UNDERSTANDING GOODS & SERVICES TAX. (FCA, Ph.D, ICWA(F), MBA, M.Com, PGDCA) (Ph.d, M.Com, M.A. (Eco))

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2 UNDERSTANDING GOODS & SERVICES TAX Dr. Saurabh N Gaur (FCA, Ph.D, ICWA(F), MBA, M.Com, PGDCA) Dr.Raj Narayan Gaur (Ph.d, M.Com, M.A. (Eco))

3 Published by: All India Tax Association, Edition : First Year : Price : Rs. 250/- Understanding Goods & Services Tax by : Dr. Saurabh N. Gaur Dr. Raj Narain Gaur

4 PREFACE G ood and Services Tax (GST) is an upcoming system of taxation in India which merged many individually applied taxes into a single tax. It was introduced as The Constitution (One Hundred and First Amendment) Act, 2016, following the passage of Constitution 122nd Amendment Bill. The GST is governed by GST Council and its Chairman is Union Finance Minister of India Arun Jaitely. Introduction of GST is a significant step in the reform of Indirect Taxation in India. Amalgamating several Central and State taxes into a single tax would mitigate cascading or double taxation, facilitating a common national market. This book is a fresh and pioneering effort towards the understanding and conceptualization of GST. It is an intensive instruction program based on the author s many years of experience and interest in the various aspects of national and international taxation. The entire matter has been arranged in a sequential manner so that the book takes the professionals from questions on basic understanding and slowly increases the level of complexity so as to ensure a better understanding of the logics incorporated in solving a problem. The editorial team has made painstaking efforts in arranging the material in a manner which makes them feel comfortable with the roots of each topic. In the end I just want to say that remember. WINNERS DON T DO DIFFERENT THINGS, THEY DO THINGS DIFFERENTLY!! So, enjoy studying!! -Dr. Saurabh N. Gaur (FCA)

5 ACKNOWLEDGEMENT T he conceptualization and completion of this book is a result of concerted efforts of various individuals without whose help this book would have not been possible. I give thanks to God for giving me protection and ability to do work. And I would like to add a heartfelt word for the people who have helped me in bringing out the creativeness of this book. To commence with things I would like to take this opportunity to gratefully and humbly thank to my Guru Ji and my father Mr. Raj Narayan Gaur for being appreciative enough by giving me inspiration to write this book. Laslty I am not able to list all the contributors here due to space constraints but I value the significance of each and every contribution made by Tabrez Alam, Deepali Mishra, Amrit Rastogi, Priyanka Sharma, Manisha Dwivedi and Krati Rastogi Dr. Saurabh N Gaur (FCA) July, 2017 All efforts have been made to avoid omissions or errors in this publication. However, in spite of our best efforts, some error or discrepancy may have skipped our view. Any mistake, error or discrepancy may be brought to our notice and we shall ensure that it is taken care of in the next edition. No part of this book may be reproduced, copied, stored in a retrieval system or transmitted in any form or by any means [electronic, mechanical or graphic, including photocopying, taping, or information retrieval systems] or reproduced on any disc, tape, perforated media or any other information storage device, etc., without the written permission of the publishers. Breach of this condition shall be liable for legal action. All disputes are subject to Lucknow Jurisdiction only.

6 INDEX S.No CHAPTER PAGE NO. 1. INTRODUCTION ADMINISTRATION LEVY AND COLLECTION OF TAX TIME AND VALUE OF SUPPLY INPUT TAX CREDIT REGISTRATION TAX INVOICE, CREDIT AND DEBIT NOTES MAINTENANCE OF ACCOUNTS AND RECORDS RETURNS PAYMENT OF TAX REFUND PROCESS UNDER GST ASSESSMENT AND AUDIT INSPECTION, SEARCH, SEIZURE AND ARREST DEMANDS AND RECOVERIES LIABILITY TO PAY IN CERTAIN CASES OFFENCES AND PENALTIES TRANSITIONAL PROVISIONS CLASSIFICATION OF GOODS AND SERVICES: HSN CODES AND ACCOUNTING CODES INPUT SERVICE DISTRIBUTOR REVERSE CHARGE MECHANISM E-COMMERCE OPERATOR JOB WORK WORK CONTRACT RETAIL TRADER SMALL MANUFACTURER EXPORT RULES

7 27. EXEMPTED SUPPLIES UNDER GST VAT CONCEPTS AND ITS APPLICATION IN GST INTEGRATED GOODS AND SERVICE TAX ACT, 2017[IGST] STATE GOODS AND SERVICE TAX ACT, 2017[SGST] THE UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017 [UTGST] PRELIMINARY THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, SHORTCOMINGS/ DRAWBACKS OF THE LAW

8 CHAPTER-1 INTRODUCTION BACKGROUND: The former Indirect Tax Structure in India was based on the Three Lists in the Seventh Schedule to the Constitution of India, namely Union List, State List and Concurrent List. This structure dates back to 1950s. Over the years, the structure has become outdated due to changes in technologies, and situation. Due to ambiguity in definition, certain transactions were charged to both, Service Tax and VAT For e.g. Works Contract, Food related services, software services, IPR (Intellectual Property Right) related services, renting of movable property etc. GST is the solution to get over the defects in former indirect tax structure. NEED FOR RESTRUCTURING THE INDIRECT TAXATION SYSTEM: In the present tax structure there was no system of providing input credit mechanism between taxes levied by State and the centre. Thus, cascading effect arises. The present tax structure was complex as there were various definitions of the same transaction in different states as well as Central laws. The distinction between goods and services were fading due to improvement in technology and innovation. Several transactions take the character of sales as well as services giving rise to complexity. E.g. Works Contract. Taxes such as Additional Customs Duty, Surcharge etc. were not included in CENVAT system. These taxes were included in the output products and services resulting in cascading effects. In VAT System also taxes such as Entry tax, Octroi, Luxury Tax, Entertainment Tax were kept outside VAT scheme. In case of CST on inter-state sales, no set-off was allowed, which also increase cascading effect. There was lack of cross verification of returns filed under State as well as Central taxation rules. The State govt. is levying Entry Tax and Octroi compliance to which is time consuming. The transporters are required to wait for hours on border of a State while entering in other State. There are various tax forms and returns relating to various duties under various taxation laws. These returns are complex and lengthy and need simplification. WHAT IS GST? Goods and Services Tax means a tax on supply of goods or services, or both, except taxes on supply of alcoholic liquor for human consumption. GST is one indirect tax for the whole nation, applicable on the supply of goods or services as against the present concept of tax on manufacture of goods or on sale of goods or on provision of services. GST will be based on the principle of destination based consumption taxation as against the present principle of origin based taxation i.e. tax is payable in the State where goods or services or both are finally being consumed. It will be a dual GST* with Centre and the States simultaneously levying it on a common base. For supplies within State or Union Territory- (a) CGST will be payable to Central Government and (b) SGST or UTGST will be payable to State Government or Union Territory. Area up to 12 nautical miles inside sea is part of State (or U.T.) which is nearest. IGST shall be levied for inter-state supplies (from one state or UT to another). IGST is payable if supply is beyond 12 nautical miles but up to 200 nautical miles. GST Compensation 12% shall be levied on Pan Masala, tobacco products, coal, aerated waters and motor cars. Import of goods would be treated as inter-state supplies subject to IGST in addition to the applicable customs duties. Import of services would be treated as inter-state supplies and would be subject to IGST. GST would apply to all goods and services except Alcohol for human consumption. 1

9 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX There shall be levied a tax called the Central Goods and Services Tax on all intra-state supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. - SEC. 9(2) CGST ACT *CONCEPT OF DUAL GST: There will be a dual GST- State GST (SGST) and Central GST (CGST) on supply of goods and services within the State. The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise. Cross utilization of ITC both in case of Inputs and capital goods between the CGST and the SGST would not be permitted except in the case of inter-state supply of goods and services (i.e. IGST). Example: PARTICULARS WITHOUT GST (in Rs.) WITH GST (in Rs.) 1. MANUFACTURER TO WHOLESALER Cost of production Add: Profit Margin Manufacturer Price Add: Excise 12% TOTAL VALUE Add: Add: 9% Add: 9% INVOICE VALUE WHOLESALER TO RETAILER Cost to wholesaler Add: Profit TOTAL VALUE Add: Add: 9% Add: 9% INVOICE VALUE RETAILER TO CONSUMER Cost to Retailer Add: Profit TOTAL VALUE Add: Add: 9% Add: 9% TOTAL PRICE TO FINAL CONSUMER Cost saving to consumer NOTES: 1. ITC to wholesaler is Rs. 980 and Rs in case of without GST and with GST respectively. 2. ITC to retailer is Rs and Rs in case of without GST and with GST respectively. TAXES SUBSUMED IN GST: 2

10 INTRODUCTION CENTRAL TAXES STATE TAXES - CENTRAL EXCISE DUTY - STATE VAT - DUTIES OF EXCISE (MEDICINAL AND TOILET - CENTRAL SALES TAX PREPARATIONS) - ADDITIONAL DUTIES OF EXCISE (GOODS OF - PURCHASE TAX SPECIAL IMPORTANCE) - ADDITIONAL DUTIES OF EXCISE (TEXTILES AND - LUXURY TAX TEXTILE PRODUCTS) - ADDITIONAL DUTIES OF CUSTOMS (CVD) - ENTERTAINMENT TAX - SPECIAL ADDITIONAL DUTY OF CUSTOMS (SAD) - TAXES ON ADVERTISEMENTS - SERVICE TAX - TAXES ON LOTTERIES, BETTING AND GAMBLING. - CESSES AND SURCHARGES INSOFAR AS THEY - STATE CESSES AND SURCHARGES INSOFAR AS RELATE TO SUPPLY OF GOODS OR SERVICES. THEY RELATE TO SUPPLY OF GOODS OR SERVICES. TAXES WHICH ARE NOT TO BE SUBSUMED IN GST: 1. Basic customs duty 2. Exports Duty 3. Road and Passenger Tax 4. Toll Tax 5. Property Tax 6. Stamp Duty 7. Electricity Duty Commodities currently outside the GST ambit: Alcohol for human consumption Petroleum products like petroleum crude, motor spirit High speed diesel Natural gas Aviation turbine fuel and electricity The existing taxation system (VAT, Central Excise) will continue in respect of the above commodities. Tobacco and tobacco products would be subject to GST. In addition, the Central would have the power to levy Central Excise duty on these products. Current Tax Structure vs. GST Regime BASIS CURRENT SCENARIO GST SCENARIO STRUCTURAL DIFFERENCE BASIS OF LEVY (a) Central taxes: Excise, Custom, Service Tax, CST etc. (b) State Taxes: VAT, Luxury tax, Entertainment Tax etc. Taxable at the place of: (a) Manufacture/ sale of goods (b) Rendering of Services. REGISTRATION Decentralized registration under Central and State Authorities. TAX PROCEDURES Central Excise and Service Tax- Uniform. VAT varies from State to State. EXCISE DUTY Excise Duty charged up to the point of Manufacturing. 3 A dual layered tax system with both Central and State GST levied on same base on all the goods and services (except Petroleum, High Speed Diesel, Motor Spirit and Natural Gas) Taxable at the place of Consumption, a destination based tax. Uniform E-registration process based on PAN of Entity. Uniform process and common dates for collection/ deposit of tax and filing of returns. Replaced by CGST to be charged up to Retail Level.

11 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX COUNTERVAILING DUTY Taxed by Centre separately in case of To be subsumed under CGST. Import. SERVICE TAX Charged by Centre under Finance Act. To be subsumed under CGST and SGST based on Place of Supply Rules. CENTRAL SALES TAX Applicable at concessional rate of 2% To be subsumed in IGST. on inter-state transfers against C- Forms, otherwise full rate (5% to 14.5%). STATE VAT All goods are taxed, except exempt Subsumed in SGST. items. Varies from state to state. ENTRY TAX Currently being charged by selected states for interstate transfers held as import in Local area. No entry tax. Additional 1% tax to be levied on inter-state supply of selected goods.* INTER-STATE TRANSFER TO BRANCH OR AGENT Exempt against Form F. To be taxable but full credit available to dealers. INTRA-STATE TRANSFER Generally exempt. Depends upon State Might be taxable unless TIN of TO BRANCH OR AGENT CASCADING EFFECT CROSS SET- OFF OF LEVY THRESHOLD LIMITS FOR LEVY OF TAX. REVERSE CHARGE RATIONALE BEHIND IMPLEMENTING GST: VAT procedure. This problem arises because credit of CST and many other taxes not allowed. Currently set-off of Excise duty and Service Tax is allowed. (a) Central Excise- Rs. 1.5 Crores. (b) VAT- Varies from Rs. 5 to 20 lacs from state to state. (c) Service Tax- Rs. 10 lacs. There is no reverse charge mechanism in Excise. In service tax reverse charge is only applicable to certain services and to certain persons. transferor and transferee is same. Credit available on the full amount of taxes up to retailer. No cross set-off between CGST and SGST. Threshold limit for exemption Rs. 20 lacs (Rs. 10 lacs for special category states). In GST Reverse charge will be applicable on specified supplies of goods and services both. I. BENEFITS TO GOVERNMENT: GST replaces multiple indirect taxes at the Central and State levels. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Central and State. All the management of GST would be handled by the GSTN portal. Because of the advanced IT platform, it would be difficult to evade GST. The in-built mechanism of Input Tax Credit incentivizes tax compliance by the traders. Hence better control on revenue leakage. The duplication of indirect tax collection would end after the GST. GST will decrease the cost of tax collection leading to higher revenue efficiency. Both the Centre and State government would benefit. It will help to build a transparent and corruption free tax administration. India will gain by implementing GST as it will promote exports, raise employment and boost growth. II. TO BUSINESS: Reductions in the multiplicity of taxes that are at present governing our indirect tax system leading to simplification and uniformity. Reduction in compliance costs since multiple records keeping for a variety of taxes is no longer required. Will improve tax compliance as all returns will be filed online, input tax credit will be verified online, encouraging more paper trail of transaction. Simplified and automated procedures for various processes such as registration, returns, refunds, tax payments etc. All interaction takes place through the common GSTN portal- so less public interface between the tax payer and the tax administration. 4

12 INTRODUCTION Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services will lend greater certainty to taxation system. Electronic matching of input tax credits all across India thus making the process more transparent and accountable. Currently there are no specific provisions for treatment of the e-commerce sector. There are variable VAT laws for this sector. For e.g. - e-commerce operators are treated as facilitators or mediators in states like Kerala and Rajasthan which do not require them to register for VAT. While in U.P. they are required to file a declaration. GST clearly maps out the provisions applicable to this sector. Hence no complication regarding inter-state movement of goods. III. TO CONSUMERS: Final price of goods is expected to be lower due to seamless flow of input tax credit between the manufacturer, retailer and service provider. A large segment of small retailers will be either exempted from tax or will bear very low tax rates under Compounding scheme- purchases from such entities will cost less for the consumers. Average tax burden on companies is likely to come down which is expected to reduce prices resulting in more consumption. 5

13 CHAPTER-2 ADMINISTRATION CONSTITUTION (101 ST AMENDMENT) ACT: Constitution Amendment Bill passed by Rajya Sabha on and Lok Sabha on Notified as Constitution (101 st Amendment) Act, 2016 on Key Features: The Act provides for a levy of GST on supply of all goods or services except Alcohol for human consumption. The tax shall be levied as dual GST separately but concurrently by the Union and the States. The Parliament will have exclusive power to levy GST (IGST) on inter-state trade or commerce (including imports) in goods or services. The Central Government will have the power to levy excise duty in addition to the GST on tobacco and tobacco products. The tax on supply of five petroleum products viz., crude, high speed diesel, petrol, ATF and natural gas will be levied from a later date on the recommendation of GST Council. A Goods and Service Tax Council shall be constituted. GOODS AND SERVICE TAX COUNCIL (GSTC) GST Council: - GST Council has been created under Article- 279A of the Constitution of India. Its main objective is to develop a harmonized national market of goods and services. 1) Constituted by the President with effect from ) Consisting of : a. Union Finance Minister b. Minister of State (Revenue) c. State Finance Ministers d. Chairperson- Union FM 3) Council guided by need for: a. A harmonized structure for GST, and b. A harmonized national market for goods and services. Functions of GST Council: - As per Article 279A(4), the council will make recommendations to the union and the states on important issues related to GST, like Taxes, cesses, and surcharges to be subsumed under the GST; Goods and services which may be subject to, or exempt from GST; The threshold limit of turnover for application of GST; Rates of GST; Model GST laws, principles of levy, apportionment of IGST and principles related to place of supply; Special provisions with respect to the eight north eastern states, Himachal Pradesh, Jammu and Kashmir, and Uttarakhand; and Other related matters. The decisions of the GST Council are made by three-fourth majority of the vote cast. The centre has onethird of the vote cast, and the states together have two-third of the vote cast. Each state has one vote irrespective of its size or population. The recommendations of GST council have some force but are not legally binding on the govt. DECISIONS MADE BY GST COUNCIL Threshold limit for exemption will be Rs. 20 lacs. (Rs. 10 lacs for special category States) 6

14 ADMINISTRATION Composition threshold will be Rs. 1.5 Crores- not available to inter-state suppliers, service providers (except restaurant service) and specified category of manufacturers. Existing tax incentive schemes may be continued by way of reimbursement through budgetary route. The schemes will not continue in GST in present form. To ensure single interface all administrative control overa. 90% of taxpayers having turnover below Rs. 1.5 Crores would vest with States b. 10% of taxpayers having turnover below Rs. 1.5 Crores would vest with Centre. c. Taxpayers having turnover above Rs. 1.5 Crores would be divided equally between Centre and State. d. Same arrangement applicable for IGST Act with few exceptions. CGST, UTGST, IGST, SGST and GST Compensation Law approved. Formula for calculating compensation finalized. Four major tax rates have been finalized- 5%, 12%, 18% and 28%. Besides, some goods and services have been exempt. Separate tax rate for precious metals has been A cess over the peak rate of 28% on certain specified luxury and sin goods would be imposed for a period of five years to compensate States for any revenue loss on account of implementation of GST. GOODS AND SERVICE TAX NETWORK (GSTN): The Goods and Service Tax Network (GSTN) is a company set up by the govt. for providing shared IT infrastructure and Services to the Central and State govt., tax payers, and other stakeholders for implementation of the Goods and Services Tax (GST). GSTN was incorporated as a Non-Government, not for profit (Section 25), private limited company registered under the Companies Act. To enable efficient and reliable provision of services in a demanding environment, a non-government structure for the GSTN Special Purpose Vehicle (SPV) was conceived by the Government after considering key parameters such as independence of management, strategic control of Government, flexibility in organizational structure, agility in decision making and ability to hire and retain competent human resources. The authorised share capital of the company is Rs. 10 Crores with 49% equity held by the Govt. (Central Govt. and State/UT govt.) and 51% equity is held by private financial institutions namely ICICI Bank, HDFC Bank, HDFC Ltd., LIC Housing Finance and National Stock Exchange Strategic Investment Corporation Ltd. Objectives of GSTN:The GSTN has been mandated to provide following services to the various stakeholders: Provide common and shared IT infrastructure and services to the Central and State Governments, Tax Payers and other stakeholders. Partner with other agencies for creating an efficient and user-friendly GST Eco-system. Encourage and collaborate with GST Suvidha Providers (GSPs) to roll out GST Applications for providing simplified services to the stakeholders. Carry out research, study best practices and provide Training and Consultancy to the Tax authorities and other stakeholders. Provide efficient Backend Services to the Tax Departments of the Central and State Governments on request. Develop Tax Payer Profiling Utility (TPU) for Central and State Tax Administration. Assist Tax authorities in improving Tax compliance and transparency of Tax Administration system. Deliver any other services of relevance to the Central and State Governments and other stakeholders on request. GST SUVIDHA PROVIDER (GSP): Goods and Service Tax Network (GSTN) has appointed 34 GST Suvidha Providers (GSPs) to develop simple applications to be used by taxpayers for interacting with GSTN. 34 companies have been given permission to act as GST Suvidha Providers. GST Suvidha Providers are expected to enable taxable persons to comply with the requirements of GST and bring about easy access to GSTN. GSPs will enable small accounting software 7

15 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX providers to access GSTN through them. Suvidha Providers will act as an isolation layer for GST system. They will enable optimal, 24*7 use of GST Portal. ANTI- PROFITEERING MEASURES IN GST: Section 171 has been inserted in CGST Act which provides that it is mandatory to pass on the benefit due to reduction in rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices. This section further provides for the establishment of an authority against anti-profiteering in order to ensure its compliance. The objective of this move is to protect consumers from inflation after GST implementation. 8

16 CHAPTER-3 LEVY AND COLLECTION OF TAX MEANING OF CGST ACT: CGST Act is an Act to make a provision for levy and collection of tax on intra-state supply of goods or services or both by the Central Government and for mattersconnected therewith or incidental thereto. This act shall extend to whole of India except the state of Jammu & Kashmir. Central Goods and Service Tax (Extension to Jammu & Kashmir) Act, 2017 has been enacted which makes all the rules, provisions, notifications and order made under CGST Act, 2017 to be applicable on the state of Jammu & Kashmir as well In the above definition we are required to understand meaning of certain terms:- Intra-state:- Where the goods or services are supplied within the geographical boundaries of a particular state, it is known as intra-state supply of goods and services. Goods: - Means every kind of movable property other than money and securities but includes actionable claims, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. 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. Following are two types of taxes that are levied on intra-state supply of goods and services:- "CGST" LEVIED AND COLLECTED BY CENTRAL GOVERNMENT "SGST" LEVIED AND COLLECTED BY STATE GOVERNMENT INTRA-STATE SUPPLY OF GOODS AND SERVICES We can understand the taxes that will be leviable on intra-state supply of goods and services with the help of following example:- M/s Raman Kishore & sons of Rajasthan sold 4 Almirahs of worth Rs. 15,000 each to Home Decors and Designers of Rajasthan. On these goods CGST and SGST both will be leviable at the rate of 6% each where CGST will be collected by the Central Govt. and SGST by the respective State Govt. Taxable event: - There shall be levied a tax called the Central Goods and Services Tax on all intra-state supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. - SEC. 9(2) CGST ACT Under GST, liability to pay tax arises at the time of supply of goods and services as compared to previous laws where liability to pay tax arises either at the time of manufacture or sale of goods or provision of services. 9

17 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX SCOPE OF SUPPLY [Section. 7] 1. For the purpose of this Act, the expression Supply includes:- o all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; o import of services for a consideration whether or not in the course or furtherance of business; o the activities specified in Schedule I, made or agreed to be made without a consideration; Activities specified in schedule I are as follows:- 1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets. 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business Provided that gifts not exceeding fifty thousand rupees 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 goodsi. by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or ii. by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal. 4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business. Activities to be treated as supply of goods or supply of services as referred to in Schedule II are to be treated as supply, these are:- Transfer - any transfer of the title in goods, any transfer of right in goods or of undivided share in goods without transfer of title in goods, or; Any transfer of title in goods which stipulates that property in goods shall pass at a future date is considered as supply of goods. Land and Building any lease, tenancy, easement, license to occupy land or any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce use is considered as supply of services. Treatment or process - Any treatment or process which is applied to another person's goods is a supply of services. Transfer of business assets (a) Where goods forming part of the assets of business are transferred or disposed of by or under the direction of person carrying on business, it will be considered as supply of goods. (b) Where goods held or used for business are put to any private use by or under the direction of person carrying on the business or given by him to someone for purpose other than the purpose of business, it will be considered as supply of services. (c) Where any person ceases to be a taxable person, goods held by him as part of the assets of the business carried upon by him are deemed to be supplied by him in the course of his business immediately before he ceases to be a taxable person, unless i. the business is transferred as going concern to another person. ii. the business is carried on by a personal representative who is deemed to be a taxable person. Supply of services a) renting of immovable property 10

