Background Material. Goods & Services Tax. Eastern India Regional Council The Institute of Chartered Accountants of India

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1 Background Material on Goods & Services Tax Eastern India Regional Council The Institute of Chartered Accountants of India

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3 ACKNOWLEDGEMENT: We are thankful to all the tireless efforts in earnestly contributing for the Background Material on GST. Without their kindest support this would not have been a success. CA.Avinash Poddar CA.Ashok Batra CA.Navya Malhotra CA.Sandesh Mundhra CA.Rajiv Kumar Sharma Eastern India Regional Council The Institute of Chartered Accountants of India

4 Message from CA Manish Goyal, Chairman, EIRC Dear Esteemed professional Colleagues, Life isn t about finding yourself. Life is about creating yourself George Bernard Shaw This famous adage, has always given me great impetus in rethinking about my strategies towards the enormous responsibilities bestowed upon me being the Chairman of this Eastern Region for the year We all know that a smart professional is not necessarily, one who knows all answers but a person who knows where to find them. This new era of Indirect Tax regime has forced the professionals alongwith every single individual to be in a learning mode. However we being the superior guide to the mass and also because of onus given by the exchequer on our profession, we need to evolve as master of the subject and guide the mass at large. It is mandated that we have a greater responsibility for the same and to stand firm on the expectation of our fellow citizens. With this we have no short cuts or relaxation to take the learning unconcernedly. We at the helm of affairs of the Eastern Region have hence geared up to give required exposure and training to our professionals,being imparted by experts from all over the Country. In order to further assist you a Background material on the subject carries immense importance. It is an endeavour to empower the members with information which would be exhaustive and at the same time handy. The GST booklet would serve this dual purpose. With multifarious sections, the background deals with all relevant and pertinent matters related to all fields of GST. The booklet compiled lucidly and vividly not only would simplify the professional work of our esteemed members but also the contents would meet the expectations of professionals. I wish to place on record the contribution and unstinted support by all my colleagues in the Regional Council in bringing out this Background material and I must make special mention of the contributions made by various contributors who have put in their tireless effort in bringing out this publication. I would love to receive inputs and suggestions from users of this publication for further improvement and updating the issue. CA Manish Goyal, Chairman, EIRC of ICAI

5 About the Authors CA.Avinash Poddar, Surat, CA. Avinash Poddar is a practicing Chartered Accountant with Indirect Taxes as his core area of practice. He has authored many books at National Level and also a book in Gujarati being the resident of the State of Gujarat. He is a person who believes in gaining knowledge from whatever source possible and at the same time sharing the same with others... CA. Ashok Batra B. Com (Hons.), LL.B, FCA, He is a Law Graduate and renowned Chartered Accountant. In addition, he holds the privilege of completing his Graduation from prestigious & most sought after institution of Delhi University i.e. Shri Ram College of Commerce. He has been functioning as a practicing Chartered Accountant ever since 1982 not only in traditionally ear-marked area of Direct Taxation but also in less travelled region of Indirect Taxation (particularly Service Tax & VAT). CA Navya Malhotra, B. Com(H), ACA, DISA CA Navya Malhotra, is an associate member of the Institute of Chartered Accountants of India since He has also done his graduation from University of Delhi. As a post qualification course, he has also completed his Diploma in Information Systems Audit (D.I.S.A) from the Institute of Chartered Accountants of India. CA Sandesh Mundhra CA Sandesh Mundhra is a Fellow Chartered Accountant with hands on experience and expertise in Project Management and Tax issues affecting construction & Real Estate sector, Corporate Training, Review of Consolidated Financial Statements Presently working as an Independent practitioner and also as a partner with M/s SNKI & Co., Ahmedabad, Audit & Assurance. CA. Rajeev K. Sharma The writer of this article is a Chartered Accountant having more than 17 years of experience in the field of indirect tax. He has authored a book on Punjab Value Added Tax, Law and Practice of Punjab VAT. He has to his credit many papers, published in National Level reputed tax publishers and presented at various National and State Level Forms.

6 6 Contents Sl. Page Topic No. No. 1 Chapter 1.1 Introduction And Applicability 8 2 Chapter 1.2 Important Terms Under GST 14 3 Chapter 1.3 The Term Supply, Composite Supply And Mixed Supply 26 4 Chapter 1.4 Levy And Collection Of Tax 29 5 Chapter 1.5 Composition Levy 31 6 Chapter 1.6 Time Of Supply 32 7 Chapter 1.7 Value Of Supply 35 8 Chapter 1.8 Input Tax Credit And Transfer Of Input Tax Credit 37 9 Chapter 1.9 Registration Chapter 1.10 Tax Invoice, Credit And Debit Notes Chapter 1.11 Returns Chapter 1.12 Payment Of Tax Chapter 1.13 Tax Deduction At Source Chapter 1.14 Reverse Charge Mechanism & Compensation Cess Chapter 1.15 Anti-Profiteering Clause Chapter 1.16 Transitional Provisions Chapter 1.17 Refunds Chapter 1.18 Accounts And Records Chapter 1.19 Job Work Chapter 1.20 Collection Of Tax At Source Chapter 1.21 Assessment Chapter 1.22 Audit Chapter 1.23 Demands And Recovery Chapter 1.24 Important Of GSTN, GST, Asp Chapter 1.25 Levy Of Compensation Cess (GST Compensation To State Act 2017) Chapter 2.1 Introduction And Applicability Chapter 2.2 Administration Chapter 2.3 Levy And Collection Of Tax Chapter 2.4 Determination Of Nature Of Supply Chapter 2.5 Place Of Supply Of Goods And Services Chapter 2.6 Refund Of Integrated Tax To Foreign Tourist Chapter 2.7 Zero Rated Supply Outline Of Important Provisions Of ITC Apportionment Of Credit And Blocked Credits Availability Of Input Tax Credit In Special Circumstances Reversal Of Input Tax Credit Where Shifted From Regular Section To Composition Levy Or Supplies Becomes Exempt 37 Outline Of Important Transitional Provisions

7 7 Sl. No. Topic Page No. 38 Transitional Arrangement For Input Tax Credit For A Registered Person Miscellaneous Transitional Provisions Understanding Import Export Procedure Under GST (CA Navya Malhotra) Procedure Of Filing Letter Of Undertaking (LUT)/Bond Under GST For Exports Invoicing For Exports Imports Change In Import Procedure SEZ Invoices For Supplies By SEZs Input Tax Mechanism Under Export And Import GST Impact Study On Construction Sector (CA.Sandesh Mundhra) Scheme Of Taxation Under GST Law Benefits Of GST Exemptions Impact On Ongoing Projects Transitional Issues Taxability Of Ongoing Projects Redevelopment (Including Slum Rehabilitation) Leasing Of Properties GST Returns Accounts And Records Under GST Transitional Issues In GST On Textiles - Deemed Credit Of CGST On Textile Cloth And Other Items (CA. Rajiv Sharma) Analysis Of Legal Provisions Table Of Reference 211

8 8 Chapter 1.1 Introduction and Applicability Introduction Goods and Services tax (GST) has been identified as one of most important tax reforms postindependence. It is a tax trigger, which will lead to business transformation for all major industries. Major step was to have the constitution amended which was done in the form of 101 st Constitution Amendment Act, 2016 for GST in the Parliament on 8 August 2016 and thereafter recently four GST Bills also got clearance from the Lok Sabha on 29 March 2017 and also from Rajya Sabha on 6 April 2017, with the clear road map being laid down by the Finance Ministry, the Government of India seems to be on course to implementing GST with effect from 1 July On 12 th April 2017 fours Acts are assented and notified. These are following: Central Goods and Services Tax Act 2017 Integrated Goods and Services Tax Act 2017 Union Territory Goods and Services Tax Act 2017, and Goods and Services Tax (Compensation to States) Act The GST Council consisting of representatives from the Centre as well as the states, after being constituted, met on twelve occasions to discuss various issues including dual control, GST laws, exemptions, thresholds, rate structure, compensation cess etc. and reached consensus on the same. Council has also recommended four-tier GST rate structure and the thresholds. The following is the detail regarding the GST Council meeting and its outcomes: Sr. No. Date Outcome of Meetings 1 22 nd & 23 rd September, 2016 GST Exemption Threshold Threshold limit to be set at Rs. 20 lakh per annum. In respect of north eastern and hilly states the limit to be set at Rs. 10 lakh per annum. The threshold for availing the Composition scheme would be Rs.50 lakhs. Service providers would be kept out of the Composition scheme Compensation Norms of states The compensation law and draft compensation formula for states would be decided subsequently. The base year for calculating compensation for states would be FY Dual Control & Assessment of Assesses Assessees having turnover below Rs. 1.5 Cr to be assessed by state officials and those above Rs. 1.5 Cr to be assessed by officials of the state as well as the centre. 1.1 million service tax assesses will continue to be assessed by the officials of the centre.

9 th September, 2016 Approve GST Draft Rules and Formats Approval of the Draft GST Rules on Registration; Payment; Return; Refund and Invoice, Debit & Credit Notes with the understanding that minor changes may be permitted with the approval of the Chairperson, if required, due to suggestions from the stakeholders or from the Law Department th to 19 th October, rd & 4 th November, 2016 Compensation to states To compensate States for 5 years for loss of revenue due to implementation of GST, the base year for the revenue of the State would be and a fixed growth rate of 14% will be applied to it Existing Exemptions All entities exempted from payment of indirect tax under any existing tax incentive scheme would pay tax in the GST regime and the decision to continue with any incentive scheme shall be with the concerned State or Central Government. In case any State Government or Central Government decides to continue any existing exemption/incentive scheme, it will be administered by way of a reimbursement mechanism. GST Rates and slabs were proposed. Also, the formula for the Centre compensating loss of revenue to states, 3-4 alternatives were discussed, but a decision could not be reached. GST Rates and slabs decided Bands of rates of goods under GST shall be 5%, 12%, 18% and 28% and in addition there would be a category of exempt goods. Further, a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the rate of 28% for payment of compensation to the States The meeting turned out to be inconclusive, as the impasse over the issue of assessee jurisdiction continued. 5 2 nd & 3 rd December, th December, 2016 The Council had a detailed discussion on the Model CGST and SGST legislation (Model GST Law) which was released in the public domain on 26 November The council deliberated upto section 99 of the Model GST Law out of the 197 sections nd & 23 rd December, 2016 Members debated over the provisions of the draft Central/state legislation three legislations mentioned above and parked the contentious issue of cross-empowerment for the second day. Finally, by the end of the meeting, the council reached a broad consensus on the draft of Central and state GST Legislations.

10 rd & 4 th January, 2017 No consensus has been achieved on Dual Control. States demanded taxation rights for sales made in the high seas (within 12 nautical miles). Furthermore, the states requested the GST Council to increase the number of items on which this new Cess is to be levied. The Cess has been additionally proposed to compensate the states for their revenue loss (estimated at INR 900 billion). Accordingly, the GST Council assured that the Cess will be levied on a list of commodities notified by the GST Council. At the end of year five, this Cess will be merged with the GST rate or divided between the Centre and states, as the Council decides th January, 2017 Dual Control of Center and State Government in GST Assessment Under the proposed tax regime, 90% of all assessees with a turnover of Rs 1.5 crore or less will be assessed for scrutiny and audit by state authorities, the remaining 10% by the Centre. Assessees with a turnover above Rs 1.5 crore, Centre and states will assess in a 50:50 ratio Resolving of IGST Dispute under GST Any IGST disputes among states will be resolved by the Centre. Taxation Rights under GST in Territorial waters extending to 12 nautical miles Territorial waters extending to 12 nautical miles fall under control of the union government but as per convention, states will be empowered to collect tax on any economic activity in this zone th February, 2017 Formally approved Compensation law. Some of the issues in CGST/SGT/IGST laws were discussed, final version of law (CGST/SGST/IGST)shall come on next meeting 4th & 5th March 11 4 th March, 2017 The council cleared the crucial CGST and IGST Bills. Hotels with annual turnover of less than 50 lakhs, will pay the lowest tax rate of 5% under the GST regime. The assignment of tax slabs for different categories of goods and services will be taken for redressal in the next GST council meeting

11 th March, 2017 State GST Bill and Union Territory Bill have been given approval by the Council. The Council also approved the bound rate of 15% as peak rate for the proposed Cess to be levied on certain demerit goods. The bound rate for aerated drinks and luxury car has been kept at 15% while the same will be 135% for the pan masala. For tobacco it is going to be 290 per cent or Rs 4170 per 1000 sticks. The Council also gave its nod for formation of a Committee to look into the issues of Meta Permit to be given for the movement of goods laden trucks in the GST regime. Formal approval to all the five legislations has been given by the Council. The five draft laws will be sent to the cabinet for approval and subsequently to Parliament st March, 2017 Five set of Draft Rules originally approved to be altered in consonance with the GST legislations: Nod to another four sets of Draft Rules Final approval to these 4 Draft Rules and rate structure to be taken up in next meeting: th May 2017 Approved GST rates for goods and GST Compensation Cess. fitment of rates of goods were discussed during the Council meeting rd June 2017 Council cleared the pending rules, including transition provisions and returns. All the states agreeing to a July 1 rollout of the new tax regime th June 2017 Council revised 66 items rates out of 133 representations. Council finalize accounting rules. Union territories with legislature, i.e., Delhi & Puducherry, will adopt SGST Act and the balance 5 Union territories without legislatures will adopt UTGST Act. Meanwhile, Centre and States have already begun the enrolment process for migrating existing taxpayers to the proposed tax regime through GST common portal. Central Goods and Service Tax Rules issued till date Sr. No. Rule Name Number of Rules 1 Composition Rules Rule 3 to 7 2 Registration Rule 8 to 26 3 Determination of Value of Supply Rule 27 to 35 4 Input Tax Credit Rule 36 to 45 5 Tax Invoice, Credit and Debit Note Rules Rule 46 to 55 6 Accounts and Records Rule 56 to 58

12 12 7 Returns Rule 59 to 84 8 Payment of Tax Rule 85 to 88 9 Refund Rule 89 to Assessment and Audit Rule 98 to Advance Rulings Rule 103 to Appeals and Revision Rule 108 to Transitional Provisions Rule 117 to Anti Profiteering Rule 122 to E Way Rules Rule Inspection, Search and Seizure Rule 139 to Demands and Recovery Rule 142 to Offences and Penalties Rule 162 GST in India and its coverage GST is a destination-based tax that will replace the current Central taxes and duties such as Excise Duty, Service Tax, Counter Vailing Duty (CVD), Special Additional Duty of Customs (SAD), central charges and cesses and local state taxes, i.e., Value Added Tax (VAT), Central Sales Tax (CST), Octroi, Entry Tax, Purchase Tax, Luxury Tax, Taxes on lottery, betting and gambling, state cesses and surcharges and Entertainment tax (other than the tax levied by the local bodies). It will be a dual levy with State/Union territory GST and Central GST. Moreover, inter state supplies would attract an Integrated GST, which would be the sum total of CGST and SGST/UTGST. Petroleum products, i.e., petroleum crude, high speed diesel, motor spirit, aviation turbine fuel, natural gas will be brought under the ambit of GST from such date as may be notified by the Government on recommendation of the Council. Alcohol for human consumption has been kept outside the purview of GST. Consensus between Central and state governments has been reached on four-tier rate structure viz. 5%; 12%; 18% and 28% for essential commodities; Standard rate for goods and services; Standard rate for goods and services and for goods which are taxed at rate higher than 28% currently, respectively. A well-designed GST in India is expected to simplify and rationalize the current indirect tax regime, eliminate tax cascading and put the Indian economy on high-growth trajectory. The proposed GST levy may potentially impact both manufacturing and services sector for the entire value chain of operations, namely procurement, manufacturing, distribution, warehousing, sales, and pricing. It will also stimulate the need to relook at internal organization and IT systems. With its proposed implementation from 1 July 2017 gaining intensity, it is critical for companies, which have business operations in India to understand the broad contours and framework of the proposed GST law, likely impact of the new levy on their business and start taking appropriate steps to meet its requirement and be GST ready. Benefits of GST GST has been envisaged as a more efficient tax system, neutral in its application and attractive in distribution. The advantages of GST are: Wider tax base, necessary for lowering the tax rates and eliminating classification disputes

13 13 Elimination of multiplicity of taxes and their cascading effects Rationalization of tax structure and simplification of compliance procedures Harmonization of center and State tax administrations, which would reduce duplication and compliance costs Automation of compliance procedures to reduce errors and increase efficiency Destination principle The GST structure would follow the destination principle. Accordingly, imports would be subject to GST, while exports would be zero-rated. In the case of inter-state transactions within India, the State tax would apply in the State of destination as opposed to that of origin. Taxes to be subsumed GST would replace most indirect taxes currently in place such as: Central Taxes Central Excise Duty [including additional excise duties, excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955] Service tax Additional Customs Duty (CVD) Special Additional Duty of Customs (SAD) Central Sales Tax ( levied by the Centre and collected by the States) Central surcharges and cesses ( relating to supply of goods and services) State Taxes Value Added Tax Octroi and Entry Tax Purchase Tax Luxury Tax Taxes on lottery, betting & gambling State cesses and surcharges Entertainment tax (other than the tax levied by the local bodies) Central Sales Tax ( levied by the Centre and collected by the States) Roadmap Ahead The GST Bills have been passed by the Parliament. Subsequent to the passage of GST Bills in the Parliament, states will take up State GST Bills for clearance in the respective state legislative assemblies. Even few states such as Telangana, Bihar, UP have also passes the State Goods and Services Tax Act in their State Assembly. The list of exemption, classification of goods and service, and machinery provisions including valuation and other rules are yet to be notified. Rates etc. are expected to be announced after the next meeting of the Council that is scheduled on 18 th and 19 th May As per the office order issued by the Central Board of Excise and Customs, the Government has set up ten working groups to iron out sectoral issues faced by trade and industry to ensure smooth transition to GST. Sectors include banking, telecom, IT and ITES, financial, textile, oil and gas, gems and jewellery, transport and logistics, and MSMEs. Readiness of the Goods and Services Tax Network is a big question as GSTN is the backbone of GST and unless it is rolled out perfectly GST is not going to be successful. Training of Trade, Professionals and Department. This is an important aspect because all needs to be trained and educated in such a manner that they become capable of handling the massive date and work pressure under GST. Applicability Section 1 Short title, extent and commencement Sub-Sec (1) This Act may be called the Central Goods and Services Tax Act, Sub-Sec (2) It extends to the whole of India except the State of Jammu and Kashmir. But not by way of an ordinance this Act extends to Jammu and Kashmir also. Sub-Sec (3) It shall come into force on such date as the Central or a State Government may, by notification in the Official Gazette, appoint in this behalf: Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

14 14 Chapter 1.2 Important Terms under CGST (Definitions) Introduction Before reading the provisions of any law we need to first understand the meaning of various terms those are being used in the said law. As per general view, one shall not discuss selected definitions and leave rest which is felt to be of less importance. It could be said that we should be aware of each term that is defined in the statute so that in case of any dispute pertaining to a term we can argue about the fact the same is defined or not. Therefore in this chapter, all the terms defined in this Act i.e. Central Goods and Services Tax Act 2017 has been taken. Therefore let us see the terms used in this GST law and how those terms are defined. Definitions (Section 2 of the Central Goods and Services Tax Act 2017) Sr. No. Terms Definitions 1 Actionable Claim shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882); 2 Address of Delivery means the address of the recipient of goods or services or both indicated on the tax invoice issued by a registered person for delivery of such goods or services or both; 3 Address on Record means the address of the recipient as available in the records of the supplier; 4 Adjudicating Authority means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal; 5 Agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; 6 Aggregate Turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess; 7 Agriculturist means an individual or a Hindu Undivided Family who undertakes cultivation of land (a) by own labour, or (b) by the labour of family, or (c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family; 8 Appellate Authority means an authority appointed or authorised to hear appeals as referred to in section 107;

15 15 9 Appellate Tribunal means the Goods and Services Tax Appellate Tribunal constituted under section 109; 10 Appointed Day means the date on which the provisions of this Act shall come into force; 11 Assessment means determination of tax liability under this Act and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment; 12 Associated Enterprise shall have the same meaning as assigned to it in section 92A of the Income-tax Act, 1961 (43 of 1961); 13 Audit means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder; 14 Authorized Bank shall mean a bank or a branch of a bank authorised by the Government to collect the tax or any other amount payable under this Act; 15 Authorised means the representative as referred to in section 116; Representative 16 Board means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963); 17 Business includes (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and

16 16 (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; 18 Business Vertical means a distinguishable component of an enterprise that is engaged in the supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals. Explanation. For the purposes of this clause, factors that should be considered in determining whether goods or services are related include (a) the nature of the goods or services; (b) the nature of the production processes; (c) the type or class of customers for the goods or services; (d) the methods used to distribute the goods or supply of services; and (e) the nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities; 19 Capital Goods means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business; 20 Casual Taxable Person means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business; 21 Central Tax means the central goods and services tax levied under section 9; 22 Cess shall have the same meaning as assigned to it in the Goods and Services Tax (Compensation to States) Act; 23 Chartered Accountant means a chartered accountant as defined in clause (b) of subsection (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949); 24 Commissioner means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under section 3 and the Commissioner of integrated tax appointed under the Integrated Goods and Services Tax Act; 25 Commissioner in the means the Commissioner referred to in section 168; Board 26 Common Portal means the common goods and services tax electronic portal referred to in section 146; 27 Common Working Days in respect of a State or Union territory shall mean such days in succession which are not declared as gazetted holidays by the Central Government or the concerned State or Union territory Government;

17 17 28 Company Secretary means a company secretary as defined in clause (c) of subsection (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980); 29 competent authority means such authority as may be notified by the Government; 30 Composite Supply means a supply made by a taxable person 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; Illustration. Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; 31 Consideration in relation to the supply of goods or services or both includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 32 Continuous Supply Of Goods 33 Continuous Supply Of Services means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify; means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify; 34 Conveyance includes a vessel, an aircraft and a vehicle;

18 18 35 Cost Accountant means a cost accountant as defined in clause (c) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959); 36 Council means the Goods and Services Tax Council established under article 279A of the Constitution; 37 Credit Note means a document issued by a registered person under subsection (1) of section 34; 38 Debit Note means a document issued by a registered person under subsection (3) of section 34; 39 Deemed Exports means such supplies of goods as may be notified under section 147; 40 Designated means such authority as may be notified by the Board; Authority 41 Document includes written or printed record of any sort and electronic record as defined in clause (t) of section 2 of the Information Technology Act, 2000 (21 of 2000); 42 Drawback in relation to any goods manufactured in India and exported, means the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in the manufacture of such goods; 43 Electronic Cash Ledger means the electronic cash ledger referred to in sub- section (1) of section 49; 44 Electronic Commerce means the supply of goods or services or both, including digital products over digital or electronic network; 45 Electronic Commerce Operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce; 46 Electronic Credit Ledger means the electronic credit ledger referred to in sub-section (2) of section 49; 47 Exempt Supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply; 48 Existing Law means any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both passed or made before the commencement of this Act by Parliament or any Authority or person having the power to make such law, notification, order, rule or regulation; 49 Family means, (i) the spouse and children of the person, and (ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on the said person; 50 Fixed Establishment means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical

