATI ON QUESTIONS Multiple Choice Question :
1. Is GST applicable to all?
a. on turnover above 10 lakhs
b. on turnover above 20 lakhs
c. on turnover above 30 lakhs
d. on turnover above 40 lakhs
2. Aggregate turnover includes:
a) Taxable supplies of goods or se rvice or both
b) Exempt supplies of goods
c) Exports
d) All of the above

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107 3. Which of the following persons are not liable for registration?
a) Any person engaged exclusively in supplying services wholly
exempt from tax
b) Casual Taxable Person
c) Both (a) and (b)
d) None of the above
4. Within how many days a person should apply for registration?
a. Within 60 days from the date he becomes liable for registration.
b. Within 30 days from the date he becomes liable for
registration.
c. No Time Limit
d. Within 90 days from the date he becomes liable for registration.
5. A person having _______ business verticals in a State ______ obtain
a separate registration for each business vertical.
a. Single, shall
b. Multiple, shall
c. Multiple, may
d. Single, may
6. What is the validity of the registration certificate?
a. One year
b. No validity
c. Valid till it is cancelled.
d. Five years.
7. The registration certificate granted to Non -resident taxable person is
valid for days from the effective dat e of registration.
a. 30
b. 60
c. 90
d. 120

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108 8. If an entity has multiple branches within the same state, it requires
a. Registration for each branch separately
b. Single registration for all the branches
c. Multiple registration or single registr ation at the option of the
Assessee
d. Registration for each branch separately if the turnover of each
branch exceeds INR 20 Lakhs
9. Which of the following persons are not liable for registration?
a. Any person engaged exclusively in supplying goods or services
wholly exempt from tax
b. Causal taxable person
c. Non-resident taxable person
d. None of the above
10. An agriculturist is not required to take registration if he supplies
a. Any agricultural produce
b. Any agricultural produce grown by him or o ther agriculturalist
c. Agricultural produce out of cultivation of land
d. All the above
Self Examination Questions :
1. Explain the c oncept of casual taxable person .
2. What are the provisions for registration of a non - resident taxable
person
3. List out the forms used for registration and cancellation
3. State whether the following are true or false:
a) A migrated taxpayer cannot cancel his registration
b) Registration may be refused if turnover does not exceed the taxable
limit
c) A farmer is not liabl e to GST in respect of his agriculture
d) A plastic surgeon , who provides life -saving surgery for Rs 10lakh
(exempt) and cosmetic surgery ( taxable)for Rs 12 lakh not liable for
registration .
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109 f) An advocate is liable for registration under GST.
g) A Jammu taxpayer with taxable turnover of Rs 15 l akh not liable for
registration .
h) Application for registrant in is to be made in GST -REG 1
i) A non - resident has to pay tax in advance
j) A GST number taken by fr aud can be cancelled
k) A cancellation order cannot be revoked.
(False : a, b, d, e, f and j , True : c, g, h, i )


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