18 LEVY AND COLLECTION OF TAX b) construction of a complex, building, and civil structure intended for sale to a buyer except where the entire consideration has been received after issuance of completion certificate or after its first occupation, whichever is earlier. 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 is treated as supply of services. Composite Supply following composite supply shall be treated as supply of services:- a) Works contract b) Where as a part of supply of any service, goods, being food or any other article for human consumption or any drink(except alcoholic liquor) is also supplied it is considered as supply of service. Supply of goods - Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods. Having understood what comes under the supply of goods and services under this act, now we shall also discuss various activities or transactions which shall not be treated as supply of goods or services:- Activities or transaction specified in schedule III :- 1. Services by an employee to employer in the course of or in relation to his employment. 2. 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, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of 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 or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause 3. Services of funeral, burial, crematorium or mortuary including transportation of the deceased. 4. Sale of land other than as specified in para 5(b) of schedule II in which construction of a complex, building, civil structure is considered as supply of services. 5. Actionable claims, other than lottery, betting and gambling. B. Activities or transaction undertaken by the Central Government, 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. As per notification no. 14/2017following supply shall be treated neither as a supply of goods nor a supply of service, namely:- Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution. Provided notification will mutatis mutandis be applicable on IGST & UTGST. SUPPLY Inclusions All forms of supply of goods or servicesor both Exclusions Service by employee to employer 11

19 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Import of services for consideration whether or not in course or furtherance of business Service by any court of Tribunal established under any law Activities specified in Schedule I, made or agreed to be made without consideration Schedule I Permanent transfer/disposal of business assets Supply between related parties/distinct person Gifts by employer to employee exceeding Rs.50,000 Supply of goods by principal to agent or agent to principal Import of services by taxable person from related person or any of his establishment outside India, in course or furtherance of business (As per ICAI Journal) Functions performed by MP, MLA member of Panchayats, Municipalities and other local authorities; or Persons holding constitutional post: or Any chairperson, member or director in body established by CG/SG/local authority who is not deemed as an employee before commencement of this clause Service of funeral, burial, crematorium or mortuary Sale of land, building, where no consideration received before issuance of completion certificate Actionable claims other than lottery, betting & gambling Transactions undertaken by CG/SG/local authority in which they are engaged as public authorities Tax Liability on Composite and Mixed Supply[Section 8] Section 8 deals with how the tax liability in case of mixed supply and composite supply will be determined. 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. For Example- A packaged supply of family celebrations consisting of chocolates, dry frits and aerated drinks in the same box is supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. An important condition under this is it shall not be treated as mixed supply if these items are supplied separately (i.e., at their respective prices without being contained in single packaged box). 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. For Example- 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. Now we shall see how tax liability will be determined in each of above case:- a) Composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and whole supply will be taxable at the rate at which principal supply is liable to be taxed. b) A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 12

20 LEVY AND COLLECTION OF TAX Levy and Collection of tax[section 9] 1) Central Goods and Service Tax is a tax that shall be levied on all intra-state supply of goods or services or both, except on supply of alcoholic liquor for human consumption, on value determined under section 15 and at such rates, not exceeding twenty per cent. 2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), and 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. 3) The government may by notification specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both. Reverse charge mechanism- 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. 4) The central tax in respect of the supply of taxable goods or services or both by unregistered supplier to a registered person shall be paid by the registered recipient on reverse charge basis. As per notification no. 8/2017 a person receiving goods or services from unregistered dealer is not required to pay tax under reverse charge mechanism, upto the amount of Rs. 5,000 per day from any or all the suppliers, who is or are not registered. Where aggregate value of such supplies of goods or services exceed Rs. 5,000 tax is required to be paid on whole amount. Provided notification will mutatis mutandis be applicable on IGST & UTGST. As per notification no. 38/2017- CTR, the reverse charge mechanism u/s 9(4) and notification no. 8/2017- CTR, shall remain suspended till and shall be reviewed by a committee of experts. It may be noted in this regard that there is no change on reverse charge provisions u/s 9(3) of CGST, relating to GTA, Legal Services provided by an Advocate, etc. and for that reason it s just a partial suspension of RCM, only. 5) The Government, on the recommendations of the Council specifies categories of services the tax on intra- State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it. Electronic commerce operator-means any person who owns, operates or manages digital or electronic facility or platform for the supply of goods or services or both, including digital products over digital or electronic network. For Example- Uber, Amazon etc. 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 the representative is also not present in taxable 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. Note- in sub-section(3),(4) and (5) of section 9 all the provisions of this Act shall apply to such recipient or electronic commerce operator as if he is the person liable for paying the tax in relation to the supply of such services. Composition Levy [Section 10] A registered person whose aggregate turnover in the preceding financial year did not exceed 1.5 Crore rupees, may opt to pay, in lieu of tax payable by him, an amount calculated at such rate as may be prescribed but not exceeding Manufactures, other than manufacturers of such goods as may be notified 2% of Turnover (1% Central by the Government (Ice-cream, Pan Masala, Tobacco products etc.) Tax + 1% State Tax) In case where goods are supplied as part of service(like food or drinks for 5% of Turnover (2.5% Central human consumption as a part of services) Tax + 2.5% SGST) In case of other suppliers eligible for composition levy 1% of Turnover (0.5% Central Tax + 0.5% State Tax) 13

21 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Provided that the aggregate turnover shall be 1 Crore rupees in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Himachal Pradesh. Eligibility Criteria- registered persons who shall be eligible to opt composition scheme are as follows:- He is engaged in supply of goods, being food, or any other article for human consumption (except alcoholic liquor for human consumption) by way of or as a part of any service, where such service is for cash, deferred payment or other valuable consideration. He must not be engaged in supply of goods which are not leviable to tax under this act. He is not engaged in making interstate (i.e., from one state to another) outward supplies of goods. He is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source. He is not a manufacturer of such goods as notified by Government on the recommendations of the council. As per Notification No. 8/2017- Central Tax: manufacturers of Ice cream and other edible ice (whether or not containing Cocoa), Pan Masala, Tobacco and tobacco substitutes, shall not be eligible to opt for composition scheme u/s 10. Lapse of option- option availed by a registered person shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit of Rs. 1 Crore rupees. 1) A registered person availing this option shall not collect tax from the recipient on supplies made by him Also he shall not be entitled to take any credit of input tax. 2) Where the proper officer has reason to believe that a taxable person though not eligible to pay tax under this section has paid tax as such, such person shall, in addition to tax payable by him under any other provision of this act, be liable to pay penalty. COMPOSITION RULES Rule 3 Intimation for composition levy: 1. Any person who has been granted provisional registration under Rule-24, and opts for composition scheme, shall file an intimation in FORM GST CMP-01 prior to the appointed day but not later than 30 days after the said day. Provided that where such intimation is filed after the appointed day, the registered person shall not collect any tax from the appointed day but shall issue bill of supply for supplies made after the said day. 2. Any person who applies for registration under Rule-8 may give an option to pay tax u/s 10 in Part B of FORM GST REG-01 which shall be considered as an intimation to pay tax u/s Any registered person who opts to pay tax u/s 10 shall file an intimation in FORM GST CMP-02 prior to the commencement of the financial year for which such option is exercised and shall furnish the statement in FORM GST ITC-03 in accordance with Rule- 44 within 60 days from the date on which such option is exercised or within such extended period. 3A. Notwithstanding anything contained in the above rules, a person who has been granteda provisional registration under Rule 24 or certificate of registration under Rule 10(1) may opt composition scheme with effect from the first day of the month immediately succeeding the month in which he files an intimation in FORM GST CMP-02, on or before , and shall furnish the statement in FORM GST ITC-03 in accordance with rule 44(4) within 90 days from the day on which such person commences to pay tax u/s 10: Provided that the said person shall not be allowed to furnish the declaration in FORM GST TRAN-1 after the statement in FORM GST ITC- 03 has been furnished. 14

22 LEVY AND COLLECTION OF TAX 4. Any person who files an intimation under sub-rule (1) shall furnish the details of stock, including inward supply of goods from unregistered persons, held by him on the day preceding the date from which he opts composition scheme, in FORM GST CMP-03 within 90 days of exercise of option. 5. Any intimation under sub-rule (1) or (3) in respect of any place of business in any State or Union territory shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number. Rule 4 Effective date for composition levy 1. The liability to pay tax under composition scheme shall be effective from the beginning of financial year, where registered person who opts to pay tax under composition scheme has filed intimation on common portal including details of stock within sixty days from which the option of composition levy is exercised. And in case of persons who has been granted registration on a provisional basis and who opts to pay tax under composition scheme shall file intimation before appointed day and option to pay tax shall be effective from appointed day. 2. The liability to pay tax for those people who have provided intimation to pay tax under composition scheme at the time of registration shall be effective only after grant of registration. Rule 5Conditions and restrictions for composition levy Person exercising the option to pay tax under composition scheme shall comply with following conditions. 1. He is neither a casual taxable person nor a non-resident taxable person. 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, in a State or a Union Territory where he has no fixed place of business; Non-Resident taxable person- same as casual taxable person and the said person is also not resident in India. 2. The goods held in stock by him on the appointed day have not been purchased in the course of inter-state trade or commerce or imported from a place outside India or received from his branch situated outside the State or from his agent or principal outside the State. 3. The goods held in stock by him have not been purchased from an unregistered person and where purchased, he pays the tax on the basis of reverse charge mechanism on such goods. 4. He shall be liable to pay tax on the basis of reverse charge mechanism on inward supply of goods or services or both received from un-registered persons. 5. He was not engaged in the manufacture of goods as notified by government on the recommendations of council, during the preceding financial year. 6. He shall mention the words composition taxable person, not eligible to collect tax on supplies at the top of the bill of supply issued by him. 7. He shall mention the words composition taxable person on every notice or signboard displayed at prominent places. The registered person paying tax under this section may not file a fresh intimation every year. Rule 6 Validity of Composition Levy 1. The option exercised by a registered person to pay tax u/s 10 shall remain valid so long as he satisfies all the conditions mentioned above. 2. Such person shall be liable to pay tax u/s 9(1) from the day he ceases to satisfy any of the conditions mentioned in Sec. 10 or above Rules and shall issue tax invoice thereafter. He shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within 7 days of occurrence of such event. 3. The registered person who intends to withdraw from the composition scheme shall before the date of such withdrawal, file an application in FORM GST CMP

23 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 4. Where the proper officer has reasons to believe that the registered person was not eligible to pay tax u/s 10 or has contravened the provisions of the Act or provisions of this Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax u/s 10 shall not be denied. 5. Upon receipt of the reply to the show cause notice issued as above from the registered person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of 30 days of the receipt of such reply, either accepting the reply, or denying the option to pay tax u/s 10 from the date of the option or from the date of the event concerning such contravention, as the case may be. 6. Every person who has furnished an intimation under sub-rule (2) or filed an application for withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal of option has been passed in FORM GST CMP-07 under sub-rule (5), may furnish a statement in FORM GST ITC-01 containing details of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him on the date on which the option is withdrawn or denied, within a period of 30 days from the date from which the option is withdrawn or from the date of the order passed in FORM GST CMP-07, as the case may be. 7. Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the option to pay tax u/s 10 in accordance with sub-rule (5) in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number. As per Notification 45/2017- CT, the registered person who opts to pay tax u/s 10 with effect from the first day of a month which is not the first month of a quarter shall furnish the return in FORM GSTR-4 for that period of the quarter for which he has paid tax u/s 10 and shall furnish the returns as applicable to him for the period of the quarter prior to opting to pay tax u/s 10. List of Forms under Composition Scheme: S. No. Form No. Description 1. GST CMP GST CMP GST CMP-03 Intimation to pay tax under section 10 (composition levy) (Only for persons registered under the existing law migrating on the appointed day) Intimation to pay tax under section 10 (composition levy) (For persons registered under the Act) Intimation of details of stock on date of opting for composition levy (Only for persons registered under the existing law migrating on the appointed day) 4. GST CMP-04 Intimation/Application for withdrawal from composition Levy 5. GST CMP-05 Notice for denial of option to pay tax under section GST CMP-06 Reply to the notice to show cause 7. GST CMP-07 Order for acceptance / rejection of reply to show cause notice 16

24 LEVY AND COLLECTION OF TAX COMPOSITION SCHEME CONDITIONS NON ELIGIBILITY AGGREGATE TURNOVER>1.5 CRORES TAX IS NOT COLLECTED FROM RECIPIENT OF SUPPLY INPUT TAX CREDIT NOT AVAILED RATE OF TAX MANUFACTURER= 1% OF TURNOVER IN STATE OR UNION TERRITORY SUPPLIER PROVIDING RESTRAUNT SERVICES= 2.5% OF TURNOVER OTHER SUPPLIERS= 0.5% OF TURNOVER SUPPLY OF SERVICE EXCEPT CLAUSE(b) OF PARA 6 OF SCHEDULE II SUPPLY OF GODS NOT LIABLE TO TAX SUPPLY OF GOODS THROUGH E- COMMERCE OPERATOR MANUFACTURER OF GOODS NOTIFIED BY GOVERNMENT MULTIPLE REGISTERED PERSONS HAVING SAME PAN UNLESS ALL OPT TO PAY TAX UNDER COPOSITION SCHEME ACTIONALBLE CLAIMS OTHER THAN BETTING, LOTTERY & GAMBLING TRANSACTIONS UNDERTAKEN BY CG/ SG/ LOCAL AUTHORITY IN WHICH THEY ARE ENGAGED AS PUBLIC AUTHORITIES (As per ICAI Journal) Power to grant exemption from tax [Section 11] Where government thinks it is necessary so to do in public interest, it may on recommendation of the council exempt such 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. Notification no.7/2017 As per section 11(1) of this Tax Act, the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts, supplies of goods specified below from the whole of the central tax leviable thereon under section 9 of t his Act: S. No. Tariff item, sub heading, heading or Chapter Description of supply of Goods (1) (2) (3) 1. Any chapter The supply of goods by the CSD to the Unit Run Canteens 2. Any chapter The supply of goods by the CSD to the authorized customers 3. Any chapter The supply of goods by the Unit Run Canteens to the authorized customers Provided notification will mutatis mutandis be applicable on IGST & UTGST. 17

25 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX As per notification no 6/2017 a Canteen Stores Dept. (CSD) under the ministry of Defence shall be entitled to claim 50% of central tax paid on inwards supply of goods received by it for the purpose of further supply of such goods to unit run canteens or to the authorised customer of CSD. Provided notification will mutatis mutandis be applicable on IGST & UTGST. FRINGE BENEFITS TO EMPLOYEES SUBJECT TO GST: As per explanation (a)(iii) to Section 15, employer and employee are to be treated as related persons. Services by employee to employer are not subject to GST. Fringe benefits or perquisites are currently taxable in the hands of employee as a part of their income from salary. As per Schedule- II para 4(b), if goods held for business purposes are put to private use, or made available to any person for any purpose other than business, whether or not for consideration, the usage or making available of such goods is a supply of services. This will cover services provided by employer to employees for personal use of employees. Hence fringe benefits given to employees or directors by a company shall be subjected to GST. Rate of Goods in CGST: A. RATE- 0.25%: 1. Diamonds (non-industrial unworked) 2. Precious stones, other than diamonds, and semi-precious stones (unworked) 3. Synthetic or reconstructed precious or semi-precious stones (unworked). B. RATE- 3%: 1. Pearls, natural or cultured, whether or not worked or graded but not strung, mounted or set. 2. Diamonds other than non-industrial unworked diamonds. 3. Precious stones, other than diamonds, and semi-precious stones, synthetic or reconstructed precious or semi-precious stones (other than unworked) 4. Dust and powder of natural or synthetic precious or semi-precious stones 5. Silver (including silver plated with gold or platinum), Gold (including gold plated with platinum), Platinum, Base metals clad with silver or gold or platinum (in semi-manufactured or powder form). 6. Waste and scrap of precious metal. 7. Articles of Jewellery, articles of goldsmiths and silversmiths wares of precious metals, other articles of precious metals, articles of natural or cultured pearls, imitation Jewellery and coins. EXEMPTED RATE- 5% RATE- 12% RATE- 18% RATE- 28% All live animals Fish, fish fillets and Live horses. Malt, whether or Molasses. Pan (except live horse). other fish meat, fresh Condensed not roasted. Bidi masala. All Live fish. Fresh milk or chilled, put up in Milk. Butter wrapper leaves. goods and pasteurized milk unit container and and other Indian Katha. containing (excluding UTHT), bearing a brand fats. Cheese. Vegetable added sugar or curd, lassi, butter name. UTHT. Milk Fruits, dried, waxes, beeswax. other milk, chena or paneer and cream other than mixtures of Sugar sweetening (non-branded). Birds condensed milk. nuts or dried confectionery matter. eggs, natural honey Cream, yogurt, fruits (other other than white Unmanufacture (non-branded). fermented or than chocolate and d tobacco. Human hair. Live acidified containing tamarind chewing gum Cigars. Tobacco trees and other sugar or fruit, nuts or and (excludes extracts and plants. All vegetables cocoa. Chena or chestnuts). msihri, essences. fresh and chilled. paneer put up in unit Starches. batashaetc Portland Coconuts fresh or container and Prepared cement, dried, peeled or not. bearing a registered fish. Pasta, Cocoa butter, aluminous 18

26 LEVY AND COLLECTION OF TAX Other nuts fresh. Fresh fruits and peels of fruits. Coffee beans of seed quality. Wheat, barley, oats, rice (other than those bearing a brand name). soyabeans, sunflower seeds, other oil seeds of seed quality. Sugar beet and sugar cane. Lac and shellac. Puffed rice. Papad, bread other than pizza bread. Prasadami. Water other than water sold in sealed container. Tender coconut water. Salt of all types. Electrical energy. Human blood. Organic manure. Kajal, kumkum, bindi, sindur, alta.plastic bangles. Firewood and fuel wood. Stamp papers. Postal items sold by govt. Cheques, loose or in book form. Printed books, newspapers, journals, colouring books, maps. Duty credit scrips. Raw silk, wool uncombed, Gandhi topi, khadi yarn, jute fibre. Indian national flag. Earthen pots and clay lamps. Glass bangles. Manually operated agricultural implements. Handloom (weaving machinery). Spacecraft and spacecraft launch brand name. Birds eggs. Natural honey bearing a brand name. Edible products of animal origin not elsewhere specified. Ivory, tortoise shell, coral and similar materials. Dry plants and roots aka Jaribooti. Frozen and preserved vegetables. Cashew nuts, desiccated coconuts.dried areca nuts, chestnuts, walnuts, makhana. Sliced & dried mangoes. Grapes dried and raisins. Preserved fruits and nuts. Dried tamarind. Coffee and tea (other than unprocessed green tea leaves). Vanilla, cinnamon, cloves, nutmeg, ginger, saffron, turmeric. All cereals put up in containers and bearing a brand name. All oil seeds other than of seed quality. Natural gums other than lac and shellac. Compounded asafoetida. Vegetable materials commonly used for plaiting like bamboos. Soya bean oil, ground nut oil, olive oil and other oils (not chemically modified). Beet sugar, cane sugar, palmyra sugar. Vermicelli, pizza bread, khakhra, rusks, sweetmeatsnamkeen noodles. Vegetables, fruits and nuts prepared or preserved by vinegar. Jams, fruit jellies, marmalades etc. Fruit juices and vegetable juices. Roasted coffee substitutes and extracts, essences and concentrates thereof. Sauces. Yeasts. Soya bari, bari. Namkeens put up in unit container and bearing a registered brand name. Soya milk drinks. Fruit pulp. Beverages containing milk. Marble blocks, granite blocks. Iodine. Medicinal oxygen and hydrogen peroxide. All kinds of printing ink, drawing ink fountain pen and ball pen powder, chocolates. Corn flakes, cereal flakes, biscuits, pastries and cakes. Extracts, essences and concentrates of coffee &tea.soups and broths. Ice cream and other edible ice whether or not containing cocoa. Food preparations not elsewhere specified. Water not containing added sugar. Ethyl alcohol and other spirits. Vinegar and other substitutes obtained from acetic acid. Marble and travertine, granite (other than blocks). Slag and ash other than fly ash. All organic and inorganic chemicals. Nicotine gum. Artists, students, or signboard painters colours, amusement colours. Essential oils including concretes and absolutes. Perfumes. cement, slag cement, super sulphate cement. Paints and varnishes. New pneumatic tyres of rubber. ACs, refrigerators, dish washers, household washing machines, vacuum cleaners, electric shavers. Digital cameras and video camera recorders (other than CCTV).Motor vehicles for transport of 10 or more persons including drivers. Motor cars and other motor vehicles designed for the transport of persons, including station wagons and racing cars. Motor vehicles for transport of goods (other than refrigerated motor vehicles). Motor cycles. Aircrafts for personal use. Yachts and other vessels for pleasure or sports, rowing boats and canoes. 19

27 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX vehicles. Hearing aids. Indigenous handmade musical instruments. Passenger baggage.poojasamagr i namely rudraksha, wooden khadau, panchamrit, unbranded honey, kalava, chandantika etc. Supply of lottery by any person other thanstate Govt., UT or Local Authority subject to the condition that such lottery has suffered appropriate tax when supplied by govt. to the lottery distributor. s (other than those bearing a registered brand name), ice and snow. Tobacco leaves. Unroasted iron pyrites. Limestone. Iron ores and concentrates including roasted iron pyrites. Fly ash. Bio gas. Kerosene PDS. Bunker fuel namely- IFO 180 CST and IFO 380 CST. LPG for supply to domestic consumers. Nuclear fuel. Compressed air. Insulin. ORS. Animal, vegetable, chemical and mineral fertilizers. Agarbatti. Handmade safety matches. Natural rubber. Erasers. Kites, brochures. Silk yarn. Woven fabrics of silk, wool, cotton. Woven fabrics of manmade textile materials. Real zari thread (gold) and silver thread, combined with textile thread. Knitted and crocheted fabrics. Apparel articles of sale value not exceeding Rs Footwear MRP exceeding Rs Fly ash bricks with 90% or more fly ash content. Building bricks. Aircraft engines. Postage and revenue stamps other than those under exempt. ink. Tooth powder. Menthol and peppermint. Surgical rubber gloves. Rubber bands. Hand bags and shopping bags of cotton and jute. Sport gloves. Idols of wood, stone and metals (other than precious metals). Tableware and kitchenware of wood. Exercise book, graph book and laboratory note book and note books. Printed or illustrated postcards, calendars of any kind, other printed matter. Apparel and clothing articles of sale value exceeding Rs Umbrellas and walking sticks. Sand lime bricks, Beauty and make up preparations (other than Kajal, kumkum, bindi, sindur, alta). Oral and dental preparations, dental floss. Preshave, shaving and after shave preparations. Deodarants. Soap, detergents, washing preparations. Artificial waxes. Polishes and creams for footwear, furniture etc. Modelling pastes including those put up for children s amusement. Fireworks. Matches other than handmade safety matches. Insecticides. Tableware, kitchenware, other household articles of plastic. Articles of apparel and clothing accessories of vulcanized rubber (other than Surgical gloves). School bags, suit cases, trunks etc. of leather, plastic, textile materials (other than Revolvers and pistols. Video games consoles and machines. Smoking pipes and cigar holders. Scent sprays. All dutiable articles intended for personal use. Lottery authorized by State Govt. 20

28 LEVY AND COLLECTION OF TAX Rosaries, prayer beads or hawansamagri. fly ash blocks. Mathematica l boxes, geometry boxes and colour boxes, pencil sharpeners. Table, kitchen or other household articles of iron & steel, copper and aluminium. Sewing machines. Telephones. LED lamps. Non motorised bicycles and tricycles. Blood glucose monitoring system. Contact lenses, spectacle lenses. Corrective spectacles. Bamboo furniture. Coir products (except mattress). Pens (other than fountain & stylograph pens), pencils, combs, hairpins, hair- curlers. 21 handbags and shopping bags of cotton or jute). Other articles of leather. Articles of fur skin including artificial fur skin. Registers, account books, receipt books, memo pads. Footwear with outer soles of rubber, plastics, leather. Laboratory or pharmaceutical glassware.razor s and razor blades. Articles of Cutlery, manicure or pedicure sets and instruments. Nuclear reactors. Weaving machines. Electric motors and generators. Primary cells and batteries. Portable electric lamps.telephon e sets, microphones, loudspeakers, headphones and earphones, video recorders. Discs, tapes and other storage devices. CCTVs, computer monitors, settop box for TV, cars for physically handicapped.