19 19 resources to supply services, or to receive and use services for its own needs; 51 Fund means the Consumer Welfare Fund established under section 57; 52 Goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; 53 Government means the Central Government; 54 Goods and Services Tax (Compensation to States) Act 55 Goods and Services Tax Practitioner means the Goods and Services Tax (Compensation to States) Act, 2017; means any person who has been approved under section 48 to act as such practitioner; 56 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; 57 Integrated Goods means the Integrated Goods and Services Tax Act, 2017; and Services Tax Act 58 Integrated Tax means the integrated goods and services tax levied under the Integrated Goods and Services Tax Act; 59 Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; 60 Input Service means any service used or intended to be used by a supplier in the course or furtherance of business; 61 Input Service Distributor means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office; 62 Input Tax in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of sub-sections (3)

20 20 and (4) of section 9; (c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy; 63 Input Tax Credit means the credit of input tax; 64 Intra-State Supply of Goods shall have the same meaning as assigned to it in section 8 of the Integrated Goods and Services Tax Act; 65 Intra-State Supply of Services shall have the same meaning as assigned to it in section 8 of the Integrated Goods and Services Tax Act; 66 Invoice or Tax means the tax invoice referred to in section 31; Invoice 67 Inward Supply in relation to a person, shall mean receipt of goods or services or both whether by purchase, acquisition or any other means with or without consideration; 68 Job Work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly; 69 Local Authority means (a) a Panchayat as defined in clause (d) of article 243 of the Constitution; (b) a Municipality as defined in clause (e) of article 243P of the Constitution; (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of 2006); (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution; 70 Location of the Recipient of Services means, (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

21 21 71 Location of the Supplier of Services (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 received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; means, (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment 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 supplier; 72 Manufacture means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term manufacturer shall be construed accordingly; 73 Market Value shall mean the full amount which a recipient of a supply is required to pay in order to obtain the goods or services or both of like kind and quality at or about the same time and at the same commercial level where the recipient and the supplier are not related; 74 Mixed Supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration. A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; 75 Money means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or

22 22 electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value; 76 Motor Vehicle shall have the same meaning as assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988); 77 Non-Resident Taxable Person means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India; 78 Non-Taxable Supply means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act; 79 Non-Taxable means the territory which is outside the taxable territory; Territory 80 Notification means a notification published in the Official Gazette and the expressions notify and notified shall be construed accordingly; 81 Other Territory includes territories other than those comprising in a State and those referred to in sub-clauses (a) to (e) of clause (114) ; 82 Output Tax in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis; 83 Outward Supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business; 84 Person includes (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (h) any body corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; (j) a local authority;

23 23 (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860 (21 of 1860); (m) trust; and (n) every artificial juridical person, not falling within any of the above; 85 Place of Business includes (a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or (b) a place where a taxable person maintains his books of account; or (c) a place where a taxable person is engaged in business through an agent, by whatever name called; 86 Place of Supply means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act; 87 Prescribed means prescribed by rules made under this Act on the recommendations of the Council; 88 Principal means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both; 89 Principal Place of Business means the place of business specified as the principal place of business in the certificate of registration; 90 Principal Supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; 91 Proper Officer in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board; 92 Quarter shall mean a period comprising three consecutive calendar months, ending on the last day of March, June, September and December of a calendar year; 93 Recipient of supply of goods or services or both, means (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;

24 24 94 Registered Person means a person who is registered under section 25 but does not include a person having a Unique Identity Number; 95 Regulations means the regulations made by the Board under this Act on the recommendations of the Council; 96 Removal in relation to goods, means (a) despatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier; or (b) collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient; 97 Return means any return prescribed or otherwise required to be furnished by or under this Act or the rules made thereunder; 98 Reverse Charge means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or subsection (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act; 99 Revisional Authority means an authority appointed or authorised for revision of decision or orders as referred to in section 108; 100 Schedule means a Schedule appended to this Act; 101 Securities shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 102 Services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; 103 State includes a Union territory with Legislature; 104 State tax means the tax levied under any State Goods and Services Tax Act; 105 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; 106 Tax Period means the period for which the return is required to be furnished; 107 Taxable Person means a person who is registered or liable to be registered under section 22 or section 24; 108 Taxable Supply means a supply of goods or services or both which is leviable to tax under this Act; 109 Taxable Territory means the territory to which the provisions of this Act apply; 110 Telecommunication Service means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means;

25 The State Goods and Services Tax Act means the respective State Goods and Services Tax Act, 2017; 112 Turnover in State or Turnover in Union means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or Territory both and inter-state supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess; 113 Usual Place of means Residence (a) in case of an individual, the place where he ordinarily resides; (b) in other cases, the place where the person is incorporated or otherwise legally constituted; 114 Union Territory means the territory of (a) the Andaman and Nicobar Islands; (b) Lakshadweep; (c) Dadra and Nagar Haveli; (d) Daman and Diu; (e) Chandigarh; and (f) other territory. Explanation. For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f) shall be considered to be a separate Union territory; 115 Union Territory Tax means the Union territory goods and services tax levied under the Union Territory Goods and Services Tax Act; 116 Union Territory Goods and Services means the Union Territory Goods and Services Tax Act, 2017; Tax Act 117 Valid Return means a return furnished under sub-section (1) of section 39 on which self-assessed tax has been paid in full; 118 Voucher means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument; 119 Works Contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; 120 words and expressions used and not defined in this Act but defined in the Integrated Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts; 121 any reference in this Act to a law which is not in force in the State of Jammu and Kashmir, shall, in relation to that State be construed as a reference to the corresponding law, if any, in force in that State.

26 26 Chapter 1.3 The Term Supply, Composite Supply, Mixed Supply Supply - Section 7 Under the GST regime, old terms such as manufacture, sale, and provision of services have no value and such terms are of no use. Under GST its only one term and that is supply. Supply is the taxable event and not the manufacture or sale. Hence as soon as event/transaction/activity is covered under the definition of supply the taxable event triggers. Only issue in the Goods and Services Tax regime is that, the term supply is defined in an inclusive manner and it is really difficult to digest the definition of the same. Let us see the way it is defined and provided for in Section 7 of the Central Goods and Services Tax Act 2017: Sub-Section (1) SUPPLY Includes (a) all form of supply for a consideration by a person in the course or furtherance of business. (b) importation of service, for a consideration and whether or not in the course or furtherance of business (c) Activities specified in Schedule I (reproduced below), made or agreed to be made without a consideration (d) Activities to be treated as supply of goods or supply of services as referred to in Schedule II (reproduced below) Sub-Section (2) Notwithstanding anything contained in sub-section (1), shall be treated neither as a supply of goods nor a supply of services activities or transactions specified in Schedule III (reproduced below) ; or such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, Sub-Section (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as a supply of goods and not as a supply of services; a supply of services and not as a supply of goods Schedule - I MATTERS TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION 1. Permanent transfer/ disposal of business assets where input tax credit has been availed on such assets 2. Supply of goods or services between related persons, or between distinct persons as specified in section 25, when made in the course or furtherance of business Provided that gifts not exceeding Rs. 50,000/- in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. 3. Supply of goods (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal, or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal 4. Importation of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

27 27 Schedule - II Supply of Goods Transfer Land and Building Composite supply Schedule II Activities to be treated as supply of goods or supply of services Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. Supply of services Transfer of business assets 1. Transfer (a) (b) any transfer of the title in goods is a supply of goods; any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (c) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services; (c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, 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. 5. Supply of services The following shall be treated as supply of services, namely: (a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

28 28 Explanation. For the purposes of this clause (1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely: (i) (ii) an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) 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. 6. Composite supply The following composite supplies shall be treated as a supply of services, namely: (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. Supply of Goods The following shall be treated as supply of goods, namely: Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. Schedule - III Services by an employee to the employer in the course of or in relation to his 1. employment Services by any Court or Tribunal established under any law for the time being in force. (a) The functions performed by the Members of Parliament, State Legislature, 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 by any person as a Chairperson / Member / Director in a body established by the Central / State Government or local authority and who is not deemed as an employee before the commencement of this clause Services of funeral, burial, crematorium or mortuary including transportation of the deceased. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. Actionable claims, other than lottery, betting and gambling.

29 29 Composite and Mixed Supply Section 8 Composite Supply 2(30) - a supply made by a taxable person 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 Tax liability on composite and mixed supplies shall be determined in the following manner Mixed Supply 2(74) - two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply In case of Composite Supply One of which is Principal supply shall be treated as Supply of such principal supply In case of Mix Supply shall be treated as Supply of that supply which attracts highest rate of tax Hence if we need to understand with the help of an example let s do that: Example of Composite Supply Supply of Televisions with free installation service OR Sale of Vehicle with free service of the same these are examples of composite contract because here there are more than once supply of goods or services or both. There is a priciple supply and the multiple supplies are naturally bundled. The tax liability in case of composite supply shall be at the rate that is applicable to the principle supply. Example of Mixed Supply The best example can be where fruits are supplied with dry fruits. Another example can be tooth brush and tooth paste. Both are independent items and nothing can be said to be a principle supply and hence is a mixed supply. The tax liability in case of mixed supply shall be at the highest rate applicable to any of the items forming part of the mixed supply. Chapter 1.4 Levy, Collection and Exemption Levy and Collection - Section 9 of the Central Goods and Services Tax Act 2017 This is one of the most important sections of the GST law because this gives us the basis on which the tax shall be levied under goods and services tax. It provides for the transactions on which the tax shall be levied under the CGST Act As per provisions of Section 9, tax shall be levied in case of intra state supplies. The provision is exactly mentioned herein below. Just read line by line and step by step. There shall be levied a tax called CGST On all intra-state supplies except on the supply of alcoholic liquor for human consumption On the value determined u/s 15 and at such rates as may be notified not exceeding 20% And collected in such manner as may be prescribed. Central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel Shall be levied w.e.f. such date as may be notified by govt

30 30 The Central Government may notify by notification, categories of supply of goods and/or services the tax on which is payable on reverse charge basis by the recipient and provisions of liabilities of supplier becomes applicable to such recipient Supply by a non-registered person, to a registered person, shall attract reverse charge and provisions of liabilities of supplier becomes applicable to such recipient Government may notify such categories of services tax on which shall be paid by the electronic commerce operator if such services are supplied through it. Where ECO does not have a physical presence in the taxable territory, any person representing shall be liable to pay tax where ECO does neither have a physical presence in the taxable territory nor a representative, it shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax. Power to Grant exemption from tax - Section 11 of the CGST Act 2017 As we are aware that under GST anything that is to be done can be done only when the same is recommended by the GST Council and therefore it could be said that by virtue of newly inserted Article 279A of the Constitution of India by virtue of 101 st Constitution Amendment Act 2016, the most powerful body under GST is the council since nothing can happen or move with its recommendation. Therefore on this basis it could be said that if some exemptions are to given it has to be discussed in the council and in case, the council approves and recommends, the exemption is possible. The provision is discussed as under only thing that needs to be kept in mind here is, exemption can be general or by way of special order and in case if after the said exemption is notified any explanation is required the same can be done but within one year from the date of issue of notification and such explanation shall be presumed to have been part of such provision/notification from the first day. Where the Government is satisfied that it is necessary in the public interest so to do, it may, exempt generally, either absolutely or subject to such conditions as may be specified therein on the recommendations of the Council, by notification goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification Where the Government is satisfied that it is necessary in the public interest so to do, it may, exempt from payment of tax any goods or services or both on which tax is leviable. on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

31 31 Chapter 1.5 Composition Levy Section 10 - Composition Levy A registered person, not having aggregate turnover exceeding 50 lakhs in the preceding financial year may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed and shown herein below in flow chart. * Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees, as may be recommended by the Council. By virtue of Notification No. 08/2017 Central dated , the limit is increased to 75 lakhs for each state except Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh as for these specified states the limit is 50 Lakhs. Composition Levy 5 Conditions, if any one satisfied, could not opt for composition levy Turnover below Rs. Turnover above Rs. Registered person shall not be allowed to opt for composition levy under, it satisfy the following conditions: 50 Lacs* 50 Lacs* (a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II; Not eligible for (b) he is not engaged in making any supply of 5 Yes Composition Levy goods which are not leviable to tax under conditions? this Act; No (c) he is not engaged in making any inter- State outward supplies of goods; *Limit of Rs. 50 Lacs Manufacturer 1% of (d) he is not engaged in making any supply of Turnover * can be increased up to goods through an electronic commerce operator who is required to collect tax at Others 0.5% of Rs. 1 crore source under section 52; and Turnover * (e) he is not a manufacturer of such goods as Supply of food for human consumption 2.5% of Turnover * may be notified by the Government on the recommendations of the Council: Where a person with a PAN has more than one registrations, it shall be mandatory for all such persons same PAN to opt for composition levy else the registered person shall become ineligible for opting for composition levy. Restrictions: 1. No Tax to be collected from recipient 2. No entitlement of credit on Inputs. 3. If PO has reason to believe that person not eligible u/s 10, In addition to any tax, also penalty and provisions of sec. 73 or 74 shall apply 4. The day aggregate turnover exceeds the limit specified, the option of composition shall laps. Other Relevant Points to be noted 1. A person covered under Composition Levy may become liable under reverse charge on inward supplies from Unregistered Person as per Sec 9(4). 2. * the rate of composition mentioned above is under CGST Act, same rate will be under SGST Act also. Therefore the rates will be double i.e. 0.5% will be 1%, 1% will be 2% and 2.5% will be 5%

32 32 Chapter 1.6 Time of Supply Section 12 - Time of Supply of Goods There is always a difference between a taxable event and the point of taxation. In the current tax regime, in case of service tax - the taxable event is provision of service or agreeing to provide a service whereas the point of taxation is determined as per point of taxation rules, 2011 similarly under GST also the taxable event is supply of good or services or both but the point of taxation is known as time of supply of goods and services i.e. the date/time on which, the liability to pay tax arises Sub-Section (1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section Sub-Section (2) -in case or normal supply of goods Earliest of the Following : Date of issue of Invoice by the supplier; or Last date on which he is required to issue the invoice with respect to supply; or Date of receipt of the payment with respect to supply where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount. Sub-Section (3)- in case of supply of goods under reverse charge Earliest of the following : Date of Receipt of Goods Date of payment as entered in books or Date of debit in bank account, whichever is earlier Date immediately following 30 days from the sdate of issuance of invoiceif not determinable as per above, TOS shall be date of entry in books of account of recipient Sub-Section (4)- in case of supply of vouchers If Supply identifiable at that point Date of Issue In other cases Date of redemption Sub-Section (5)- residuary provision In case time of supply cannot be determined under the provisions of sub-section (2) or subsection (3) or sub-section (4), it shall be determined as under Where periodical return has to be filed Date when such return is to be filed In any other case Date on which CGST/SGST paid Sub-Section (6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value

33 33 Section 13 - Time of Supply of Services Sub Section (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section. Sub Section (2)-in case of supply of service Invoice issued within time limit - Date of issue of Invoice by the supplier; or Date of receipt of the payment; whichever is earlier Invoice issued after time limit - Date of Provision of service or Date of receipt of the payment; whichever is earlier Date on which recipient shows the receipt of service in his books of accounts If excess received up to Rs. 1,000/, Time of supply at the option of supplier. Sub Section (3) -in case of covered under reverse charge Date of payment as entered in books or Date of payment in bank account, which ever is earlier Date immediately following 60 days from the date of issuance of Invoice by the supplier Sub-Section (4) )-in case of supply of vouchers If Supply identifiable at that point Date of Issue In other cases Date of redemption Sub-Section (5) - Residuary Section Where periodical return has to be filed Date when such return is to be filed In any other case Date on which CGST/SGST paid Sub Section (6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value

34 34 Section 14 - Time of Supply - Change in rate of tax in respect of supply of goods or services. Supplied Issue of Invoice Receipt of Payment Time of Supply Before the change in rate After After Date of Invoice or Receipt of Payment, which ever is earlier Before the change in rate Before After Date of Issue of Invoices Before the change in rate After Before Date of Receipt of Payment After the change in rate Before Before Date of Invoice or Receipt of Payment, which ever is earlier After the change in rate Before After Date of Receipt of Payment After the change in rate After Before Date of Issue of Invoices

35 35 Chapter 1.7 Value of Supply Section 15 - Value of Supply Tax has to be paid on the basis of value of supply and therefore the valuation becomes very important. Under GST the taxable event is supply of goods or services or both and even if there is no consideration, it becomes supply in certain situations as mentioned in schedule I of the CGST Act, Now since it is widely discussed and accepted that in GST even the branch transfers are going to taxable therefore it becomes important for us to determine the value on which tax has to be paid correctly and reasonably. Value of Supply of goods or Service or Both The Transaction Value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and recipient of the supply are not related and. the price is the sole consuderation for the supply Which includes not include any discount which is given (a) Any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this act, the state goods and services tax act, the union territory goods and services tax act and the goods and services tax (compensation to states) act, if charged separately by the supplier; (b) Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) Incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) Interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) Subsidies [including the value of supply of the supplier who receives the subsidy.] directly linked to the price excluding subsidies provided by the central government and state governments (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) after the supply has been effected, if (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) ITC as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

36 36 Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. The value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed. (a) persons shall be deemed to be related persons if (a) such persons are officers or directors of one another s businesses; (b) such persons are legally recognised partners in business; (c) such persons are employer and employee; (d) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (e) one of them directly or indirectly controls the other; (f) both of them are directly or indirectly controlled by a third person; (g) together they directly or indirectly control a third person; or (h) they are members of the same family; (b) the term person also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

37 37 Chapter 1.8 Input Tax Credit and Input Tax Credit Transfer Section -16 (1) Manner of availing ITC Input Tax Credit (ITC) is one of the base on which the building of GST is placed. The reason for saying so is out of many issues in the current Indirect Tax Regime, one of the major issue is cascading effect i.e. Tax on Tax and therefore GST was proposed with the intention of having seamless flow of credit. So it could be said that provisions pertaining to ITC have to be understood and digested completely so as to determine whether the current issues are properly addressed or not in GST Every registered taxable person - subject to such conditions and restrictions as may be prescribed; and - Within the time and manner specified in section 49 Entitled to take ITC admissible to him Said amount to be credited to the electronic credit ledger of such person Credit of input tax charged on any supply of goods or services or both is only allowed for inputs which are used or intended to be used in the course or furtherance of his business Section 16 (2) - Conditions for availing ITC Registered person shall not be entitled to take credit of any input tax in respect of any supply of goods and/or services to him unless: He is possession of: Tax invoice, or Debit note, or Such other tax paying document as may be prescribed Issued by supplier registered under the Act Receipt of goods and / or services Can ITC be claimed on tax paid on advance? Payment of tax charged in respect of such supply to credit of government in: Cash; or Utilization of ITC admissible in respect of said supply Furnished return u/s 39 Whether this refers to return filed by : Vendor ; or Assesse

38 38 Where goods against an invoice are received in instalments / lots ITC will be available only after receipt of last lot / instalment Where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis: the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier; and an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability along with interest thereon, in such manner as may be prescribed the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. Section 16 (3) - Conditions for availing ITC Input tax credit will not be allowed to the registered taxable person on the tax component who has already claimed depreciation on the tax component of the cost of capital goods under the provisions of Income Tax Act, 1961 (43 of 1961) Section 16 (4) - Conditions for availing ITC A taxable person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods and/or services after: Filing of the return u/s 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains; or Furnishing of the relevant annual return Whichever is earlier

39 39 Section 17 (1) - ITC in case goods/services partly used for business and partly for other purposes Business purpose Input tax attributable to business purpose allowable Goods/ Services/Both Used For Other purpose Not Defined Input tax attributable to other purpose NOT allowable Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. Section 17 (2) & (3) - ITC in case of Goods/Services used partly for Taxable and Zero rated supply and partly for exempted supply including RCM Goods / Services/ Both For Used For For Exempt supplies -Taxable supplies Input tax attributable to: taxable supplies including Zero rated supplies allowable - It shall include supplies on which recipient is liable to pay tax under Reverse charge, transactions in securities, sale of land and, subject to clause (b) of para 5 of Schedule II, sale of building ITC is not allowed in respect of input tax attributable to exempt supply Central or State Govt. may by notification prescribe the manner for attributing the above credit [Section 17(6)]

40 40 Section 17 (4) - ITC in case of Banking company or Financial Institution including NBFC 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 sub-section (2), or avail of, every month, an amount equal to fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month. Option once exercised shall not be withdrawn during the remaining part of the financial year. the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number

41 41 Section 17 (5) - Where ITC not admissible (a) motor vehicles and other conveyances except when they are used Motor vehicles (i) for making the following taxable supplies, namely: and other (A) further supply of such vehicles or conveyances ; or conveyanc (B) transportation of passengers; or e (C) imparting training on driving, flying, navigating such vehicles or [Section conveyances; 17(5)(a) (ii) for transportation of goods; Specified supply of goods or services or both [Section 17(5)(b)] (b) the following supply of goods or services or both (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; (iii) rent-a-cab, life insurance and health insurance except where (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession; Works contract services [Section 17(5)(c)] Goods or services [Section 17(5)(d)] (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Goods and/or services Tax paid under Section 10 [Composition levy] - [Section 17(5)(e)] Received by a Non-resident Taxable person except on goods imported by him [Section 17(5)(f)] Used for personal consumption - [Section 17(5)(g)] Goods which are lost, stolen, destroyed, written off or disposed of by way of gift or free samples- [Section 17(5)(h)] Any tax paid in accordance with the provisions of sections 74, 129 and 130: [Section 17(5)(i)] Explanation. For the purposes of clauses (c) and (d), the expression construction includes reconstruction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

42 42 ITC Section 17 (6) [Section 17(6)] Government may, by notification issued in this behalf, prescribe the manner in which the credit referred above me attributed - [Section 17(6)] Section -18 ITC on Input, Input in semi-finished or finished goods in case of person registered u/s. 25(1) and 25(3) [Sec 18(1)(a)] Sec 18 (1)(b) Every registered taxable person Applied for registration within 30 days from the date he becomes liable and has been granted registration shall be Entitled to take ITC admissible to him In respect of inputs, inputs contained in semi finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable - Any person registered u/s 25 (3) - shall be Entitled to take ITC admissible to him In respect of inputs held in stock, inputs contained in semi finished or finished goods held in stock on the day immediately preceding the date of grant of registration ITC in case of conversion from composition levy to regular dealer 18 (1)(c) Any registered taxable person Ceases to pay tax u/s 10, he shall be Entitled to take ITC admissible to him In respect of inputs held in stock, inputs contained in semi finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax u/s 9 18 (1)(d) - Where an exempt supply of goods or services or both by a registered taxable person becomes a taxable supply, such person shall be, Entitled to take ITC admissible to him In respect of inputs held in stock, inputs contained in semi finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable. PROVIDED that the credit on capital goods shall be reduced by such percentage points as may be prescribed in this behalf

43 43 Section 18 (2) - ITC admissible up to 1 year A taxable person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply Section 18 (3) ITC in case of change in Constitution Where there is a change in the constitution of a registered taxable person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provision for transfer of liabilities, the said registered taxable person shall be allowed to transfer the input tax credit that remains unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in the manner prescribed. Section 18 (4) ITC in case of switch over of regular dealer to composition levy or exempted supplies Where any registered taxable person who has availed of input tax credit switches over as a taxable person for paying tax under section 10 or, where the goods or services or both supplied by him become exempt absolutely u/s. 11, he shall pay an amount by way of debit in the electronic credit or cash ledger, equivalent to the credit of input tax In respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of such switch over or, as the case may be, the date of such exemption: PROVIDED that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

44 44 Section 18 (5) & Section 18 (6) - Manner of Calculation of ITC Sec 18 (6) Sec 18 (5) The amount of credit under subsection (1) and payable under sub-section (4) shall be calculated in such manner as may be prescribed In case of supply of capital goods or P &M, on which ITC has been taken the registered taxable person shall pay an amount equal to the ITC taken on the said capital goods or P & M reduced by the percentage points as may be specified in this behalf or the tax on the transaction value of such capital goods or P & M under sub-section (1) of section 15, whichever is higher PROVIDED FURTHER that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods under sub-section (1) of section 15

45 45 Section 19- Taking ITC in respect of inputs and capital goods sent for job-work (1) The Principal be allowed input tax credit on inputs sent to a job-worker for job-work (2) entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job-work without their being first brought to his place of business (3) Where inputs sent for job work not received within 1 year, it shall be deemed that such inputs has been supplied by the principal on the day when those were sent In case where sent directly to job worker, period of 1 year to be counted from the date of receipt by job worker (4) The Principal be allowed input tax credit on Capital goods sent to a job-worker for jobwork (5) entitled to take credit of input tax on Capital Goods even if the capital goods are directly sent to a job worker for job-work without their being first brought to his place of business (6) Where Capital Goods sent for job work not received within 3 year, it shall be deemed that such Capital Goods has been supplied by the principal on the day when those were sent In case where sent directly to job worker, period of 3 year to be counted from the date of receipt by job worker (7) Period of 1/3 year above shall not apply to moulds and dies, jigs and fixtures, or tools sent out to a job-worker for job-work

46 46 Sec 20 - Manner of distribution of credit by ISD Sub Section (1) ISD shall distribute- CGST as CGST/IGST IGST as IGST/CGST by issuing a document containing the amount of ITC being distributed in such manner as may be prescribed. Sub Sec (2) ISD may distribute the credit subject to following conditions (a) the credit can be distributed against a prescribed document issued to each of the recipient the credit so distributed, and such document shall contain details as may be prescribed (b) the amount of the credit distributed shall not exceed the amount of credit available distribution (c) the credit of tax paid on input services attributable to a recipient of credit shall be distribu only to that recipient (d) the credit of tax paid on input services attributable to more than one recipient of credit sh be distributed only amongst such recipient(s) to whom the input service is attributable a such distribution shall be pro rata on the basis of the turnover in a State or turnover i Union territory of such recipient, during the relevant period, to the aggregate of the turno of all such recipients to whom such input service is attributable and which are operationa the current year, during the said relevant period; (e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata

47 47 Explanation A. For the purposes of this section, the relevant period shall be- (i) if the recipients of the credit have turnover in their States in the financial year preceding the year during which credit is to be distributed, the said financial year; or (ii) if some or all recipients of the credit do not have any turnover in their States in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed. Explanation B. - For the purposes of this section, recipient of credit means the supplier of goods and / or services having the same PAN as that of ISD. Explanation C. the term turnover, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule. Sec 21 - Manner of recovery of credit distributed in excess Where the ISD distributes the credit in contravention of the provisions contained in section 20 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipient(s) along with interest, and the provisions of section 73 or 74, as the case may be, shall apply mutatis mutandis for effecting such recovery.

48 48 Chapter 1.9 Registration under GST Section 22 - Person liable for Registration Registration is the first step towards the compliance of any tax law. Under GST, also registration of new person and migration of existing person is going to be very relevant and crucial. In this chapter we will be discussing the provisions pertaining Registration. Amendment therein, Cancellation and revocation of cancellation. Another reason why registration under GST is crucial is that there is no concept of Centralised Registration and hence a person has to take registration in each state from where he makes any supplies Other than Special Category Threshold Limit Every Supplier Liable in the State from where he supply and aggregate turnover in F.Y. exceeds 20 lakh rupees Special Category Every Supplier Liable in the State from where he supply and aggregate turnover in F.Y. exceeds 10 lakh rupees Where supply made to states such as Arunachal Pradesh, Assam, J & K, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh & Uttrakhand, supplier liable to be registered if aggregate turnover in F.Y. exceeds 10 lakh rupees Presently registered person will be liable to take registration from the appointed day In case of transfer of business on account of succession or otherwise, shall be liable to be registered with effect from the date of such transfer or succession Other than above cases such as amalgamation or demerger by an order of court/tribunal, shall be liable to be registered, with effect from the date on which the ROC issues a certificate of incorporation Explanation :- (i) aggregate turnover shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals; (ii) the supply of goods, after completion of job-work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker; (iii) special category States shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution Section 23 - Person not liable for Registration any person engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act or under IGST Act an agriculturist, to the extent of supply of produce out of cultivation of land Persons not liable for Registration Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.

49 49 Section 24 - Compulsory Registration (i) persons making any inter-state taxable supply; (ii) casual taxable persons making taxable supply; (iii) persons who are required to pay tax under reverse charge; (iv) person who are required to pay tax under sub-section (5) of section 9; (v) non-resident taxable persons making taxable supply; (vi) persons who are required to deduct tax u/s 51, (vii) persons who make 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) persons who supply goods or services or both, other than supplies specified u/s 9(5), through such electronic commerce operator who is required to collect tax at source u/s 52; (x) every electronic commerce operator; (xi) every person supplying online information and data base access or retrieval services from a place outside India to a person in India, other than a registered person; and (xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.

50 50 Section 25 - Procedure for registration Every person liable to be registered u/s. 22 & 24 shall apply in each state or UT where liable Within 30 days from the date he becomes liable for registration In the prescribed manner and subject to specified conditions Casual Person or Non resident taxable person shall apply at least 5 days prior to commencement of business Person seeking registration shall be granted single registration in a state or union territory Option of separate registration, in a state or UT, is allowed but only for Business Vertical Option of Voluntary Registration Shall be treated as Distinct person in case of multiple registration within state and also in two different states PAN Compulsory (except for Non Resident Taxable Person) In case liable to deduct TDS u/s 51, in addition to PAN, he must have TDN and TCN Non resident taxable person shall have to submit any other prescribed documents for Registration In case of failure to be register, PO may proceed to register such person in prescribed manner Granting of Unique Identification Number (UIN) for purposes, including refund of Tax, as may be prescribed Registration or UIN shall be granted or rejected in the manner and within prescribed period RC shall be issued in such form and with effect from such date as may be prescribed Registration or UIN shall be deemed to be granted after the expiry of period prescribed u/s 25(10) provided no deficiency is communicated to applicant within such period

51 51 Section 26 - Deemed Registration Grant of Registration or UIN under the SGST or UTGST Act shall be deemed to be granted in CGST also subject to the condition that application not rejected within time specified u/s 25(10) Rejection of application for Registration or UIN under the SGST or UTGST Act shall be deemed to be rejected in CGST Act also. Section 27 - Casual Taxable Person and Non-resident Taxable Person Certificate of Casual Taxable Person (CTP) or Non resident taxable person (NRTP) shall be valid for 90 days from effective date of registration or period specified in application, whichever is earlier Taxable supply shall be made only after the issuance of Registration Certificate Proper officer may extend this period to further 90 days on sufficient reasons being shown CTP or NRTP make an advance deposit of tax in an amount equivalent to the estimated tax liability at the time of application u/s. 25(1) In case of Extension period, amount estimated for extension period should also be deposited in advance Amount deposited in advance shall be credited to the electronic cash ledger and shall be utilised in the manner provided u/s. 49

52 52 Section 28 Amendment of Registration Person shall inform the proper officer of any changes in the information furnished at the time of registration or that furnished subsequently In the manner and within such period as may be prescribed Proper officer may approve or reject in the registration particulars in the manner and within such period as may be prescribed Approval of the proper officer shall not be required in respect of such particulars as may be prescribed Show Cause Notice and reasonable opportunity of being heard should be given by the Proper Officer in case he is willing to reject the amendment application Approval or rejection in SGST/UTGST act shall be deemed to be the approval or rejection in this Act. Section 30 - Revocation of Cancellation of Registration Person may apply for revocation of cancellation of registration to such proper officer in the prescribed manner within 30 days from the date of service of the cancellation order PO may by an order either revoke cancellation of the registration or reject the application for revocation for good and sufficient reasons Show Cause Notice and reasonable opportunity of being heard should be given in case PO is willing to reject the application for revocation of cancellation of registration Approval in SGST/UTGST act shall be deemed to be approval in CGST act

53 53 Section 29 - Cancellation of registration Cancellation of Registration On his own motion or on an application filed by the registered person or by his legal heirs On his own motion, from such date, including any retrospective date, as he may deem fit the business has been discontinued, transferred, amalgamated with other legal entity, demerged or otherwise disposed of; or a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or Change in the constitution of the business; or a person paying tax under section 10 has not furnished returns for 3 consecutive tax periods; or Taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24 any other registered person has not furnished returns for a continuous period of 6 months; or any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

54 54 Cancellation of registration shall not affect Liability of the person to pay tax and Other dues under this act or To discharge any obligation under this act or the rules made thereunder For any period prior to the date of cancellation Whether or not such tax and other dues are determined before or after the date of cancellation Cancellation under SGST or UTGST Act shall be deemed to be a cancellation of registration under CGST Act Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, To be calculated in prescribed manner In case of capital goods or plant and machinery, the taxable person shall pay higher of the below amount an amount equal to the ITC taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery u/s 15

55 55 Chapter 1.10 Tax invoice, Credit and Debit Notes Section 31 (1) - Tax Invoice in case of supply of goods Invoice Shall be issued before or at the time of Removal of Goods for Supply to the recipient, where movement is involved; or Delivery of goods or making available, in any other case A registered taxable person supplying taxable goods, shall Type of Goods Where the supply involves the movement of goods. Where the supply does not involve the movement of goods. Issuance of Tax Invoice Tax invoice shall be issued before or at the time removal of goods for the supply to the recipient. Tax invoice shall be issued before or at the time of delivery of goods or making the goods available to the recipient. Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

56 56 Section 31 (2) Tax Invoice in case of supply of services Invoice Shall be issued before or after the provision of service But within prescribed period in this behalf CG/SG on recommendation by notification may specify category of services for which any other document issued shall be deemed to be a Tax Invoice A registered person supplying taxable services, shall before or after the provision of service but within a prescribed period, (prescribed time limit as per the Rules is 30 days except for banking company, financial institution including NBFC because it their case the prescribed time limit is 45 days ) issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which (a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or (b) tax invoice may not be issued.

57 57 Section 31 (3) Tax invoice in other situations (a) When invoice has already been issued between effective date of registration and the date of issuance of registration certificate a registered taxable person may, within one month from the date of issuance of certificate, issue a revised invoice, in the prescribed manner. (b) If value of supply is below 200 Rs. than the registered person may not issue Bill of Supply, subject to such conditions and in such manner as may be prescribed. (c) A registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed. he may not issue Bill of Supply, subject to such conditions and in such manner as may be prescribed. (d) When a registered taxable person receive advance payment He will issue a receipt voucher or any other document, including such particulars as may be prescribed. (e) where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, registered person may issue to the person who had made the payment, a refund voucher against such payment; (f) a registered person who is liable to pay tax under subsection (3) or sub-section (4) of section 9 (g) a registered person who is liable to pay tax under subsection (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both shall issue a payment voucher at the time of making payment to the supplier.

58 58 Section 31 (4) - Tax invoice in case of Continuous Supply of Goods In case of Continuous supply of goods Where successive statement of accounts or payment are involved, Invoice shall be issued before or at the time of issuance of each such statement or at the time of receipt of each such payment. Where successive statement of accounts or payment are not involved? Section 31 (5) - Tax invoice in case of Continuous Supply of Services In case of Continuous supply of services where the due date of payment is ascertainable from the contract where the due date of payment is not ascertainable from the contract where the payment is linked to the completion of an event the invoice shall be on or before the due date of payment the invoice shall be issued before or at the time when the supplier of service receives the payment the invoice shall be issued on or before the date of completion of that event. Section 31(6) - Tax invoice In a case where the supply of services ceases under a contract before the completion of the supply the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply effected before such cessation.

59 59 Section 31 (7) - Goods sent on approval In case of Goods sent on approval or sale or return Where goods are removed before it is known whether supply will take place. Invoice shall be issued at the earliest of the following 6 months from the date of removal Before or at the time when it becomes known that supply has taken place Explanation. For the purposes of this section, the expression tax invoice shall include any revised invoice issued by the supplier in respect of a supply made earlier. Section 32 Prohibition on Unauthorized Collection of Tax A person who is NOT REGISTERD TAXABLE PERSON Shall NOT collect TAX for supplying Goods/Service No registered person shall collect tax except in accordance with the provisions of this Act or the rules made thereunder.

60 60 Section 33 - Amount of tax to be indicated in tax invoice and other documents where any supply is made for a consideration, Every person liable to pay tax for such supply shall prominently indicate amount of Tax in all documents related to assessment, tax invoice and other like documents the amount of tax which shall form part of the price at which such supply is made Section 34 - Credit and Debit Notes Taxable Value/Tax charged in the invoice is found less than the taxable value/tax payable It shall include supplementary Invoice Taxable Value/Tax charged in the invoice exceeds the taxable value/tax payable Goods supplied are returned or Services supplied found to be deficient Debit Note shall be issued Credit Note shall be issued Person shall declare the details of DN in the return for the month in which such DN has been issued. Tax Liability shall be adjusted in the manner specified in the Act Person shall declare the details of CN in the return for the month in which such CN has been issued but not later than- September following end of year; or Date of filling of relevant Annual Return Whichever is earlier, and The tax liability shall be adjusted in the manner prescribed. Where the incidence of Tax has been passed on to any person-no reduction in Liability of Supplier

61 61 Chapter 1.11 Return Introduction In india,most of the taxation laws are self assessment based which means that a person needs to assess his tax liability on his own and pay the tax accordingly and then thereafter inform the tax authorities by way of filling a return. Under GST also the same is going to continue i.e. it is also a self-assessment based tax and the information needs to be submitted by way of periodical returns discussed hereinafter Section 37 - Furnishing details of outward supplies Sub Section (1) Every registered person except ISD, NRTP, person liable to pay u/s. 10 or 51 or 52 Shall furnish return electronically by 10 th of the next month. Such details shall be communicated to the recipient within such time and manner as prescribed. Not allowed to furnish anything between 11th to 15th of the next month. Commissioner may extend this period by notification for notified class of persons Any extension granted under SGST/UTGST by commissioner, CGST will also have same effect Sub Section (2) Person who has been communicated the details u/s. 38(3) or 38(4) shall Either Accept or Reject the details Up to 17 th day but not before 15 th day, of the month succeeding the tax period and the details furnished shall stand amended automatically. Sub Section (3) Person who has furnished details as per sub-sec(1) and which have remained unmatched u/s. 42/43 shall Rectify the error/ omission in the prescribed manner and Pay the Tax and Interest Such error/omission allowed to be rectified before Annual return filling date or Return u/s. 39 filling date for September of succeeding year to the relevant tax period Explanation. For the purposes of this Chapter, the expression details of outward supplies shall include details of invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made during any tax period.

62 62 Section 38 - Furnishing details of inward supplies Sub Section (1) Every registered person except ISD, NRTP, person liable to pay u/s. 10 or 51 or 52 shall verify, validate, modify or delete, if required, the details communicated u/s. 37(1) Outward supply becomes inward supply for recipient, who shall prepare details of his inward supplies and CN/DN and May include details of inward supplies not declared by the supplier u/s. 37(1) Sub Section (2) Every registered person except ISD, NRTP, person liable to pay u/s. 10 or 51 or 52 Shall furnish details of inward supply of goods/services or both and also on which liable under reverse charge and inward supply of goods/services or both taxable under IGST Act and CN/DN Such details for tax period must be furnished after the 10th day but before 15th day of the month succeeding the tax period in prescribed form and manner Commissioner may, for reasons to be recorded in writing, extend this period by notification for notified class of persons Any extension granted under SGST/UTGST by commissioner, CGST will also have same effect Sub Section (3) Details of Supplies modified, deleted or included by the recipient and furnished under sub-section (2) shall be communicated to the supplier in prescribed time and manner Sub Section (4) Details of Supplies modified, deleted or included by the recipient in return under sub-section (2) or u/s. 39(4), shall be communicated to the supplier in prescribed time and manner Sub Section (5) Person who has furnished details as per sub-sec(2) and which have remained unmatched u/s. 42/43 shall Rectify the error/omission in the prescribed manner and Pay the Tax and Interest Such error/omission allowed to be rectified before Annual return filling date or Return, u/s. 39, filling date for September of succeeding year to the relevant tax period

63 63 Section 39 Furnishing of returns Every registered person except ISD, NRTP, person liable to pay u/s. 10 or 51 or 52 shall for every calender month and part thereof furnish a return, electronically, of inward and outward supplies on or before the 20th day of the of goods/services or both, ITC availed, tax payable/paid or any month succeeding such calendar other prescribed particulars month or part thereof For person covered u/s. 10, shall file return electronically for each quarter or part thereof of turnover in the State or Union territory, inward within 18 days after the end of such quarter supplies of goods/services or both, tax payable/paid A person liable to deduct tax u/s. 51 shall furnish a return electronically for the month within 10 days of after the end of such month Every ISD shall furnish a return electronically for every month or part thereof within 13 days after the end of such month Every Registered NRTP shall furnish a return electronically every month or part thereof within 20 days after the month end/within 7 days after the last day of registration period,whichever is earlier Commissioner may extend this period by notification for notified class of persons` Any extension granted under SGST/UTGST by commissioner, CGST will also have same effect Return to be filed under sub-section (1),(2),(3) and (5) of Section 39 above, shall be filed only after the payment of tax due as per return Those registered person who are covered under sub-section(1) or (2)are required to file return irrespective of the fact that there are no supplies of goods/services or both have been made during such tax period. If after filling returns as per above sub-sections, the registered Person discovers any error/omission, other than result of scrutiny etc by the tax department, he shall rectify such error/omission in the return for the period in which such error/omission is noticed along with payment of interest This mistake shall be allowed to be rectified before Annual return filling date or Return, u/s. 39, filling date for September or 2nd quarter of succeeding year to the relevant tax period No return filling shall be allowed for a period if the return for any previous period has not been furnished

64 64 Section 40 - First Return Declare the same in the first return furnished by him after grant of registration. Every registered person who has made outward supplies In the period between the date on which he became liable to registration till the date on which registration has been granted shall Every registered person who has made outward supplies in the period between the date on which he became liable to registration till the date on which registration has been granted shall declare the same in the first return furnished by him after grant of registration. Section 41 - Claim of ITC and provisional acceptance thereof Every registered person shall be entitled to take the credit of eligible input tax, in his return and shall be credited on a provisional basis to his ECL as per the conditions and restrictions prescribed The credit referred above shall be utilised only for payment of self- assessed output tax

65 Section 42- Matching, reversal and reclaim of reduction in OTL 65 The details of every inward supply furnished by registered person be matched for a tax period with the corresponding details of outward supply furnished by the corresponding registered person in his valid return for same or preceeding period. with the IGST paid u/s. 3 of the Customs Tariff Act, 1975 in import of goods. for duplication of claims of ITC Claim of ITC in respect of Invoices or Debit notes should match as per above 2 conditions If matched, shall be accepted as ITC and communicated to recipient If ITC claimed in inward return is in excess of the amount declared by corresponding person in his outward supply or not shown in outward supplies by supplier Both person shall be communicated in the prescribed manner Duplication of claims of ITC shall be communicated to the recipient in the prescribed manner If any discrepancy found as per sub-section (3) is not rectified in the monthly return of that month in which communicated, Output Tax Liability (OTL) of recipient for next month shall get increased Section 42- Matching, reversal and reclaim of reduction in OTL Amount claimed as ITC is found to be in excess on account of duplication of claims shall be added to the OTL of the recipient in his return for the month in which communicated The recipient shall be eligible to reduce from his OTL by the amount added u/ss. (5), if the supplier declares the invoice details or debit note in his valid return within specified time u/s. 39(9) Whose OTL is increased u/ss (5) or (6) Shall be liable to pay interest as per Sec 50 for the period starting from date of Availment of credit till the date of addition of ITC If OTL u/ss (7) gets reduced, Interest paid as per above discussion Shall be refunded in ECL in prescribed manner Amount of interest shall not exceeds amount of interest paid by the supplier The amount reduced from the OTL in contravention of the provisions of sub-section (7) Interest will also be leviable as per Sec shall be added to the OTL 50(3)

66 66 Section 43 - Matching, reversal and reclaim of reduction in OTL The details of every credit note furnished by registered person be matched for a tax period with the corresponding reduction in the claim for ITC by the corresponding registered person in his valid return for duplication of claim reduction in output tax liability Claim of reduction in output tax liability should match with the corresponding reduction in claim for ITC by the recipient If matched, shall be finally accepted and communicated to supplier. If reduction of output tax liability in respect of outward supplies exceeds the corresponding reduction in the claim for ITC or the corresponding credit note is not declared by the recipient in his valid returns Both persons shall be communicated in the prescribed manner Duplication of claims reduction in output tax liability shall be communicated to the Supplier in the prescribed manner If any discrepancy found as per sub-section (3) is not rectified in that month return in which communicated, Output Tax Liability of supplier for next month shall get increased Section 46 - Notice to return defaulters Where a registered person fails to furnish Notice shall be issued within fifteen days a return u/s. 39/44/4 5 requiring him to furnish such return in prescribed form and manner

67 67 Section 43 - Matching, reversal and reclaim of reduction in OTL Amount in respect of any reduction in OTL on account of duplication of claims shall be added to the OTL of the supplier for the month in which duplication is communicated The supplier shall be eligible to reduce his OTL by the amount added u/ss. (5), if the recipient declares the details of the credit note in his valid return within specified time u/s. 39(9) Whose output tax liability is increased u/ss (5) or (6) Shall be liable to pay interest as per Sec 50 for the period starting from date of such claim of reduction in OTL till the date of addition If OTL u/ss (7) gets reduced, Interest paid as per above provision Shall be refunded in ECL in prescribed manner Amount of interest shall not exceed amount of interest paid by the recipient The amount reduced from the OTL in contravention of the provisions of sub-section (7) shall be added to the OTL Interest will also be leviable as per Sec 50(3)

68 68 Section 44 - Annual return Every registered person shall be - Require to file annual return for every year Before 31 st December following end of such financial year List of Excluded persons :- NRTP, CTP, ISD, Person paying Tax u/s. 51 or 52 Person require to be audited u/s. 35(5) shall furnish Annual Return under sub-section (1) And copy of the audited annual accounts And a reconciliation statement and Such other particulars as may be prescribed Section 45 - Final Return Furnish a return u/s. 39(1) and whose registration has been cancelled Every registered person who is required to within three months of the date of cancellation or date of order of cancellation, whichever is later shall furnish a final return

69 69 Section 47 - Levy of Late Fee who fails to furnish details of outward or inward supplies u/s. 37/38 or returns u/s. 39/45 by the due date shall pay a late fee of 100 Rs. per day subject to a maximum amount of Rs Any registered person Any registered person who fails to furnish returns u/s. 44 by the due date shall pay a late fee of 100 Rs. per day subject to 0.25% of his total turnover in the State or Union territory Section 48 - Goods and services tax practitioners Following shall be prescribed in respect of Goods and Service Tax Practitioners manner of approval of goods and services tax practitioners their eligibility conditions duties and obligations manner of removal and other conditions relevant for their functioning A registered person may authorise an approved goods and services tax practitioner to furnish the details of supplies u/s. 37/38 and the return u/s. 39/44/45 as may be prescribed the responsibility for correctness of any particulars furnished in the return or other details shall continue to rest with the registered person on whose behalf such return and details are furnished

70 70 Chapter 1.12 Payment of Tax Section 49 - Payment of Tax, Interest, Penalty & other Amounts Every deposit towards interest, tax, penalty, fee, etc. Subject to such conditions and restrictions as may be prescribed Shall be credited to Electronic Cash Ledger of such person Date of credit in govt. account shall be deemed to be the date of deposit in the Electronic Cash Ledger (ECAL) Self assessed ITC from returns to be credited in Electronic Credit Ledger (ECRL), maintained as prescribed Amount in ECAL to be used for paying tax, interest, penalty, fees, etc. Subject to such conditions and within such time as may be prescribed Amount in Electronic Credit Ledger (ECRL) to be used for paying output Tax Liability under this Act or Integrated Goods and Services Tax Act Subject to such conditions and within such time as may be prescribed Payment of tax, interest, etc. shall be made by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed. This flowchart depicts that if there is balance in Electronic Credit Ledger then it shall be utilised for payments of GST under different Act as per the given Balance Available in order. Example about how to understand Electronic Credit Ledger of the flowchart is as under: Balance in CGST can be used for CGST payment CGST SGST/UTGST IGST first and then if balance remains for IGST Payment. CGST IGST SGST/UTGST IGST IGST CGST SGST/UTGST Apply same in case of SGST/UTGST and IGST Credit Balance. Cross Credit of CGST and SGST is the only restriction

71 71 Section 49 Payment of Tax, Interest, Penalty & other Amounts Balance in ECAL or ECRL after payment of Taxes and others shall be refunded as per the provisions of Section 54 or this Act and the rules made thereunder Electronic Liability Ledger (ELL ) shall carry all the liabilities under the Act and shall be maintained as may be prescribed For discharging Tax and other dues, the taxable person shall follow the following order :- (a) self-assessed tax, and other dues related to returns of previous tax periods; (b) self-assessed tax, and other dues related to return of current tax period; (c) any other amount payable under the Act or the rules made thereunder including the demand determined under section 73 or 74 Every Person paying Tax under this Act shall, unless otherwise proved, be deemed to have passed on the incidence of Tax to recipient of such goods or services or both. Section 45 - Interest on delayed Payment of Tax Every person liable to pay Tax under the Act or Rules if fails to pay the same or any part thereof within prescribed period, shall On his account pay interest at such rate notified but not exceeding 18% for the period for which the Tax or any part thereof remains unpaid Interest to be calculated from the 1 st day on which tax was due to be paid In case where undue or excess ITC is claimed u/s. 42(10) or undue or excess reduction in output tax liability u/s. 43(10) is made by taxable person, he shall be liable to pay interest at such rate, not exceeding 24%, as may be notified.