29 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Original engravings, sculptures. Antiques of an age exceeding 100 years. Lottery run by State Govt. Permanent transfer of Intellectual Property right in respect of goods other than Information Technology software. Baby carriages. Balloons, gliders, parachutes. Goggles, binoculars. Cameras projectors. Watches. Pianos and musical instruments. Bombs, swords. Electronic toys like pedal cars. Fountain pens. Cigarette lighters. Laboratory chemicals. Tractor tyre. Permanent transfer of Intellectual Property right in respect of IT software. Rates provided in the above table are IGST rates. CGST & SGST rates shall be 50% of IGST rates. RATES ON SERVICES IN INDIA AS APPROVED BY GST COUNCIL Nil 5% 12% 18% 28% Support services to Goods agriculture, forestry,fishing, and Supply of food/ drinks in outdoor catering (full ITC available) animal husbandry (including agricultural operations, supply of farm labour, renting or leasing of agro machinery or vacant land with or without a structure incidental to its use) passenger transport(other than sleeper class) by rail (ITC available for input services) GTA Services for transport of goods (both- used goods for personal use and others) (no ITC available) Transport of goods in container by rail by person other than Indian Railways (full ITC available) Supply of Food/ Supply of Food/ drinks drinks in non air in air conditioned or conditioned or central heated central heated restaurant or restaurant, not restaurant having having licence to licence to serve liquor. serve liquor (full ITC available) Services provided by race club. (full ITC available) Supply of food/drinks in 5 star rated or above air conditioned restaurant. (full ITC available) 22

30 LEVY AND COLLECTION OF TAX (full ITC available) Renting of motor cab (no ITC available) Transport of passenger by AC contract/ stage carriage or radio taxi (no ITC available) Transport of passengers by air in economy class (ITC available for input services) Renting of hotels, inns, guest houses, clubs or campsite having room tariff 1000 or above but not exceeding 2500 per room per day. (full ITC available) Services by foreman of chit fund in relation to chit. (ITC available for input services) Transport of passengers by air in other than economy class (full ITC available) Renting of hotels, inns, guest houses, clubs or campsite having room tariff 2500 or above but not exceeding 7,500 per room per day. (full ITC available) Bundled services including supply of food/ drinks together with renting of premises like pandals and shamianas (full ITC available) Services by way of admission or access to circus, Indian classical dance including folk dance, Theatrical performance, drama. (full ITC available) Transport of Temporary transfer Real estate services. passengers by air or permitting the (full ITC available) embarking from or right to use terminating in a Intellectual Property Regional in respect of goods Connectivity Scheme other than IT Airport Software. (ITC available for (full ITC available) input services) Accommodation in 5 star rated or above hotels, inns, guest house or clubs where rent is above 7,500 per room per night. (full ITC available) Gambling (full ITC available) Services by way of admission to entertainment events or access to amusement facilities. (full ITC available) Transport of passengers by motorcab, or Renting of motorcab (where cost of fuel is charged from the service recipient.) (no ITC available) All other construction, accommodation, food and beverage, passenger transport, goods transport, financial and related services or rental services of transport vehicle, other professional technical businessnot specified 23 and Construction of complex, building, civil structure for the purpose of sale to buyer, wholly or partly, where entire consideration is received after issuance of completion certificate or first occupation, whichever is earlier. (full ITC available but no refund in case of overflow of ITC )

31 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Transport of goods in a vessel. (only ITC of services will be available) Tour operators services (no ITC available) Leasing of aircraft (ITC available for input services) Selling of space for advertisement in print media (full ITC available) services of job work in relation to printing of newspapers, textile yarn, cut and polish diamonds, printing of books, journals and periodicals, processing of hides, skins and leather. (full ITC available) elsewhere. (full ITC but no refund of overflow of ITC) Postal and courier services. Electricity, gas, water and other distribution services.(including support services related to such distribution) (full ITC available) Composite supply of work contract. (full ITC available) Services in wholesale and retail trade(including services of commission agents, brokers auctioneers who work for fee or commission) (full ITC available) Research and development services, Legal and accounting services (full ITC available) Temporary transfer or permitting the right to use Intellectual Property in respect of IT Software. (full ITC available) Telecommunication, broadcasting and information supply services. (full ITC available) 24

32 LEVY AND COLLECTION OF TAX Maintenance, repair and installation (exceptconstruction) services. (full ITC available) Manufacturing services on physical inputs (goods) owned by others. Or Other manufacturing services; publishing, printing and reproduction services; materialsrecovery services. (full ITC available) Community, Social and Personal Servicesand other miscellaneous services, including:- 1.Public administration services 2. Education services 3.Human health 4. Sewage and Waste Collection, treatment and disposal (full ITC available) Rates provided in the above table are IGST rates. CGST & SGST rates shall be 50% of IGST rates. As per Notification No. 31/2017- CTR following changes are made in respect of services specified in the above table- Description of Service Rate Transport of passengers by any motor vehicle designed to carry 5% (ITC of input service passengers where the cost of fuel is included in the consideration in same line of business) charged from the service recipient Or Renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient 12% (With Full ITC) 5% (ITC of input service in same line of business) Or 12% (With Full ITC) Job Work services in relation to precious stones, Jewellery including imitation Jewellery Job Work services in relation to food and food products except packing of processed milk into packets Job Work services in relation to Chapter 23 except dog and cat food put up for retail sale 5% 5% 5% 25

33 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Job Work in relation to manufacture of umbrella 12% Job Work in relation to manufacture of clay bricks 5% Services by way of printing on job work basis or on goods belonging 5% to others in relation to printing of all goods under Chap 48 or 49 which attract or NIL Services by way of printing on job work basis or on goods belonging 12% to others in relation to printing of all goods under Chap 48 or 49 which attract Services by way of printing on job work basis or on goods belonging 18% to others in relation to printing of all goods under Chap 48 or 49 other than those covered above Services by way of printing in relation to printing of all goods under 12% Chap 48 or 49 which attract or NIL, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer. Services by way of printing in relation to printing of all goods under 12% Chap 48 or 49 which attract where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer. Services by way of printing in relation to printing of all goods under 18% Chap 48 or 49 which attract or above, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer. Leasing of vehicles purchased and leased prior to 1/07/ % of applicable GTS+ Cess rate* Sale/ Disposal of vehicles covered by above leases 65% of applicable GTS+ Cess rate* Sale/supply of vehicles by a registered person, who had procured the 65% of applicable GTS+ vehicle prior to 1 st July, 2017 and has not availed input tax credit of Cess rate* excise, VAT or any other taxes paid on such vehicles. Works Contract services involving predominantly earth works 5% supplied to govt. Works Contract services in respect of offshore works contract 12% relating to oil & gas exploration & production (E&P) in the offshore area beyond 12 nm Transportation of natural gas through pipeline 5% (without ITC) Or 12% (with ITC) All stand-alone restaurants irrespective of AC or otherwise and food 5% (Without ITC) parcels (or takeaways). Restaurants in hotel premises having room tariff of less than Rs % (Without ITC) per unit per day Restaurants in hotel premises having room tariff of less than Rs % (With full ITC) and above per unit per day (even for a single room) Outdoor catering 18% Job work services in relation to manufacture of those handicraft 5% (With full ITC) goods in respect of which the casual taxable person has been exempted from obtaining registration Permanent transfer of Intellectual Property other than Information 12% 26

34 LEVY AND COLLECTION OF TAX Technology software (in goods) Permanent transfer of Intellectual Property in respect of Information Technology (in goods) 18% Note- 1) Transfer of right to use any goods for any purpose will attract same rate of GST and Compensation Cess as are applicable on supply of such goods. 2) Transfer of right in goods or of undivided share in goods without transfer of title thereof will attract the same GST rate and Compensation Cess as applicable on supply of such goods which involve transfer of title in goods. 3) Supply consisting of 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. Tax will be levied on such transfer at the same of rate of GST and Compensation Cess as applicable on supply of such goods. Services exempted from levy of tax:- 1. Services by Government or a local authority excluding the following services (i) Services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) Transport of goods or passengers; or (iv) Any service, other than services covered under clauses (i) to (iii) above, provided to business entities. 2. Services by the Reserve Bank of India 3. Services by a foreign diplomatic mission located in India 4. Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products or agricultural produce by way of (i) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing or (ii) Supply of farm labour; (iii) Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; (iv) Renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; (v) Loading, unloading, packing, storage or warehousing of agricultural produce; (vi) Agricultural extension services; (vii) Services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce. 5. Service by way of access to a road or a bridge on payment of toll charges. 6. Transmission or distribution of electricity by an electricity transmission or distribution utility. 7. Services by way of renting of residential dwelling for use as residence. 8. Services by way of (i) Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services); (ii) Inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers; 9. Services by way of transportation of goods:- (i) By road except the services of (A) A goods transportation agency; or (B) A courier agency; 27

35 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 10. Services provided by operators of the Common Bio-medical Waste Treatment Facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto; 11. Services by a veterinary clinic in relation to health care of animals or birds; 12. Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;[charitable activities may be defined as presently in notification No 25/2012-ST. 13. Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement; 14. Services provided bya. An arbitral tribunal to - (i) Any person other than a business entity; or (ii) A business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; b. A partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to- (i) An advocate or partnership firm of advocates providing legal services; (ii) Any person other than a business entity; or (iii) A business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; or c. A senior advocate by way of legal services to- (i) Any person other than a business entity; or (ii) A business entity up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. 15. Services provided,- a. By an educational institution to its students, faculty and staff; b. To an educational institution, by way of,- (i) Transportation of students, faculty and staff; (ii) Catering, including any mid-day meals scheme sponsored by the Government; (iii) Security or cleaning or house-keeping services performed in such educational institution; (iv) Services relating to admission to, or conduct of examination by, such institution; upto higher secondary. Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent. 16. Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme, - a. two year full time residential Post Graduate Programmes in Management for the Post Graduate b. Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management; fellow programme in Management; c. five year integrated programme in Management 17. Services provided to a recognized sports body bya. an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body; b. another recognised sports body; 18. Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii)dance, or (iii)theatre, if the consideration charged for such performance is not more than one lakh and fifty thousand rupees: Provided that the exemption shall not apply to service provided by such artist as a brand ambassador; 19. Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India; 20. Services by way of giving on hire - a. to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or b. to a goods transport agency, a means of transportation of goods; 21. Transport of passengers, with or without accompanied belongings, by - 28

36 LEVY AND COLLECTION OF TAX a. air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; b. non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or c. stage carriage other than air-conditioned stage carriage 22. Services of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension Fund Regulatory And Development Authority Act, 2013 (23 of 2013) 23. Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government 24. Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial year subject to the following conditions, namely:- a. the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and b. a period of three years has not been elapsed from the date of entering into an agreement as an incubatee; 25. Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution - a. as a trade union; b. for the provision of carrying out any activity which is exempt from the levy of GST; or c. up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex; 26. Services by an organiser to any person in respect of a business exhibition held outside India; 27. Services by way of slaughtering of animals; 28. Services of public libraries by way of lending of books, publications or any other knowledge-enhancing content or material; 29. Services by Employees State Insurance Corporation to persons governed under the Employees Insurance Act, 1948 (34 of 1948); 30. Services by way of transfer of a going concern, as a whole or an independent part thereof; 31. Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets; 32. Services by government, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution. 33. Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables; 34. Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo; 35. Services provided by Government or a local authority to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to (a) services at S. No. 1 (i), (ii)and (iii); and (b) services by way of renting of immovable property; Note: For S.No. (i), (ii)and (iii) refer to point no. 1 of this list. 36. Services provided by Employees Provident Fund Organisation (EPFO) to persons governed under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); 37. Services provided by Insurance Regulatory and Development Authority of India (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999); 38. Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market; 39. Services provided by National Centre for Cold Chain Development under Ministry of Agriculture, Cooperation and Farmer s Welfare by way of cold chain knowledge dissemination; 40. Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India. 41. Services provided by Government or a local authority to another Government or local authority: 29

37 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Provided that nothing contained in this entry shall apply to services at S. No. 1 (i), (ii)and (iii) above Note: For S.No. (i), (ii)and (iii) refer to point no. 1 of this list. 42. Services provided by Government or a local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate. 43. Services provided by Government or a local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract; 44. Services provided by Government or a local authority by way of- (a) registration required under any law for the time being in force; (b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, including fire license, required under any law for the time being in force; 45. Services provided by Government or a local authority by way of assignment of right to use natural resources to an individual farmer for cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products; 46. Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution: this shall be continued by way of notification under section 7(2)(b) of CGST/SGST Acts. 47. Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016: Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource; 48. Services provided by Government or a local authority by way of allowing a business entity to operate as a telecom service provider or use radiofrequency spectrum during the period prior to 1st April, 2016, on payment of licence fee or spectrum user charges, as the case may be; 49. Services provided by Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT). 50. Services by an acquiring bank, to any person in relation to settlement of an amount upto two thousand rupees in a single transaction transacted through credit card, debit card, charge card or other payment card service. Explanation. For the purposes of this entry, acquiring bank means any banking company, financial institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card 51. Services of leasing of assets (rolling stock assets including wagons, coaches, locos) by Indian Railways Finance Corporation to Indian Railways 52. Taxable services, provided or to be provided, by a Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India or bio-incubators recognized by the Biotechnology Industry Research Assistance Council, under Department of Biotechnology, Government of India; 53. One time upfront amount (called as premium, salami, cost price, development charges or by any other name) leviable in respect of the service of granting long term lease (30 years or more) of industrial plots, provided by the State Govt. Industrial Development Corporations or Undertakings to industrial units. Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50 per cent. or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area. Notification No. 32/2017- CTR 54. Services provided to the Central government by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of viability gap funding (VGF). 30

38 LEVY AND COLLECTION OF TAX Provided that nothing contained in this entry shall apply on or after the expiry of a period of 1 year from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation. 55. Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation; 56. Services by way of training or coaching in recreational activities relating to,- a. arts or culture. or b. sports by charitable entities registered under section 12AA of Income tax Act, 1961; 57. Any services provided by, _ (i) The National Skill Development Corporation set up by the Government of India; (ii) A Sector Skill Council approved by the National Skill Development Corporation; (iii) An assessment agency approved by the Sector Skill Council or the National Skill Development Corporation; (iv) A training partner approved by the National Skill Development Corporation or the Sector Skill Council in relation to a. the National Skill Development Programme implemented by the National Skill Development Corporation; or b. a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or c. any other Scheme implemented by the National Skill Development Corporation. 58. Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme 59. Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training. 60. Services by way of sponsorship of sporting events organised,- a. by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, State, zone or Country; b. by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat; c. by Central Civil Services Cultural and Sports Board; d. as part of national games, by Indian Olympic Association; or e. under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme; 61. Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the Beneficiary-led individual house construction / enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY); 62. Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex; 63. Services of general insurance business provided under following schemes - a. Hut Insurance Scheme; b. Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development Programme); c. Scheme for Insurance of Tribals; d. Janata Personal Accident Policy and Gramin Accident Policy; e. Group Personal Accident Policy for Self-Employed Women; f. Agricultural Pumpset and Failed Well Insurance; g. Premia collected on export credit insurance; h. Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture; i. Jan Arogya Bima Policy; j. National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); k. Pilot Scheme on Seed Crop Insurance; 31

39 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX l. Central Sector Scheme on Cattle Insurance; m. Universal Health Insurance Scheme; n. RashtriyaSwasthyaBimaYojana; or o. Coconut Palm Insurance Scheme; p. Pradhan MantriSuraksha Bima Yojna; q. Niramaya Health Insurance Scheme implemented by Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999); or 64. Services of life insurance business provided under following schemes a. Janashree Bima Yojana (JBY); or b. Aam Aadmi Bima Yojana (AABY); c. Life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum amount of cover of fifty thousand rupees; d. Varishtha Pension Bima Yojana; e. Pradhan Mantri Jeevan Jyot ibima Yojana; f. Pradhan Mantri Jan Dhan Yogana; g. Pradhan Mantri Vaya VandanYojana; and h. Any other insurance scheme of the State Government as may be notified by Government of India on the recommendation of GSTC. 65. Services by way of collection of contribution under Atal Pension Yojana (APY). 66. Services by way of collection of contribution under any pension scheme of the State Governments. 67. Service of transportation of passengers, with or without accompanied belongings, by a. Railways in a class other than (A) First class; or (B) An air-conditioned coach; b. Metro, monorail or tramway; c. Inland waterways; d. Public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (i) Metered cabs or auto rickshaws (including E-rickshaws); 68. Services by a person by way ofa. Conduct of any religious ceremony; b. Renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act), or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the Income-tax Act: Provided that nothing contained in (b) of this exemption shall apply to,- (i) Renting of rooms where charges are Rs 1000/- or more per day; (ii) Renting of premises, community halls, kalianmandapam or open area, etc where charges are Rs 10,000/- or more per day; (iii) Renting of shops or other spaces for business or commerce where charges are Rs 10,000/-or more per month. 69. Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation less than one thousand rupees per day or equivalent; 70. Services by way of transportation by rail or a vessel from one place in India to another of the following goods a. Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; b. Defense or military equipments; c. Newspaper or magazines registered with the Registrar of Newspapers; d. Railway equipments or materials; e. Agricultural produce; f. Milk, salt and food grain including flours, pulses and rice; and 32

40 LEVY AND COLLECTION OF TAX g. organic manure 71. Services provided by a goods transport agency, by way of transport in a goods carriage of,- a. Agricultural produce; b. Goods, where gross amount charged c. for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees; d. Goods, where gross amount charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred fifty; e. Milk, salt and food grain including flour, pulses and rice; f. Organic manure; g. Newspaper or magazines registered with the Registrar of Newspapers; h. Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or i. Defense or military equipment s; 72. Services by the following persons in respective capacities - a. business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch; b. any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in clause (g); or c. business facilitator or a business correspondent to an insurance company in a rural area; 73. Carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce; 74. Services by way of loading, unloading, packing, storage or warehousing of rice; 75. Services by way of right to admission to, - a. circus, dance, or theatrical performance including drama or ballet; b. award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event; c. recognised sporting event; where the consideration for admission is not more than Rs 250 per person in (i), (ii) and (iii) above. 76. Services provided by Government or a local authority where the gross amount charged for such services does not exceed Rs.5000/. Provided that nothing contained in this entry shall apply to services S. No. 1 (i), (ii)and (iii) above: Provided further that in case where continuous supply of service, as defined in sub-section (33) of section2 of the CGST Act, 2017, is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year; 77. (i) Health care services by a clinical establishment, an authorised medical practitioner or para-medics; (ii) Services provided by way of transportation of a patient in an ambulance, other than those specified in (i) above; 78. Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. 79. Services provided to the Central Government, State Government, and Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, and Union territory administration. 80. New Exemption: Services provided by the Goods and Services Tax Network (GSTN) to the Central Government or State Governments/Union Territories for implementation of Goods and Services Tax (GST) Notification No. 32/2017- CTR 33

41 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 1. Government authority to include any authority set up to carry out any functions entrusted to a Panchayat under Article 243G. 2. Supply of services or goods by a Govt. Entity to Central Govt., State Govt., UT or Local Authority or any person specified by them against consideration received from them in the form of grants, shall be exempt. 3. The services provided by a GTA to an unregistered person including unregistered casual taxable person other than the recipients liable to pay tax on GTA services under reverse charge shall be exempted from GST. 4. Services by way of access to a road or a bridge on payment of annuity shall be exempt. Notification No. 47/2017- CTR a) The service provided by Fair Price Shops to Central Govt., State Govt., or U.T. by way of sale of food grains, kerosene, sugar, edible oil, etc. under Public Distribution System against consideration in the form of commission or margin shall be exempt. b) Services by way of admission to a protected monument so declared under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 or any of thestate Acts, for the time being in force, shall be exempt. 34

42 CHAPTER-4 TIME AND VALUE OF SUPPLY Time of supply of goods [Section 12] The liability to pay tax on goods shall arise at the time of supply as determined hereunder. The time of supply of goods shall be:- - Date of issue of invoice by the supplier or the last date on which he is required to issue invoice with respect to the supply, or - Date on which the supplier receives the payment with respect to the supply Whichever is earlier. 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 for such excess amount shall be date of issue of invoice. Explanation- The date on which the supplier receives the payment shall be:- Date on which payment is entered in books of accounts OR Date on which payment is credited to his bank account, Whichever is earlier I. In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be :- Date of receipt of goods, OR Date of payment as entered in the books of accounts of the recipient ORDate on which payment is debited in his bank account, whichever is earlier, OR Date immediately following 30 days from date of issue of invoice by supplier, Whichever is earlier. Where it is not possible to determine the time of supply under clause (a),(b),(c), in that case time of supply shall be:- Date of entry in the books of accounts of recipient of the supply. II. In case supply by vouchers by a supplier, time of supply shall be:- Date of issue of voucher if supply can be identified at that time OR Date of redemption of voucher in any other case. For instance- A beauty product company issued vouchers for making advertisement of their product, as per its terms whoever gets the voucher can redeem it and can take company s products up to rupees 5000 free for one month. Here the time of supply will be when the person redeems his voucher and take company s products. III. IV. Where it is not possible to determine the time of supply under sub section (2),(3) and(4), the time of supply shall- In case where a periodical return has to be filed, be the date on which such return is to be filed, OR In any other case, be the date on which tax is paid Where there is an addition in value of supply by way of interest, late fees or penalty for delayed payment of any consideration the time of supply related to that addition in value shall be date on which supplier receives such addition in value. 35

43 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX TIME OF SUPPLY OF GOODS A GENERAL CASE - Date of issue of invoice, OR - Date of receipt of payment Whichever is earlier B REVERSE CHARGE - Date of receipt of goods OR MECHANISM - Date of payment OR - Date immediately after 30 days from the date of issue of invoice by the supplier Whichever is earlier. Otherwise date of entry in books of recipient. C VOUCHERS - The date of issue of voucher, if supply can be identified at that point OR D EXCEPTIONAL CASES (Other than A, B & C) - The date of redemption of voucher, in all other cases. If it is not possible to determine the time of supply by the above provisions, then it will be- - The date on which a periodical return has to be filedor - The date on which the CGST/SGST is paid, in any other case. Time of supply of services [Section 13] 1) Liability to pay tax on service shall arise at the time of supply. 2) Time of supply of service shall be determined as follows:- (a) Date of issue of invoice by the supplier, if the same is issued within prescribed time OR Date of receipt of payment, whichever is earlier (b) Date of provision of service, if the invoice is not issued by supplier in prescribed time OR Date of receipt of payment, whichever is earlier Where provision of clause (a) and (b) do not apply, there time of supply of service shall be date on which recipient shows the receipt of services in his books of accounts. Where the supplier of taxable services receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice the time of supply for such excess amount shall be date of issue of invoice Explanation- Date of receipt of payment under this section shall have same meaning as in the case of time of supply of goods. 3) In case of supplies in respect of which tax is paid or liable to be paid on reverse basis, the time of supply shall be:- (a) Date of payment as entered in books of accounts of recipient OR Date on which payment is debited in his bank account, whichever is earlier. OR (b) Date immediately following sixty days from the date of issue of invoice by supplier, Whichever is earlier Where it is not possible to determine the time of supply under clause(a), (b), time of supply in that case shall be date of entry in books of accounts of recipient of supply. NOTE In case of supply by associated enterprises, where supplier of service is located outside India, time of supply shall be:- Date of entry in the books of account of the recipient of supply OR Date of payment, whichever is earlier. 36

44 TIME VALUE OF SUPPLY 4) In case of supply of services by voucher same provisions shall be applicable as in case of supply of goods by vouchers. 5) Where it is not possible to determine the time of supply under sub section (2),(3) and(4), the time of supply shalla) In case where a periodical return has to be filed, be the date on which such return is to be filed, OR b) In any other case, be the date on which tax is paid 6) Where there is an addition in value of supply by way of interest, late fees or penalty for delayed payment of any consideration The time of supply related to that addition in value shall be date on which Supplier receives such addition in value TIME OF SUPPLY OF SERVICES A B GENERAL CASE REVERSE CHARGE MECHANISM - Date of issue of invoice, OR - Date of receipt of payment Whichever is earlier - Date on which payment is made, OR - Date immediately after 60 days from the date of issue of invoice by the supplier Whichever is earlier Otherwise date of entry in the books of recipient. C VOUCHER - The date of issue of voucher, if the supply can be identified at that point OR - The date of redemption of voucher, in all other cases. D ASSOCIATED - The date of entry in books of recipient, OR ENTERPRISES - The date of payment E EXCEPTIONAL CASES Whichever is earlier. If it is not possible to determine the time of supply by the above provisions, then it will be- - The date on which a periodical return has to be filed or - The date on which the CGST/SGST is paid, in any other case. Change in rate of tax in respect of supply of goods or services [Section 14] Where there is change in rate of tax in respect of goods or services or both, time of supply shall be determined in the following manner:- Where goods or services or both are supplied before the change in rate of tax Payment and invoice Invoice issued and payment is also received after change in rate of tax 37 Time of supply Date of receipt of payment Or Date of issue of invoice, whichever is earlier Date of issue of invoice Invoice issued prior to the change in rate of tax, Payment received after change Payment received before change in rate of tax, Date of receipt of payment Invoice issued after change Where goods or services or both are supplied after the change in the rate of tax Payment and invoice Time of supply Payment received after change in rate of tax, Date of receipt of payment Invoice issued prior to the change Invoice issued and payment received before change in rate of tax Date of receipt of payment Or Date of issue of invoice, whichever is earlier