72 72 Section 51 - Tax Deduction at Source (TDS) Chapter 1.13 Tax Deduction at Source Notwithstanding anything contained to the contrary in this Act, the Government may mandate, - (a) a department or establishment of the CG/SG, or (b) Local authority, or (c) Governmental agencies, or (d) such persons or category of persons as may be notified, by Government on the recommendations of the Council, deduct tax at the rate of 1% from the payment made or credited to the supplier of taxable goods or services or both, where total value of such supply, under a contract, exceeds 2,50,000/- Amount deducted as TDS shall be paid to appropriate Govt within 10 days from the end of the month in which deduction is made. Deductor shall issue a Certificate to the deductee with appropriate details as may be prescribed In case of failure to furnish the certificate within 5 days of crediting TDS to govt, deductor shall be liable to pay late fee of Rs.100/day up to the extent of Rs 5,000 from the date of expiry of 5 days till failure is rectified Deductee shall claim credit, in Electronic Cash Ledger, of Tax deducted and shown in return filed under Section 39(3) by the deductor. In case deductor fails to deposit TDS, he shall be liable to pay interest as per Section 50(1) in addition to amount of Tax deducted. Any amount of Default under this section to be determined as per Section 73 or 74 as the case may be. Refund to deductor or deductee because of excess or erroneous deduction shall be as per provisions of Section 54 but NO REFUND in case amount deducted has been credited to Electronic Cash Ledger of the deductee. Important point No deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

73 73 Chapter 1.14 Reverse Charge Mechanism & Compensation Cess Section 9(3) and Section 9(4) Levy under Reverse Charge Introduction Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge. In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism. The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods. Current scenario At present, similar provisions of Reverse Charge are available in Service Tax for the services like- Insurance agent Services of a director to a company Manpower supply Goods Transport Agencies Non-resident service providers Any service involving aggregators Currently there is no reverse charge in supply of goods. Reverse Charge under GST Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. Reverse charge may be applicable for both services as well as goods. Situations where reverse charge will apply 1. Unregistered dealer selling to a registered dealer In such a case, the registered dealer has to pay GST on the supply. There has been a relaxation provided in a manner that is the aggregate value of supply from all unregistered persons in a day does not exceed Rs 5000/- this provision of reverse charge shall not be applicable. 2. Services through an e-commerce operator If an e-commerce operator supplies services then reverse charge will apply on the e-commerce operator. He will be liable to pay GST. For example, Urban Clap provides services of plumbers, electricians, teachers, beauticians etc. Urban Clap is liable to pay GST and collect it from the customers instead of the registered service providers. If the e-commerce operator does not have does not have a physical presence in the taxable territory, then a person representing such electronic commerce operator for any purpose will be liable to pay tax. If there is no representative, the operator will appoint a representative who will be held liable to pay GST. 3. Other categories of supplies applicable for reverse charge will be notified by the Centre or State Government.

74 74 In case a person being a recipient is made liable to pay tax under reverse charge, he shall step into the shoes of a supplier and all the provisions of this Act that applies to a supplier shall be applicable to him also. Various other GST related aspects to be kept in mind A. Registration All persons who are required to pay tax under reverse charge have to register for GST irrespective of the threshold B. Time of Supply of Goods under Reverse Charge In case of reverse charge, the time of supply shall be the earliest of the following dates (a) the date of receipt of goods OR (b) the date of payment OR (c) the date immediately after THIRTY days from the date of issue of invoice by the supplier If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply shall be the date of entry in the books of account of the recipient. For clause (b)- the date of payment shall be earlier of- 1. The date on which the recipient entered the payment in his books OR 2. The date on which the payment is debited from his bank account C. Time of Supply of Goods under Reverse Charge In case of reverse charge, the time of supply shall be the earliest of the following dates (a) The date of payment OR (b) The date immediately after SIXTY days from the date of issue of invoice by the supplier (30 days for goods) If it is not possible to determine the time of supply under (a) or (b), the time of supply shall be the date of entry in the books of account of the receiver of service. For clause (a)- the date of payment shall be earlier of- 1. The date on which the recipient entered the payment in his books OR 2. The date on which the payment is debited from his bank account When supplier is located outside India In case of associated enterprises, where the supplier of service is located outside India, the time of supply shall bethe date of entry in the books of account of the receiver OR the date of payment -whichever is earlier D. Input tax credit on reverse charge Tax paid on reverse charge basis will be available for input tax credit if such goods and/or services are used, or will be used, for business. The service recepient (i.e., who pays reverse tax) can avail input tax credit. E. Tax Invoice The supplier must mention in his tax invoice whether the tax is payable on reverse charge. Where the reverse charge is on the recipient by virtue of Section 9(4), the invoice pertaining to those suppliers needs to be generated and issued by the recipient only. F. GST Compensation Cess GST Compensation Cess will also be applicable on reverse charge. GST Compensation Cess will be levied and collected at a rate which will be notified later. This will apply on all supplies of goods and services, including imports and reverse charge supplies. The purpose is to compensate States for loss of revenue on implementation of GST. This will be applicable for 5 years from the date GST gets implemented.

75 75 Chapter 1.15 Anti-Profiteering Clause Section 171- Anti Profiteering Measure This is one of the most dangerous provisions. This provision was brought in for the first time through revised model GST law that was released on 26th November Reason of adding such clause is provide a security and assurance to the consumer that whatever benefit a businessman would get after the implementation of GST, that is not available to him in the present Indirect Tax regime, need not be retained by him over and above his normal margin because this benefit whether because of reduction of tax rates or availability of input tax credit does not belong to him and if he is allowed to retain the same this will be wrong. He is not entitled to such benefit as this will be an extra benefit or profit for him whereas will be a loss for the consumer. Therefore it could be said that anti-profiteering measure gives a reason to smile to all the consumers under GST because those benefits will have to be passed to them. (1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3) The Authority referred to in subsection (2) shall exercise such powers and discharge such functions as may be prescribed. Conclusion Everything has a brighter side as well as a dark side. Anti-profiteering clause is certainly going to be boon for the consumers but at the same time there is lot of subjectivity involved in the same which may give rise to dandaraj and corruptionand hence it may prove to be a curse to lot of businessman. At times it may become difficult to justify and prove to the departmental officer whether the benefit have been really passed on to the consumer or not.

76 76 Chapter 1.16 Transitional Provision Introduction Since we are entering into a new Indirect Tax Regime known as GST, Transitional Provisions are very crucial and important to understand and implement. Various questions such as - What will happen to our stock lying on the appointed day or What will be the treatment of pending adjudication, appeals, refunds, goods sent on job work, etc once GST gets implemented whether it will be as per new law i.e. GST or the existing law. Another relevant question is what will happen to my balances in CENVAT or VAT credit account. Whether it will be available in new regime or not. All these questions are addressed properly under the transitional provisions and for smooth implementation of GST, We need to understand the transitional provisions minutely and follow the provisions and procedures specified Section Migration of existing taxpayers Sub Sec (1) Sub Sec (2) On and from the appointed day, every person registered under any of the existing laws and having a valid PAN shall be issued a certificate of registration on provisional basis, subject to such conditions and in such form and manner as may be prescribed, which unless replaced by a final certificate of registration under sub-section (2), shall be liable to be cancelled if the conditions so prescribed are not complied with Final RC shall be granted In such form and manner and subject to such conditions as may be prescribed Sub Sec (3) If Final RC stands cancelled, Provisional Certificate shall also stands cancelled

77 77 Section 140 (1) - Transitional arrangements for ITC Amount of CENVAT Credit carried forward in a return to be allowed as ITC A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his Electronic Credit Ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed No Credit in the following Circumstances Where the credit not admissible as ITC under this Act Where not furnished the return for period of 6 months under existing Law immediately preceding the appointed day Where said credit relates to goods manufactured and cleared under exemption notifications Section 140(2) - Transitional arrangements for ITC Unavailed CENVAT Credit on Capital goods not carried forward in a return, to be allowed in certain situations A registered person other than a person opting to pay tax under section 10, shall be entitled to take, in his Electronic Credit Ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed No Credit unless Where the credit admissible under the existing law and also under this Act

78 78 Section 140(2) - Transitional arrangements for ITC Unavailed CENVAT Credit on Capital goods not carried forward in a return, to be allowed in certain situations A registered person other than a person opting to pay tax under section 10, shall be entitled to take, in his Electronic Credit Ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed No Credit unless Where the credit admissible under the existing law and also under this Act Explanation Unavailed CENVAT Credit Amount of CENVAT Credit eligible on Capital Goods CENVAT already availed

79 79 Section 140 (3)Transitional arrangements for ITC Credit of eligible duties and taxes in respect of Inputs held in a stock to be allowed in certain situations. Currently not liable to be registered Sub Section (3) A registered person Manufacturer/provider of exempted goods/ service works contractor availing abatement under 26/2012-ST First/second stage dealer Registered importer Depot of a manufacturer Such stock to be used for making taxable supplies Such person eligible to take ITC on inputs under this Act The said person must be in possession of invoice or prescribed documents Such invoices or documents were issued not earlier than 12 months supplier of services is not eligible for any abatement under this Act Shall be entitled to take in Electronic Credit Ledger, Eligible credits on inputs, inputs in semi-finished and in finished goods held in stock on the appointed day where a registered person, other than a manufacturer or a supplier of services, is not in possession of an invoice or other documents then, he shall, pass on the benefit of such credit by way of reduced prices to the recipient, and he shall be allowed to take credit at such rate and in such manner as may be prescribed

80 80 Section 140 (4) - Transitional arrangements for ITC Eligibility of credit in case a person is engaged in manufacture of taxable as well as exempted goods in existing law A registered person engaged in the manufacture of taxable/exempted goods under the Central Excise Act, 1944 (1 of 1944) provision of taxable/exempted services under Chapter V of the Finance Act, 1994 (32 of 1994) but which are liable to tax under this Act, shall be entitled to take, in his Electronic Credit Ledger the amount of CENVAT credit carried forward in a return as per 140(1); and the amount of CENVAT credit of eligible duties, relating to such exempted goods or services, as per 140 (3). Section -140 (5)Transitional arrangements for ITC Credit of eligible duties in respect of input or input services received on or after appointed day but the duty paid under the existing law Sub Section (5) A registered person shall get credit of eligible duties and taxes paid by him under earlier Law In his Electronic Credit Ledger on inputs or input services received on or after appointed day Provided he has to recorded invoice or other duty or tax paid documents in his books of account within 30 days from appointed day This period can be further extended to more 30 days on sufficient cause being shown He has to furnish a statement in prescribed manner in respect of credits taken under this sub-section

81 81 Section 140 (6) - Transitional arrangements for ITC Credit of eligible duties in case tax was paid at fix rate or as a fix amount under existing law A registered Person Paying tax at fix rate or paying a fix amount Shall be entitled to take in Electronic Credit Ledger, Eligible credits on inputs, inputs in semi-finished and in finished goods held in stock on the appointed day subject to the following conditions, namely - Such stock to be used for making taxable supplies Such person eligible to take ITC on inputs under this Act The said person must be in possession of invoice or prescribed documents Such invoices or documents were issued not earlier than 12 months He is not paying tax u/s. 10 i.e. Composition Levy Section 140 (7) Transitional arrangements for ITC Distribution of Credit under this Act by Input Service Distributor Input Service Distributor shall Be eligible for distribution of Credit For any Service received prior to appointed day. Even if invoice received on or after appointed day

82 82 Section 140 (8) - Transitional arrangements for ITC Carry forward of credit where person has centralized registration under existing law A registered person having centralised registration under the existing law and registered under CGST Act Shall be allowed to take in his Electronic Credit Ledger Credit of amount of CENVAT credit carried forward in return under existing Law for period ending with the day immediately preceding the appointed day If he furnishes return for the period ending with the day immediately preceeding the appointed day under existing law within 3 months of the appointed day, credit shall be allowed provided Such return is either original or revise where credit has been reduced from that claimed earlier He shall not be allowed credit unless the said amount is admissible as ITC under this Act Credit may be transferred to any of the registered persons having same PAN for which registered centrally under existing law Section 140 (9) - Transitional arrangements for ITC Eligibility of credit under this Act in case CENVAT was reversed under existing law due to non-paymment If CENVAT credit availed for input services provided under the existing law has been reversed due to nonpayment of the consideration within 3 months Such credit can be reclaimed if He has made the payment within 3 months from the appointed day Section 140 (10) - Transitional arrangements for ITC The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed.

83 83 Section 141 Transitional provisions relating to Job Work Where Inputs removed as such or after being partially processed for further processing, testing, repair, etc OR Semi finished had been removed for carrying out certain manufacturing process OR Finished/excisable goods had been removed for carrying out tests or other processes not amounting to manufacture Prior to the appointed day Prior to the appointed day Goods returned by Job Worker Goods Supplied Directly If returned within 6 months from the appointed day or extended period If not within 6 months Can be done on payment of Tax in India or Without payment of Tax for exports No Tax ITC shall be liable to be recovered as per Sec 142(8)(a) The benefit of non-payment of tax as discussed above shall not be payable, only if both declare the details of the inputs or goods held in stock by the job-worker on behalf of the manufacturer on the appointed day in the prescribed form and manner

84 84 Section 142 (1) Misc. Transitional Provisions Goods removed prior to the appointed day and returned after the appointed day Duty paid on goods at the time of removal, under the earlier Law Removal shall be within 6 months prior to the appointed day and if such goods are Returned to the place of business within 6 months from the date of applicability of GST by person other than registered person No Tax will be payable Returned to the place of business by a registered person GST payable as the return shall be deemed to be a supply Refund of Tax paid under earlier law may be claimed on receipt of goods Section 142 (2) - Misc. Transitional Provisions Where price is revised either upward or downward on or after the appointed day Where a contract entered into prior to the appointed day and the price of any goods or services or both is Upward Revised on or after appointed day Downward Revised on or after appointed day The registered person shall issue a supplementary invoice or Debit Note within 30 days of price revision The registered person shall issue a Credit Note within 30 days of price revision (recipient to reduce his ITC correspondingly) Such Supplementary Invoice/Debit Note/Credit Note deemed to have been issued in respect of an outward supply under this Act

85 Section 142 (3) Misc. Transitional Provisions Claim for refund filed before on or after the appointed day of any amount paid under the existing Law 85 Any refund claim filed before, on or after the appointed day for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be Disposed of in accordance with the provisions of earlier law Refund is allowed or partially allowed Refund is rejected or partially rejected The portion allowed will be paid in cash subject to doctrine of unjust enrichment The portion rejected will lapse No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act. Section 142 (4) Misc. Transitional Provisions Claim for refund filed after the appointed day of any amount paid under the existing Law Any refund claim filed after the appointed day in respect of the goods or services exported before or after the appointed day, shall be Disposed of in accordance with the provisions of earlier law Refund is allowed or partially allowed Refund is rejected or partially rejected The portion allowed will be paid in cash The portion rejected will lapse

86 86 Section 142 (5) - Misc. Transitional Provisions Claim for refund file after the appointed day for refund of tax paid under existing law in respect of services not provided Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash Section 142 (6) - Misc. Transitional Provisions Proceedings of Appeal, review or reference relating to claim of CENVAT credit initiated on or after the appointed day Every proceeding of appeal revision, review or reference Relating to claim for CENVAT credit/itc initiated whether before, on or after the appointed day under the existing law Shall be disposed of as per earlier law and Amount of credit found admissible shall be paid in cash Relating to recovery for CENVAT credit/itc initiated whether before, on or after the appointed day under the existing law Shall be disposed of as per earlier law and Amount of credit recoverable shall be recovered as arrear of tax Notwithstanding anything to the contrary contained under the provisions of earlier law. other than sub-sec (2) of Sec 11B of Central Excise Act, 1944(1 of 1944) Amount so recovered shall not be admissible as ITC under this Act the amount rejected, if any, shall not be admissible as ITC under this Act. No refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.

87 87 Section 142 (7) - Misc. Transitional Provisions Proceedings of Appeal, review or reference relating to output duty or tax liability initiated on or after the appointed day Any proceedings of appeal, review or reference relating to output duty liability initiated before, on or after the appointed day under the existing law, shall be Disposed of in accordance with the provisions of earlier law Any amount found to be refundable Any amount found to be recoverable Refundable in cash subject to doctrine of unjust enrichment Amount rejected, if any shall not be admissible as ITC under this Act. Recovered as an arrear of tax under GST law unless recovered in existing law Amount so recovered shall not be admissible as ITC Section 142 (8) - Misc. Transitional Provisions Assessment or Adjudication process imitated before or after the appointed day where in pursuance of an assessment or adjudication proceedings instituted before, on or after the appointed day under the existing law Any amount of tax, interest, fine or penalty If refundable If recoverable Refundable in cash The same shall, unless recovered under existing law, be recovered as an arrear of tax under GST law Amount rejected, if any shall not be admissible as ITC under this Act. Not admissible as ITC

88 88 Section 142 (9) - Misc. Transitional Provisions Return furnished under Old Law, revised after appointed day Due to Revising of return under earlier law if any amount Becomes Recoverable or CENVAT becomes inadmissible Becomes Refundable or CENVAT is found admissible, the same shall be The same shall, unless recovered under the existing law, shall be recovered as an arrear of tax under this Act Such amount recovered shall not be admissible as ITC under this Act. Refunded in cash [this provision overrides other provisions of the said law other than Section 11B (2) of the Central Excise Act, 1944] Amount rejected, if any, shall not be admissible as ITC under this Act. Section 142 (10) - Misc. Transitional Provisions Contract entered into prior to appointed day and Goods/Services supplied after the appointed day Goods/Services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under this Act

89 Section 142 (11) - Misc. Transitional Provisions Tax not to be paid under this Act if paid under existing law 89 No Tax shall be payable on Tax Shall be leviable under this Act and Goods under this Act to the extent the tax was leviable on the said goods under Value Added Tax Services under this Act to the extent the tax was leviable on the said Services under Finance Act, 1994 The taxable person shall be entitled to take credit of VAT and ST paid under existing Law To the extent of supplies made after the appointed day Section 142 (12) - Misc. Transitional Provisions Goods sent on approval basis prior to appointed day and returned after the appointed day Goods sent on approval basis, not earlier than 6 months before the appointed day If rejected or not approved by the buyer and returned on or after the appointed day If Returned after 6 months or extended period (2 months) If Returned within 6 months or extended period (2 months) Tax payable by person returning such goods if goods are liable to tax under this Act No, tax on goods returned Tax shall be payable by the person who has sent the goods on approval basis if such goods are liable to tax under this Act, and are not returned within a period specified in this subsection.

90 90 Section 142 (13) - Misc. Transitional Provisions Tax deduction require under existing law, No tax to be deducted under this Act Where a supplier has made any sale of goods in respect of which tax was required to be deducted at source under any law of a State or Union territory relating to VAT and has also issued an invoice for the same before the appointed day, No deduction of tax at source u/s. 51 shall be made by the deductor where payment to the said supplier is made on or after the appointed day Explanation. For the purposes of this Chapter, the expressions capital goods, Central Value Added Tax (CENVAT) credit, first stage dealer, second stage dealer, or manufacture shall have the same meaning as respectively assigned to them in the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder. Section 54 (1) & (2) - Refund of Tax Chapter 1.17 Refund Any person claiming refund of any tax and interest, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in prescribed form and manner If a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of section 49(6), may claim such refund in the return furnished under section 39 in prescribed manner. A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified u/s 55 entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of six months from the last day of the quarter in which such supply was received Section 54 (3) - Refund of Tax

91 91 Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period Refund of unutilised credit shall be allowed No refund of unutilised credit shall be allowed (1) zero rated supplies made without payment of tax Other than point (1) and (2) (2) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the government on the recommendations of the council In cases where the goods exported out of india are subjected to export duty If the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies Section 54(4) Refund of Tax application shall be accompanied by such documentary evidence as may be prescribed to establish that a refund is due to the applicant such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person No documents required if amount of refund is below Rs. 2 Lac. Instead of such documentary or other evidence, he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person Section 54 (5) & (6) & (7) - Refund of Tax

92 92 If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57 Notwithstanding anything contained above, the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, 90% of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order as stated above for final settlement of the refund claim after due verification of documents furnished by the applicant Issue an order as per above, within sixty days from the date of receipt of application complete in all respects Section 54 (8) - Refund of Tax Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies; refund of unutilised input tax credit under sub-section (3); refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued; refund of tax in pursuance of section 77; the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify

93 93 Section -54 (9) & (10) - Refund of Tax Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made thereunder or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8). Where any refund is due under sub-section (3) to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may (a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be; (b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law specified date shall mean the last date for filing an appeal under this Act Section -54 (11) & (12) - Refund of Tax Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine. Where a refund is withheld under subsection (11), the taxable person shall, notwithstanding anything contained in section 56, be entitled to interest at such rate not exceeding 6% as may be notified on the recommendations of the Council, if as a result of the appeal or further proceedings he becomes entitled to refund

94 94 Section -54 (13) & (14) - Refund of Tax Notwithstanding anything to the contrary contained in this section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of section 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39. Notwithstanding anything contained in this section, no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if the amount is less than 1,000 Rs.

95 95 Section 54 - Explanation For the purposes of this section, (1) refund includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under sub-section (3). (2) relevant date means (a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods, (i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or (ii) if the goods are exported by land, the date on which such goods pass the frontier; or (iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India; (b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished; (c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of (i) receipt of payment in convertible foreign exchange, where the supply of services had been completed prior to the receipt of such payment; or (ii) issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice; (d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction; (e) in the case of refund of unutilised input tax credit under sub-section (3), the end of the financial year in which such claim for refund arises; (f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof; (g) in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and (h) in any other case, the date of payment of tax.

96 96 Section-55 - Refund in certain cases The Government may, on the recommendations of the Council, by notification, specify any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries and any other person or class of persons as may be specified in this behalf, who shall, subject to such conditions and restrictions as may be prescribed, be entitled to claim a refund of taxes paid on the notified supplies of goods or services or both received by them. Section 56 - Interest on delayed refunds If any tax ordered to be refunded where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality And the same is not refunded within sixty days from the date of receipt of interest at such rate not exceeding 6 % interest at such rate not exceeding 9 % as may be specified in the notification issued by the Government on the shall be payable from the date immediately after the expiry of sixty days of application till the date where any order of refund is made by an Appellate Authority, Appellate Tribunal

97 97 Section 57 - Consumer welfare Fund Government shall constitute a Consumer Welfare Fund and following shall be credited to the Fund - the amount referred to in sub-section (5) of section 54; any income from investment of the amount credited to the Fund; and such other monies received by it, in such manner as may be prescribed Section 58 - Utilisation of Fund All sums credited to the Fund shall be utilised by the Government for the welfare of the consumers in such manner as may be prescribed. maintain proper and separate account and other relevant records in relation to the Fund and Government or the authority specified by it shall prepare an annual statement of accounts in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India Chapter 1.18 Accounts & Records Section 35 - Accounts and Other Records This chapter discuss the provisions pertaining to maintenance of accounts and other records under GST, the need for getting the same audited and also the provisions pertaining to retention to this accounts and records Every registered taxable person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of production or manufacture of goods, of inward or outward supply of goods and/or services, of stock of goods, of input tax credit availed, of output tax payable and paid, and such other particulars as may be prescribed Where more than one place of business specified, the accounts for each place shall be kept at the concerned place Accounts and other records can be kept in electronic form in such manner as may be prescribed

98 98 Every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter irrespective of whether he is a registered person or not shall maintain records of consigner, consignee and other relevant details of the goods as may be prescribed Commissioner may notify class of persons to maintain additional records and accounts for specified purpose Where Commissioner feels maintenance of accounts is not possible for a class of person, he may, with reasons recorded in writing, permit such class of person to maintain accounts in the manner prescribed Registered person having turnover exceeding the prescribed limit during the Financial Year shall have it audited by a CA or CMA and shall submit a copy along with reconciliation statement u/s 44(2) and other prescribed documents to the PO In case taxable person fails to account for goods/services, PO shall determine the tax payable and the provisions of Sec. 73 or 74 shall apply. Section 36 - Period of retention of accounts Every registered taxable person shall keep and maintain records as per section 35(1) and shall retain them for 72 months from the due date of filling of Annual Return for the year to which record pertains In case where matter in before any appellate/revisional authority or tribunal or court, books must be retained for 1 year after the final disposal or for period specified above, whichever is later

99 99 < Section 143 Job Work Procedure Chapter 1.19 Job Work under GST Now a day s most of the corporates are outsourcing certain processes so as to reduce the cost of manufacturing or output. The person who outsources to another person is known as principal and the person to whom the work or process is outsourced is known as job worker. These two terms are defined under the model GST law as under: "Job work" means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression "job worker" shall be construed accordingly - clause 2(68) of CGST Act, "Principal" means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both. - clause 2(88) of CGST Act, Sub-Sec A registered person (principal) may under intimation and subject to such conditions as (1) may be prescribed, send inputs or capital goods for job work, without payment of tax, to a job worker This permission will be for transfer of goods from principal to the job worker and then from there to another job worker again without payment of tax. Further to this after the completion of job work the goods shall be: brought back inputs or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax; OR supply such inputs or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be: Direct supply from the premises of job worker shall be allowed only after fulfilling the following conditions: Principal declares the place of business of the job worker as his additional place of business except in a case where: (i) the job worker is registered under section 25; or (ii) the principal is engaged in the supply of such goods as may be notified by the Commissioner. Sub-Sec (2) Sub-Sec (3) Sub-Sec (4) The responsibility for accountability of the goods including payment of tax thereon shall lie with the principal. Where the inputs sent for job work are not received back within the time limit mentioned in sub section (1) above or are not supplied from the place of the job worker within the time limit of one year, it shall be deemed that such inputs had been supplied by the principal to the job-worker on the day when the said inputs were sent out. Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back within the time limit mentioned in sub section (1) above or are not supplied from the place of the job worker within the time limit of three year, it shall be deemed that such capital goods had been supplied by the principal to the job-worker on the day when the said capital goods were sent out.

100 100 Sub-Sec Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap (5) generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered. Explanation. For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker. In the below mentioned the entire procedure of job work has been depicted. Supply from place of business of Principal/Registered Person Principal/ Registered tax payer Taxable Goods Without Payment of Tax Taxable Goods Job worker 1 Job worker 2 Without Payment of Tax Supply within India Payment of Tax Taxable goods without payment of tax export Without payment of Tax Principle place of business of Principal

101 101 Supply from place of business of job worker Principal/ Registered tax Payer Taxable Goods Without Payment of Tax Principal should declare this place of job worker as his additional place. Such declaration not required where: Job worker -registered u/s 25 Supply of goods as may be notified Job worker 1 Taxable goods without payment of tax Job worker 2 Payment of Tax Without payment of Tax Supply within India export

102 102 Chapter 1.20 Collection of Tax at Source Section 52 Collection of Tax at Source Under GST, the concept of Collection of Tax at Source is being introduced and the said responsibilities has been given to every electronic commerce operator. As per the provisions, whenever a transaction happens through an E-commerce operator, provision of TCS is attracted and he becomes liable to collect 1% on the net value of taxable supplies made through it by the other supplier. In this chapter, we will be understanding the provisions, in relation to Tax Collection at Source Notwithstanding anything contained to the contrary in this Act, every electronic commerce operator include not being an agent shall collect an amount calculated at such rate not exceeding 1%, as may be notified by the Government on the recommendations of the Council of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator net value of taxable supplies shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified u/s 9(5), made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month The power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode of recovery from the operator. Amount collected should be paid within 10 days from the end of the month in which collection is made A statement should be furnished electronically with details of outward supplies effected through it and the amount collected in such form and manner as may be prescribed within 10 days after the end of such months to which collection relates Every operator shall furnish an annual statement electronically containing details of outward supplies effected and returned through it and the amount collected in the prescribed form and manner before 31 st December of the following year In case operator discovers any error or omission in the statement furnished, other than due to scrutiny, audit, inspection or enforcement by tax authorities, operator shall rectify subject to payment of interest as per section 50(1) No such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of statement for the month of September following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier. The supplier who has supplied through the operator shall claim credit in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished as discussed above, in prescribed manner Such details furnished shall be matched with corresponding details of outward supplies furnished by the concerned supplier registered under this Act

103 103 Where the details of outward supplies furnished by the operator do not match with the corresponding details furnished by the supplier u/s 37, the discrepancy shall be communicated to both persons The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier, where the value of outward supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in his return for the month succeeding the month in which the discrepancy is communicated Supplier whose output tax liability has been increased as above, shall pay the tax payable in respect of such supply along with interest, at the rate specified u/s 50(1) Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the course of any proceedings under this Act, requiring the operator to furnish such details, as specified in notice, relating tosupplies of goods or services or both effected through such operator during any period; or on the amount so added from the date such tax was due till the date of its payment stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, Required information as per notice above shall be furnished within 15 working days of the date of serving of notice In case the person fails to furnish required information shall without prejudice to any action that may be taken u/s 122, be liable to a penalty which may extend to Rs. 25,000/- Explanation. For the purposes of this section, the expression concerned supplier shall mean the supplier of goods or services or both making supplies through the operator.

104 104 Section 59 - Self Assessment Chapter 1.21 Assessments under GST Every registered taxable person shall himself assess the taxes payable under this Act and Furnish a return for each tax period as specified under section 39. Section 60 - Provisional Assessment Where taxable person is unable to determine value of goods or services or both or to determine the rate of tax applicable thereto Request may be made to the proper officer in writing giving reasons for payment of tax on provisional basis, and The proper officer may allow at such rate or on such value as may be specified by him, by way of an order, within 90 days from the date of receipt of such request. For such allowance execution of bond as prescribed with such surety or security as the proper officer may deem fit This is required for binding taxable person for payment of difference of tax at the time of final assessment The proper officer shall pass the final assessment order within 6 months from the date of communication of provisional order after taking into account such information as may be required for finalising the assessment. The above period of 6 months on sufficient cause being shown and for recorded reasons, by extended by JC/ADC for further period not exceeding 6 months or by Commissioner for further period not exceeding 4 years. Taxable person shall pay interest, at the rate specified u/s 50(1), on any tax payable on supplies under provisional assessment but not paid within prescribed time limit u/s. 39 Interest to be paid for the period starting from the first day after the due date till the date of actual payment, whether such amount is paid before or after the issuance of final assessment. In case taxable person entitled for refund u/s 54 after final assement order, Interest shall be paid on such refund u/s 56.

105 105 Section 61 - Scrutiny of Returns The Proper officer may scrutinize the return and the related particulars furnish by taxable person to verify the correctness of the return The discrepancies if any shall be informed in such manner as may be prescribed and call for explanation thereto. If explanation acceptable no further action to be taken and taxable person shall be informed If no satisfactory explanation given within 30 days or extended period, of being informed, appropriate action may be initiated by the proper officer In case discrepancies accepted by the taxable person, not corrected in the return of the month when accepted, appropriate action may be initiated by the proper officer including those u/s 65 or 66 or 67 or determine the tax and other dues u/s 73 or 74. Section 62 - Assessement of non fillers of returns (Best Judgement Assessment) Where return U/S 39 or U/S 45 in not filled, even after service of notice U/S 46 The proper officer may proceed to the best of his judgement and assess the tax liability Such assessement must be on basis of available material or gathered material Such assessement order must be issued within a period of 5 years from the date specified under section 44 for furnishing of the annual return for the financial year to which tax not paid relates. In case valid return is filled within 30 days of service of aforesaid order, the said order shall be deemed to be withdrawn Such withdrawn does not immune the taxable person from payment of interest u/s. 50 or late fee u/s. 47

106 106 Section 63 - Assessement of unregistered persons Where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under section 29 (2) but who was liable to pay tax The proper officer may proceed to assess the tax liability of such taxable person to the best of his judgement For the relevant tax periods and Issue an assessment order within five years from the due date for filing of the annual return for the year to which the tax not paid relates: Such assessment order shall not be passed without giving a SCN and reasonable opportunity of being heard Section 64 - Summary Assessment in certain cases In order to protect the interest of revenue, the proper officer having evidence of outstanding liability may, with prior permission of ADC/JC Proceed to assess the tax liability and Issue the assessment order provided he has reasons to believe that any delay would adversely affect the interest of revenue In a situation where the person of whom the liability is, not ascertainable and the liability is of supply of goods, the person in-charge of such goods would become liable for payment of tax and other amount due If the taxable person makes an application within 30 days from the date of receipt of aforesaid order, he may withdraw such order OR If ADC/JC considers the aforesaid order as erroneous he may withdraw such order and After withdrawal in both the above cases, the PO shall follow procedure laid down in Sec. 73 or 74

107 107 Chapter 1.22 Audit Introduction Audit by Tax Authorities had been a point of litigation under service tax but now with the introduction of GST Law and the introduction of Audit by Tax Authorities provision settles all such disputes and therefore in GST regime, Tax Authorities will be empowered to conduct the Audit of any registered person. Further the provision of Special Audit is also incorporated in the GST Law which authorises a commissioner to appoint a chartered accountant or cost accountant for such purpose of special audit. In this chapter, discussions pertaining to Audit by tax authorities and Special Audit has been discussed. Section 65 - Audit by Tax Authorities by way of a general or a specific order, Commissioner or any officer authorised by him, may undertake audit of any registered person for such period, at such frequency and in prescribed manner Such audit may be conducted at the place of business of registered person or officer s office Registered person shall be informed not less than 15 working days prior to the conduct by way of a notice of audit in prescribed manner Audit shall be completed within a period of 3 months from the date of commencement of the audit Where commissioner is satisfied that audit can not be completed in 3 months, he may extend the period further but not beyond 6 months on the basis of recorded and written reasons During the course of audit, the authorised officer may require the registered person, - to afford him the necessary facility to verify to furnish such information as he may the books of account or other documents as he require and render assistance for timely may require; completion of the audit. On conclusion of audit, the proper officer shall, within 30 days, inform the auditee, about the findings and the reasons thereof and his rights and obligations Where the audit results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action u/s 73 or 74

108 108 Section 66 - Special Audit If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, the value has not been correctly declared or is of the opinion that the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner Chartered accountant or cost accountant so nominated shall, within the period of 90 days, submit a report of such audit duly signed and certified by him to the said Assistant Commissioner mentioning therein such other particulars as may be specified Assistant Commissioner may, on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason, extend the said period by a further period of 90 days Even if the accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force, the audit conducted under this section shall have the effect Opportunity of being heard to registered person should be given in respect of any material gathered which is proposed to be used in any proceedings against him under this Act or the rules made thereunder The expenses of the examination and audit of records, including the remuneration of such chartered accountant or cost accountant, such determination shall be shall be determined and paid by the Commissioner and final Where the special audit conducted results in detection of tax not paid or short paid or erroneously refunded, or ITC wrongly availed or utilised, proper officer may initiate action u/s 73 or 74

109 109 Chapter 1.23 Demand & Recovery Demand of Tax - General Understanding Demand can be raised by Tax Authorities whenever there is short-payment or non-payment or errornous refund or wrong claim of input tax credit, he is supposed to issue a Show Cause Notice (SCN) for the same. Under GST Law, the time limit for the issuance of ORDER is provided and therefore it becomes the responsibility of the adjudicating authority not only to issue a SCN but also to adjudicate the same within the prescribed time limit. This is certainy a welcome provision in comparision to what we have today. In this chapter we shall be discussing the provisions pertaining to Demand of Tax and recovery thereof Tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized Section 73 Section 74 Any reason other than fraud or any wilful misstatement or suppression of facts By reason of fraud or any wilful misstatement or suppression of facts Section 73 Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful- misstatement or suppression of facts. 1 Proper officer shall issue SCN as to why amount specified therein shall not be paid along with Interest/Penalty 2 Shall be issued at least 3 months prior to time limit for issuance of Order 3 Serving a statement for any other period other than as covered in subsection 1 provided grounds relied upon are same 4 Payment of Tax along with Interest on own ascertainment before service of SCN or statement. Intimation to proper officer in writing No SCN or statement to be issued 5 If payment under s/s 4 falls short, SCN to be issued 6 If Tax paid along with Interest within 30 days of issuance of SCN, No penalty and proceedings stands concluded 7 8 Determination of amount of Tax, Interest & Penalty equal to 10% of Tax or 10,000 which ever is higher Issuance of Order under s/s 7 within 3 years from the due date of filling of AR for the concerned year or from the date of erroneous refund.

110 110 Analysis Sub-Sec (1) Sub-Sec (2) Sub-Sec (3) Sub-Sec (4) Sub-Sec (5) Sub-Sec (6) Sub-Sec (7) Sub-Sec (8) Sub-Sec (9) Where any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized for any reason, other than the reason of fraud or any willful-misstatement or suppression of facts to evade tax, the proper officer shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit, requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and penalty leviable under the provisions of this Act or the rules made thereunder. The proper officer shall issue the above referred notice at least three months prior to the time limit specified in sub-section (10) for issuance of order. Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under sub-section(1), on the person chargeable with tax. The service of such statement shall be deemed to be service of notice on such person under the aforesaid sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice. The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty leviable under the provisions of this Act or the rules made there under. Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. Where any person chargeable with tax under sub-section (1) or under sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said tax shall be deemed to be concluded. The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty not exceeding 10% of tax or Rs. 10,000/-, whichever is higher, due from such person and issue an order.

111 Sub-Sec (9) Sub-Sec (10) Sub-Sec (11) tax shall be deemed to be concluded. The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty not exceeding 10% of tax or Rs. 10,000/-, whichever is higher, due from such person and issue an order. The proper officer shall issue the order under sub-section (9) within three years from the due date or the actual date, whichever is earlier, for filing of annual return for the year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates or, as the case may be, within three years from the date of erroneous refund. Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax. 111 Section 74 - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfulmisstatement or suppression of facts. 1 Proper officer shall issue SCN as to why amount specified therein shall not be paid along with Interest/Penalty 2 Shall be issued at least 6 months prior to time limit for issuance of Order 3 Serving a statement for any other period other than as covered in sub-section 1 provided grounds relied upon are same 4 Payment of Tax along with Interest and 15% penalty on own ascertainment before service of SCN or statement. Intimation to proper officer in writing No SCN or statement to be issued 5 If payment under s/s 4 falls short, SCN to be issued 6 If Tax paid along with Int. and 25% penalty within 30 days of issuance of SCN, No penalty and proceedings stands concluded 7 Determination of amount of Tax, Interest & Penalty 8 Issuance of Order under s/s 7 within 5 years from the due date of filling of AR for the concerned year or from the date of erroneous refund. 9 If Tax along with Interest and 50% of Penalty within 30 days of Communication of Order, all proceedings to be drop. Section 74 Sub-Sec (1) Where any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any willful- misstatement or suppression of facts to evade tax, the proper officer shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.

112 112 Sub-Sec (2) The proper officer shall issue the above referred notice at least six months prior to the time limit specified in sub-section (10) for issuance of order. Sub-Sec (3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under sub-section (1), on the person chargeable with tax. Sub-Sec (4) The service of such statement shall be deemed to be service of notice on such person under the aforesaid sub-section (1), subject to the condition that the grounds relied upon for such periods other than those covered under sub-section(1) are the same as are mentioned in the earlier notice. Sub-Sec (5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. Sub-Sec (6) The proper officer, on receipt of such information, shall not serve any notice under subsection (1), in respect of the tax so paid or any penalty leviable under the provisions of this Act or the rules made there under. Sub-Sec (7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. Sub-Sec (8) Where any person chargeable with tax under sub-section (1) or under sub-section (2) pays the said tax along with interest payable under section 50 and a penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceedings in respect of the said tax shall be deemed to be concluded. Sub-Sec (9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. Sub-Sec (10) Sub-Sec (11) The proper officer shall issue the order under sub-section (9) within a period of 5 years from the due date or the actual date, whichever is earlier, for filing of annual return for the year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates or, as the case may be, within 5 years from the date of erroneous refund. Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to 50% of such tax within 30 days of the communication of order, all proceedings in respect of the said tax shall be deemed to be concluded. Explanation 1. For the purposes of section 73 and this section, (i) the expression all proceedings in respect of the said notice shall not include proceedings under section 132; (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. Explanation 2. For the purposes of this Act, the expression suppression shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer.

113 113 Section 75 - General provisions relating to determination of tax If service of notice or issuance of order is stayed by an order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in subsections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74 Where any Appellate Authority or Appellate Tribunal or court concludes that the notice issued under sub-section (1) of section 74 is not sustainable for the reason that the charges of fraud or any the proper officer shall determine the wilful-misstatement or suppression of facts to tax payable by such person, deeming as evade tax has not been established against the if the notice were issued under subsection (1) of section person to whom the notice was issued, 73 If order is required to be issued in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court, such order shall be issued within two years from the date of communication of the said direction. An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or any adverse decision is contemplated against such person. The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing: Provided that no such adjournment shall be granted for more than three times to a person during the proceedings. The proper officer, in his order, shall set out the relevant facts and the basis of his decision. The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice

114 114 Section 75 - General provisions relating to determination of tax Where the Appellate Authority or Appellate Tribunal or court modifies the amount of tax determined by the proper officer, the amount of interest and penalty shall stand modified accordingly, taking into account the amount of tax so modified. The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability. The adjudication proceedings shall be deemed to be concluded, if the order is not issued within 3 years as provided for in sub-section (10) of section 73 or within 5 years as provided for in sub-section (10) of section 74. An issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the AppellateAuthority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in sub-section (10) of section 73 or sub-section (10) of section 74 where proceedings are initiated by way of issue of a show cause notice under the said sections. Notwithstanding anything contained in section 73 or section 74, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79. Where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act.

115 115 Section 76 - Tax collected but not paid to Government Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not. Where any amount is required to be paid to the Government under sub-section (1), and which has not been so paid, the proper officer may serve on the person liable to pay such amount a notice requiring him to show cause as to why the said amount as specified in the notice, should not be paid by him to the Government and why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act The proper officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub-section (2), determine the amount due from such person and thereupon such person shall pay the amount so determined. The person referred to in sub-section (1) shall in addition to paying the amount referred to in sub-section (1) or sub-section (3) also be liable to pay interest thereon at the rate specified under section 50 from the date such amount was collected by him to the date such amount is paid by him to the Government

116 116 Section 76 - Tax collected but not paid to Government An opportunity of hearing shall be granted where a request is received in writing from the person to whom the notice was issued to show cause. The proper officer shall issue an order within one year from the date of issue of the notice. Where the issuance of order is stayed by an order of the court or Appellate Tribunal, the period of such stay shall be excluded in computing the period of one year. The proper officer, in his order, shall set out the relevant facts and the basis of his decision. The amount paid to the Government under sub-section (1) or sub-section (3) shall be adjusted against the tax payable, if any, by the person in relation to the supplies referred to in sub-section (1). Where any surplus is left after the adjustment under sub-section (9), the amount of such surplus shall either be credited to the Fund or refunded to the person who has borne the incidence of such amount. The person who has borne the incidence of the amount, may apply for the refund of the same in accordance with the provisions of section 54.