45 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Invoice issued after change in rate of tax, Payment is received prior to the change Date of issue of invoice Value of taxable supply [Section 15] 1) The value of supply of goods or services is 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 the recipient are not related persons and price is the sole consideration for supply. 2) Value of supply shall include:- - Any taxes, duties, cesses, fees and charges levied under any law for the time being in force except CGST tax, SGST tax, IGST tax, UTGST tax or Goods and Service( Compensation Cess). - 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. - Incidental expenses, including commission and packing, charged by supplier to the recipient of supply. - Interest or late fee or penalty for delayed payment of any consideration for any supply. - Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. 3) The value of the supply shall not include any discount which is given- - before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply - after the supply has been effected, if 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 input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply 4) Where value of the supply of goods or services cannot be determined under sub section (1), the same shall be determined in such manner as may be prescribed. 5) Value of such supplies as notified by the Government on the recommendations of the council same shall be determined in such manner as may be prescribed. Explanationa) Related person - i. such persons who are officers or directors of one another s businesses ii. such persons are legally recognised partners in business iii. such persons are employer and employee iv. 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 v. one of them directly or indirectly controls the other vi. both of them are directly or indirectly controlled by a third person vii. together they directly or indirectly control a third person viii. they are members of the same family b) persons who are associated in the business of one another in which one is sole agent or sole distributor or sole concessionaire, of the other, shall be deemed to be related. Illustration 1- M/s Exclusive dealers bought cloth fabric worth Rs. 10,000 from M/s Narayan Bros. For delivering the goods to recipient, goods were transported by supplier on which toll tax of Rs 200 was levied. M/s Exclusive dealers issued invoice in which they charged CGST & 10%. Calculate value of supply and tax to be charged from M/s Narayan bros. Solution- As per section 15(2)(a) value of supply includes all taxes levied under any other law for the time 38

46 TIME VALUE OF SUPPLY being in force, so value of supply will be:- Value of cotton fabric 10,000 Add :- Toll tax paid 200 Total value of supply 10,200 CGST on total value of 10% (10,200*10%) 1,020 SGST on total value of 10% (10,200*10%) 1,020 Total tax payable 2,040 Illustration 2-Mr. Ramanand ordered supply of motor vehicle from Hero Motocorp worth Rs, 50,000. Name plate was not included in order specification. But Hero Motocorp supplied name plate of Rs Calculate the value of supply. Solution- As per section 15(2)(b) &(c), the value of supply of motor vehicle is Rs, 50,800, as the name plate is mandatory part for the vehicle to get registered by Mr. Ramanand. If supplier would not have provided the same to recipient, it would have been purchased by him from some other place before registration. So Rs. 800 is an incidental expense and thus included in value of supply. So total value of supply is Rs. 50,800. Illustration 3-Mr. Harish retail suppliers of stationery bought goods from Bhasin stationers worth Rs. 15,000 on credit. Where terms of sale clearly specify that if recipient fails to make payment within 25 days from the date of sale an interest will be levied on the outstanding 5%. Mr. Harish made full payment on 40 th day. Calculate the Value of supply. Solution- As per section 15(2)(d) the amount of interest or late fee for delayed payment is included in the value of supply. So the value of supply will be:- Value of stationery bought 15,000 Add:- Interest on late payment [ 15,000*5%*15/365] 31 Total value of supply 15,031 ** Days for which delay is made in payment(40-25=15 days) Illustration 4-Mr. Ansari orders 50 Rs. 20,000 each from Electronic Corner from where they get 2% on payment of the outstanding amount within 2 months. Mr. Ansari made payment within the specified period. Determine the value of supply and tax payable where rate is 10%. Solution- As per section 15(3), value of supply shall be calculated as follows:- Value of 50 laptops [50*20,000] 10,00,000 Less:- 2% 20,000 Final value of supply 9,80,000 CGST on final value [9,80,000*10%] 98,000 SGST on final value [9,80,000*10%] 98,000 Total tax payable 1,96,000 Valuation rules- Determination of value of supply Rule-27 Value of supply of goods or services where the consideration is not wholly in money: Value of supply of goods or services where the consideration is not wholly in money, there value shall be:- a) The open market value of such supply. b) Where open market value is not available, value of supply shall be:- Total of = Consideration in money + Amount in money equivalent to the consideration not in money(if it is known at the time of supply) c) If value is not determinable in above sub clauses, the value will be equal to the value of supply of like kind and quality of goods or services. d) If value is not determinable under above clauses it shall be equal to Total of = Consideration in money + amount in money that is equivalent to consideration not in money as determined by application of rule 4 or rule 5 in that order. 39

47 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Illustration 1-A laptop is supplied for Rs. 40,000 along with printer manufactured by the same person, where open market value of printer is known at the time of supply that is Rs. 4,000. But the open market value of laptop is not available. Determine the value of supply. Solution- The value of supply of laptop as per Rule 1 sub-rule(b) is 44,000 which is calculated as follows:- Consideration paid for laptop in money 40,000 Add:- Amount in money equivalent to consideration not in money 4,000 Total value of supply 44,000 Case I- In case the value could not be determined as above, the value of goods can be determined as follows:- We will find out the value of same kind and quality of goods in market and consider that value to be the value of our goods. Rule 28 Value of supply of goods or services between distinct or related persons, other than through an agent Value of the supply of goods or services or both in this case shall:- a) be the open market value of such supply, b) if open market value is not available, be the value of supply of goods or services of like kind and quality c) if value is not determinable under clause (a) or (b), be the value as determined by application of rule 4 and rule 5 in that order Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. Rule 29 Value of supply of goods made or received through an agent The value of supply of goods between the principal and his agent shall:- a) be the open market value of goods supplied, or at the option of supplier- 90% of price charged by the recipient from his customer, not being a related person on further supply of such goods. Example- Principal supplies wooden dining table to his agent and agent is supplying dining table of like kind and quality at a price of Rs.10,000 per dining table on the date of supply. Another independent supplier supplies same goods to the said agent at price of Rs. 9,200. Value of supply made by principal shall be Rs. 9,200 or where he exercises the option the value shall be 90% of 10,000 i.e., Rs. 9,000. b) Where value is not determinable under clause (a), the same shall be determined by application of rule 4 and rule 5 in that order Rule 30 Value of supply of goods or services or both based on cost Where the value of a supply of goods or services or both is not determinable by any of the preceding rules, the value shall be:- 110% of cost of production or manufacture or cost of acquisition of goods or cost of provision of services. Illustration 6- A manufacturer uses raw material worth Rs 2,00,000 on which labour and overhead are incurred worth Rs. 1,50,000 and Rs. 50,000 each. Due to non-availability of like kind and quality of goods in the market, the open market value of such goods is unavailable. Determine the value of taxable supply in the case specified above. Solution- As per Rule 4 where value of supply of goods or services is not determinable by any other manner then the value of supply shall be determined in following manner:- Raw Material utilized for manufacture 2,00,000 Labour 1,50,000 Overhead 50,000 Cost of goods manufactured 4,00,000 Taxable Value of supply (4,00,000*110%) 4,40,000 40

48 TIME VALUE OF SUPPLY Rule 31 Residual method Where the value of supply of goods or services or both cannot be determined under rules 1 to 4, the same shall be determined using reasonable means consistent with the principles and general provisions of section 15 and these rules. Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4 Rule 32Determination of value in respect of certain supplies 1) Value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereunder:- 2) The value of supply of service in relation to purchase or sale of foreign currency, including money changing, shall be determined in following manner:- a) For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to (Buying rate/selling rate - Reserve bank of India Reference rate for that currency at that time) *total units of currency Where RBI reference rate for that currency is not available, value shall be:- 1% of gross amount of Indian Rupees received or provided by the person changing the money Illustration-Anand provides services in relation to purchase or sales of foreign currency, including money changing, for a particular day in the month of January he sold US$ Rs RBI Reference Rate for US$ on that day in month of January is Rs Calculate the value of service in this case. Solution- As per Rule 6, value of such supply of services shall be determined in following manner:- Value of service = (Selling Rate RBI Reference Rate)*total units of currency = ( ) * 10,000 = ( 1.32 ) * 10,000 = Rs. 13,200 Note:- In case RBI Reference rate is not available, the value of supply of services shall be calculated in following manner:- Value of services = 1% * ( Total units of currency * Selling Rate) = 1% * ( 10,000 * 66.20) = 1% * 6,62,000 = Rs. 6,620 Where neither of the currencies exchanged in Indian Rupees, the value shall be equal to:- 1% of lesser of two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI. Illustration- A customer has purchased on Feb 12, 2017 US$ 1000 from an authorized dealer in exchange of 865 Euros, Calculate value of taxable services. Where RBI Reference Rate for Euro on the date of exchange is Rs. 71 and for Dollar is Rs. 55. Solution- As per Rule 6, value of taxable supply shall be calculated as follows:- Value of US$ in Indian Rupees ( 1,000 * 65 ) 65,000 Value of Euros in Indian Rupees ( 865 * 71 ) 61,415 Lowest of the two values 61,415 Taxable Value of supply of service (1% * 61,415) b) At the option of supplier of services, the value in relation to supply of foreign currency, including money changing, shall be deemed to be: 1% of gross amount of currency exchanged uptors. 1,00,000 (subject to minimum of Rs. 250) Rs. 1,000 plus 0.5% of gross amount of currency exchanged for an amount exceeding Rs. 1,00,000uptoRs. 10,00,000 Rs. 5,500 plus 0.1% of gross amount of currency exchanged for an amount exceeding Rs. 10,00,000(subject to max amount of Rs. 60,000) 41

49 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Illustration- X, an agent providing currency exchange services converted US$ 50,000 into Indian 1 US$ = Rs agent opts to pay tax on supply of these taxable services on the basis of slabs provided under the GST valuation rules. Determine the value of supply in this case. Solution- As per Rule 6, value of taxable supply of services can be determined as follows:- Value of US$ 50,000 in Indian Rupee (50,000 * 64.88) Rs. 32,44,000 Now applying slab on above amount --- Up to Rs. 1,00,000 1% of gross amount of currency exchanged (1,00,000 * 1%) 1,000 Above 1,00,000 till 10,00, % of gross amount [(10,00,000-1,00,000) * 0.5%] 4,500 Above 10,00,000, 0.10% of gross amount [(32,44,000 10,00,000) * 0.10%] 2,244 Total taxable value of supply of service 7,744 3) The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent, shall be deemed to be:- Value of supply of service = 5% of basic fare in case of domestic bookings (flights). AND 10% of basic fare in case of international bookings Basic fare For the purpose of this sub-rule means the part of the air fare on which commission is normally paid to air travel agent by airlines. Illustration 1- Happy Holidays Pvt Ltd. an air travel agent booked domestic flight for one of its customers. Flight is booked for forward as well as return journey from Delhi to Mumbai. Basic fare of the flight booked by the agent is Rs. 3,000 each for forward and return journey. Determine the value of supply of service provided by air travel agent to its customers. Solution- As per Rule 6, sub-rule (3) value of services can be determined as follows:- Basic fare for outward and return journey (3000 * 2) 6,000 Value of service in case of booking of domestic flights (6000 * 5%) 300 Illustration 2- Agent specified in illustration 10, booked air ticket for its client for outward and return journey from Delhi to Singapore. Basic fare of air ticket booked is Rs. 10,000 each for outward and return journey. Determine the value of supply of service by air travel agent in relation to booking of air tickets. Solution- As per Rule 6, sub-rule (3) value of service can be determined as follows:- Basic fare for outward and return journey (10,000 * 2) 20,000 Value of service in case of booking of international flights (20,000 * 10%) 2,000 4) The value of supply of services in relation to life insurance business shall be:- a) If the amount of saving or investment from the amount of premium is intimated to policy holder at the time of supply of service, then value of service shall be:- Gross premium charged from policy holder amount allocated for investment/savings b) In case of single premium annuity policy, value shall be:- 10% of single premium charged from policy holder c) In all other cases, For first year = 25% of the premium charged from policy holder In subsequent years = 12.5% of the premium charged from policy holder Illustration 1-Mr. Anil, Life Insurance Agent providing Life Insurance services collects annual premium of Rs. 20,000 from a policy holder. At the time of collection of premium he intimates policy holder regarding the amount of investment from the amount of premium that is Rs. 10,000, calculate the value of service of Life Insurance Agent in the given case. Solution- As per Rule 6, sub-rule (4), the value of service can be determined in the following manner:- Value of service= Gross premium charged from policy holder - Amount allocated for investment Value of service = 20,000 10,000 Value of service = 10,000 42

50 TIME VALUE OF SUPPLY Illustration 2-Mr. Anil, Life Insurance Agent providing Life Insurance services collects single annuity premium from policy holder Rs. 1,50,000. Calculate the value of service in the given condition. Solution- As per Rule 6, sub-rule (4), the value of service in case of single premium annuity policy can be determined in the following manner:- Value of service = 1,50,000 * 10% Value of service = 15,000 Illustration 3-Mr. Anil, Life Insurance Agent providing Life Insurance services collects Rs. 20,000 as premium for first financial year and the same amount for second financial year as well. Calculate the value of service for both the financial years. Solution- As per Rule 6, sub-rule (4), the value of service in case where the amount of investment is not specified from the amount of premium shall be determined as follows:- Value of service for the first financial year = Amount of premium charged * 25% = 20,000 * 25% Value of service for the first financial year =Rs. 5,000 For next and all subsequent years value of service = Amount of premium charged * 12.5% = 20,000 * 12.5% =Rs. 2,500 5) Where a person dealing in the buying or selling of second hand goods, i.e., used goods and where no input tax credit has been availed on purchase of such goods, makes a taxable supply, value of such supply shall be:- Selling price purchase price Where such value is negative it shall be ignored. Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession. As per notification no 10/2017where a registered person dealing in buying and selling of second hand goods has sold some of such goods there he is required to pay tax only on the outward supply of such goods as the purchases of such goods from unregisterd person by that dealer is exempt from whole of the central tax. Provided notification will mutatis mutandis be applicable on IGST & UTGST. 6) Value of token, or a voucher, or a coupon, or a stamp(other than postage stamp) redeemable against supply of goods or services shall be equal to Money value of goods or services redeemable against such token, voucher, coupon or stamp Illustration-Shoppers Stop is providing free gift vouchers on its anniversary worth 2000 points to its visitors through which they can buy clothes or accessories. A customer purchased clothes worth Rs by redeeming the free gift voucher. Calculate value of supply of goods in the case specified above. Solution- As per Rule 6, sub-rule (6) the value of voucher shall be equal to the money value of goods redeemed against such voucher. Thus value in the given case will be Rs. 1,999. 7) The value of taxable services provided by such class of service providers as may be notified by the Govt. as referred to in Entry 2 of Schedule I between distinct persons, other than those where ITC is not available u/s 17(5) shall be deemed to be NIL. Rule 33Value of supply of service in case of pure agent The expenditure or cost incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following condition are satisfied, namely:- 43

51 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX The supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient. The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service, and The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Pure agent - means a person whoa) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; b) neither intends to hold nor holds any title to the goods or services or both so supplied or provided as pure agent of the recipient of supply; c) does not use for his own interest such goods or services so procured; and d) Receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration. Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to Registrar of the Companies. The fees charged by the Registrar of the companies registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A s recovery of such expenses is a disbursement and not part of the value of supply made by A to B. Illustration- R.P. Associates a firm of chartered accountants provide accounting services to ABC Pvt. Ltd. ABC Pvt. Ltd. Informed R.P. Associates about filing of their yearly records with registrar of companies for which R.P. Associates called a firm of Company Secretary. R.P. Associates acting as pure agent on behalf of ABC Pvt. Ltd. Made payment to CS of Rs. 10,000 and included same amount in their invoice Rs. 50,000 (i.e., 40,000 as their own accounting fees and 10,000 payable to CS) issued to ABC Pvt. Ltd. Without adding any commission on the said payment. Solution- As per Rule 7, the value received by R.P. Associates from ABC Pvt. Ltd. For their own accounting fees will be considered as the amount against supply of services, i.e., Rs. 40,000 Rule 34Rate of exchange of currency, other than Indian rupees, for determination of value The rate of exchange for determination of value of taxable goods or services or both shall be the applicable reference rate for that currency as determined by the Reserve Bank of India on the date of time of supply in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act. Rule 35 Value of supply inclusive of integrated tax, central tax, State tax, Union Territory tax: Where the value of supply is inclusive of Integrated Tax, or as the case may be, Central Tax, State Tax, U.T. Tax, the tax amount shall be determined in the following manner: Tax Amount= (Value inclusive of taxes * tax rates in % of IGST/CGST/SGST or UTGST)/ (100+sum of tax rates in %) 44

52 CHAPTER-5 INPUTTAX CREDIT Input Tax Credit [Section 16] Every person shall be entitled to take credit of tax paid on any supply of goods or services or both to him, in his electronic credit ledger, which are used or intended to be used in the course of furtherance of his business, at the time of final payment subject to such conditions as may be prescribed and in the manner specified in section 49. No registered person shall be entitled to take credit of any input tax in respect of any supply of goods or services or both, unless:- a) He is in possession of tax invoice, debit note or any other document issued by the registered supplier, as the evidence of tax actually being paid by him. b) He has received the goods or services or both. c) The tax charged in respect of such supply has actually been paid to the government in cash or through utilization of input tax credit admissible in respect of such supply. d) He has furnished the return under section 39. Where recipient fails to pay to the supplier of goods or service or both, the amount towards the value of supply along with tax payable thereon within the period of 180 days from the date of issue of invoice by the supplier, an amount equal to input tax credit availed by the recipient shall be added to his output tax liability along with interest thereon. Where any person has claimed depreciation on tax component of the cost of capital goods and plant and machinery, their input tax credit on the said tax component will not be allowed. A registered person shall not be entitled to take credit in respect of any invoice or debit note for supply of goods or services after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of relevant annual return, whichever is earlier.(sec16(4)) Apportionment of credit and blocked credits [Section 17] Where goods or services or both are used by the registered persons partlyfor purpose of business and partly for other purposes, input tax credit will be available for only those input goods or services that are used for the purpose of business. Where goods or services or both are used by the registered persons partly for effecting taxable supplies including zero rated supply and partly for effecting exempt supplies, the amount of input tax credit shall be restricted to so much amount as is attributed to the said taxable supplies including zero rated supply. Illustration- Mr. A purchased goods of Rs and paid Rs. 100 as GST. Out of which, goods worth of Rs. 300 has been used by Mr. A for his use other than business. How will you deal with this? Solution- As per sec-17, if any goods or services are used for the purpose other than business, then ITC will not be available to that extent which is not used for the business. So, ITC will be available only of Rs. 70(100x( )/1000). Note-The same will apply in case of supply of goods or services which is partly taxable and partly Exempted. The value of exempt supplies in above sub-section shall be such as may be prescribed, it shall also include supply on which recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and sale of building (Subject to schedule II Para 5(b)). 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 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. 45

53 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Illustration- ABC Ltd.(NBFC) is engaged in providing the banking services. It furnishes the following information:- 1- ITC availed on inputs - 2,00, ITC availed on input services - 5,00, Output GST liability 10,20,000 Determine the amount of tax liability. Solution- 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 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. Now, ITC on inputs - 2,00,000 ITC on Input Services - 5,00,000 Total = 7,00,000 ITC of 50% is available(i.e. 3,50,000) Output GST Liability = 10,20,000 Less: Eligible ITC Available = (3,50,000) Net Taxable = 6,70,000 Input tax credit shall not be available in case of following:- a) Motor vehicles and other conveyances, except when they are used for:- (i) Making following taxable supplies:- A) Further supply of such vehicles or conveyances. B) Transportation of passengers C) Imparting training or driving, flying, navigating such vehicles or conveyances. (ii) For transportation of goods. b) Supplies 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 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. e) goods or services or both on which tax has been paid under composition scheme. f) goods or services or both received by a non-resident taxable person except on goods imported by him. g) goods or services or both used for personal consumption; h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and i) any tax paid in accordance with the penalty or interest. 46

54 INPUT TAX CREDIT Availability of credit in special circumstances [Section- 18] 1) Subject to such conditions and restrictions as may be prescribed - A person who has applied for registration within 30 days from the date on which he becomes liable to registration and has been granted registration, he shall be entitled to take credit of input tax in respect of inputs held in stock and input contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable. A person who was not eligible to have registration but he voluntarily applies for registration there he shall be entitled to take credit of input tax in respect of inputs held in stock and in semi-finished goods or finished goods held and on capital goods on the day immediately preceding the date of grant of registration. Where any person ceases to be eligible for composition scheme he shall be entitled to take credit of input tax in respect of inputs held in stock, semi finished goods or finished goods and on capital goods on the day immediately preceding the day on which he becomes liable to pay tax under normal method. Where any exempt supply of goods or services or both becomes taxablesupply, such person can avail the credit of input tax in respect of inputs held in stock, semi finished goods, finished goods or 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. 2) A registered person shall not be entitled to take credit of input tax under any of the above conditions 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. S. No. Form No. Description 1. Form GST ITC 1 Declaration for claim of input tax credit under sub-section (1) of section Form GST ITC 2 3. Form GST ITC 3 Declaration for transfer of ITC in case of sale, merger, demerger, amalgamation, lease or transfer of abusiness under sub-section (3) of section 18. Declaration for intimation of ITC reversal on inputs, inputs contained in semifinished and finishedgoods and capital goods in stock under sub-section (4) of section Form GST ITC 4 Details of goods/capital goods sent to job worker and received back. Illustration- Mr. A has furnished the following information regarding ITC available for adjustment:- S. No. Particulars Date of Invoice ITC Paid 1 Goods A 14/09/ Goods B 10/04/ Input Service 22/12/ Goods C 25/11/ Goods D 02/04/ Goods E Invoice is issuing - Determine the total ITC that can be availed during the month of November, Solution- As per rules, ITC cannot be availed after the expiry of one year from the date of issue of tax invoice. Now, computation of ITC that can be availed are as follows:- S. No. Particulars Amount Remark 1 Goods A Not Available After 1 Year 2 Goods B 5000 Within 1 year 3 Input Service Within 1 Year 4 Goods C 7250 Within 1 Year 5 Goods D Within 1 Year 6 Goods E Not available Without invoice, no credit can be claimed 3) Where there is change in constitution of registered person on account of sale, demerger, merger, amalgamation, lease or transfer of the business with specific provisions of transfer of liabilities, the vendor business shall be allowed to transfer the input tax credit remaining unutilized in his electronic credit ledger to such resulting business. 47

55 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 4) Where any registered person who has availed input tax credit opts to pay tax under composition scheme, or where goods or services supplied by him become wholly exempt, there he shall be liable to pay an amount equivalent to the credit of input tax held in stock semi finished goods or finished goods and on capital goods, on the day immediately preceding the date of exercising of such option or the date of exemption as the case may be. 5) Amount of credit and amount payable in above conditions shall be calculated in such manner as may be prescribed. 6) In case capital goods or plant and machinery on which input tax credit has been taken are supplied, registered person shall pay an amount equal to input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as prescribed or tax on transaction value of such capital goods or plant and machinery, whichever is higher. Where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, taxable person may pay tax on transaction value of such goods. Taking ITC in respect of inputs and capital goods sent for Job work [Section 19] Job Work means any treatment or process undertaken by a person on goods belonging to another registered person. 1) Principal shall be allowed input tax credit on inputs sent to a job worker for job work subject to some conditions and restrictions as may be prescribed. 2) As specified in section 16 where a person can take credit of input tax only when he has received goods or services, but in the case of job work the principal is entitled to take credit of inputs even if the inputs are directly sent to job worker for job work without being first brought to his place of business. 3) Where the inputs sent by principal to job worker are not received by the principal after completion of the job work or are not supplied from the place of business of job worker within one year of being sent out, 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 inputs were directly sent to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker. 4) Principal shall be allowed input tax credit on capital goods sent to a job worker for job work subject to some conditions and restrictions as may be prescribed. 5) As specified in section 16 where a person can take credit of capital goods only when he has received goods or services, but in the case of job work the principal is entitled to take credit on capital goods even if the capital goods are directly sent to job worker for job work without being first brought to his place of business. 6) Where the capital goods sent by principal to job worker are not received by the principal after completion of the job work within three year of being sent out, 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. Where capital goods were directly sent to a job worker, the period of three year shall be counted from the date of receipt of capital goods by the job worker. 7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work. Manner of Distribution of credit by Input Service Distributor [Section 20] 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. 48

56 INPUT TAX CREDIT 1) The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed. 2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:- The credit can be distributed to the recipients of credit against a document containing such details as may be prescribed. The amount of the credit distributed shall not exceed the amount of credit available for distribution. The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient. the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period; 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 on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period. Manner of Recovery of credit distributed in excess [Section 21] Where the Input Service Distributor 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 recipients along with interest. Input Tax Credit Rules Rule 36- Documentary requirements and conditions for claiming input tax credit The input tax credit shall be availed by registered person, including the Input Service Distributor, on the basis of any of the following documents:- a) An invoice issued by the supplier of goods or services or both. b) An invoice issued in case where tax is payable by receiver of goods from unregistered person under reverse charge mechanism and in case of e-commerce operator. c) A debit note issued by supplier in accordance with Sec. 34. d) A bill of entry or other similar document prescribed under Customs Act, 1962 for assessment of integrated tax on imports. e) An ISD invoice or ISD credit note issued by an Input Service Distributor in accordance with Invoice Rules. Input tax credit shall be availed by a registered person only if all the applicable particulars of 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. No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been raised on account of any fraud willful misstatement or suppression of facts. Rule 37- Reversal of input tax credit in case of non-payment of consideration 1. A registered person, who has availed input tax credit on any inward supply of goods or services or both, but fails to pay the supplier the value of such supply along with tax payable within one hundred and eighty days, shall furnish the details of such supply and the amount of input tax credit availed of in FORM GSTR-2for the month immediately following 180 days from the date of issue of invoice. Provided that the value of supplies made without consideration as per Schedule I shall be deemed to have been paid for the purposes of this Sub-rule. 2. The amount of such input tax credit as specified above shall be added to output tax liability of such registered person for the month in which details were furnished. 49

57 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 3. The registered person shall be liable to pay interest at the rate notified for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability as mentioned above. 4. The time limit specified in Sec. 16(4) shall not apply to a claim for re-availing of any credit that had been reversed earlier. Illustration - Mr. A purchased inputs of Rs. 10,000 on 01/10/2016 on which input tax of Rs. 1,000 is paid. Mr. A has paid the value of goods along with tax on 01/04/2017. Calculate eligibility of ITC. Solution- As per Rule-2 of Input Tax Credit Rules, A registered person, who has availed input tax credit on any inward supply of goods or services or both, but fails to pay the supplier the value of such supply along with tax payable within one hundred and eighty days, shall reverse the ITC availed on such input. Since payment are not made within 180 days(i.e. 30/03/2017), ITC availed on the goods shall be reversed And shall be added to normal output tax liability for payment. Rule38-Claim of credit by a banking company or a financial institution A banking Company or a Financial Institution or an NBFC that chooses to comply with Sec. 17(4) instead of Sec. 17(2) shall follow the procedure specified below: a. The said company or institution shall not avail the credit of tax paid on inputs and input services that are used for non-business purposes and for those supplies on which credit of input tax is not available u/s 17(5). b. The said company or institution shall avail the credit of tax paid on inputs and input services referred to in Sec 17(4) and not covered under clause (a) above. c. 50% of the remaining input tax credit shall be the input tax credit admissible to the company or the institution and shall be furnished in FORM GSTR-2 d. The amount of credit as referred above shall be credited to the electronic credit ledger of the said company or institution. Illustration- ABC Ltd.(NBFC) is engaged in providing the banking services. It furnishes the following information:- 1- ITC availed on inputs - 2,00, ITC availed on input services - 5,00, Output GST liability 10,20,000 Determine the amount of tax liability. Solution-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 advancesshall have the option to either comply with the provisions 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. Now, ITC on inputs - 2,00,000 ITC on Input Services - 5,00,000 Total = 7,00,000 ITC of 50% is available(i.e. 3,50,000) Output GST Liability = 10,20,000 Less: Eligible ITC Available = (3,50,000) Net Taxable = 6,70,000 Rule39-Procedure for distribution of input tax credit by Input Service Distributor An Input Service Distributor shall distribute input tax credit in following manner:- (a) The input tax credit available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in FORM GSTR-6. 50

58 INPUT TAX CREDIT (b) The Input Service Distributor shall separately distribute the amount in-eligible for taking as input tax credit and the amount eligible as input tax credit. (c) The input tax credit on account of central tax, State tax, Union territory tax and integrated tax shall be distributed separately. (d) The input tax credit that is distributed to one of the recipients, R 1, whether registered or not, from amongst the total of all the recipients to whom input tax credit is attributable, including the recipient(s) who are engaged in making exempt supply, or are otherwise not registered for any reason shall be the amount, C1, which is calculated as follows:- C 1 = (t1 T) C Where C is the amount of credit to be distributed t 1 is the turnover of person R 1 during the relevant period T is the aggregate of turnover of all recipients during the relevant period (e) Input tax credit of Integrated tax shall be distributed as input tax credit of integrated tax to every recipient. (f) The input tax credit on account of central tax and State tax shall, - Location of recipient same as Input Service Distributor, credit will be distributed against Central tax and State tax respectively. - Location of recipient is in different state as that of Input Service Distributor,be distributed as integrated tax which is equal to aggregate of input tax credit of central tax and state tax. (g) The Input Service Distributor shall issue an ISD invoice clearly indicating in such invoice that it is issued only for distribution of input tax credit. (h) The Input Service Distributor shall issue an ISD credit note, for reduction of credit in case the input tax credit already distributed gets reduced for any reason. (i) Any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor by the supplier shall be distributed among the recipient and such credit shall be distributed in the month in which the debit note has been included in the return in FORM GSTR-6. (j) Any amount of input tax credit that is required to be reduced on issuance of credit note shall be apportioned among recipient in the ratio in which input tax credit in original invoice was distributed, and the amount so apportioned shall be :- - Reduced from amount to be distributed in which credit note is included in return in FORM GSTR-6 - Or to be added to the output tax liability of recipient where the amount to be apportioned becomes negative after deducting the amount for which credit note is issued. If the amount of input tax credit distributed by an Input Service Distributor is reduced later on for any other reason for any of the recipients, including that it was distributed to a wrong recipient by the Input Service Distributor, the process prescribed in above clause (j) shall automatically apply for reduction of credit. Input Service Distributor shall issue an ISD invoice along with ISD credit note to the recipient whose credit is required to be reduced as such and that ISD invoice along with ISD credit note shall be included in the return in FORM GSTR-6 for the month in which such credit note and invoice was issued. Illustration- Input tax credit available to an Input Service Distributor for Rs. 1,20,000. It has 3 units namely A, B & C( having turnover of Rs. 60,00,000, 30,00,000 & 30,00,000 respectively. Compute the amount of ITC distribution. Solution- As per Rule-4, ITC shall be distributed in the ratio of turnover. So, ITC to be distributed- In the hands of A = 1,20,000 X60,00,000 = 60,000 1,20,00,000 In the hands of B = 1,20,000 X 30,00,000 = 30,000 1,20,00,000 51

59 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX In the hands of C = 1,20,000 X 30,00,000 = 30,000 1,20,00,000 Rule 40-Manner of claiming credit in special circumstances Input tax credit claimed on the inputs lying in stock or inputs contained in semi-finished or finished goods lying in stock, or the credit claimed on capital goods where composition scheme lapses or exempt goods becomes taxable, shall be calculated keeping in view following conditions:- (a) Input tax credit on capital goods under such condition shall be claimed after reducing the tax paid on such goods by five percentage points per quarter of a year or part thereof from the date of invoice on which the capital goods were received by the taxable person. (b) The registered person shall within 30 days from the date of his becoming eligible to avail input tax credit, make a declaration in FORM GST ITC-01 to the effect that he has become eligible to avail of input tax credit. (c) The declaration made shall clearly specify the details relating to the inputs lying in stock or inputs contained in semi-finished or finished goods lying in stock or in capital goods:- - On the day immediately preceding the date from which he becomes liable to pay tax where he is required to get registered within thirty days of becoming eligible for registration. - On the day immediately preceding the date of grant of registration in case of voluntary registration by person. - on the day immediately preceding the date from which he becomes liable to pay tax under normal method, i.e., when the person is no more eligible to pay tax under composition scheme. - on the day immediately preceding the date from which supplies made by the registered person becomes taxable where supply made by such persons were exempt until now. (d) The declaration furnished in clause above shall be certified by a practicing chartered account or cost accountant if the aggregate value of claim on account of central tax, State tax and integrated tax exceeds two lakh rupees. As per notification no. 10/2017- Central Tax, the amount of credit in case of supply of capital goods or plant and machinery as above shall, be calculated by reducing the input tax on the said goods at the rate of five percentage points for every quarter or part thereof from the date of the issue of the invoice for such goods. Rule 41-Transfer of credit on sale, merger, amalgamation, lease or transfer of a business A registered person shall furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business in FORM GST ITC-02 along with a request to transfer the unutilized input tax credit lying in his electronic credit ledger to the transferee. (In the case of demerger the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.) The transferor shall also submit a copy of a certificate issued by a practicing chartered account or cost accountant certifying such transaction or activity. The transferee shall accept the details so furnished by the transferor and, upon such acceptance, the unutilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger. The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account. Rule 42- Manner of determination of input tax credit in certain cases and reversal thereof The input tax credit in respect of inputs or input services being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely:- 52

60 INPUT TAX CREDIT a) total input tax involved on inputs and input services in a tax period, be denoted as T ; b) the amount of input tax, out of T, attributable to inputs and input services intended to be used exclusively for purposes other than business, be denoted as T1 ; c) the amount of input tax, out of T, attributable to inputs and input services intended to be used exclusively for effecting exempt supplies, be denoted as T2 ; d) the amount of input tax, out of T, in respect of inputs on which credit is not available be denoted as T3 e) the amount of input tax credit credited to the electronic credit ledger of registered person, be denoted as C1 and calculated as:- C1 = T- (T1+T2+T3) f) the amount of input tax credit attributable to inputs and input services used exclusively in or in relation to taxable supplies including zero rated supplies, be denoted as T4 g) T1, T2, T3 and T4 shall be determined and declared by the registered person at the invoice level in FORM GSTR-2; h) Input tax credit left after attribution of input tax credit under clause (g) shall be called common credit, be denoted as C2 and calculated as C2 = C1- T4; i) The amount of input tax credit attributable towards exempt supplies, be denoted as D1 and calculated as: D1= (E F) C2 Where; E is the aggregate value of exempt supplies, that is, all supplies other than taxable and zero rated supplies, during the tax period, and F is the total turnover of the registered person during the tax period: Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of E/F shall calculated by taking values of E and F of the last tax period for which details of such turnover are available, previous to the month during which the said value of E/F is to calculated; (For the above purpose, it has been clarified that the aggregate value of exempt supplies and the total turnover shall exclude 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) j) the amount of credit attributable to non-business purposes if common inputs and input services are used partly for business and partly for non-business purposes, be denoted as D2, and shall be equal to five per cent. of C2; and k) the remainder of the common credit shall be the eligible input tax credit attributed to the purposes of business and for effecting taxable supplies including zero rated supplies and shall be denoted as C3, where C3 = C2 - (D1+D2); l) The amount C3 shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax; m) The amount equal to D1 and D2 shall be added to the output tax liability of the registered person: Provided that if the amount of input tax relating to inputs or input services which have been used partly for purposes other than business and partly for effecting exempt supplies has been identified and segregated at invoice level by the registered person, the same shall be included in T1 and T2 respectively, and the remaining amount of credit on such input or input services shall be included in T4. 1) The input tax credit determined under sub-rule (1) shall be calculated finally for the financial year before the due date for filing the return for the month of September following the end of the financial year to which such credit relates, in the manner prescribed in the said sub-rule and, 53

61 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX a) where the aggregate of the amounts calculated finally in respect of D1 and D2 exceeds the aggregate of the amounts determined under sub-rule (1) in respect of D1 and D2, such excess shall be added to the output tax liability of the registered person and the said person shall be liable to pay interest on the said excess amount at the rate specified for the period starting from first day of April of the succeeding financial year till the date of payment b) where the aggregate of the amounts determined under sub-rule (1) in respect of D1 and D2 exceeds the aggregate of the amounts calculated finally in respect of D1 and D2, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates. Illustration- Mr. A purchased goods of Rs and paid Rs. 100 as GST. Out of which, goods worth of Rs. 300 has been used by Mr. A for his use other than business. How will you deal with this? Solution- As per rule, if any goods or services are used for the purpose other than business, then ITC will not be available to that extent which is not used for the business. So, ITC will be available only of Rs. 70 (100 x ( )/1000). Note-The same will apply in case of supply of goods or services which is partly taxable and partly exempted. Rule 43- Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases The input tax credit in respect of capital goods, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,- the amount of input tax in respect of capital goods used or intended to be used exclusively for nonbusiness purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and shall not be credited to his electronic credit ledger; the amount of input tax in respect of capital goods used or intended to be used exclusively for effecting taxable supplies including zero-rated supplies shall be indicated in FORM GSTR-2 and shall be credited to the electronic credit ledger; the amount of input tax in respect of capital goods not covered under clauses (a) and (b),denoted as A, shall be credited to the electronic credit ledger and the useful life of such goods shall be taken as five years on the condition that where any capital goods earlier covered under clause (a) is subsequently covered under this clause, the value of A shall be arrived at by reducing the input tax at the rate of five percentage points for every quarter or part thereof and the amount A shall be credited to the electronic credit ledger; the aggregate of the amounts of A credited to the electronic credit ledger under clause (c), to be denoted as Tc, shall be the common credit in respect of capital goods for a tax period on a condition that where any capital goods earlier covered under clause (b) is subsequently covered under this clause, the value of A arrived at by reducing the input tax at the rate of five percentage points for every quarter or part thereof shall be added to the aggregate value Tc ; the amount of input tax credit attributable to a tax period on common capital goods during their residual life, be denoted as Tm and calculated as:- Tm= Tc 60 the amount of input tax credit, at the beginning of a tax period, on all common capital goods whose residual life remains during the tax period, be denoted as Tr and shall be the aggregate of Tm for all such capital goods. the amount of common credit attributable towards exempted supplies, be denoted as Te, and calculated as: Te= (E F) x Tr where, E is the aggregate value of exempt supplies, that is, all supplies other than taxable and zero rated supplies, during the tax period, and 54

62 INPUT TAX CREDIT F is the total turnover of the registered person during the tax period: Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of E/F calculated by taking values of E and F of the last tax period for which details of such turnover are available, previous to the month during which the said value of E/F is to calculated; Explanation: For the purposes of this clause, the aggregate value of exempt supplies and total turnover shall exclude 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; the amount Te along with applicable interest shall, during every tax period of the residual life of the concerned capital goods, be added to the output tax liability of the person making such claim of credit. The amount Te shall be computed separately for central tax, State tax, Union territory tax and integrated tax. As per Notification No. 55/2017- CT, after rule 43 where input tax credit has to be determined in case of capital goods, in explanation a para has to be inserted where exempt supply is required to include any services whose place of supply is in Bhutan or Nepal, against which payment is to be received in Indian rupee is also exempt from tax. Rule44- Manner of reversal of credit under special circumstances 1. The amount of input tax credit, relating to inputs lying in stock, inputs contained in semi-finished and finished goods lying in stock, and capital goods lying in stock, for the purposes of stock and capital goods relatable to such exempt supply or held in stock or capital goods immediately preceding the date of cancellation of registration, shall be determined in the following manner namely,- (a) For inputs lying in stock, and inputs contained in semi-finished and finished goods lying in stock, the input tax credit shall be calculated proportionately on the basis of corresponding invoices on which credit had been availed by the registered taxable person on such input. (b) For capital goods lying in stock the input tax credit involved in the remaining residual life in months shall be computed on pro-rata basis, taking the residual life as five years; Illustration Capital goods have been in use for 4 years, 6 month and 15 days. The residual remaining life in months = 5 months ignoring a part of the month Input tax credit taken on such capital goods =C Input tax credit attributable to remaining residual life =C multiplied by 5/60 2. The amount, as prescribed in sub-rule (1) shall be determined separately for input tax credit of central tax, state tax, Union Territory Tax and Integrated tax. 3. Where the tax invoices related to the inputs lying in stock are not available, the registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of goods on the effective date of occurrence of any of the events specified in sub-section (4) of section 18 or, as the case may be, sub-section (5) of section The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such amount relates to cancellation of registration. 5. The details furnished in accordance with sub-rule (3) shall be duly certified by a practicing Chartered Accountant or Cost Accountant. 6. The amount of ITC for the purposes of Sec. 18(6) relating to capital goods shall be determined in the same manner as specified in Sub-rule (1)(b) and the amount shall be determined separately for ITC of central tax, state tax, Union Territory Tax and Integrated tax. Provided that where the amount so determined is more than the tax determined on the transaction value of the capital goods, the amount determined shall form part of the output tax liability and the same shall be furnished in FORM GSTR-1. Rule 45-Conditions and restriction in respect of inputs and capital goods sent to the job Worker 1. The inputs or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where the inputs or capital goods are sent directly to job worker. 55

63 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 2. The challan issued by the principal to the job worker shall contain the details specified in rule Invoice.8: 3. The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST ITC-04 furnished for that period on or before 25 th day of the month succeeding the said quarter. 4. If the inputs or capital goods are not returned to the principal within the time stipulated in section 143, the challan issued under sub-rule (1) shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest. Explanation.- For the purposes of this Chapter,- (1) capital goods shall include plant and machinery as defined in the Explanation to section 17; (2) for determining the value of an exempt supply as referred to in sub-section (3) of section 17:- (3) The value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and (4) the value of security shall be taken as one per cent. of the sale value of such security. INPUT TAX CREDIT ELIGIBILITY Supplies used in furtherance if business. Possession of invoice/equivalent document. Receipt of Supplies. Tax charged actually paid to government. Furnished return u/s 39. CREDIT RESTRICTED TO NON-ELIGIBILITY Payment not made within 180 days from date of issue of invoice, reavailment when payment made. Claimed depreciation of tax component. After due date of furnishing return u/s 39 for the month of September following the end of FY to which invoice/debit note pertains or annual return, whichever is earlier. Inward supplies used for business and other purposes. Inward supplies used for Exempted and Taxable output supplies. Input tax attributable to supplies used for business purposes. Input tax attributable to taxable supplies including zero rated supplies. Ineligible supplies as per Sec. 17(5). No credit after the expiry of 1 year from date of issue of invoice in case of new registration or person ceases to pay tax u/s 10 or exempt supply becomes taxable. 56

64 INPUT TAX CREDIT INPUT TAX CREDIT IN SPECIAL CASES Goods sent for Job Work Input Service Distributor Special Circumstances Principal entitled to take ITC on inputs/capital sent for Job Work Even if inputs/capital goods sent directly to Job Worker DEEMED SUPPLY Inputs not received back within 1 year. Capital Goods not received back within 3 years. Pro-rata distribution of credit. By way of issue of document. On the basis of turnover in a state/ UT. Transfer of Credit In case of change in constitution of business. Reversal of Credit Person opts to pay tax u/s 10. Supply of Capital goods or P/M on which ITC was taken. (As per ICAI Journal) Illustrations on Treatment of ITC: Case-1: Purchase and supply within State: Illustration-1: M/s XYZ purchases input worth Rs. 10,000 and makes sale of Rs Rate of SGST and CGST on supply is 12 % each. Rate of SGST and CGST on purchase is 12 % each. Input tax credit shall be computed as follows: PARTICULARS CGST SGST Tax payable on supply of goods (@ 12%) Less: Tax already paid on purchase of inputs (@ 12%) Net tax payable Illustration- 2: M/s XYZ purchases input worth Rs. 10,000 and makes sale of Rs Rate of SGST and CGST on supply is 5 % each. Rate of SGST and CGST on purchase is 12 % each. Input tax credit shall be computed as follows: PARTICULARS CGST SGST Tax payable on supply of goods (@5 %) Less: Tax already paid on purchase of inputs (@ 12%) Excess Credit to be carried forward in credit ledger. (300) (300) Excess credit due to difference in GST rates is termed as difference due to inverted duty structure. Illustration- 3: Mr. A purchases inputs worth Rs. 20,000 on which SGST and CGST are each. Value added by him on the said inputs amounts to Rs. 10,000. Value of supply is Rs. 15,000 while remaining 57

65 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX goods worth Rs. 15,000 are held in stock. Rate of SGST and CGST on supply is 12%. Input tax credit shall be computed as follows: PARTICULARS CGST SGST Tax payable on supply of goods (@ 12%) Less: Tax already paid on purchase of inputs (@ 12%) Excess Credit to be carried forward in credit ledger One to one relation between input and output is not required. Hence, entire input tax can be claimed even if a part of output is held in stock. Case-2: Where both taxable and exempt supplies are made: Illustration- 4: Mr. A purchases inputs worth Rs. 10,000 on which SGST and CGST are each. He manufactured two products from the inputs- Product X worth Rs. 12,000 [tax rate 12% in CGST and IGST each] and Product- Y worth Rs. 12,000 [exempt in CGST and IGST]. Input tax credit shall be computed as follows: PARTICULARS CGST SGST Tax payable on supply of goods (@ 12%) Less: Tax already paid on purchase of inputs (@ 12%) [pro-rata on the basis of turnover] Net Tax Payable Case- 3: Purchase within state, supply outside the state: Illustration- 5: Mr. Amit purchased inputs worth Rs. 10,000 within State on which SGST and CGST are each. He made inter-state supply worth Rs. 15,000 on which IGST is Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on inter-state supply of goods 24%) NIL NIL 3600 Less: Tax already paid on intra-state purchase of inputs (@ 12%) Net Tax Payable [ ] 1200 *the entire amount of CGST and SGST can be utilized for payment of IGST. Case- 4: Purchase within State, supply within and outside the state: Illustration- 6: Mr. Amit purchased inputs worth Rs. 15,000 within State on which SGST and CGST are each. He made inter-state supply worth Rs. 5,000 on which IGST is He also made supply of Rs. 25,000 within the State on which SGST and CGST is each. Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on inter-state supply of goods NIL NIL 1200 Tax payable on intra-state supply of goods (CGST & each) NIL Less: Tax already paid on intra-state purchase of inputs (@12%) Net Taxable Payable Illustration- 7: Mr. Sumit purchased inputs worth Rs. 15,000 within State on which SGST and CGST are He made inter-state supply worth Rs. 12,000 (Rate of IGST 24%). He also made intra-state supply of Rs. 12,000 (Rate of SGST and CGST 12% each). Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on inter-state supply of goods NIL NIL 2880 Tax payable on intra-state supply of goods (CGST & each) NIL Less: Tax already paid on intra-state purchase of inputs (@12%) * Net Taxable Payable NIL NIL