117 117 Section 77- Tax wrongfully collected and paid to the Central or a State Government Tax wrongfully collected and deposited with the Central or a State Government Particulars Sub Section (1) Sub Section (2) Wrongly Collected and Paid CGST/SGST IGST To be Collected and Paid Course of Action IGST Pay IGST along with Interest and claim refund of CGST/SGST CGST/SGST Pay CGST/SGST (1) A registered person who has paid the Central tax and State tax or, as the case may be, the Central tax and the Union territory tax on a transaction considered by him to be an intra-state supply, but which is subsequently held to be an inter-state supply, shall be refunded the amount of taxes so paid in such manner and subject to such conditions as may be prescribed. (2) A registered person who has paid integrated tax on a transaction considered by him to be an inter- State supply, but which is subsequently held to be an intra-state supply, shall not be required to pay any interest on the amount of central tax and State tax or, as the case may be, the Central tax and the Union territory tax payable. Section 78 - Initiation of recovery proceedings Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of 3 months from the date of service of such order failing which recovery proceedings shall be initiated Proper officer may say taxable person, with reason in writing and in the interest of revenue, to make such payment within such period less than a period of three months as may be specified by him

118 118 Section 79 - Recovery of tax. (1) Where any amount payable by a person to the Government under any of the provisions of this Act or the rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely: (a) the proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other specified officer; (b) the proper officer may recover or may require any other specified officer to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the proper officer or such other specified officer; (c) (i) the proper officer may, by a notice in writing, require any other person from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the Government either forthwith upon the money becoming due or being held, or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (ii) every person to whom the notice is issued under sub-clause (i) shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary; (iii) in case the person to whom a notice under sub-clause (i) has been issued, fails to make the payment in pursuance thereof to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Act or the rules made thereunder shall follow; (iv) the officer issuing a notice under sub-clause (i) may, at any time, amend or revoke such notice or extend the time for making any payment in pursuance of the notice; (v) any person making any payment in compliance with a notice issued under sub-clause (i) shall be deemed to have made the payment under the authority of the person in default and such payment being credited to the Government shall be deemed to constitute a good and sufficient discharge of the liability of such person to the person in default to the extent of the amount specified in the receipt; (vi) any person discharging any liability to the person in default after service on him of the notice issued under sub-clause (i) shall be personally liable to the Government to the extent of the liability discharged or to the extent of the liability of the person in default for tax, interest and penalty, whichever is less; (vii) where a person on whom a notice is served under sub-clause (i) proves to the satisfaction of the officer issuing the notice that the money demanded or any part thereof was not due to the person in default or that he did not hold any money for or on account of the person in default, at the time the notice was served on him, nor is the money demanded or any part thereof, likely to become due to the said person or be held for or on account of such person, nothing contained in this section shall be deemed to require the person on whom the notice has been served to pay to the Government any such money or part thereof;

119 (d) the proper officer may, in accordance with the rules to be made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person; (e) the proper officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business or to any officer authorised by the Government and the said Collector or the said officer, on receipt of such certificate, shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue; (f) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the proper officer may file an application to the appropriate Magistrate and such Magistrate shall proceed to recover from such person the amount specified thereunder as if it were a fine imposed by him. 119 (2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section. (3) Where any amount of tax, interest or penalty is payable by a person to the Government under any of the provisions of this Act or the rules made thereunder and which remains unpaid, the proper officer of State tax or Union territory tax, during the course of recovery of said tax arrears, may recover the amount from the said person as if it were an arrear of State tax or Union territory tax and credit the amount so recovered to the account of the Government. (4) Where the amount recovered under sub-section (3) is less than the amount due to the Central Government and State Government, the amount to be credited to the account of the respective Governments shall be in proportion to the amount due to each such Government. Section 80 - Payment of tax and other amount in instalments. On an application filed by a taxable person, extend the time for payment or the Commissioner may, for reasons to be recorded in writing, allow payment of any amount due under this Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly instalments not exceeding 24, subject to payment of interest under section 50 and subject to such conditions and limitations as may be prescribed If there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and shall, without any further notice being served on the person, be liable for recovery

120 120 Section 81 - Transfer of property to be void in certain cases Where a person, after any amount has become due from him, creates a charge on or parts with the property belonging to him or in his possession by way of sale, mortgage, exchange, or any other mode of transfer whatsoever of any of his properties in favour of any other person with the intention of defrauding the Government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said person Provided that, such charge or transfer shall not be void if it is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under this Act or without notice of such tax or other sum payable by the said person, or with the previous permission of the proper officer Section 82 - Tax to be first charge on property. Notwithstanding anything to the contrary contained in any law for the time being in force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), any amount payable by a taxable person or any other person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge on the property of such taxable person or such person

121 121 Section 83 - Provisional attachment to protect revenue in certain cases. Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed. Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order. Section 84 - Continuation and validation of certain recovery proceedings. Where any notice of demand in respect of any tax, penalty, interest or any other amount payable under this Act, (hereafter in this section referred to as Government dues ), is served upon any taxable person or any other person and any appeal or revision application is filed or any other proceedings is initiated in respect of such Government dues, then (a) where such Government dues are enhanced in such appeal, revision or other proceedings, the Commissioner shall serve upon the taxable person or any other person another notice of demand in respect of the amount by which such Government dues are enhanced and any recovery proceedings in relation to such Government dues as are covered by the notice of demand served upon him before the disposal of such appeal, revision or other proceedings may, without the service of any fresh notice of demand, be continued from the stage at which such proceedings stood immediately before such disposal; (b) where such Government dues are reduced in such appeal, revision or in other proceedings (i) it shall not be necessary for the Commissioner to serve upon the taxable person a fresh notice of demand; (ii) the Commissioner shall give intimation of such reduction to him and to the appropriate authority with whom recovery proceedings is pending; (iii) any recovery proceedings initiated on the basis of the demand served upon him prior to the disposal of such appeal, revision or other proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.

122 122 Chapter 1.24 Importance of Goods and Services Tax Network (GSTN) & GST Suvidha Providers (GSP) Goods and Services Tax Network (GSTN) Role and Importance Goods and Services Tax Network (GSTN) is a non-profit organisation formed to create a platform for all the concerned parties i.e. stakeholders, government, taxpayers to collaborate on a single portal. The portal will be accessible to the central government which will track down every transaction on its end while the taxpayers will be having a vast service to return file their taxes and maintain the details. The IT network will be developed by private firms which are being in tie up with the central government and will be having stakes accordingly. The known authorised capital of GSTN is 10 crore (US$1.6 million) in which Central government holds 24.5 percent of shares while the state government holds 24.5 percent and rest with private banking firms. Structure of GSTN The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the first time to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. Currently, the Centre and State indirect tax administrations work under different laws, regulations, procedures and formats and consequently the IT systems work as independent sites. Integrating them for GST implementation would be complex since it would involve integrating the entire indirect tax ecosystem so as to bring all the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and other external stakeholders. Besides, GST being a destination based tax, the inter- state trade of goods and services (IGST) would need a robust settlement mechanism amongst the States and the Centre. This is possible only when there is a strong IT Infrastructure and Service back bone which enables capture, processing and exchange of information amongst the stakeholders (including tax payers, States and Central Governments, Accounting Offices, Banks and RBI). In compliance of the above decision, GST Network was registered as a non-government, notfor-profit, private limited company under section 8 (under new companies Act, not for profit companies are governed under section 8) of the Companies Act 1956 with the following equity structure: Central Government 24.5% State Governments & EC 24.5% HDFC 10% HDFC Bank 10% ICICI Bank 10% NSE Strategic Investment Co. 10% LIC Housing Finance Ltd. 11% Relationship of GSTN with Tax Administrators The common GST Portal developed by GSTN will function as the front-end of the overall GST IT eco-system. The IT systems of CBEC and State Tax Departments will function as back-ends that would handle tax administration functions such as registration approval, assessment, audit,

123 123 adjudication etc. Nine States and CBEC are developing their backend systems themselves. GSTN is doing the backend for 20 States and 5 UTs. GSTN has been interacting with CBEC and States for ensuring mutual interaction between the front-end that would be operated by GSTN and the back-ends of the tax administrations. During the operation phase as well GSTN will continue the interaction with CBEC and states and extend help wherever necessary. GST IT Strategy: Role assigned to GSTN Creation of common and shared IT infrastructure for functions facing taxpayers has been assigned to GSTN and these are filing of registration application, filing of return, creation of challan for tax payment, settlement of IGST payment (like a clearing house), generation of business intelligence and analytics. All statutory functions to be performed by tax officials under GST like approval of registration, assessment, audit, appeal, enforcement etc. will remain with the respective tax departments. The diagram below shows the work distribution. Role of GSTN- in PAYMENT of GST Under GST, all challans will have to be prepared by taxpayers on the GST portal only. This has been done to ensure that bank tellers do not enter wrong TIN number from hand written challans as happens sometimes today. Once Challan is created with GSTIN, name of taxpayer, amount under various tax heads and sub-heads, the taxpayer has following two options to pay the tax: He can choose online option under which, he will have to choose one of the agency banks (i.e. banks authorized by RBI to collect GST on their behalf) from the dropdown menu and after that he will be taken to the website of chosen bank to make payment by providing user ID and password of bank. After completion of payment, he will be brought back to GST portal from where he can download the paid challan, which is generated by GST System on confirmation from the Bank. The other option of tax payment is to print the challan and present the same in the relevant bank for Over the Counter Payment (OTC). The bank after realising the payment will transfer

124 124 the money to RBI and send confirmation of payment to GST Portal for accounting. At the end of the day, the GST portal will prepare a summary of all payment confirmations received by it from Banks and share the same with RBI and accounting authorities for reconciliation. No tax money will ever come to GSTN in any manner. GSTN will only get conformation of payment from the Banks. Role of GSTN- in RETURNS of GST Under GST, there will be common return for CGST, SGST and IGST, eliminating the need to file separate tax returns with Central and state GST authorities. Checking of claim of Input Tax Credit (ITC) is one of the fundamental pillars of GST, for which data of Business to Business (B2B) invoices have to be uploaded and matched. The Common GST Portal created and managed by GSTN will do this matching on the basis of invoice level data filed as part of return by all taxpayers. Similar exercise will be done for inter-state supplies where goods or services will move from the state of origin to the state of consumption and so will the taxes. The claim of IGST and its utilization will be settled based on returns filed at the Common GST portal. Role of GSTN- in REGISTRATION of GST Under GST, the registration of taxpayers will be common under Central and State GST and hence one place of filing application for the same i.e. the Common GST portal. The application so received will be checked for its completeness by the GST portal, which will also carry out validation of data like PAN from CBDT, CIN/DIN from MCA and Aadhaar of promoters, if provided, from UIDAI. After completion of validation, the registration application will be shared with respective central and state tax authorities. Query of tax authorities, if any and their final decision will be communicated to GST portal which in turn will communicate the same to the taxpayer. The Common GST Portal, as explained in brief above, will be the single interface for all taxpayers from any part of the country. Only in case where a taxpayer is picked up for scrutiny or audit, and such cases are expected to be small in number, he will interface with the respective tax authority issuing the notice under the Act. For all other cases, which is expected to be around 95%, the Common GST Portal will be the only taxpayer interface. Conclusion After the entire above discussion one thing can be said that GSTN is going to be the backbone of GST and it needs to be proper and as per the expectations and according to the planned standards. If by any chance GSTN is not rolled out rightly at right time GST is going to fail and fall back on the Government very badly. This is said and felt by me because of the fact that under GST anything and everything will be done on the portal electronically and there will be no manual interaction. Therefore we should be hopeful that the companies which are developing the common portal of GSTN do that as per the expected and planned standards and well in time so that the role out of GST is successful.

125 125 GST Suvidha Provider (GSP) Role and Importance The GST System is going to have a G2B portal for taxpayers to access the GST Systems, however, that would not be the only way for interacting with the GST system as the taxpayer via his choice of third party applications, which will provide all user interfaces and convenience via desktop, mobile, other interfaces, will be able to interact with the GST system. The third party applications will connect with GST system via secure GST System APIs. All such applications are expected to be developed by third party service providers who have been given a generic name, GST Suvidha Provider or GSP. The GSPs are envisaged to provide innovative and convenient methods to taxpayers and other stakeholders in interacting with the GST Systems from registration of entity to uploading of invoice details to filing of returns. Thus there will be two sets of interactions, one between the App user and the GSP and the second between the GSP and the GST System. It is envisaged that App provider and GSP could be the same entity. Another version could where data in required format directly goes to GSP-GST Server. The diagram below gives the most generic case. In the evolving environment of the new GST regime it is envisioned that the GST Suvidha Providers (GSP) concept is going to play a very important and strategic role. It is the endeavour of GSTN to build the GSP eco system, ensure its success by putting in place an open, transparent and participative framework for capable and motivated enterprises and entrepreneurs. GST Compliance Requirement by the Taxpayer The taxpayer under GST Regime will have to provide following information at regular intervals: Invoice data upload (B2B and large value B2C) Upload GSTR-1 (return containing supply data) which will be created based on invoice data and some other data provided by the taxpayer. Download data on inward supplies (receipts or purchase) in the form of Draft GSTR-2 from GST Portal created by the Portal based on GSTR-1 filed by corresponding suppliers. Do matching of purchases made and that downloaded from GST portal. Finalize the same based on his own purchase (inward supply data) and upload GSTR-2 File GSTR-3 created by GST Portal based on GSTR-1 and 2 and other info and tax paid. Similarly there are other returns for other categories of taxpayers like casual taxpayer or composition taxpayers. GSP Concept It is expected that the GSPs shall provide the tax payers with all services mentioned above in addition to maintaining their individual business ledgers (sales ledger and purchase ledger) and other value added services around the same. Another important service expected from GSPs is the automatic

126 126 reconciliation of purchase made and entered in the purchase register and data downloaded in the form of GSTR-2 from the GST portal. In additional there will be sector-specific or trade specific needs which the GSPs are expected to fulfil. The conceptual diagram depicting the same is as given below. While the GST System will have a G2B portal for taxpayers to access the GST System there will be a wide variety of tax payers (SME, Large Enterprise, Small retail vendor etc.) who will require different kind of facilities like converting their purchase/sales register data in GST compliant format, integration of their Accounting Packages/ERP with GST System. Similarly, the specific needs of an industry or trade could be met by GSP. In short, the GSP can help the taxpayers in GST compliance through their innovative solutions. Services Provided by GSP and ASP (Application Service Providers) GSPs acting as ASPs are expected to enable taxpayers to comply with the provisions of GST law through their web platform. These application service providers should provide taxpayers and other stakeholders with innovative and convenient methods of interacting with the GST Systems, from registration, to uploading invoice details, to filing returns. ASPs can come up with an application to provide GST filing facility in existing software, or, with the help of ASP partners, they can develop an end-to-end solution with which corporates, consultants, and taxpayers can manage their sale/purchase and GST filing: e.g., an offline utility-like spreadsheet; taxpayers could fill out their invoice details and then upload it on the GST portal for processing. Similarly, for tax consultants (TC), ASPs can provide a dashboard that displays a list of all his/her clients. Clicking on a client would give the TC a snapshot of the client s actions/ pending actions. GSP and ASPs in Action With respect to the GST IT ecosystem, taxpayers can be divided into three broad categories, namely: Users with standalone or networked systems that are not connected to the Internet Users with applications with API interfaces such as Tally, SAP, Oracle, Ramco ERP, Microsoft ERP and many more. Users with applications that are in the cloud and can work in both offline and online mode, have well-defined API based architecture, and use latest technologies. Users in the first category will necessarily need a third party (GSP/ASP) to help them upload invoice data, file returns, etc., generated from their accounting software. However, many in the other two categories will prefer to have GST Access in a user-friendly enriched form through the GSP/ASP network, even though they may be in a position to directly consume APIs in the form provided by GSTN. Conclusion An important part of GST compliance will be filing data with the GSTN. An IT ecosystem under GST, through a network of GSPs and ASPs, will help corporate and tax consultants achieve better databased compliance under the GST regime.

127 127 Chapter 1.25 Levy of Compensation Cess Introduction & Applicability: Section 1 Short title, extent and commencement Sub-Sec (1) This Act may be called the Goods and Services Tax (Compensation to States) Act, Sub-Sec (2) It extends to the whole of India Sub-Sec (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Section 2 Definitions Sub-Sec (1)(a) Central tax means the central goods and services tax levied and collected under the Central Goods and Services Tax Act. Sub-Sec Central Goods means the Central Goods and Services Tax Act, 2017 (1)(b) and Services Tax Act Sub-Sec (1)(c) cess means the goods and services tax compensation cess levied under section 8 Sub-Sec (1)(d) compensation means an amount, in the form of goods and services tax compensation, as determined under section 7 Sub-Sec (1)(e) Council means the Goods and Services Tax Council constituted under the provisions of article 279A of the Constitution Sub-Sec (1)(f) Fund means the Goods and Services Tax Compensation Fund referred to in section 10. Sub-Sec input tax in relation to a taxable person, means, (1)(g) (i) cess charged on any supply of goods or services or both made to him; (ii) cess charged on import of goods and includes the cess payable on reverse charge basis. Sub-Sec (1)(h) Sub-Sec (1)(i) Sub-Sec (1)(j) Sub-Sec (1)(k) Sub-Sec (1)(l) Sub-Sec (1)(m) Integrated Goods and Services Tax Act integrated tax prescribed projected growth rate Schedule State means the Integrated Goods and Services Tax Act, means the integrated goods and services tax levied and collected under the Integrated Goods and Services Tax Act means prescribed by rules made, on the recommendations of the Council, under this Act; means the rate of growth projected for the transition period as per section 3 means the Schedule appended to this Act means, (i) for the purposes of sections 3, 4, 5, 6 and 7 the States as defined under the Central Goods and Services Tax Act; and

128 128 Sub-Sec (1)(n) Sub-Sec (1)(o) Sub-Sec (1)(p) Sub-Sec (1)(q) Sub-Sec (1)(r) Sub-Sec (1)(s) Sub-Sec (2) State Tax State Goods and Services Tax Act taxable supply transition date transition period (ii) for the purposes of sections 8, 9, 10, 11, 12, 13 and 14 the States as defined under the Central Goods and Services Tax Act and the Union territories as defined under the Union Territories Goods and Services Tax Act; means the State goods and services tax levied and collected under the respective State Goods and Services Tax Act means the law to be made by the State Legislature for levy and collection of tax by the concerned State on supply of goods or services or both means a supply of goods or services or both which is chargeable to the cess under this Act shall mean, in respect of any State, the date on which the State Goods and Services Tax Act of the concerned State comes into force; means a period of five years from the transition date; and Union Territories means the Union Territories Goods and Services Tax Act, Goods and Services Tax Act The words and expressions used and not defined in this Act but defined in the Central Goods and Services Tax Act and the Integrated Goods and Services Tax Act shall have the meanings respectively assigned to them in those Acts. Base Year, Projected Growth and Compensation Section 3 Projected growth rate. The projected nominal growth rate of revenue subsumed for a State during the transition period shall be fourteen per cent. per annum. Section 4 Base Year For the purpose of calculating the compensation amount payable in any financial year during the transition period, the financial year ending 31st March, 2016, shall be taken as the base year. Section 5 Base year revenue. Sub- Sec (1) Subject to the provision of sub-sections (2), (3), (4), (5) and (6), the base year revenue for a State shall be the sum of the revenue collected by the State and the local bodies during the base year, on account of the taxes levied by the respective State or Union and net of refunds, with respect to the following taxes, imposed by the respective State or Union, which are subsumed into goods and services tax, namely: (a) the value added tax, sales tax, purchase tax, tax collected on works contract, or any other tax levied by the concerned State under the erstwhile entry 54 of List-II (State List) of the Seventh Schedule to the Constitution; (b) the central sales tax levied under the Central Sales Tax Act, 1956 (74 of 1956); (c) the entry tax, octroi, local body tax or any other tax levied by the concerned State under the erstwhile entry 52 of List-II (State List) of the Seventh Schedule to the Constitution; (d) the taxes on luxuries, including taxes on entertainments, amusements, betting and

129 129 Sub- Sec (2) Sub- Sec (3) Sub- Sec (4) Sub- Sec (5) Sub- Sec (6) gambling or any other tax levied by the concerned State under the erstwhile entry 62 of List-II (State List) of the Seventh Schedule to the constitution; (e) the taxes on advertisement or any other tax levied by the concerned State under the erstwhile entry 55 of List-II (State List) of the Seventh Schedule to the Constitution; (f) the duties of excise on medicinal and toilet preparations levied by the Union but collected and retained by the concerned State Government under the erstwhile article 268 of the Constitution; (g) any cess or surcharge or fee leviable under entry 66 read with entries 52, 54, 55 and 62 of List-II of the Seventh Schedule to the Constitution by the State Government under any Act notified under sub-section (4), prior to the commencement of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016: Provided that the revenue collected during the base year in a State, net of refunds, under the following taxes shall not be included in the calculation of the base year revenue for that State, namely: (a) any taxes levied under any Act enacted under the erstwhile entry 54 of List-II (State List) of the Seventh Schedule to the Constitution, prior to the coming into force of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016, on the sale or purchase of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption; (b) tax levied under the Central Sales Tax Act, of 1956), on the sale or purchase of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption; (c) any cess imposed by the State Government on the sale or purchase of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption; and (d) the entertainment tax levied by the State but collected by local bodies, under any Act enacted under the erstwhile entry 62 of List-II (State List) of the Seventh Schedule to the Constitution, prior to coming into force of the provisions of the Constitution (One Hundred and First Amendment) Act, In respect of the State of Jammu and Kashmir, the base year revenue shall include the amount of tax collected on sale of services by the said State Government during the base year. In respect of the States mentioned in sub-clause (g) of clause (4) of article 279A of the Constitution, the amount of revenue foregone on account of exemptions or remission given by the said State Governments to promote industrial investment in the State, with respect to such specific taxes referred to in sub-section (1), shall be included in the total base year revenue of the State, subject to such conditions as may be prescribed. The Acts of the Central Government and State Governments under which the specific taxes are being subsumed into the goods and services tax shall be such as may be notified. The base year revenue shall be calculated as per sub-sections (1), (2), (3) and (4) on the basis of the figures of revenue collected and net of refunds given in that year, as audited by the Comptroller and Auditor-General of India. In respect of any State, if any part of revenues mentioned in sub-sections (1), (2), (3) and (4) are not credited in the Consolidated Fund of the respective State, the same shall be included in the total base year revenue of the State, subject to such conditions as may be prescribed.