66 INPUT TAX CREDIT *The excess input credit of SGST and CGST ( =360) shall be utilized for payment of IGST. Case- 5: Purchase within State, supply outside the state and Exports: Illustration- 8: Mr. Sumit purchased inputs worth Rs. 15,000 within State on which SGST and CGST are He made inter-state supply worth Rs. 12,000 (Rate of IGST 24%). He also exported goods worth Rs. 12,000. Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST (within Exports India) Tax payable on inter-state supply of goods NIL NIL 2880 Tax Payable on exports NIL Tax already paid on intra-state purchase of inputs Less: ITC of CGST and SGST claimed in IGST 2880 Excess Credit of SGST 720* *The credit of IGST, CGST and SGST is required to be used in that sequence. Hence credit of CGST= 1800 and credit of SGST= 1080 shall be utilized for IGST. The excess credit of SGST= 720 shall be carried forward. If it cannot be utilized, refund can be obtained. Case- 6: Purchase outside the State, supply within the state: Illustration- 9: Mr. A made inter-state purchase worth Rs. 10,000 (Rate of IGST- 24%). He made intra-state supplies worth Rs. 18,000. (Rate of CGST and SGST- 12% each). Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on intra-state supply of goods (@12%) NIL Tax already paid on inter-state purchase of inputs (@24%) 2400 Less: ITC of IGST claimed in CGST and SGST* Net tax payable 1920 * IGST credit shall be utilized in sequence of IGST, CGST and SGST. Case- 7: Purchase outside the state, sales within and outside the state: Illustration- 10: Mr. A made inter-state purchase worth Rs. 10,000 (Rate of IGST- 24%). He made intra-state supply worth Rs. 5,000 (Rate of CGST and SGST- 12% each). He also made inter-state supplies worth Rs. 25,000 (Rate of IGST- 24%). Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on intra-state supply of goods (@12%) NIL Tax payable on inter-state supply of goods (@24%) NIL NIL 6000 Tax already paid on inter-state purchase of inputs (@24%) 2400* Net tax payable * IGST credit shall be utilized in sequence of IGST, CGST and SGST. Illustration- 11: Mr. A made inter-state purchase worth Rs. 15,000 (Rate of IGST- 24%). He made intra-state supply worth Rs. 15,000 (Rate of CGST and SGST- 12% each). He also made inter-state supplies worth Rs. 5,000 (Rate of IGST- 24%). Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on intra-state supply of goods (@12%) NIL Tax payable on inter-state supply of goods (@24%) NIL NIL 1200 Tax already paid on inter-state purchase of inputs (@24%) 3600 Less: ITC of IGST claimed in IGST, CGST and SGST in that order Net tax payable NIL 1200 NIL 59

67 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Illustration- 12: Mr. A made inter-state purchase worth Rs (Rate of IGST- 24%). He made intra-state supply worth Rs. 5,000 (Rate of CGST and SGST- 12% each). He also made inter-state supplies worth Rs. 5,000 (Rate of IGST- 24%). Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on intra-state supply of goods (@12%) NIL Tax payable on inter-state supply of goods (@24%) NIL NIL 1200 Tax already paid on inter-state purchase of inputs (@24%) 1920 Less: ITC of IGST claimed in IGST, CGST and SGST in that order Net tax payable NIL 480 NIL Case- 8: Purchase outside the state, supply within the state and export: Illustration- 13: Mr. A made inter-state purchase worth Rs. 10,000 (Rate of IGST- 24%). He made intra-state supply worth Rs. 15,000 (Rate of CGST and SGST- 12% each). He also made exports worth Rs. 15,000. Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on intra-state supply of goods (@12%) NIL Tax payable on exports of Rs. 15,000 NIL Tax already paid on inter-state purchase of inputs (@24%) 2400 Less: ITC of IGST claimed in IGST, CGST and SGST in that order Net tax payable NIL 1200 NIL Case- 9: Purchase and Sales both outside the state: Illustration- 14: Mr. A made inter-state purchase worth Rs. 10,000. He made inter-state supplies worth Rs. 15,000. Rate of IGST= 24%. Input tax credit shall be computed as follows: PARTICULARS IGST Tax payable on inter-state supply of goods (@24%) 3600 Less: Tax already paid on inter-state purchase (@24%) 2400 Net tax payable 1200 Case- 10: Purchase and sales both within and outside the State: Illustration- 15: Mr. A made inter-state purchases worth Rs. 10,000. He also purchased goods worth Rs. 2,000 within state. He made inter-state supplies worth Rs. 5,000 and intra-state supplies of Rs. 10,000. Rate of IGST= 24%. Rate of CGST and SGST is 12% each. Input tax credit shall be computed as follows: PARTICULARS CGST SGST IGST Tax payable on intra-state supply of goods (@12%) Tax payable on inter-state supply of goods (@24%) 1200 Tax already paid on intra-state purchase of inputs (@12%) Tax already paid on Inter-state purchase of inputs (@24%) 2400 Less: ITC of IGST claimed in IGST, CGST and SGST in that order Net tax payable NIL 720 NIL *IGST credit shall be utilized in sequence of IGST, CGST and SGST. 60

68 CHAPTER-6 REGISTRATION PERSONS LIABLE FOR REGISTRATION (SEC-22):- Every supplier of taxable supplies if his aggregate turnover* in a F.Y. exceeds Rs. 20 Lakhs. Rs. 10 Lakh in Special Category States. (Special Category States: - Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand). Every person who is registered or holds a license under an existing law. In case of transfer of registered business on account of succession or otherwise, the transferee or successor shall be liable to be registered from the date of such transfer or succession. In case of transfer on account of amalgamation or de-merger of two or more companies pursuant to an order of High Court, Tribunal or otherwise, transferee shall be liable to be registered from the date of issue of C.O.I. giving effect to such order. *Aggregate turnover includes all taxable and exempt supplies, exports and inter-state supplies on same PAN on all India bases. It excludes inward supplies taxable on reverse charge basis, CGST, SGST, UTGST, IGST and cess. PERSONS NOT LIABLE FOR REGISTRATION (SEC-23):- Any person not liable to tax or wholly exempt from tax under this Act or IGST Act need not register, An agriculturist, to the extent of supply of produce out of cultivation of land does not require registration. COMPULSORY REGISTRATION IN CERTAIN CASES (SEC-24):- Persons making inter-state taxable supply Casual taxable persons making taxable supply Persons required to pay tax under reverse charge Persons required to pay tax u/s 9(5) {E-commerce operators} Non-resident taxable persons making taxable supply Persons required to deduct tax u/s 51, whether or not separately registered under this Act. [Separate registration required for TDS] Persons who supply goods or services or both on behalf of other taxable persons whether as an agent or otherwise. Input Service Distributor. [Separate registration is required for ISD purposes] Persons who supply goods or services or both, other than supplies specified u/s 9(5), through such e- commerce operator who is required to collect tax u/s 51. [u/s 9(5) govt. can notify e-commerce operators who will be liable to pay entire GST] Every e-commerce operator. Every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person. [thus, no separate registration required] Such other persons or class of persons as the govt. may notify. As per Notification No. 65/2017- CT, the persons making supplies of services other than supplies made through electronic commerce operator, who is required to collect tax at source, and having aggregate turnover (on all India basis), not exceeding Rs. 20 Lakhs in a financial year (Rs. 10 Lakh in case of special category states) are exempt from obtaining registration. PROCEDURE FOR REGISTRATION [SEC. 25 read with RULE-8, 9&10 of REGISTRATION RULES]: Every person liable to be registered shall apply for registration within 30 days of becoming so liable in every such State or U.T. in which he is so liable. A person may get himself registered voluntarily. Every person shall have a PAN in order to be eligible for registration 61

69 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX A. APPLICATION FOR REGISTRATION [RULE-8]: 1. A person liable for registration shall declare his PAN, mobile no., address, State (or U.T.) in PART A of FORM GST REG A S.E.Z. unit or S.E.Z. developer shall make a separate application for registration as a business vertical distinct from its other units located outside the Special Economic Zone. 3. Every person being an input service distributor shall make a separate application for registration as such ISD. 4. The PAN shall be validated online from the database of CBDT. Mobile no., and id shall be verified through OTP. 5. After successful verification, a temporary reference number shall be generated. 6. Using the reference number generated as above, the applicant shall submit an application in PART B of FORM GST REG-01, duly signed or verified through electronic verification code. 7. On receipt of an application, an acknowledgement shall be issued to the applicant in FORM GST REG List of documents to be uploaded with FORM GST REG-01: Sr. No. Documentation Type of business Photograph Proprietor, Managing Partner, Karta, Managing Director, Managing director, other authorised person. 2 Proof of Partnership deed, registration certificate as applicable. Constitution of Business 3 Proof of Principal Place of Business 4 Bank Account Related Proof 5 Authorization Form (a) Own Premises: electricity bill (b) Rented premises: Rent agreement (c) In any other case: A copy of Consent Letter with any document in support of ownership. (d) In case of an SEZ, necessary documents/ certificates issued by the Govt. Scanned copy of the first page of Bank passbook or scanned copy of a cancelled cheque. For each Authorized Signatory, authorization or copy of Resolution of the Managing Committee or Board of Directors has to be filed. B. VERIFICATION OF APPLICATION AND APPROVAL [RULE- 9]: 1. The proper officer shall examine the above application and accompanying documents. If the same are in order, he will grant registration to the applicant within3 days from submission of application. 2. Where the application is found to be deficient, or where clarification is required, he may issue notice in FORM GST REG-03 within 3 of submission of application. The applicant shall furnish required clarification in FORM GST REG-04 within 7 days from receipt of such notice. 3. Where the P.O. is satisfied with such clarification, he may approve the grant of registration within 7 days of receipt of such clarification. 4. Where no reply is furnished within prescribed period or where P.O. is not satisfied with the reply he shall reject such application in FORM GST REG Deemed Registration: If the proper officer fails to take any action within 3/7 days as the case maybe, the application shall be deemed to have been approved. C. ISSUE OF REGISTRATION CERTIFICATE [RULE- 10]: 1. Where the application has been approved, a certificate of registration in FORM GST REG-06 shall be made available to the applicant and a GSTIN shall be assigned in the following format: STATE PAN ENTITY CHECK STRUCTURE OF GSTIN: 15 digit Alphanumeric Structure State-wise 62

70 REGISTRATION Based on PAN Two Characters for entity code 13 th digit for Business Verticals of entities with same PAN in same state One Checksum character 2. Registration shall be effective from the date when person becomes liable to register where application has been submitted within 30 days. 3. Where application has been submitted after 30 days from the date of his becoming liable to register, the effective date of registration shall be the date of grant of registration. 4. Every certificate made available on the Common Portal shall be digitally signed by the P.O. 5. In case of deemed registration, the applicant shall be communicated the registration number and the certificate of registration shall be made available on the Common Portal within 3 days after expiry of period u/r 2(5). D. PHYSICAL VERIFICATION OF BUSINESS PREMISES [RULE-25]: Where the proper officer is satisfied that the physical verification of the place of business of a registered person is required after grant of registration, he may get such verification done and the verification report along with other documents, including photographs, shall be uploaded in Form GST REG-30 on Common Portal within 15 days following the date of such verification. E. DISPLAY OF REGISTRATION CERTIFICATE AND GSTIN ON THE NAME BOARD [RULE-18]: Every registered person shall display his certificate of registration in a prominent location at his principal place of business and at every additional place of business. Every registered person shall display his GSTIN on the name board exhibited at the entry of his principal place of business and at every additional place of business. Deemed Registration [Sec-26]: The grant of registration or the UIN under SGST Act or the UTGST Act shall be deemed to be a grant of registration or the UIN under this Act subject to the condition that the application for registration or the UIN has not been rejected under this Act within the time specified u/s 25(10). Notwithstanding anything in Sec 25(10), any rejection of application for registration or the UIN under the SGST Act or the UTGST Act shall be deemed to be a rejection of application under this Act. A. SEPARATE REGISTRATION FOR MULTIPLE BUSINESS VERTICALS WITHIN A STATE OR UNION TERRITORY [RULE-11]: 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. Sec 2(18) A person seeking registration under this Act shall be granted a single registration in a State or Union Territory: Provided that a person having multiple business verticals in a State or U.T. may be granted a separate registration for each business vertical, subject to such conditions as may be prescribed. - Sec 25(2) A person who has obtained more than one registration shall be treated as distinct persons for the purpose of this Act. 1. A person requiring separate registration for any of its multiple business verticals shall be granted separate registration in respect of the business verticals subject to the following conditions: a. Such person has more than 1 business vertical b. No business vertical shall eligible for Compounding Scheme if any one of the other verticals is paying tax u/s 9. 63

71 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX c. All separately registered verticals shall pay tax on supplies made to another registered vertical of same person and issue a tax invoice for such supply. Where any business vertical of a registered person that has been granted a separate registration becomes ineligible to pay tax u/s 10, all other business verticals of the said person shall become ineligible to pay tax under that section. 2. A person obtaining separate registration may submit a separate application in FORM GST REG-01 in respect of each such vertical. B. REGISTRATION OF PERSONS REQUIRED TO DEDUCT/COLLECT TAX AT SOURCE [RULE- 12]: 1. A person required to deduct/collect tax at source as per Sec. 51 or 52 shall submit FORM GST REG-07 duly signed or verified through electronic verification code, for registration. 2. The P.O. may grant registration after due verification and issue certificate of registration in FORM GST REG-06 within 3 days from submission of application. 3. Where the person registered as above is no longer required to deduct/collect tax at source, the P.O. may cancel the registration of such person in FORM GST REG-08. C. CASUAL TAXABLE PERSON AND NON-RESIDENT TAXABLE 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 Sec 2(20) 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. - Sec 2(77) Casual taxable person and non-resident taxable person making taxable supply need to be compulsorily registered as per Sec 24. As per proviso to Sec 25(1), a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to commencement of business. I. SECTION 27: SPECIAL PROVISIONS FOR CTP AND NRTP:- - The registration certificate issued to the said person shall be valid for the period specified in application or 90 days from the effective date of registration, whichever is earlier. Such period can be extended. - Such a person is required to make an advance deposit of tax equivalent to the estimated tax liability at the time of submission of application. Additional amount shall be deposited for extension of time where such extension is sought. - The amount so deposited shall be credited to the e-cash ledger of such person. II. GRANT OF REGISTRATION TO NRTP [RULE- 13]: - A non-resident taxable person shall submit an application along with a valid passport, duly signed or verified through electronic verification code in FORM GST REG-09, at least 5 days prior to commencement of business. - Such person shall be given a temporary reference number for making advance payment of tax. - Such person shall make advance deposit of tax equivalent to estimated tax liability for the period of registration. - The application for registration of such person shall be signed by his authorized signatory being a person resident in India having a valid PAN. - List of documents to be uploaded as evidence are as follows: 1 Proof of Principal Place of Business (a) Own Premises- Electricity Bill (b) Rented Premises- Rent Agreement (c) In any other case- A copy of the Consent Letter with any document in support of ownership of the premises. 2 Proof of Non-Resident Taxable Scanned copy of passport with VISA details. In case of a 64

72 REGISTRATION Person business entity established outside India, its tax identification number or unique number provided by the Govt. of that country. 3. Bank Account Related Proof Scanned Copy of the first page of Bank Passbook. 4. Authorization Form For each Authorised Signatory mentioned in the application form, Authorization or copy of Resolution of the Managing Committee or Board of Directors shall be filed. - III. GRANT OF REGISTRATION TO A PERSON SUPPLYING OIDAR SERVICES [RULE-14]: - Any person supplying online information and data base access or retrieval services from a place outside India to a non-taxable online recipient shall submit an application for registration, duly signed or verified through electronic verification code, in FORM GST REG Such person is required to provide the Uniform Resource Locators (URLs) of the website through which taxable services are provided in the above application form for registration. - The applicant shall be granted registration in FORM GST REG-06, subject to such conditions and restrictions as may be notified. IV. EXTENSION IN PERIOD OF REGISTRATION OF OPERATION BY CTP AND NRTP [RULE- 15]: - Where a registered casual/ non-resident taxable person intends to extend the period of registration indicated in his application of registration, an application in FORM GST REG-11 shall be furnished by such person before the end of validity of registration granted to him. - The above application shall be acknowledged only on payment of the amount u/s 27(2). D. SUO MOTO REGISTRATION [RULE-16]: - Where the P.O. finds that a person liable to be registered has failed to apply for such registration, P.O. may grant temporary registration to such person and issue an order in FORM GST REG The registration granted as above shall be effective from the date of order granting registration. - The person to whom such temporary registration has been granted shall submit an application for registration as provided in Rule- 1 or Rule- 5 within 90 days of such registration. If the said person files an appeal against such grant of temporary registration, application for registration shall be submitted within 30 days from the date of order upholding the liability to registration by the Appellate Authority. - The provisions of rule-2 ad rule-3 shall, mutatis mutandis, apply. - The GSTIN assigned shall be effective from the date of order granting registration as per (1) above. ASSIGNMENT OF UNIQUE IDENTITY NUMBER (UIN) - Sec 25(9) read with RULE- 17 of REGISTRATION RULES: Any specialized agency of the UNO or any Multilateral Financial Institution and Organisation notified under the U.N. (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries and any other person as govt. may notify, shall be granted a UIN. Sec 25(9) 1. A person required to be granted a UIN may submit an application in FORM GST REG- 13, duly signed or verified through electronic verification code. 2. The P.O. shall assign a UIN to the said person and issue a certificate in FORM GST REG-06 within 3 days from the date of submission of application. AMENDMENT OF REGISTRATION- SEC 28 read with RULE-19 of REGISTRATION RULES Where there is any change in any particulars furnished in application form, as the case maybe, either at the time of obtaining registration or as amended from time to time, the registered person shall, within 15 days of such change, submit an application, duly signed or verified through electronic verification code, electronically in Form GST REG-14, along with documents relating to such change. (a) Where change relates toi. Legal name of business, 65

73 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX ii. Address of principal or additional place of business, iii. Addition, deletion or retirement of partners or directors, Karta, managing committee, Board of trustees, CEO or equivalent, responsible for day to day affairs of the business- Which does not warrant cancellation of registration u/s 29, the proper officer shall approve the amendment within 15 days from the date of receipt of application and issue an order in Form GST REG-15. Such amendment shall take effect from the date of occurrence of the event warranting amendment. (b) The change relating to clause (i) or (iii) in any State or U.T. shall be applicable for all registrations of the registered person obtained under these rules on the same PAN. (c) Where the change relates to any particulars other than those specified in clause (a), the certificate shall stand amended upon submission of Form GST REG-14 on the Common Portal. Any change in mobile number or address shall be carried out only after online verification through OTP. (d) Where a change in the constitution of any business results in change of the PAN, the said person shall apply for fresh registration in Form GST REG-01. Where documents are incomplete or incorrect, proper officer may serve a notice in Form GST REG-03 within 15 days from the date receipt of application, requiring him to show cause within 7 days as to why his application should not be rejected. The taxable person shall furnish a reply to the notice in Form GST REG-04 within 7 days from the date of service of such notice. Where the reply furnished is found to be not satisfactory or where no reply is furnished within 7 days, the proper officer shall reject the application and pass an order in Form GST REG- 05. If the proper officer fails to take any action within 15 days from submission of application or 7 days from receipt of reply to show cause notice, the certificate of registration shall stand amended to the extent applied for and the amended certificate shall be made available to the registered person on the Common Portal. CANCELLATION OF REGISTRATION [SECTION- 29] read with RULE-20, 21& RULE- 22: A. WHEN REGISTRATION CAN GET CANCELLED [SEC- 29(1) & (2) with Rule- 21]: a. The business has been discontinued b. The business has been transferred fully, amalgamated, demerged or otherwise disposed (here the transferee has to get registered) c. There is any change in constitution of business d. The taxable person is no longer liable to be registered e. The registered taxable person has contravened provisions of GST f. A person paying tax under composition levy has not furnished returns for three consecutive quarters g. Any taxable person who has not furnished returns for a continuous period of six months h. Any person who has taken voluntary registration and has not commenced business within six months from the date of registration. i. Any registration has been obtained by fraud the proper officer may cancel the registration with retrospective effect. j. Does not conduct any business from the declared place of business. k. Issues invoice or bill without supply of goods or services in violation of the provisions of this Act, or the rules made thereunder. B. LIABILITY TO PAY TAX AND OTHER DUES: a. All dues and tax liabilities prior to cancellation will still have to be paid. Such dues will not get waived off on cancellation. b. On cancellation, the taxable person will have to pay tax either by i. Reversing the input tax credit in raw materials in stock and inputs in semi-finished/finished goods held in stock on the day immediately preceding the date of cancellation, OR 66

74 REGISTRATION ii. Paying the output tax payable on such goods, -whichever is higher c. For capital goods, the taxable person shall payi. he input tax credit taken on the said capital goods reduced by a certain percentage (will be notified later), OR ii. The tax on the transaction values of such capital goods whichever is higher. C. APPLICATION FOR CANCELLATION OF REGISTRATION [RULE- 20]: a. A registered person seeking cancellation of his registration shall submit an application in FORM GST REG-16 within 30 days of occurrence of event warranting cancellation. He shall mention in such form, the reason for cancellation of registration. b. Such form shall include details of inputs (whether held in stock or in semi-finished, or finished goods) and of capital goods held in stock on the date from which cancellation is sought. c. In case of voluntary registration, no application for cancellation shall be considered before expiry of 1 year from the effective date of registration. D. PROCEDURE OF CANCELLATION OF REGISTRATION [RULE- 22]: a. Where the registration of a person is liable to be cancelled u/s 29, the P.O. shall issue a show cause notice to such person in FORM GST REG-17, requiring him to show cause within 7 days of service of such notice. b. The reply to such notice shall be furnished in FORM GST REG- 18 within the prescribed period. c. Where a person, having submitted an application for cancellation, is no longer liable to be registered or his registration is liable to be cancelled, the P.O. shall issue FORM GST REG-19within 30 days, to cancel the registration w.e.f. date determined by him and notify the taxable person, directing to pay arrears of any tax, interest or penalty including the amount payable u/s 29(5). d. Where reply to the show cause notice is found to be satisfactory, the P.O. shall drop the proceedings and pass an order in FORM GST REG- 20. e. The provisions of sub-rule (3) shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application had been submitted by the proprietor himself. REVOCATION OF CANCELLATION OF REGISTRATION [SEC- 30 read with RULE-23]: 1. This is applicable only when the tax officer has cancelled the registration of a taxable person on his own motion. It does not apply to cases where there has been an application for cancellation. Such taxable person can apply to the officer for revocation of cancellation within thirty days from the date of the cancellation order. 2. The officer may accept the application to allow the person to continue with his registration. If he rejects it, then he must present a show cause notice and give the taxable person a reasonable opportunity of being heard. 3. The revocation of cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a revocation of cancellation of registration under this Act. REVOCATION OF CANCELLATION OF REGSTRATION [RULE-23]: 1. A registered person, whose registration is cancelled by the proper officer on his own motion, may submit an application for revocation of cancellation of registration, in FORM GST REG-21, to such proper officer, within 30 days from the date of service of the order of cancellation of registration: Provided that no application for revocation shall be filed if the registration has been cancelled for the failure of the taxable person to furnish returns, unless such returns are filed and any amount due as tax, in terms of such returns has been paid along with any amount payable towards interest, penalties and late fee payable in respect of the said returns. 2. (a) Where the proper officer is satisfied that there are sufficient grounds for revocation of cancellation of registration, he shall revoke the cancellation of registration by an order in FORM GST REG-22 within 30 days from the date of receipt of the application and communicate the same to the applicant 67

75 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX (b) The proper officer may under circumstances other than those specified in clause (a), by an order in FORM GST REG-05, reject the application for revocation of cancellation of registration and communicate the same to the applicant. 3. The proper officer shall, before passing the order referred to in clause (b) of sub-rule (2), issue a notice in FORM GST REG 23 requiring the applicant to show cause as to why the application submitted for revocation under sub-rule (1) should not be rejected and the applicant shall furnish the reply within 7 days from the date of the service of notice in FORM GST REG Upon receipt of the information or clarification in FORM GST REG-24, the proper officer may proceed to dispose of the application in the manner specified in sub-rule (2) within 30 days from the date of receipt of such information or clarification from the applicant. MIGRATION OF PERSONS REGISTERED UNDER EXISTING LAW [RULE- 24]: 1. (a) Every person, other than a person deducting tax at source or an Input Service Distributor, registered under an existing law and having a Permanent Account Number issued under the Income-tax Act, 1961 (Act 43 of 1961) shall enroll on the Common Portal by validating his address and mobile number. (b) Upon enrolment under clause (a), the said person shall be granted registration on a provisional basis and a certificate of registration in FORM GST REG-25, incorporating the GSTIN therein, shall be made available to him on the Common Portal: Provided that a taxable person who has been granted multiple registrations under the existing law on the basis of a single PAN shall be granted only one provisional registration under the Act: Provided further that a person having centralized registration under Chapter V of the Finance Act, 1994 shall be granted only one provisional registration in the State or Union territory in which he is registered under the existing law. (CGST Rules only) 2. (a) Every person who has been granted a provisional registration under sub-rule (1) shall submit an application electronically in FORM GST REG 26, duly signed or verified through electronic verification code, along with the information and documents specified in the said application, on the Common Portal. (b) The information asked for in clause (a) shall be furnished within a period of three months or within such further period as may be extended by in this behalf. (c) If the information and the particulars furnished in the application are found, by the proper officer, to be correct and complete, a certificate of registration in FORM GST REG-06 shall be made available to the registered person electronically on the Common Portal. 3. Where the particulars or information specified in sub-rule (2) have either not been furnished or not found to be correct or complete, the proper officer shall cancel the provisional registration granted under sub-rule (1) and issue an order in FORM GST REG-28: Provided that no provisional registration shall be cancelled as aforesaid without serving a notice to show cause in FORM GST REG-27and without affording the person concerned a reasonable opportunity of being heard: Provided further that the show cause notice issued in FORM GST REG-27can be vacated by issuing an order in FORM GST REG-20, if it is found, after affording the person an opportunity of being heard, that no such cause exists for which the notice was issued. 4. Every person registered under any of the existing laws, who is not liable to be registered under the Act may, within thirty days from the appointed day, at his option, submit an application electronically in FORM GST REG-29 at the Common Portal for cancellation of the registration granted to him and the proper officer shall, after conducting such enquiry as deemed fit, cancel the said registration. 5. Documents required to be uploaded as evidence are as follows- Sr. No. Documentation Type of business 1 Photograph Proprietor, Managing Partner, Karta, Managing Director, Managing director, other authorised person. 2 Proof of Constitution of Business Partnership deed, registration certificate as applicable. 3 Proof of Principal Place of Business (a) Own Premises: electricity bill (b) Rented premises: Rent agreement (c) In any other case: A copy of Consent Letter with 68