130 130 Section 6 Projected revenue for any year. The projected revenue for any year in a State shall be calculated by applying the projected growth rate over the base year revenue of that State. Illustration. If the base year revenue for for a concerned State, calculated as per section 5 is one hundred rupees, then the projected revenue for financial year shall be as follows Projected Revenue for =100 (1+14/100)3 Section 7 Calculation and release of compensation. Sub- The compensation under this Act shall be payable to any State during the transition period. Sec (1) Sub- Sec (2) Sub- Sec (3) Sub- Sec (4) The compensation payable to a State shall be provisionally calculated and released at the end of every two months period, and shall be finally calculated for every financial year after the receipt of final revenue figures, as audited by the Comptroller and Auditor-General of India: Provided that in case any excess amount has been released as compensation to a State in any financial year during the transition period, as per the audited figures of revenue collected, the excess amount so released shall be adjusted against the compensation amount payable to such State in the subsequent financial year. The total compensation payable for any financial year during the transition period to any State shall be calculated in the following manner, namely: (a) the projected revenue for any financial year during the transition period, which could have accrued to a State in the absence of the goods and services tax, shall be calculated as per section 6; (b) the actual revenue collected by a State in any financial year during the transition period shall be (i) the actual revenue from State tax collected by the State, net of refunds given by the said State under Chapters XI and XX of the State Goods and Services Tax Act; (ii) the integrated goods and services tax apportioned to that State; and (iii) any collection of taxes on account of the taxes levied by the respective State under the Acts specified in sub-section (4) of section 5, net of refund of such taxes, as certified by the Comptroller and Auditor-General of India; (c) the total compensation payable in any financial year shall be the difference between the projected revenue for any financial year and the actual revenue collected by a State referred to in clause (b). The loss of revenue at the end of every two months period in any year for a State during the transition period shall be calculated, at the end of the said period, in the following manner, namely: (a) the projected revenue that could have been earned by the State in absence of the goods and services tax till the end of the relevant two months period of the respective financial year shall be calculated on a pro-rata basis as a percentage of the total projected revenue for any financial year during the transition period, calculated in accordance with section 6. Illustration. If the projected revenue for any year calculated in accordance with section 6 is one hundred rupees, for calculating the projected revenue that could be earned till the end of the period of ten months for the purpose of this sub-section shall be 100x(5/6)=Rs.83.33; (b) the actual revenue collected by a State till the end of relevant two months period in any financial year during the transition period shall be

131 131 Sub- Sec (5) Sub- Sec (6) (i) the actual revenue from State tax collected by the State, net of refunds given by the State under Chapters XI and XX of the State Goods and Services Tax Act; (ii) the integrated goods and services tax apportioned to that State, as certified by the Principal Chief Controller of Accounts of the Central Board of Excise and Customs; and (iii)any collection of taxes levied by the said State, under the Acts specified in subsection (4) of section 5, net of refund of such taxes; (c) the provisional compensation payable to any State at the end of the relevant two months period in any financial year shall be the difference between the projected revenue till the end of the relevant period in accordance with clause (a) and the actual revenue collected by a State in the said period as referred to in clause (b), reduced by the provisional compensation paid to a State till the end of the previous two months period in the said financial year during the transition period. In case of any difference between the final compensation amount payable to a State calculated in accordance with the provisions of sub-section (3) upon receipt of the audited revenue figures from the Comptroller and Auditor-General of India, and the total provisional compensation amount released to a State in the said financial year in accordance with the provisions of sub-section (4), the same shall be adjusted against release of compensation to the State in the subsequent financial year. Where no compensation is due to be released in any financial year, and in case any excess amount has been released to a State in the previous year, this amount shall be refunded by the State to the Central Government and such amount shall be credited to the Fund in such manner as may be prescribed. Section 8 Levy and collection of cess Sub-Sec (1) Sub-Sec (2) There shall be levied a cess on such intra-state supplies of goods or services or both, as provided for in section 9 of the Central Goods and Services Tax Act, and such inter- State supplies of goods or services or both as provided for in section 5 of the Integrated Goods and Services Tax Act, and collected in such manner as may be prescribed, on the recommendations of the Council, for the purposes of providing compensation to the States for loss of revenue arising on account of implementation of the goods and services tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force, for a period of five years or for such period as may be prescribed on the recommendations of the Council: Provided that no such cess shall be leviable on supplies made by a taxable person who has decided to opt for composition levy under section 10 of the Central Goods and Services Tax Act. The cess shall be levied on such supplies of goods and services as are specified in column (2) of the Schedule, on the basis of value, quantity or on such basis at such rate not exceeding the rate set forth in the corresponding entry in column (4) of the Schedule, as the Central Government may, on the recommendations of the Council, by notification in the Official Gazette, specify: Provided that where the cess is chargeable on any supply of goods or services or both with

132 132 reference to their value, for each such supply the value shall be determined under section 15 of the Central Goods and Services Tax Act for all intra-state and inter-state supplies of goods or services or both: Provided further that the cess on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975), at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962), on a value determined under the Customs Tariff Act, Section 9 Returns, payments and refunds.. Sub-Sec Every taxable person, making a taxable supply of goods or services or both, shall (1) (a) pay the amount of cess as payable under this Act in such manner; (b) furnish such returns in such forms, along with the returns to be filed under the Central Goods and Services Tax Act; and (c) apply for refunds of such cess paid in such form, as may be prescribed. Sub-Sec (2) For all purposes of furnishing of returns and claiming refunds, except for the form to be filed, the provisions of the Central Goods and Services Tax Act and the rules made thereunder, shall, as far as may be, apply in relation to the levy and collection of the cess leviable under section 8 on all taxable supplies of goods or services or both, as they apply in relation to the levy and collection of central tax on such supplies under the said Act or the rules made thereunder. Introduction Chapter 2.1 Introduction, Applicability and Definitions under IGST Act Integrated Goods and Services Tax is applicable only the supply is inter-state. Newly inserted Article 269A of the Constitution as amended in the form of 101 st Constitution Act 2016 provides that the power to levy and collect tax in case of inter-state supply shall be of Central Government and then thereafter the said revenue shall be apportioned between the Central Government and the state government in the agreed ratio. Applicability Section 1 Short title, extent and commencement Sub-Sec (1) This Act may be called the Integrated Goods and Services Tax Act, Sub-Sec (2) It extends to the whole of India except the State of Jammu and Kashmir. Sub-Sec (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision. Section 2 - Definitions Sub-Sec (1) Central Goods and means the Central Goods and Services Tax Act, Services Tax Act Sub-Sec (2) Central tax means the tax levied and collected under the Central Goods and Services Tax Act Sub-Sec (3) Continuous journey means a journey for which a single or more than one ticket or invoice is issued at the same time, either by a single supplier of service or through an agent acting on behalf of more than one supplier of service, and which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued. Explanation. For the purposes of this clause, the term stopover means a place where a passenger can disembark

133 Sub-Sec (4) Customs frontiers of India either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time; means the limits of a customs area as defined in section 2 of the Customs Act, 1962 (52 of 1962) Sub-Sec (5) Export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India Sub-Sec (6) Export of services means the supply of any service when, (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8 Sub-Sec (7) Fixed establishment Sub-Sec (8) Goods and Services Tax (Compensation to States) Act Sub-Sec (9) Government means the Central Government Sub-Sec Import of goods (10) Sub-Sec (11) Sub-Sec (12) Sub-Sec (13) Sub-Sec (14) Import of services Integrated tax Intermediary Location of the recipient of services means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for its own needs; means the Goods and Services Tax (Compensation to States) Act, 2017 with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India means the supply of any service, where (i) the supplier of service is located outside India; (ii) the recipient of service is located in India; and (iii) the place of supply of service is in India means the integrated goods and services tax levied under this Act means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account means, (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient 133

134 134 Sub-Sec (15) Sub-Sec (16) Sub-Sec (17) Sub-Sec (18) Sub-Sec (19) Location of the supplier of services Non-taxable online recipient Online information and database access or retrieval services Output tax Special Zone Economic means, (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and (d) in absence of such places, the location of the usual place of residence of the supplier means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory. Explanation. For the purposes of this clause, the expression governmental authority means an authority or a board or any other body, (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution Means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as, (i) advertising on the internet; (ii) providing cloud services; (iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet; (iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network; (v) online supplies of digital content (movies, television shows, music and the like); (vi) digital data storage; and (vii) online gaming in relation to a taxable person, means the integrated tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis shall have the same meaning as assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005)

135 135 Sub-Sec (20) Sub-Sec (21) Sub-Sec (22) Sub-Sec (23) Sub-Sec (24) Sub-Sec (25) Special Economic Zone developer Supply Taxable territory shall have the same meaning as assigned to it in clause (g) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005) and includes an Authority as defined in clause (d) and a Co- Developer as defined in clause (f) of section 2 of the said Act shall have the same meaning as assigned to it in section 7 of the Central Goods and Services Tax Act means the territory to which the provisions of this Act apply Zero-rated supply shall have the meaning assigned to it in section 16 words and expressions used and not defined in this Act but defined in the Central Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts. any reference in this Act to a law which is not in force in the State of Jammu and Kashmir, shall, in relation to that State be construed as a reference to the corresponding law, if any, in force in that State Chapter 2.2 Administration Section 3 Appointment of Officers The Board may appoint such central tax officers as it thinks fit for exercising the powers under this Act. Section 4 Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances. Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such exceptions and conditions as the Government shall, on the recommendations of the Council, by notification, specify. Chapter 2.3 Levy and Collection under IGST Act Section 5 Levy and collection Sub-Sec (1) On all inter-state supply of goods or services or both, except on the supply of alcoholic liquor for human consumption, a tax called Integrated Goods and Services Tax shall be levied. Such tax shall be levied at the rate specified, not exceeding 40%, by the Central Government on the recommendations of the Council. Such tax shall be collected in the manner as may be prescribed on the value determined under section 15 of the Central Goods and Services Tax Act Such tax shall be paid by the taxable person. Integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962). Sub-Sec (2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.

136 136 Sub-Sec (3) Certain goods or services or both may be specified by the Central, on the recommendation of GST Council, on which the tax shall be paid on reverse charge basis by the person receiving the goods or services or both. And in that case as the provision of this Act shall be applicable to the service recipient as if he is the person liable to pay tax in relation to such supply of goods or services or both. Sub-Sec (4) Sub-Sec (5) In case of supply of goods or services or both by a unregistered supplier to a registered person, the integrated tax shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on inter-state supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax. where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax Section 6 Power to grant exemption from tax Sub-Sec (1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification. Sub-Sec (2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable. Sub-Sec (3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under subsection (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

137 Explanation. For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both. 137 Chapter 2.4 Place of Supply goods and Services Introduction Under the GST regime, Determination of place of supply is most crucial factor because the chargeability whether of intra-state or inter-state depends on the place of supply. It shall be noted here that in GST there are 3 important concept that is to be kept in mind - (i) Taxable event i.e. supply, (ii) Time of Supply of Goods/Services, (iii) Place of Supply of Goods/Services Therefore, place of supply is very important for proper compliance under GST law. In case the place of supply is wrongly determined, it may have vast implication as per the provisions of section 77 discussed in the Chapter Demand and Recovery. Section 10 - Place of Supply of Goods other than Export/Import Section 10(1)(a) Supply involves movement of Goods Place of supply shall be Location of goods at the time at which movement terminates for delivery to recipient Section 10(1)(b) Goods supplied on direction of the third person Place of supply shall be Principal Place of Business of the third person (i.e., address in Registration Certificate) Section 10(1)(c) Supply does not involves movement of Goods Place of supply shall be Location of goods at the time of delivery to the recipient Section 10(1)(d) Goods are assembled or installed at site Place of supply shall be Place of installation or assembly Section 10(1)(e) Goods supplied on board a conveyance e.g. vessel, aircraft, train, vehicle etc. Place of supply shall be Location at which such goods are taken on board Section 10(2) Where none of the above rules apply, place of supply would be determined in the manner to be prescribed Section 11 Place of Supply of Goods-Imported to/exported from India Export of goods: Means taking goods out of India to a place outside India; Import of goods: Means bringing goods into India from a place outside India Section Situation Place of Supply 11 (1) Goods Imported into India Location of Importer 11 (2) Goods Export from India Location Outside India

138 138 Section 12 General Rule for Determination of Place of Supply of Service Sub Section (1) The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India. POS of services, except specified in sub sec. (3) & (14) Section 12 (2)(a) Where supplied to Registered Recipient: POS is Location of recipient. Section 12 (2)(b)(i) Where supplied to unregistered Recipient: POS shall be location of recipient where address is on record. Section 12 (2)(b)(ii) Where supplied to unregistered Recipient: Location of Supplier if Address is not avaulable Section 12 (3) & 12 (4) - Determination of Place of Supply of Service in relation to immovable property and personal grooming, fitness, etc Supply of Service Supply Directly in relation to (a) Immovable Property- including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or (b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, including a house boat or any other vessel; or (c) by way of accommodation in any immovable property for organizing any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or (d) any services ancillary to the services referred to in clauses (a), (b) and (c) Place of Supply Section 12(3) Location of Property/boat/Vessels located or intended to be located Restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery Place of Supply Section 12(4) Location of Actual Perfomance If the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.

139 139 Sec 12 (5), (6), (7) Determination of Place of supply of service in relation to training, admission to events and organisaton of events Section 12 (5) Supply of service Training and Perfomance Appraisal provided to (a) Registered Recipient : Location of Recipient Section 12 (6) Supply of Services for Admission to: (a) Culture & atristics (b) Sporting (c) Scientific & Educationsl (d) Entertainment Event (e) Amusemenr Park (f) Service acciliary to above Section 12(7) Supply of: a) Organising cultural, arts, sports, educational, scientific, entertainment, conference, fair exhibition or similar events b) Services ancillary to above or assigning sponsorship to such event (b) Unregistered Recipient Place of Actual Perfomance Venue of Event / park (i) Registered recipient: Location of recipient (ii) Unregistered recipient: Venue of event In case held outside India, Location of recipient Determination of Place of supply of service in relation to Transport of Goods, passengers and on board conveyance Sec 12(8), (9), (10) Supply of services of: Sec 12(8): Transportation of goods, including by mail or courier Sec 12(9): Passenger Transportation Service (Return journey treated as separate journey) Sec 12(10): Services on board conveyance like vessel, aircraft, train, motor vehicle (a) Registered Recipient: Location of Recipient (b) Unregistered Recipient: Location where goods handed over for transportation (a) Registered Recipient: Place of Registered Recipient (b) Unregistered Recipient: Place where passenger embarks on the conveyance for a continuous journey First scheduled point of departure of that conveyance for that journey

140 140 Sec. 12 (11) Determination of Place of supply of service in relation to Telecommunication Service Supply of telecommunication services including data transfer, broadcasting, DTH, cable etc. (a) Services of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna (b) Post-paid mobile connection for telecommunication and internet services* (c) Pre-paid mobile connection for telecommunication and internet services (d) In other cases Location of in situ device Location of billing address of the recipient on record Through selling agents: Location of selling agent on record of supplier Though others: Location where prepayment received Address of recipient if on records, else location of supplier Through internet: Location of recipient on record Sec. 12 (12), (13), (14) Determination of Place of supply of service in relation to Banking, Insurance and Advertisement Service Supply of: Sec 12(12) Banking and Other Financial Services including Stock Broking Location of recipient in suppliers records (If not available, location of supplier) Sec 12(13) Insurance Services Registered recipient: Location of recipient Unregistered recipient: Location of recipient in supplier s records Sec 12(14) Advertisement Services to Government, etc. Place is State of dissemination in proportion

141 141 Section 13 - Where location of Supplier of Service/recipient is outside India Sub-Section (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. Sub-Section (2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. 13(3) 13(4) 13(5) 13(6) Services i.r.o goods required to be made physically available by recipient & Services requiring physical presence of receiver/ person acting on his behalf Services supplied directly in relation to immovable property including expert & estate agents, hotel, inn, guest house, club or campsite, grant of right to use immovable property, construction work including architect Service by way of admission to/ organising an event, etc. and ancillary services Where any services referred to in (3) or (4) or (5) is supplied at more than one location, including taxable territory Location where services actually performed Location of such immovable property (or where it is intended to be located) Place where the event is actually held Location in the taxable territory

142 142 13(7) 13(8) 13(9) 13(10) Where any services referred to in (3) or (4) or (5) is supplied at more than one State or UT Banking services to account holders, intermediary services, hiring of means of transport (other than aircraft & vessels) upto period of 1 month Transportation of goods (other than by way of mail/ courier) Passenger transportation service In each of the respective States or UT Location of supplier Destination of the goods Place where passenger embarks on the conveyance for a continuous journey 13(11) 13(12) 13(13) Service provided on board a conveyance during the course of a passenger transportation operation First scheduled point of departure of that conveyance for that journey Online information and database access or retrieval services Location of recipient To prevent double taxation/ nontaxation, or for the uniform application of rules, CG has power to notify services/ circumstances Place of effective use and enjoyment of a service

143 143 Section 7 Inter-State supply Chapter 2.5 Determination of Nature of Supply Under GST it is very important to determine the nature of supply because it s only after determining the same we can make sure the tax that is to be collected and pain. Means in case the nature of supply is inter-state we shall be applying the Integrated Goods and Services Tax on the said transaction and in case it is intra state we need to apply both i.e. Central Goods and Services Tax and also State Goods and Services Tax. Sub-Sec (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, shall be treated as a supply of goods in the course of inter-state trade or commerce. Sub-Sec (2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-state trade or commerce. Sub-Sec (3) Subject to the provisions of section 12, supply of goods, where the location of the supplier and the place of supply are in (a) two different States; (b) two different Union territories; or (c) a State and a Union territory, shall be treated as a supply of goods in the course of inter-state trade or commerce. Sub-Sec (4) Supply of services imported into the territory of India shall be treated to be a supply of goods in the course of inter-state trade or commerce. Sub-Sec (5) Supply of goods or services or both, (a) when the supplier is located in India and the place of supply is outside India; (b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or (c) in the taxable territory, not being an intra-state supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce.

144 144 Section 8 Intra-State supply Sub-Sec (1) Subject to the provisions of section 10, Supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-state supply: But in case of the following, supply of goods shall not be treated as intra-state supply, namely: (i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit; (ii) goods imported into the territory of India till they cross the customs frontiers of India; or (iii) supplies made to a tourist referred to in section 15. Sub-Sec (2) Subject to the provisions of section 12, Supply of services where the location of the supplier and the place of supply of services are in the same State or same Union territory shall be treated as intra-state supply: But supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit is not a intra state supply. Explanation 1. For the purposes of this Act, where a person has, (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons. Explanation 2. A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory. Section 9 Supplies in territorial waters. Notwithstanding anything contained in this Act, (a) where the location of the supplier is in the territorial waters, the location of such supplier; or (b) where the place of supply is in the territorial waters, the place of supply, shall, for the purposes of this Act, be deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located.

145 145 Chapter 2.6 Refund of Integrated Tax to Foreign Tourist Section 15 - Refund of integrated tax paid on supply of goods to tourist leaving India. As we have seen under section 8 sub section (1) clause (iii) of first proviso, supplies made to a tourist referred to in Section 15 shall not be treated as intra-state supply and hence it needs to be treated as inter-state supply which will attract Integrated Goods and Services Tax. The provision pertaining to supply of goods to a tourist leaving India is: The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed. Explanation. For the purposes of this section, the term tourist means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate nonimmigrant purposes. Chapter 2.7 Zero Rated Supply Section 16 Zero Rated Supply. Sub-Sec (1) Meaning Sub-Sec (2) Sub-Sec (3) Zero rated supply means any of the following supplies of goods or services or both, namely: (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. Zero rated supplies is an exempt supply and therefore no tax is payable on such supplies but then also as per the provisions of sub-section (5) of Section 17, credit on input tax for making zero rated supplied may be availed. A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely: (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, And for claiming the refund the registered person shall follow the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

146 146 CA. Ashok Batra B. Com (Hons.), LL.B, FCA An overview on Important Provisions of Input Tax Credit and Transitional Provisions Introduction Input Tax Credit [ITC] shall undoubtedly be one of the most important areas of the New Indirect Tax Regime namely GST. Thus, it becomes indispensable for all the concerned professionals to be thoroughly aware with the relevant provisions of the ITC before advising either their employers or clients. Similarly, Transitional Provisions are also very crucial because any mistake in respect of complying with aforesaid Transitional Provisions shall result in attracting applicable interest and penalty. In this Article, an outline of the important provisions of both the above-mentioned topics has been given. Outline of Important Provisions of ITC Eligibility for Taking ITC Section 16(1) ITC shall be available to a Registered Person for the CGST/SGST/UTGST/IGST charged on input services, inputs or capital goods used or intended to be used in the course or furtherance of business. Conditions for availing eligible input tax credit by Registered Person - Section 16(2)

147 147 (a)he is in possession of a tax Invoice or debit note issued by a supplier registered under this Act or other taxpaying documents as may be prescribed-section 16(2)(a) read with Rule 36 of the CGST Rules, (b) Registered Person has received the goods or services or both - Section 16(2)(b) (c)tax credit not to be allowed if depreciation claimed on the component of tax Section 16(3) Apportionment of Credit and blocked credits Section17 Proportionate Input Tax Credit In terms of Section 17(1) where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes i.e. (nonbusiness purposes including personal purposes) the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. As per the provisions of section 17(6) the Government may prescribe the manner in which the credit for business and for other purposes may be attributed. Further in terms of Section 17(2) where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Further Section 17(3) provides that the value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. As per the provisions of Section 17(4) of CGST Act, 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 sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse. Apportionment of credit and Blocked Credits- Section 17(5) ITC shall not be available in respect of the following, namely: Input tax credit paid on the purchases of motor vehicles and other conveyances shall not be generally available to a registered person.

148 148 However, tax credit on motor vehicles and other conveyances shall be available to taxable person if such motor vehicle and other conveyances are used for making the following taxable supplies, namely: (A) further supply of such vehicles or conveyances; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances. tax credit shall not be available to the registered person for the following supply of goods or services or both: 1. Food and Beverages 2. Outdoor Catering Services 3. Beauty Treatment 4. Health Services 5. Cosmetic and Plastic Surgery Services Tax credit shall not be available to a registered person for the membership of a club, health and fitness centre. Tax credit shall not be available to a registered person for rent-a-cab, life insurance and health insurance supplies received by it. Tax credit shall not be available to a registered person for any tax paid on goods or services or both on which tax has been paid under Section 10 i.e. composition levy. Tax credit shall not be available to a registered person for any tax paid on goods or services or both received by a non-resident taxable person except on goods imported by him. Tax credit shall not be available to a registered person for any tax paid on goods or services or both used for personal consumption.. Tax credit shall not be available to a registered person on goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Availability of Input Tax Credit in Special Circumstances Section 18 In the following cases tax credit shall be available to supplier of goods or services or both on the stocks and or capital goods subject to fulfilment of conditions and restrictions as specified in each case: Case/Situation Entitlement to take Input Tax in respect of Any person who has applied for registration within 30 days from the date on which he becomes Inputs held in stock and inputs contained in semifinished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.

149 149 Case/Situation liable for registration and has been granted such registration Section 18(1)(a) A person who takes registration under sub-section (3) of section 25 i.e. a person who takes voluntarily registration, though not liable to be registered under the provisions of CGST Act -Section 18(1)(b) Where any registered person ceases to pay tax under section 10 i.e. composition Levy Section 18(1)(c) Where an exempt supply of goods or services or both by a registered person becomes a taxable supply Section 18(1)(d) Entitlement to take Input Tax in respect of Further, in terms of Rule 40(1)(b) of the CGST Rules, 2017 the registered person shall within thirty days from the date of his becoming eligible to avail of input tax credit under section 18(1) shall make a declaration, electronically, on the Common Portal in FORM GST ITC-01 to the effect that he is eligible to avail of input tax credit as aforesaid. Inputs held in stock and inputs contained in semifinished or finished goods held in stock on the day immediately preceding the date of grant of registration. Further, in terms of Rule 40(1)(b) of the CGST Rules, 2017 the registered person shall within thirty days from the date of his becoming eligible to avail of input tax credit under section 18(1) shall make a declaration, electronically, on the Common Portal in FORM GST ITC-01 to the effect that he is eligible to avail of input tax credit as aforesaid. Inputs held in stock, inputs contained in semifinished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9 i.e. at regular rates. Inputs held in stock and inputs contained in semifinished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable. No tax credit after the expiry of one year from the date of issue of tax invoice Section 18(2) Transfer of ITC in case of change in the constitution of a Registered Person - Section 18(3)

150 150 Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed. Unutilised input tax credit in the electronic credit ledger of transferor of business in the situations specified above shall be transferred to the transferee subject to following conditions: - 1. There is a specific provision for transfer of liabilities; and 2. Tax credit shall be transferred to transferee in the manner discussed in Rule 41 of the CGST Rules, Reversal of Input Tax Credit where shifted from regular section to composition levy or supplies becomes exempt -Section 18(4) Case/Situation Where any registered person who has availed of input tax credit opts to pay tax under section 10 i.e. Composition Levy Section 18(4) Where the goods or services or both supplied by him become wholly exempt Section 18(4) Reversal of input tax credit He shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semifinished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption. Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse. He shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semifinished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption.