76 REGISTRATION any document in support of ownership. (d) In case of an SEZ, necessary documents/ certificates issued by the Govt. 4 Bank Account Related Proof Scanned copy of the first page of Bank passbook or scanned copy of a cancelled cheque. 5 Authorization Form For each Authorized Signatory, authorization or copy of Resolution of the Managing Committee or Board of Directors has to be filed. METHOD OF AUTHENTICATION [RULE-26]: 1) All applications, including reply, if any, to the notices, returns, appeals or any other document required to be submitted under these rules shall be so submitted electronically at the Common Portal with digital signature certificate or through e-signature as specified under the Information Technology Act, 2000 (21 of 2000) or through any other mode of signature notified by the Board in this behalf. 2) Each document including the return furnished online shall be signed or verified through EVC S. No. Type of Person Signatory a) Individual Individual Himself or a person authorised by him b) H.U.F. Karta, or any member authorised by Karta c) Company C.E.O. or authorised signatory d) Govt. agency, or Local Authority Officer Authorised in this behalf e) Partnership Firm Any partner (not minor) or authorised signatory f) A.O.P. Any member or authorised signatory g) Trust Any Trustee or authorised signatory h) Any other person Person competent to act on his behalf. Or by a person authorised in accordance with the provisions of section 48. 3) All notices, certificates and orders under these Rules shall be issued electronically by the proper officer or any other officer authorised to issue any notice or order, through digital signature certificate specified under the Information Technology Act, 2000 (21 of 2000). FORMS RELATING TO REGISTRATION S. No. Form Name Description 1 GST REG- 01 Application for Registration 2 GST REG- 02 Acknowledgement of application 3 GST REG- 03 Notice seeking additional information/ clarification relating to application for registration 4 GST REG- 04 Filing clarification / additional information for Registration 5 GST REG- 05 Order of rejection of registration application 6 GST REG- 06 Registration Certificate 7 GST REG- 07 Application for registration as a Tax Deductor or Tax Collector at Source 8 GST REG- 08 Order for cancellation of Application in Form GST REG GST REG- 09 Application for registration of a NRTP 10 GST REG- 10 Application for registration of person supplying OIDAR service from outside India 11 GST REG- 11 Application for extension of period of registration by CTP or NRTP 12 GST REG- 12 Suomoto registration by proper officer 13 GST REG- 13 Application for UIN 14 GST REG- 14 Application for amendment in particulars of registration 15 GST REG- 15 Order of amendment of existing registration 16 GST REG- 16 Application for cancellation of registration 17 GST REG- 17 Show cause notice for cancellation of registration 18 GST REG- 18 Reply to SCN for cancellation of registration 19 GST REG- 19 Order for cancellation of registration 20 GST REG- 20 Dropping of proceedings if reply in Form GST REG- 18 is satisfactory 21 GST REG- 21 Application for revocation of cancellation of registration 69

77 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 22 GST REG- 22 Order of approval of application in Form GST REG GST REG- 23 SCN why application for revocation should not be rejected 24 GST REG- 24 Reply to SCN issued in respect of revocation 25 GST REG- 25 Provisional registration certificate to existing taxpayer 26 GST REG- 26 Application for enrolment of existing taxpayer 27 GST REG- 27 SCN why provisional registration should not be cancelled 28 GST REG- 28 Cancellation of provisional registration. 29 GST REG- 29 Application for cancellation of provisional registration where the person is not liable to be registered under this Act. 30 GST REG- 30 Form for field visit report. Performa of Registration Certificate (Form GST REG- 06) 70

78 REGISTRATION 71

79 CHAPTER-7 TAX INVOICE, CREDIT AND DEBIT NOTES TAX INVOICE [SEC- 31]: Every registered person is required to issue a tax invoice for all taxable supplies affected by him. 1. TIME LIMIT FOR ISSUING TAX INVOICE [SEC 31 ALONG WITH RULE- 47 OF INVOICE RULES]: a) Every registered person who supplies taxable goods shall issue a tax invoice: Before or at the time of: - Removal of goods, if supply involves movement of goods - Delivery/ making available to the recipient, if supply doesn t involve movement of goods - Issuance of successive statements of accounts or receipt of successive payments, in case of continuous supply of goods. - If supply is on approval basis, when recipient approves or six months from the date of removal, whichever is earlier. b) Every registered person who supplies taxable services shall issue a tax invoice: - Within 30 days from the date of supply, in general - Within 30 days from the due date of payment, in case of continuous supply of services where due date is ascertainable. - On or before the date of payment, in case of continuous supply of services where due date is not ascertainable. - At the time of cessation, in case of Continuous supply of services where contract ceases. - In case of a bank (or FI or NBFC), 45 days from the supply of service. - In case of a bank (or FI or NBFC) make taxable supply of services to distinct persons (specified in section 25), may issue the invoice before or at the time such supplier records the same in his books of account or before the expiry of the quarter during which the supply was made. 2. MANNER OF ISSUING INVOICE [RULE- 48]: a) In case of supply of goods, Tax Invoice shall be prepared in TRIPLICATE: - Original for recipient - Duplicate for transporter - Triplicate for supplier b) In case of supply of services, Tax Invoice shall be prepared in DUPLICATE: - Original for recipient - Duplicate for supplier c) The serial number of invoices issued during a tax period shall be furnished electronically in FORM GSTR CONTENTS OF TAX INVOICE [RULE- 46 OF INVOICE RULE]: a) Name, address and GSTIN of supplier b) A consecutive serial number, unique for a financial year c) Date of its issue d) Name, address and GSTIN or UIN, if registered, of the recipient e) Name and address of the recipient, if such recipient is un-registered and where the value of taxable supply is Rs. 50,000 or more f) HSN code/ Account code g) Description of goods or services h) Quantity in case of goods and units or Unique Quantity Code thereof i) Total value of supply of goods or services or both j) Taxable value of supply of goods or services or both taking into account discount or abatement, if any k) Rate of tax, l) Amount of tax charged in respect of taxable goods or services [CGST, SGST, IGST, UTGST or Cess] 72

80 TAX INVOICE, CREDIT AND DEBIT NOTES m) Place of supply along with the name of State, in case of a supply in the course of inter-state trade or commerce, n) Address of delivery where it is different from the place of supply o) Whether the tax is payable on reverse charge basis, and p) Signature or digital signature of the supplier or his authorized representative. 4. IN CASE OF EXPORTS [PROVISO TO RULE- 46]: a) An endorsement SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST or SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST as the case may be. b) In lieu of clause (e) above, name and address of the recipient, address of delivery, name of the country of destination and number and date of application for removal of goods for export. As per Notification No. 45/2017- CT, the following rule has been inserted- Rule 46A- Invoice-cum-bill of supply. - Notwithstanding anything contained in rule 46 or rule 49 or rule 54, where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single invoice-cum-bill of supply may be issued for all such supplies. BILL OF SUPPLY [SEC 31(3) (c) read with RULE-49 of INVOICE RULES]: A supplier supplying exempted goods or services or a supplier who has opted for composition levy scheme has to issue a bill of supply instead of a tax invoice. A bill of supply is not eligible for claiming input tax credit. Contents of bill of supply: a) Name, address and GSTIN of supplier b) A consecutive serial number, unique for a financial year c) Date of its issue d) Name, address and GSTIN/UIN, if registered, of the recipient e) HSN code/ Accounting Code f) Description of goods and/ or services g) Value of supply along with discounts and abatements h) Signature or digital signature of the supplier or his authorized representative. Provided that any tax invoice or any other similar document issued under any other Act for the time being in force in respect of any non-taxable supply shall be treated as a bill of supply for the purposes of the Act. RECIEPT VOUCHER [SEC. 31(3)(d) read with RULE- 50 of INVOICE RULE]: 1) On receipt of any advance with respect to any supply, a receipt voucher shall be issued evidencing receipt of such payment 2) Where a receipt voucher has been issued a above, but subsequently no supply is made and no tax invoice is issued, a refund voucher against such payment may be issued to the person who made such payment 3) Contents of Receipt Voucher: a. Name, address and GSTIN of supplier b. A consecutive serial number, unique for a financial year c. Date of its issue d. Name, address and GSTIN or UIN, of recipient if registered e. Description of goods or services f. Amount of advance taken g. Rate of tax (Central, state, integrated, U.T. tax, or cess) h. Amount of tax charged in respect of taxable goods or services i. Place of supply along with the name of state and its code, in case of a supply in the course of interstate supply j. Whether tax is payable on reverse charge basis k. Signature or digital signature of the supplier or his authorized representative Provided that where at the time of receipt of advancei. The rate of tax is not determinable, the tax shall be paid at the rate of 18%, 73

81 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX ii. The nature of supply is not determinable; the same shall be treated as inter-state supply. REFUND VOUCHER [SEC. 31(3)(e) read with RULE- 51 of INVOICE RULE: 1) 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, the said registered person may issue to the person who had made the payment, a refund voucher against such payment. 2) A refund voucher shall contain the following: a. Name, address and GSTIN of supplier b. A consecutive serial number, unique for a financial year c. Date of its issue d. Name, address and GSTIN or UIN, of recipient if registered e. Description of goods or services f. Number and date of receipt voucher issued in accordance with provisions of sub-rule 5. g. Amount of refund made h. Rate of tax (Central, state, integrated, U.T. tax, or cess) i. Amount of tax charged in respect of taxable goods or services j. Whether tax is payable on reverse charge basis k. Signature or digital signature of the supplier or his authorized representative PAYMENT VOUCHER [SEC. 31(3)(g)] read with RULE- 52 of INVOICE RULE: 1) A person liable to pay tax u/s 9(3) or 9(4) 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. Sec. 31(3)(f) 2) A registered person who is liable to pay tax u/s 9(3) or 9(4) shall issue a payment voucher at the time of making payment to the supplier. 3) A payment voucher shall contain the following particulars: a. Name, address and GSTIN of supplier b. A consecutive serial number, unique for a financial year c. Date of its issue d. Name, address and GSTIN or UIN, of recipient if registered e. Description of goods or services f. Amount paid g. Rate of tax (Central, state, integrated, U.T. tax, or cess) h. Amount of tax charged in respect of taxable goods or services i. Place of supply along with the name of State and its code, in case of supply in the course of inter-state trade or commerce, and j. Signature or digital signature of the supplier or his authorized representative REVISED TAX INVOICE AND CREDIT OR DEBIT NOTES [Section 31(3)(a) and Section 34 read with RULE- 53 of INVOICE RULES]: Revised Invoice: A registered person may, within one month from the date of issuance of Certificate of Registration, issue a revised invoice against the invoice already issued during the period beginning from the effective date of registration till the date of issuance of certificate of registration to him. Sec 31(3) (a) The registered person may issue a consolidated revised tax invoice in respect of all taxable supplies made to a recipient who is not registered under the Act during such period. In case of inter-state supplies, where the value of a supply does not exceed Rs. 2.5 lakhs, a consolidated revised invoice may be issued separately in respect of all recipients located in a State, who are not registered under the Act. 74

82 TAX INVOICE, CREDIT AND DEBIT NOTES Credit and Debit Notes (Sec. 34): 1) Credit note is to be issued by supplier in the following cases: a. Taxable value in the original tax invoice exceeds actual taxable value. b. Tax charged in the original tax invoice exceeds actual tax to be paid. c. Recipient refunds the goods to the supplier d. Services are found to be deficient. 2) Details of such credit note shall be declared in the return for the month during which such credit note has been issued but not later than September following the end of the FY in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. P.T. no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person. 3) Debit note is to be issued by the supplier in the following cases: a. Taxable value in the original tax invoice is less than the actual taxable value. b. Tax charged in the original tax invoice is less than the actual tax to be paid. 4) Details of such debit note shall be declared in the return for the month during which such debit note has been issued and the tax liability adjusted. 5) A revised tax invoice u/s 31 and a credit or debit note u/s 34 shall contain following particulars: a. The word Revised Invoice wherever applicable, indicated prominently b. Name, address and GSTIN of the supplier c. Nature of the document d. A consecutive serial number, unique for a financial year e. Date of issue of the document f. Name, address and GSTIN or UIN, if registered, of the recipient g. Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered h. Serial number and date of the corresponding tax invoice or, as the case maybe, bill of supply i. Value of taxable supply of goods or services, rate of tax and the amount of the tax credited or debited to the recipient j. Signature of supplier. 6) Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of Sec. 74 or 129 or 130 shall prominently contain the words INPUT TAX CREDIT NOT ADMISSIBLE TAX INVOICE IN SPECIAL CASES [RULE- 54]: A. AN ISD INVOICE OR ISD CREDIT NOTE ISSUED BY AN INPUT SERVICE DISTRIBUTOR SHALL CONTAIN THE FOLLOWING: a. Name, address and GSTIN of the ISD b. A consecutive serial number, unique for a FY c. Date of its issue d. Name, address and GSTIN of the recipient to whom the credit is distributed e. Amount of the credit distributed f. Signature of ISD B. TAX INVOICE ISSUED BY A BANKING CO./ NBFC/ FINANCIAL INSTITUTION: a. The said supplier shall issue a tax invoice or any other document in lieu thereof, then following information is not essential: i. Invoice serial no. ii. Address of the recipient Note- As per Notification No. 55/2017- CT, in rule 54 sub rule (2) the NBFC or financial institution may issue tax invoice, thereby govt. making issuance of invoice by such institutions optional and not mandatory. 75

83 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX C. IN CASE OF GOODS TRANSPORT AGENCY INVOICE SHALL CONTAIN THE FOLLOWING: a. Gross weight of the consignment b. Name of the consignor and the consignee c. Registration no. of goods carriage, used for transportation d. Details of place of origin and destination of goods transported e. GSTIN of person liable for paying tax When tax invoice is issued by a supplier of passenger transport service address of the recipient is not essential. TRANSPORTATION OF GOODS WITHOUT ISSUE OF INVOICE [RULE- 55] 1. For the purposes of a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known, b) transportation of goods for job work c) transportation of goods for reasons other than by way of supply, d) such other supplies as may be notified by the Board, The consigner may issue a delivery challan, serially numbered, in lieu of invoice at the time of removal of goods for transportation, containing following details: (a) Date and number of the delivery challan, (b) Name, address and GSTIN of the consigner, if registered, (c) Name, address and GSTIN or UIN of the consignee, if registered, (d) HSN code and description of goods, (e) Quantity (provisional, where the exact quantity being supplied is not known), (f) Taxable value, (g) Tax rate and tax amount central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee, (h) Place of supply, in case of inter-state movement, and (i) Signature. 2. The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner: a) the original copy being marked as ORIGINAL FOR CONSIGNEE b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER 3. Where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared in FORM. 4. Where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods. 5. Where the goods are being transported in a semi knocked down or completely knocked down condition, (a) The supplier shall issue the complete invoice before dispatch of the first consignment; (b) The supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice; (c) Each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified copy of the invoice; and (d) The original copy of the invoice shall be sent along with the last consignment. A registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed. Sec 31(3)(b) 76

84 Performa of Tax Invoice 77

85 CHAPTER-8 MAINTENANCE OF ACCOUNTS AND RECORDS Currently, companies pay VAT on a monthly/quarterly basis depending on the state and their turnover. CST is paid when crossing state borders and it is not allowed as input tax credit under the current tax laws. Excise duty is also levied on the capital goods. GST would subsume all the above-mentioned taxes. Tax payment would be due at the time of supply of goods under GST. Under GST, the existing system of levy of tax on manufacture, provision of taxable services, and sale of goods will be replaced by the concept of SUPPLY. Therefore, the taxable event under GST is the Supply of Goods or Services. Further under Supply there are three important concepts: Place of supply of Goods/Services Time of Supply of Goods/Services- date of issue of invoice or the date on which supplier receives the payment, whichever is earlier. If the supplier receives an amount up to Rs in excess of the invoice amount, the time of supply for the extra amount shall be the date of issue of invoice (at the option of the supplier) Value of Supply of Goods/Service- MATTERS TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION [IN TERMS OF SCHEDULE I] 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 10, when made in the course or furtherance of business. 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. ACCOUNTS AND RECORDS (SECTION 35): Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of (a) Production or manufacture of goods; (b) Inward and outward supply of goods or services or both; (c) Stock of goods; (d) Input tax credit availed; (e) Output tax payable and paid; and (f) Such other particulars as may be prescribed: Provided that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business: Provided further that the registered person may keep and maintain such accounts and other particulars in electronic form in such manner as may be prescribed. 78

86 MAINTENANCE OF ACCOUNTS AND RECORDS Every registered person required to keep and maintain books of account or other records in accordance with the provisions of sub-section (1) of section 35(written above) shall retain them until the expiry of seventytwo months from the due date of furnishing of annual return for the year pertaining to such accounts and records. Electronic cash ledger (FORM GST PMT-05), electronic input tax credit ledger (FORM GST PMT-02), and tax liability ledger (FORM GST PMT-01) have to be maintained by each person registered under GST. Electronic cash ledgers will record data of tax, interest, penalty, fees paid and payment under CGST, SGST, and IGST. Details of the input tax credit available under all heads would be available in the Electronic Input Tax credit ledger. Tax liability ledger is to be also maintained electronically for any outstanding liability arising out of the regular return, notices, and penalties. Credit available under the electronic input tax credit ledger can be utilized in the following ways-: 1. Fulfillment of liability arising due to a regular return under GST. 2. Credit reversed due to a mismatch in invoice or amount of credit. 3. Payment of any liability which arose due to receipt of demand notices. Input tax credit not claimed for up to one year from the date when tax invoice was raised shall be considered as expired. Every registered person whose turnover during a financial year exceeds the prescribed limit (i.e. 1 crore) shall get his accounts audited by a chartered accountant or a cost accountant Accounts and other records and shall submit a copy of the audited annual accounts, the reconciliation statement. A registered person supplying taxable goods shall, before or at the time of, (a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or (b) delivery of goods or making available thereof to the recipient, in any other case, Issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed. A registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed. INVOICING The recommendation of the Committee on IGST and GST on Imports with respect to the details about HSN code for goods and Accounting code for services to be captured in an invoice have been accepted with certain modifications. The details proposed by this Committee are as follows:- a) HSN code (4-digit) for Goods and Accounting Codes for Services will be mandatory initially for all taxpayers with turnover in the preceding financial year above Rs. 5 Crore (For the first year of operations of GST, selfdeclaration of turnover of previous financial year will be taken as the basis as all India turnover data will not be available in the first year. From the 2nd year onwards, turnover of previous financial year under GST will be used for satisfying this condition). b) For taxpayers with turnover between Rs 1.5 Crores and Rs 5 Crores in the preceding financial year, HSN codes may be specified only at 2-digit chapter level as an optional exercise to start with. From second year of GST operations, mentioning 2-digit chapter level HSN Code will be mandatory for all taxpayers with turnover in previous financial year between Rs. 1.5 Crores and Rs. 5.0 Crores. c) Any taxpayer, irrespective of his turnover, may use HSN code at 6- digit or 8-digit level if he so desires. d) To start with, compounding dealers may not be required to specify HSN at 2-digit level also. e) Prescribed Accounting code will be mandatory for those services for which Place of Supply Rules are dependent on nature of services to apply the destination principle, irrespective of turnover. f) HSN Codes at 8-digit level and Accounting Codes for services will be mandatory in case of exports and imports. 79

87 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX E-ledger or electronic ledger is statement of cash and input tax credit in respect of a registered taxpayer. Once a taxpayer makes GST tax payment by cash, cheque, internet banking, RTGS or NEFT the amount is credited in their respective electronic ledgers namely: Electronic Cash Ledger (tax paid by cash) Electronic Credit Ledger (tax paid as input tax credit) Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST/UTGST paid on inputs may be used only for paying SGST/UTGST. In other words, the two streams of input tax credit (ITC) cannot be cross utilized, except in specified circumstances of inter-state supplies for payment of IGST Notification no. 10/2017- Central Tax: Maintenance of accounts by registered persons [Rule- 56] 1. In addition to particulars mentioned above, every registered person shall keep and maintain, a true and correct account of the goods or services imported or exported or of supplies attracting payment of tax on reverse charge along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers. 2. Every registered person paying tax u/s 10, shall maintain the accounts of stocking respect of goods received and supplied by him, and such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof. 3. Every registered person shall keep and maintain a separate account of advances received, paid and adjustments made thereto. 4. Every registered person, other than those covered u/s 10, shall keep and maintain an account, containing the details of tax payable including tax payable under reverse charge, tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period. 5. Every registered person shall keep the particulars of- (a) names and complete addresses of suppliers from whom he has received the goods or services chargeable to tax under the Act; (b) names and complete addresses of the persons to whom he has supplied goods or services, where required under the provisions of this Chapter; (c) The complete address of the premises where goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein. 6. If any taxable goods are found to be stored at any place(s) other than those declared under sub-rule (5) without the cover of any valid documents, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person. 7. Every registered person shall keep the books of account at the principal place of business and books of account relating to additional place of business mentioned in his certificate of registration and such books of account shall include any electronic form of data stored on any electronic device. 8. Any entry in registers, accounts and documents shall not be erased, effaced or overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter, the correct entry shall be recorded and where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained. 9. Each volume of books of account maintained manually by the registered person shall be serially numbered. 10. Unless proved otherwise, if any documents, registers, or any books of account belonging to a registered person are found at any premises other than those mentioned in the certificate of registration, they shall be presumed to be maintained by the said registered person. 11. Every agent u/s 2(5) shall maintain accounts depicting the- (a) particulars of authorisation received by him from each principal to receive or supply goods or services on behalf of such principal separately; (b) particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal; 80

88 MAINTENANCE OF ACCOUNTS AND RECORDS (c) particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal; (d) details of accounts furnished to every principal; and (e) Tax paid on receipts or on supply of goods or services affected on behalf of every principal. 12. Every registered person manufacturing goods shall maintain monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products thereof. 13. Every registered person supplying services shall maintain the accounts showing quantitative details of goods used in the provision of services, details of input services utilized and the services supplied. 14. Every registered person executing works contract shall keep separate accounts for works contract showing - (a) the names and addresses of the persons on whose behalf the works contract is executed; (b) description, value and quantity (wherever applicable) of goods or services received for the execution of works contract; (c) description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract; (d) the details of payment received in respect of each works contract; and (e) The names and addresses of suppliers from whom he received goods or services. 15. The records under the provisions of this Chapter may be maintained in electronic form and the record so maintained shall be authenticated by means of a digital signature. 16. Accounts maintained by the registered person together with all the invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply shall be preserved for the period as provided in section 36 and shall, where such accounts and documents are maintained manually, be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally. 17. Any person having custody over the goods in the capacity of a carrier or a clearing and forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person shall maintain true and correct records in respect of such goods handled by him on behalf of such registered person and shall produce the details thereof as and when required by the proper officer. 18. Every registered person shall, on demand, produce the books of accounts which he is required to maintain under any law for the time being in force. Generation and maintenance of electronic records [Rule- 57]: 1. Proper electronic back-up of records shall be maintained and preserved in such manner that, in the event of destruction of such records due to accidents or natural causes, the information can be restored within a reasonable period of time. 2. The registered person maintaining electronic records shall produce, on demand, the relevant records or documents, duly authenticated by him, in hard copy or in any electronically readable format. 3. Where the accounts and records are stored electronically by any registered person, he shall, on demand, provide the details of such files, passwords of such files and explanation for codes used, where necessary, for access and any other information which is required for such access along with a sample copy in print form of the information stored in such files. Records to be maintained by owner or operator of godown or warehouse and transporters [Rule- 58] 1. Every person required to maintain records and accounts in accordance with Sec. 35(2), if not already registered under the Act, shall submit the details regarding his business in FORM GST ENR- 01, and upon validation of the details furnished, a unique enrolment number shall be generated and communicated to the said person. 2. The person enrolled as aforesaid in any other State or U.T. shall be deemed to be enrolled in the State or U.T. 3. Every person who is enrolled under sub-rule (1) shall, where required, amend the details furnished in FORM GST ENR- 01 electronically on the common portal. 4. Subject to the provisions of Rule- 1: 81