151 151 Case/Situation Reversal of input tax credit Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse. The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed Section 18(5) Reversal of input tax credit/ payment on transactional value on supply of capital goods etc. - Section 18(6) (a) In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher. (b) However, in terms of proviso to Section 18(6)of the CGST/SGST Act where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15 of the CGST Act, Outline of Important Transitional Provisions Migration of existing taxpayer- Section 139 of the CGST Act, 2017 (i) In view of Section 139(1), on and from the appointed day, every person registered under any of the existing laws and having a valid Permanent Account Number shall be issued a certificate of registration on provisional basis, subject to such conditions and in such form and manner as may be prescribed, which unless replaced by a final certificate of registration under sub-section (2), shall be liable to be cancelled if the conditions so prescribed are not complied with. (ii) Further, sub-section (2) of such Section 139 stipulates that the final certificate of registration shall be granted in such form and manner and subject to such conditions as may be prescribed. However, in view of sub-section 3 of said Section 139, the aforesaid certificate of provisional registration issued under Section 139(1) shall be deemed to have not been issued if the said registration is cancelled in pursuance of an application filed by such person that he was not liable to registration under section 22 (Person liable for registration or section 24 (Compulsory registration in certain cases).

152 152 Transitional arrangement for input tax credit for a registered person- Section 140 of the CGST Act, 2017 Section Subject Matter of Sub-section 140 (1) Carry forward of tax credit claimed in the tax returns 140(2) Carry forward of unavailed tax credit in relation to capital goods 140(3) * 1 Carry forward of tax credit by a registered person, who was not liable to be registered under the existing law like dealing in exempted goods under existing law but the same has become taxable under GST 140(4) * 1 Carry forward of tax credit by a registered person, who was engaged in the manufacture of taxable as well as exempted goods or provision of taxable as well as exempted service but which are liable to tax under GST 140(5) * 2 Tax credit in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law 140(6) * 1 Carry forward of tax credit by a registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law 140(7) Tax credit on account of any services received prior to the appointed day by an ISD 140(8) Carry forward of tax credit in case of service provider registered on centralised basis 140(9) Tax credit reversed due to non-payment of the consideration within a period of three months under Finance Act, (10) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner as may be prescribed

153 153 Miscellaneous Transitional Provisions- Section 142 of the CGST Act, 2017 Section of the CGST Act/SGST Act Heading For the Purpose of Easy Understanding 142(1) Refund of duty on any goods on which duty had been paid under the existing law at the time of removal thereof 142(2)(a) 142(2)(b) The price of any goods or services or both is revised upwards on or after the appointed day, shall be deemed to be an outward supply made under this Act The price of any goods or services or both is revised downwards on or after the appointed day, shall be deemed to be an outward supply made under this Act 142(3) Every claim for refund filed before, on or after the appointed day, under the existing law, shall be disposed of in accordance with the provisions of existing law 142(4) Every claim for refund filed after the appointed day for refund of any duty or tax paid under existing law in respect of the goods or services exported before or after the appointed day shall be disposed of in accordance with the provisions of existing law 142(5) Every claim of refund of tax filed after the appointed paid under the existing law in respect of services not provided 142(6)(a) Every proceeding of appeal, review or reference relating to a CLAIM for CENVAT credit initiated whether before, on or after the appointed day under the existing law 142(6)(b) Every proceeding of appeal, review or reference relating to RECOVERY of CENVAT credit initiated whether before, on or after the appointed day under the existing law

154 154 Section of the CGST Act/SGST Act Heading For the Purpose of Easy Understanding 142(7)(a) Every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after the appointed day under the existing law and if any amount becomes recoverable from the claimant 142(7)(b) Every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after the appointed day under the existing law, and any amount found to be admissible to the claimant 142(8)(a) In pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine penalty becomes RECOVERABLE from the person 142(8)(b) In pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes REFUNDABLE to the taxable person 142(9)(a) Where any return, furnished under the existing law, is revised after the appointed day and if, pursuant to such revision, any amount is found to be recoverable or any amount of CENVAT credit is found to be inadmissible 142(9)(b) Where any return, furnished under the existing law, is revised after the appointed day but within the time limit specified for such revision under the existing law and if, pursuant to such revision, any amount is found to be refundable or CENVAT credit is found to be admissible 142(10) Goods or services or both supplied (in pursuance of a contract entered into prior to the appointed

155 155 Section of the CGST Act/SGST Act Heading For the Purpose of Easy Understanding day) i.e. on-going contracts on or after the appointed day shall be liable to tax 142(11)(a) No tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State 142(11)(b) No tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, (11)(c) Where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act to the extent of supplies made after the appointed day i.e. supply of goods or services or both supplied after the appointed day 142(12) Any goods sent on approval basis, not earlier than six months before the appointed day, are rejected and returned to the seller on or after the appointed day 142(13) No deduction of tax at source under section 51 shall be made by the deductor on sale made under existing law which is subject to TDS and has also issued an invoice before the appointed day - Section 142(13) Conclusion Both the topics dealt in this article are of great practical utility. Resultantly, concerned professionals must devote adequate time for properly understanding these topics. ******

156 156 Understanding Import Export Procedure under GST -CA Navya Malhotra [B. Com(H), ACA, DISA] Ques. What is Export of Goods under GST? As per IGST Act Section 2(5) Export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India. Export means trading or supplying of goods and services outside the domestic territory of a country. Ques. What is Export of Services under GST? As per IGST Act Section 2(6) Export of services means the supply of any service when, (i) (ii) (iii) (iv) the supplier of service is located in India; the recipient of service is located outside India; the place of supply of service is outside India; the payment for such service has been received by the supplier of service in convertible foreign exchange; (v) the supplier of service and the recipient of service are not merely establishments of a distinct person

157 157 (vi) Ques. How are Exports treated under GST Law? Under the GST Law, export of goods or services has been treated as: Inter-State supply and covered under the IGST Act. Export is treated as Inter-state supply under GST and IGST is charge on export. zero rated supply i.e. the goods or services exported shall be relieved of GST levied upon them either at the input stage or at the final product stage. GST will not be levied in any Kind of Exports of Goods or Services. Note: Zero rated supply means no tax would be payable on such supplies, the exporter will be eligible to claim the corresponding input tax credits. The input tax credits would be available to an exporter even if supplies were exempt supplies. The exporter may utilize such credits for discharge of other output taxes or alternatively, the exporter may claim a refund of such taxes. A guidance note relating was released by the Indian government which has helped in clearing doubts regarding the claim of input tax credit on zero-rated exports. An exporter dealing in zero-rated goods under GST can claim a refund for zero-rated supplies as per the following options: (a) He may export the services under a Letter of Undertaking, without payment of IGST and claim refund of unutilized input tax credit; or As per Rule 96A of CGST Rules (1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 Bond and LUT Format to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under subsection (1) of section 50 within a period of (a) fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or (b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange. (2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system.

158 158 (3) Where the goods are not exported within the time specified in sub-rule (1) and the registered person fails to pay the amount mentioned in the said sub-rule, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79. LUT needs to be submitted with jurisdictional Deputy/ Assistant Commissioner having jurisdiction over the principal place of business of the exporter. Until a specific administrative officer is assigned, the exporter can furnish bond/ LUT before any officer (Centre or State). Considering the difficulties faced by exporters, the Government has issued Notification no. 16/2017-Central Tax and circular no. 4/4/2007-GST, both dated 07 July, 2017 to clarify certain aspects relating to bond/ LUT. The clarifications are summarized below: Submission of LUT in place of a Bond (Format for submission of LUT) 1. The following persons would be eligible to provide a LUT instead of a bond: Status holder as per Para 5 of Foreign Trade Policy ; or A person who has received foreign inward remittances equal to minimum of 10% of the export turnover, which should not be less than INR 10 million, in the preceding financial year. 2. Such a person should not have been prosecuted for any offence under the CGST Act or any existing law where the amount of tax evaded exceeds INR 25 million. 3. The LUT should be furnished in duplicate for a financial year in the prescribed format. The LUT should be executed by the working partner, the Managing Director, the Company Secretary, the proprietor or by a person duly authorized by such working partner or Board of Directors of such company or proprietor on the letter head of the registered person. 4. The LUT would be valid for 12 months. 5. If the exporter fails to comply with the conditions of LUT, he may be asked to provide a bond. CONDITION FOR LUT OR BONDS Fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India Fifteen days after the expiry of one year, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.

159 159 Procedure of filing Letter of undertaking (LUT)/BOND Under GST for Exports Rule 96A of CGST Rules: Refund of integrated tax paid on export of goods or services under bond or Letter of Undertaking.- As per Rule 96A of CGST Rules (1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 Bond and LUT Format to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under subsection (1) of section 50 within a period of (a) fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or (b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange. (2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system. (3) Where the goods are not exported within the time specified in sub-rule (1) and the registered person fails to pay the amount mentioned in the said sub-rule, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79. (4) The export as allowed under bond or Letter of Undertaking withdrawn in terms of subrule (3) shall be restored immediately when the registered person pays the amount due. (5) The Board, by way of notification, may specify the conditions and safeguards under which a Letter of Undertaking may be furnished in place of a bond. (6) The provisions of sub rule (1) shall apply, mutatis mutandis, in respect of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit without payment of integrated tax. ; Export procedure for Submission of LUT The procedure for Submission of LUT is very simple. LUT needs to be submitted with jurisdictional Deputy/ Assistant Commissioner having jurisdiction over the principal place of business of the exporter. Until a specific administrative officer is assigned, the exporter can furnish bond/ LUT before any officer (Centre or State). Under LUT an exporter need not to pay advance taxes, he just have to submit LUT. LUT is only be given after checking the ratings given to exporters, higher the ratings higher the chances of getting LUT.

160 160 Considering the difficulties faced by exporters, the Government has issued Notification no. 16/2017-Central Tax and circular no. 4/4/2007-GST, both dated 07 July, 2017 to clarify certain aspects relating to bond/ LUT. The clarifications are summarized below: Exports would be allowed under existing bonds/ LUTs by 31 July New LUT/ bonds need to be submitted in the revised format by 31 July Submission of LUT in place of a Bond (Format for submission of LUT) When a person fails to submit a LUT or by any chances not able to get LUT then he has a option to fill a bond in place of LUT. 1. The following persons would be eligible to provide a LUT instead of a bond: Status holder as per Para 5 of Foreign Trade Policy ; or A person who has received foreign inward remittances equal to minimum of 10% of the export turnover, which should not be less than INR 10 million, in the preceding fiscal year. 2. Such a person should not have been prosecuted for any offence under the CGST Act or any existing law where the amount of tax evaded exceeds INR 25 million. 3. The LUT should be furnished in duplicate for a financial year in the prescribed format. The LUT should be executed by the working partner, the Managing Director, the Company Secretary, the proprietor or by a person duly authorized by such working partner or Board of Directors of such company or proprietor on the letter head of the registered person. 4. The LUT would be valid for 12 months. 5. If the exporter fails to comply with the conditions of LUT, he may be asked to provide a bond. Submission of bond (Format of Submission of Bond)

161 Submission of bond (Format of Submission of Bond) 161 Submission of LUT in place of Bond Status holder as per FTP Such persn not in tax evaded exceeds 25 million LUT valid for 12 months With regards to submission of bond, circular no. 4/4/2017-GST provides as follows: All persons not eligible to issue LUT would need to submit a bond. A running bond will be submitted and the bond amount should cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter. A fresh bond is to be submitted if the amount in the bond is less than the outstanding tax liability on exports. The amount of bank guarantee would be decided by the jurisdictional Commissioner and it should not exceed 15% of bond amount. The Commissioner has the power to accept the bond without any bank guarantee in case of assessee with good track record. The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which the bond is being furnished. (b) He may export the services upon payment of IGST and claim refund of such tax paid. For the option (b), the shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export and the applicant has furnished a valid return. For both option (a) and (b) exporters have to provide details of GST invoice in the Shipping bill. ARE-1 which is being submitted presently shall be dispensed with except in respect of commodities to which provisions of Central Excise Act would continue to be applicable. Conclusion With GST in place, the export industry in India would be able to have internationally competitive prices due to the smooth process of claiming input tax credit and the availability of input tax credit on services.

162 162 Quest: What will be the impact of GST on zero rating of export of goods? This will make Indian exports competitive in the international market. The procedures relating to export have been simplified so as to do away with the paper work and intervention of the department at various stages of export. BENEFITS TO THE EXPORTERS MANUFACTURES UNDER GST REGIME The goods and services can be exported either on payment of IGST which can be claimed as refund after the goods have been exported, or under bond or Letter of Undertaking (LUT) without payment of IGST. In case of goods and services exported under bond or LUT, the exporter can claim refund of accumulated ITC on account of export. In case of goods the shipping bill is the only document required to be filed with the Customs for making exports. Requirement of filing the ARE 1/ARE 2 has been done away with. The supplies made for export are to be made under self-sealing and self-certification without any intervention of the departmental officer. The shipping bill filed with the Customs is treated as an application for refund of IGST and shall be deemed to have been filed after submission of export general manifest and furnishing of a valid return in Form GSTR- 3 by the applicant. INVOICING FOR EXPORTS The contents in Export Invoice remain same except inclusion of the following information. The invoice rules clearly stipulates that in case of exports, the invoice shall carry an endorsement SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST or SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST and among other details shall also contain:- (i) Name and address of the recipient, (ii) Address of Delivery, (iii) Name of the Country of Destination, and (iv) Number and date of application for removal of goods for export [ARE-1]

163 163 Quest: What is deemed export under GST Law? Whether any supply has been categorized as deemed export by the Government? Section 147 of the Central Goods and Services Tax Act, 2017 empowers the Government to notify, on the recommendation of the GST Council, certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured in India. The benefit will be available only on supply of goods and not services. Moreover explanation 2(b) to section 54 while defining relevant date for the purpose of refund claim for deemed exports talks about goods only. However section 55(1) empowers the Government to notify class of persons who will be entitled to claim refund of taxes paid on notified supplies of goods or services. Thus irrespective of section 147, the Government may extend deemed export benefits to provision of services. No goods have yet been notified under section 147. However, it is expected that some of the existing deemed exports under FTP may be notified under this section. IMPORTS Ques. What is Import under GST? Import of goods with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India. Import means bring in the goods and services in India from other countries. Import of goods into India would be treated as supply of goods in the course of inter-state trade/ commerce and would be liable to integrated tax under this Act. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services. The integrated tax on goods shall be in addition to the applicable Basic Customs Duty (BCD) which is levied as per the Customs Tariff Act. In addition, GST compensation cess, may also be leviable on certain luxury and demerit goods under the Goods and Services Tax (Compensation to States) Cess Act, The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated tax and the compensation cess on imported goods. Accordingly, goods which are imported into India shall, in addition to the Basic Customs duty, be liable to integrated tax at such rate as is leviable under the IGST Act, 2017 on a similar article on its supply in India.

164 164 Let s take an example: Suppose the assessable value of an article imported into India is Rs. 100/-. Basic Customs Duty is 10% ad-valorem. Integrated tax rate is 18%. The taxes will be calculated as under: Assessable Value= Rs. 100/- Basic Customs Duty (BCD) = Rs. 10/- Value for the purpose of levying integrated tax= Rs. 100/- + Rs.10/-= Rs. 110/- Integrated Tax = 18% of Rs.110/- =Rs Total taxes = Rs Ques. What is import of services under GST? Import of services means the supply of any service, where the supplier of service is located outside India; the recipient of service is located in India; and the place of supply of service is in India; The phrase import of service is very broad and covers all such supplies where: (a) The supplier is located outside India, (b) The recipient is located in India

165 165 (c) Place of supply is in India. The following aspects need to be noted: Supplies, where the supplier and recipient are mere establishments of a person, would also qualify as import of service. The importer will be liable to pay integrated tax on a reverse charge basis and the same will have to be discharged by cash only and credit cannot be utilized for discharging such a liability; Import of service made for a consideration alone would be taxable, whether or not in the course of business. Therefore, import of service for personal consumption for a consideration would qualify as supply and would be liable to integrated tax. However, the recipient will not be required to obtain a registration for that purpose; The threshold limits for registration would not apply and the importer would be required to obtain registration irrespective of his turnover; Import of services from related persons or establishments located outside India without consideration also would be liable to integrated tax. CHANGE IN IMPORT PROCEDURE Importer Exporter Code (IEC): In GST regime, GSTIN would be used for credit flow of IGST paid on import of goods. Therefore, GSTIN would be the key identifier. PAN would be the Import Export code (IEC). However, while PAN is identifier at the entity level, GSTIN would be used as identifier at the transaction level for every import and export. Further, in scenarios where GSTIN is not applicable, UIN or PAN would be accepted as IEC. It is advised that all importers need to quote GSTIN in their Bills of Entry in addition to IEC. In due course of time IEC would be replaced by PAN / GSTIN. Bill of Entry Regulations and Format: To capture additional details in the Bill of entry such as GSTIN, IGST rate and amount, GST Compensation Cess and amount, the electronic as well as manual formats of Bill of entry including Courier Bill of entry are being amended. For the benefit of the trade, modified Forms have been hosted on the departmental website, Further, suitable notifications shall be issued to amend the relevant regulations and introduce modified Forms. Import under Export Promotion Schemes and duty payment through EXIM scrips Under the GST regime, Customs duties will be exempted on imports made under export promotion schemes namely EPCG, DEEC (Advance License) and DFIA. IGST and Compensation Cess will have to be paid on such imports. The EXIM scrips under the export incentive schemes of chapter 3 of FTP (for example MEIS and SEIS) can be utilized only for payment of Customs duties or additional duties of Customs, on items not covered by GST, at the time of import. The scrips cannot be utilized for payment Of Integrated Tax and Compensation Cess. Similarly, scrips cannot be used for payment of CGST, SGST or IGST for domestic procurement.

166 166 Baggage Full exemption from IGST has been provided on passenger baggage. However, basic customs duty shall be leviable at the rate of 35% and education cess as applicable on the value which is in excess of the duty free allowances provided under the Baggage Rules, Input Tax Credit (ITC) under Import: In GST regime, input tax credit of the integrated tax (IGST) and GST Compensation Cess shall be available to the importer and later to the recipients in the supply chain, however the credit of basic customs duty (BCD) would not be available. In order to avail ITC of IGST and GST Compensation Cess, an importer has to mandatorily declare GST Registration number (GSTIN) in the Bill of Entry. Provisional IDs issued by GSTN can be declared during the transition period. However, importers are advised to complete their registration process for GSTIN as ITC of IGST would be available based on GSTIN declared in the Bill of Entry. Input tax credit shall be availed by a registered person only if all the applicable as prescribed in the Invoice Rules are contained in the said document, and the relevant information, as contained in the said document, is furnished in FORM GSTR-2 by such person. Customs EDI system would be interconnected with GSTN for validation of ITC. Further, Bill of Entry data in non-edi locations would be digitized and used for validation of input tax credit provided by GSTN.

167 167 PLACE OF SUPPLY IN CASE OF IMPORTS AND EXPORTS SEZ Ques. What is SEZ? SEZ is an area identified within the Country which is designated as such through a Notification issued by the Central State Government. Proposals for setting up a SEZ are to be submitted to the Board of Approval constituted under section 8(1) of the SEZ Act, However, the Central Government can suo motu set up and notifies a Special Economic Zone. The term special economic zone can further include: Free trade zones (FTZ) Export processing zones (EPZ) Free zones/ Free economic zones (FZ/ FEZ) Industrial parks/ industrial estates (IE) Free ports Bonded logistics parks (BLP Urban enterprise zones

168 168 Ques. Who is SEZ Developer? SEZ Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer The Developer or Co-Developer shall have at least twenty-six percent of the equity in the entity proposing to create business, residential or recreational facilities in a Special Economic Zone in case such development is proposed to be carried out through a separate entity or a special purpose vehicle being a company formed and registered under the Companies Act, 1956 (1 of 1956). Purpose of SEZ To provide an internationally competitive environment of exports. The objectives of Special Economic Zones include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export led growth. Some of their key objectives include: Increase in Foreign Trade by promotion of exports of goods and services Increased Foreign Investment Domestic Job creation and; Effective Administration and Compliance Procedures. Better Infrastructure Facilities GST Registrations by SEZ Units Scheme of registration of tax payers under GST envisage a single registration number in a State or Union territory. However a person having multiple business verticals in a State or Union territory is permitted to have separate registration for each business vertical [Section 25(2) of the CGST Act, 2017]. Revised draft of registration rules released on March 31, 2017 make it mandatory for a SEZ unit or SEZ developer to apply for registration as a business vertical distinct from its other units located outside the SEZ. A separate registration each would be required to be taken in case a single legal entity has more than one unit in same SEZ or the entity is also a developer and has a unit in the same SEZ. If there are more than one SEZ within a State of the same entity they may also require separate registrations. Treatment of SEZ under GST law Section 7(5)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) provides that supply of goods or services or both to or by a Special Economic Zone Developer or a Special Economic Zone unit shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce. Proviso (i) to Sub-section (1) of Section 8 of the IGST Act aims to reiterate this arrangement.

169 169 Example 1: A supplier in DTA in the State of Gujarat supplies goods or services to a SEZ unit in Gujarat. The supply will be treated as inter-state supply despite the fact that goods did not move inter-state. Example 2: A supplier in SEZ in the State of Gujarat supplies goods or services to a DTA unit in Gujarat. The supply will be treated as inter-state supply despite the fact that goods did not move inter-state. Example 3: A supplier in SEZ in the State of Gujarat supplies goods or services to a SEZ unit in Gujarat. The supply will be treated as inter-state supply despite the fact that goods did not move inter-state. Section 16 of the IGST Act provides for special treatment to Special Economic Zone Developer or a Special Economic Zone unit. Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit is treated as Zero rated supply. Suppliers of goods and services to these recipients can avail of one of the following: a) Make their supplies under bond or LUT without payment of IGST and claim credit of ITCs; b) May supplies on payment of IGST and claim refund of taxes paid. Suppliers to SEZ unit or developers under either of the above will be subjected to such conditions, safeguards and procedure as may be prescribed in this regard. Other than special treatment in terms of nature of supply and zero rating, SEZ unit or developer will be subject to all other concepts and procedures such as conditions & restrictions for availment of input tax credit, time and place of supply, filing of returns, audit, assessment, invoicing, maintenance & retention of records & documents and so on. Invoices for supplies by SEZs No separate format or content is prescribed for invoices issued by SEZs. Invoice rules applicable to exports will apply to invoices issued by SEZ for export out of India and with suitable modification to supplies to DTA. Ques. Will import of services by SEZ be liable to IGST on reverse charge basis? Import of services is included in the definition of supply. In case of import of services, suppliers remains in non-taxable territory. For collecting tax on services provided by persons located in non-taxable territory, the Government will notify the recipient of services in India to be the person liable for payment of tax on reverse charge basis. As SEZ is the person located in India, it will be liable for payment of tax on import of services and eligible to claim credit of tax so paid if it fulfills eligibility criteria. Ques. Will SEZ unit be liable to GST on receipt of supplies from unregistered persons? Section 5(4) of the IGST Act provides that the integrated tax in respect of supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis. Like any other registered tax payer, SEZ unit being a person registered under GST Act will be required to comply this requirement. It will be liable for payment of tax on receipt of supplies from unregistered persons eligible to claim credit of tax so paid if it fulfills eligibility criteria.

170 170 INPUT TAX MECHANISM UNDER EXPORT AND IMPORT Conclusion On the basis of above discussion one can conclude that all the supplies of goods or services or both to SEZ developer or SEZ unit shall be zero rated. IGST shall be payable on supplies made by SEZ developer or units. In the context of supply of goods by SEZ developer or SEZ unit author urge the Government to levy IGST under Sec. 30 of SEZ Act, 2005 itself and not under IGST Act, This will save applying two different set of valuation rules for same transaction.