89 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX a) Any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him along with the GSTIN of the registered consigner and consignee for each of his branches. b) Every owner or operator of a warehouse or godown shall maintain books of accounts with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt and disposal of such goods. 5. The owner or the operator of the godown shall store the goods in such manner that they can be identified item-wise and owner-wise and shall facilitate any physical verification or inspection by the proper officer on demand. ACCOUNTING ENTRIES UNDER GST: INTER-STATE TCS Entry In the books of Suppliers 1. At the time of sale through e-commerce portal E-Commerce operator a/c Dr. 11,800 To Sales a/c 10,000 To Output CGST a/c 900 To Output SGST a/c At the time of GST charged by e-commerce operator Commission a/c Dr. 200 Input CGST a/c Dr. 18 Input SGST a/c Dr. 18 To E-commerce operator a/c At the time of receipt from e-commerce operator Bank a/c Dr. 11,464 TCS Credit (CGST) a/c Dr. 50 TCS Credit (SGST) a/c Dr. 50 To E-commerce operator a/c 11, At the time of transfer to e-ledger E-cash Ledger (CGST) Dr. 50 E-cash Ledger (CGST) Dr. 50 To TCS Credit (CGST) a/c 50 To TCS Credit (SGST) a/c 50 In the books of e-commerce operator 1. At the time of receipt from sales Bank a/c Dr. 11,800 To Supplier a/c 11, At the time of booking of income Supplier a/c Dr. 236 To Commission Income a/c 200 To Output CGST a/c 18 To Output SGST a/c At the time of payment to the supplier 82

90 MAINTENANCE OF ACCOUNTS AND RECORDS Supplier a/c Dr. 11,564 To Bank a/c 11,464 To TCS Payable (CGST) a/c 50 To TCS Payable (SGST) a/c Payment of GST TCS Payable (CGST) a/c Dr. 50 TCS Payable (SGST) a/c Dr. 50 Output CGST a/c Dr. 18 Output SGST a/c Dr. 18 To Bank a/c 136 E-commerce operator under reverse charge with TCS In the books of supplier 1. At the time of Supply of services through e-commerce operator portal E-commerce operator a/c Dr. 20,000 To Sale of Services a/c 20, At time of GST charged by e-commerce operator Commission a/c Dr. 500 Input CGST a/c Dr. 45 Input SGST a/c Dr. 45 To E-commerce operator a/c At the time of receipt from e-commerce operator Bank a/c Dr. 19,210 TCS Credit (CGST) a/c Dr. 100 TCS Credit (SGST) a/c Dr. 100 To E-commerce operator a/c 19, At the time of transfer to e-ledger E-cash Ledger (CGST) a/c Dr. 100 E-cash Ledger (SGST) a/c Dr. 100 To TCS Credit (CGST) a/c 100 To TCS Credit (SGST) a/c 100 In the books of e-commerce operator 1. At the time of receipt of Sales Bank a/c Dr. 23,600 To Supplier a/c 20,000 To Output CGST a/c 1,800 To Output SGST a/c 1, At the time of booking of income Supplier a/c Dr. 590 To Commission income 500 To Output CGST a/c 45 To Output SGST a/c At the time of payment to the supplier 83

91 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Supplier a/c Dr. 19,410 To Bank a/c 19,210 To TCS Payable (CGST) a/c 100 To TCS Payable (SGST) a/c Payment of GST Output CGST a/c Dr. 1,845 Output CGST a/c Dr. 1,845 TCS Payable (CGST) a/c Dr. 100 TCS Payable (SGST) a/c Dr. 100 To Bank a/c 3,890 ISD Entries In the books of Input Service Distributors 1. At the time of receipt of bill Input Services Expenses a/c Dr. 100,000 Input CGST a/c Dr. 9,000 Input SGST a/c Dr. 9,000 To Branch A a/c 30,000 To Branch B a/c 45,000 To Branch C a/c 43, At the time of distribution of input based on turnover being (A: 2,00,000 ; B:1,50,000 ; C:1,00,000) Branch A a/c Dr. 8,000 Branch B a/c Dr. 6,000 Branch C a/c Dr. 4,000 To Input CGST a/c 9,000 To Input SGST a/c 9,000 In the books of Branch A 1. At the time of receipt of bill Head Office a/c Dr. 30,000 To Creditors a/c 30, At the time of payment of services Creditors a/c Dr. 30,000 To Bank a/c 30, A time of receipt of input from Head Office Input CGST a/c Dr. 4,000 Input SGST a/c Dr. 4,000 To Head Office a/c 8,000 INTRA-STATE * consider CGST and SGST at 8% Purchases:- PURCHASES A/C Dr INPUT CGST A/C Dr. 800 INPUT SGST A/C Dr. 800 TO CREDITORS A/C

92 MAINTENANCE OF ACCOUNTS AND RECORDS SALES:- DEBTORS A/C Dr TO SALES A/C TO OUTPUT CGST A/C 1200 TO OUTPUT SGST A/C 1200 CAPITAL GOODS:- CAPITAL GOODS A/C Dr INPUT CGST A/C Dr INPUT SGST A/C Dr TOCREDITORS FOR SERVICE A/C We have, OUTPUT CGST A/C 1200 OUTPUT SGST A/C 1200 INPUT CGST A/C 3200 INPUT SGST A/C 3200 PROFESSIONAL FEES FEES A/C 5000 INPUT CGST A/C 400 INPUT SGST A/C 400 TO BANK 5800 ADJUSTMENT ENTRY Case-1) We have input more than output taxes. OUTPUT CGST A/C Dr OUTPUT SGST A/C Dr TO INPUT CGST A/C 1200 TO INPUT SGST A/C 1200 So, From above entries we can see that under GST assessee can claim the credit of GST paid for legal/professional fees as well as on the purchase of fixed assets. After adjustment of output CGST and SGST with input CGST and SGST respectively, balance shall remain the electronic credit ledger or electronic cash ledger accordingly. If there had been any input tax credit left it would have been carried forward to the next year. Case-2) we have output more than input taxes at the time of payment of tax ELECTRONIC CASH LEDGER A/C(CGST) Dr. 200 ELECTRONIC CASH LEDGER A/C(SGST) Dr. 200 TO BANK A/C 400 at the time of payment of tax OUTPUT CGST A/C Dr OUTPUT SGST A/C Dr

93 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX TO INPUT CGST A/C 1000 TO INPUT SGST A/C 1000 TO ELECTRONIC CASH LEDGER A/C(CGST) 200 TO ELECTRONIC CASH LEDGER A/C(SGST) 200 We have, OUTPUT CGST A/C 1200 OUTPUT SGST A/C 1200 INPUT CGST A/C 1000 INPUT SGST A/C 1000 INTER STATE PURCHASES PURCHASES A/C Dr INPUT IGST A/C Dr TO CREDITORS A/C SALES DEBTORS A/C Dr TO SALES A/C TO OUTPUT IGST A/C 3200 SALES LOCALLY:- DEBTORS A/C Dr TOSALES A/C TO CGST A/C 2000 TO SGST A/C 2000 FIXED ASSETS:- ASSET A/C Dr INPUT CGST A/C Dr INPUT SGST A/C Dr TO VENDOR A/C TOTAL: OUTPUT CGST 2000 OUTPUT SGST 2000 OUTPUT IGST 3200 INPUT CGST 1600 INPUT SGST 1600 INPUT IGST 3520 PARTICULARS CGST SGST IGST Output Liability Less: Input Tax Liability CGST SGST

94 MAINTENANCE OF ACCOUNTS AND RECORDS IGST AMOUNT PAYABLE ) ANY INPUT CGST CREDIT WILL BE ADJUSTED AGAINST OUTPUT CGST AND THE REMAINING AMOUNT WILL BE ADJ. AGAINST IGST PAYABLE. OUTPUT CGST A/C Dr TO INPUT CGST A/C 1600 TO INPUT IGST A/C 320 TO ELECTRONIC CASH LEDGER A/C 80 2) ANY INPUT SGST CREDIT WILL BE ADJUSTED AGAINST OUTPUT SGST AND THE REMAINING AMOUNT WILL BE ADJ. AGAINST IGST PAYABLE. OUTPUT SGST A/C Dr TO INPUT SGST A/C 1600 TO ELCTRONIC CASH LEDGER A/C 400 3) ANY INPUT IGST CREDIT WILL BE ADJUSTED AGAINST OUTPUT IGST AND THE REMAINING AMOUNT CAN BE ADJ. AGAINST CGST & SGST PAYABLE. OUTPUT IGST A/C Dr TO INPUT IGST A/C ) ANY EXCESS OF INPUT CGST CAN NOT BE ADJUSTED AGAINST OUTPUT SGST ANS VICE VERSA. TDS UNDER GST:- CONSIDER TDS RATE AS 1% IN THE BOOKS OF DEDUCTOR 0.5% on CGST and 0.5% on SGST AT THE TIME OF PURCHASE PURCHASES A/C Dr INPUT CGST A/C Dr INPUT SGST A/C Dr TO X A/C AT THE TIME OF PAYMENT X A/C Dr TO TDS ON GST(CGST) A/C 1500 TO TDS ON CGST (SGST) A/C 1500 TO BANK A/C AT THE TIME OF TDS PAYMENT TDS ON GST (CGST)A/C Dr TDS ON GST (SGST)A/C 1500 TO BANK A/C 3000 IN THE BOOKS OF DEDUCTEE AT THE TIME OF SALE X GOVT. DEPARTMENT A/C Dr

95 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX TDS DEDUCTED UNDER CGST Dr TDS DEDUCTED UNDER SGST Dr TO SALE A/C TO OUTPUT SGST A/C TO OUTPUT CGST A/C AT THE TIME OF RECEIPT BANK A/C Dr TO X GOVT. DEPARTMENT A/C AT THE TIME OF RECEIPT OF TDS CERTIFICATE ELECTRONIC CASH LEDGER CGST A/C Dr ELECTRONIC CASH LEDGER SGST A/C 1500 TO TDS DEDUCTED UNDER CGST 1500 TO TDS DEDUCTED UNDER SGST 1500 * DEDUCTEE CAN TAKE THE INPUT TAX CREDIT OF TDS DEDUCTED UNDER THIS SECTION FOR THE PAYMENT OF OUTPUT CGST AND SGST * SAME TREATMENT WILL BE MADE IN CASE OF TDS DEDUCTED UNDER IGST. TCS UNDER GST IN THE BOOKS OF SUPPLIER AT THE TIME OF SALE THROUGH E-COMMERCE PORTAL E-COMMERCE OPERATOR Dr TO SALES A/C TO OUTPUT IGST A/C 1600 AT THE TIME OF COMM. CHARGED BY E-COMMERCE OPERATOR COMMISSION A/C Dr. 200 INPUT IGST A/C Dr. 32 TO E COMMERCE A/C 232 AT THE TIME OF SETTLEMENT WITH E COMMERCE OPERATOR BANK A/C Dr INPUT TCS A/C Dr. 100 TO E COMMERCE OPERATOR AT THE TIME OF TRANSFER TO E LEDGERS E CASH LEDGER(IGST) A/C Dr. 100 TO INPUT TCS A/C 100 IN THE BOOKS OF E COMMERCE OPERATOR 88

96 MAINTENANCE OF ACCOUNTS AND RECORDS AT THE TIME OF RECIEPT FROM BUYER BANK A/C Dr TO SUPPLIER A/C AT THE TIME OF BOOKING COMM. INCOME SUPPLIER A/C Dr. 232 TO COMMISSION A/C 200 TO OUTPUT IGST A/C 32 AT THE TIME OF COSOLIDATED PAYMENT TO SUPPLIER SUPPLIER A/C Dr TO TCS COLLECTED A/C 100 TO BANK A/C AT THE TIME OF PAYMENT OF LIABILITY TO GOVT. A/C OUTPUT IGST A/C Dr. 32 TCS (IGST) A/C Dr. 100 TO BANK A/C 132 E COMMERCE IN CASE OF SALE OF SERVICES (TCS WITH REVERSE CHARGE) IN THE BOOKS OF SUPPLIER AT THE TIME OF SALE OF SERVICE E COMMERCE OPERATOR A/C Dr TO SALE OF SERVICES A/C AT THE TIME OF COMM. CHARGED BY E COMMERCE OPERATOR COMISSION A/C Dr. 200 INPUT IGST A/C Dr. 32 TO E COMMERCE OPERATOR A/C 232 AT THE TIME OF FINAL PAYMENT BANK A/C Dr TCS(INPUT IGST) A/C Dr. 100 TO E COMMERCE OPERATOR A/C 9768 AT THE TIME OF TRANSFER TO E LEDGERS E CASH LEDGER A/C Dr. 100 TO TCS( INPUTIGST) A/C 100 IN THE BOOKS OF E COMMERCE OPERATOR AT THE TIME OF RECIEPT FROM BUYER BANK A/C Dr TO OUTPUT IGST A/C

97 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX TO SUPPLIER A/C AT THE TIME OF BOOKING INCOME SUPPLIER A/C Dr. 232 TO COMMISSION A/C 200 TO OUTPUT IGST A/C 32 AT THE TIME OF PAYMENT TO SUPPLIERS SUPPLIER A/C Dr TO BANK A/C 9668 TO TCS PAYABLE A/C 100 AT THE TIME OF PAYMENT TO GOVT. TCS PAYABLE A/C Dr. 100 OUTPUT IGST A/C Dr. 32 TO BANK A/C 132 REVERSE CHARGE PURCHASING FROM UREGISTERED DEALER 1. AT THE TIME OF PURCHASE PURCHASE A/C Dr TO CREDITORS AT THE TIME OF PAYMENT TO CREDITOR CREDITORS A/C Dr IGST INPUT BUT NOT DUE A/C Dr TO BANK A/C TO IGST PAYABLE A/C AT THE TIME OF PAYMENT OF GST IGST PAYABLE A/C Dr E-CASH LEDGER A/C Dr TO BANK A/C 8000 TO IGST INPUT BUT NOT DUE 8000 IMPORT IN THE BOOKS OF IMPORTER IN CASE OF IMPORT OF GOODS PURCHASES A/C Dr INPUT IGST Dr TO CREDITOR A/C TO CUSTOM DUTY PAYABLE TO IGST PAYABLE

98 MAINTENANCE OF ACCOUNTS AND RECORDS CUSTOM DUTY PAYABLE Dr IGST PAYABLE A/C Dr TO BANK A/C Taxable Value Custom Total IGST TOTAL IN CASE OF IMPORT OF SERVICES AT THE TIME OF AVAILING SERVICES Service Charges a/c Dr To Creditor a/c At the time of payment to creditor Creditor a/c Dr Input IGST but not due a/c Dr To bank a/c To IGST payable At the time of payment under reverse charge IGST payable Dr E CASH ledger(igst) a/c Dr To bank a/c To input IGST but not due a/c RECEIPT OF ADVANCE In the books of supplier 1. At the time of receipt of advance Bank a/c Dr To Advance from Debtor Payment of GST on the advance E-cash Ledger (CGST) Dr E-cash Ledger (SGST) Dr To Bank a/c At the time of issue of invoice Debtor Dr To Sales a/c To Output CGST 6300 To Output SGST 91

99 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 4. At the time of receipt of final Payment Bank a/c Dr Advance from Debtor Dr To Debtor At the time of making payment of GST E-cash Ledger (CGST) Dr E-cash Ledger (SGST) Dr To Bank a/c At the time of payment of liability Output CGST Dr Output SGST Dr To E-cash Ledger (CGST) 6300 To E-cash Ledger (SGST) 6300 Purchase from Unregistered Dealer In the books of Buyer 1. At the time of purchase Purchase a/c Dr To Creditor a/c At the time of payment to creditor Creditor a/c Dr CGST input but not due Dr SGST input but not due Dr To Bank a/c To CGST Payable 4500 To SGST Payable At time of payment of GST E-Cash Ledger (CGST) Dr E-Cash Ledger (SGST) Dr CGST Payable Dr SGST Payable Dr To Bank a/c 9000 To CGST input but not due 4500 To SGST input but not due 4500 Payment of Advance to Unregistered dealer In the books of buyer 1. At the time of payment of advance Advance Paid to Creditor a/c Dr

100 MAINTENANCE OF ACCOUNTS AND RECORDS To Bank a/c Payment of GST on such Advance E-Cash Ledger (CGST) a/c Dr E-Cash Ledger (SGST) a/c Dr To Bank a/c At the time of receipt of Invoice Purchase a/c Dr To Creditor a/c At the time of making payment Creditor a/c Dr CGST input but not due Dr SGST input but not due Dr To Bank a/c To Advance Paid to Creditor a/c To CGST Payable 7200 To SGST Payable At the time of payment of GST E-Cash Ledger (CGST) Dr E-Cash Ledger (SGST) Dr CGST Payable Dr SGST Payable Dr To Bank a/c 5400 To CGST input but not due 7200 To SGST input but not due 7200 STOCK TRANSFER Suppose Mr. A has two branches say X AND Y in different states, branch X transfer goods of value to branch Y, profit margin 10%. In the books of X at the time of supply Branch Y a/c Dr To stock a/c To Output IGST a/c 9000 At the time of payment of IGST Output IGST a/c Dr To Bank a/c

101 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX In the books of Y A the time of receipt of goods Stock a/c Dr Input IGST a/c Dr To Branch X At the time of local sales Bank a/c Dr To Sales To Output CGST a/c 4950 To Output SGST a/c 4950 At the time of payment of GST E-Cash Ledger (CGST) Dr. 450 E-Cash Ledger (SGST) Dr. 450 To Bank a/c 900 At the time of payment of tax liability Output CGST a/c Dr Output SGST a/c Dr To Input IGST a/c 9000 To E-cash Ledger (CGST) 450 To E-cash Ledger (SGST) 450 Entries in case of INPUT SERVICE DISTRIBUTOR In the books of input service distributor SERVICES ARE TAKEN BY BRANCHES BUT INVOICE IS ISSURED IN THE NAME OF HEAD OFFICE Purchases of services a/c Dr Input IGST a/c Dr To creditors a/c AT THE TIME OF PAYMENT MADE BY THE BRANCH Creditors a/c Dr To Branch a/c At the time of distributing the input credit to branches on PRO RATA basis Branch A a/c Dr. 493 Branch B a/c Dr. 535 Branch C a/c Dr. 572 To input IGST a/c

102 MAINTENANCE OF ACCOUNTS AND RECORDS In the books of Branch A At the time of payment to creditors on behalf of head office Head office a/c Dr To Bank a/c At the time of receipt of INPUT CREDIT from H.O. Input IGST a/c Dr. 493 To Head Office a/c 493 Accounting Treatment of Refunds in Case of Export of Goods and Services: Under GST law, the exports of goods or services are treated as Inter-State Supplies. We have already discussed the impact of GST on exports in our previous article How Exports are Treated Under GST. In the case of export supplies, the exporter has two options: A. Export Under Bond/LUT (Clear goods without payment of duty and claim the refund of Input credits): In this case, the exporter has to record sale without charging any tax and determine the unutilized input credit of inputs for claiming the refund. The journal entry for refund claim will be as follows: CGST Refund Receivable A/c Dr. xxx SGST Refund Receivable A/c Dr. xxx IGST Refund Receivable A/c Dr. xxx To CGST Input Credit A/c (unutilized input credit) To CGST Input Credit A/c (unutilized input credit) To IGST Input Credit A/c (unutilized input credit) xxx xxx xxx B. Export Under Rebate Claim (Clear goods with payment duty and claim the refund of duty paid on export goods): In this case, the sale will be recorded as follows: Debtors A/c Dr. xxx IGST Refund Receivable A/c Dr. xxx To Sales A/c To IGST Payable A/c xxx xxx Accounting Treatment for Imports In our previous article Treatment of Imports under GST regime we have discussed that Imports are treated as Inter-State supplies and therefore, IGST will be payable by the importer of goods or services. Further, the Custom duty is also applicable in the case of Import of Goods but the input credit of Custom duty is not allowed. Hence the importer can claim input credit of IGST and the Custom Duty will be added in the cost of imported goods:- Purchase A/c Dr. xxx IGST Input Credit A/c Dr. xxx To Creditor A/c To IGST Payable A/c To Custom Duty Payable A/c xxx xxx xxx Accounting Entries for Set Off of Input Credit Against Out Tax Liability of GST Under the GST law, the set-off of input credit is allowed in following order:- INPUT CREDIT ORDER OF SET OFF OF INPUT CREDIT AGAINST OUTPUT LIABILITY CGST First Towards CGST 95

103 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Balance Towards IGST SGST First Towards SGST Balance Towards IGST IGST First Towards IGST Secondly Towards CGST Balance Towards SGST We can understand the order of input credit set off and its journal entries with an example: Example Month End Details (Total Balances): CGST Payable (Output) A/c Rs. 50,000 CGST Input Credit A/c Rs. 30,000 SGST Payable (Output) A/c Rs. 50,000 SGST Input Credit A/c Rs. 30,000 IGST Payable (Output) A/c Rs. 80,000 IGST Input Credit A/c Rs. 1,00,000 INPUT CREDIT CGST PAYABLE - RS SGST PAYABLE - RS IGST PAYABLE - RS CGST Input Credit Rs SGST Input Credit - Rs IGST Input Credit Rs Rs Electronic Cash Ledger - Rs Total Rs Rs Rs Set Off At the end of the Month: Accounting Entries for this Set-off CGST Payable A/c Dr. 50,000 To CGST Input Credit A/c 30,000 To IGST Input Credit A/c 20,000 SGST Payable A/c Dr. 50,000 To SGST Input Credit A/c 30,000 To Electronic Cash Ledger A/c 20,000 IGST Payable A/c Dr. 80,000 To IGST Credit A/c 80,000 96

104 CHAPTER-9 RETURNS Types of GST Returns Important Points Even if no purchase or sale activity took place during the month a NIL return need to be filed. Penalty of not filling is Rs.100 per day maximum Rs. 5,000. Every Registreded dealer need to file 3 returns monthly. Quarterly return need to filed under compostion scheme. Same return filed for IGST,CGST,SGST/UTGST. Filing of return would be only through online mode. Facility of offline generation and preparation of the return will be provided which will have to be uploaded. The return have to be filed through online portal of GST and no such offline submission of the return will be made avaliable to the taxpayers. All the reurns uploded must be signed with DSC of the authrorized person of such return or the taxpayer can use Aadhar based signature verification. There will be no revision of any return filed under GST. Any modifcation relating to an earlier tax period can be made in the returns filed later on as they will have heads of amendments relating to earlier period returns filed. Penalty for not filing annual return u/s 44 is Rs. 100 per day subject to a maximum of an amount calculated at a quarter per cent of his turnover in the State or U.T. Meaning of certain words: a. GSTIN Goods and Services Taxpayer Identification Number b. UID Unique Identification Number for Embassies c. HSN Harmonized System of Nomenclature for goods d. SAC Services Accounting Code e. GDI Government Department Unique ID where department does not have GSTIN f. POS Place of Supply of Goods or Services State code to be mentioned Returns to be filled as per category of taxpayers: 1. Normal/Regular & Causal Taxpayers (GSTR-1, 2, 3 & 9) 2. Compounding Taxpayers (GSTR-4 & 9A) 3. Foreign Non-Resident Taxpayer (GSTR-5) 4. Input Service Distributor (GSTR-6) 5. Tax (TDS) Deductor (GSTR-7) 6. E-commerce operator (GSTR-8) 7. Taxpayer issued a UIN (GSTR-11) Return Form What to file? By Whom? By When? GSTR-1 Details of outward supplies of Registered Taxable 10th of the next month taxable goods and/or services Supplier effected GSTR-2 Details of inward supplies of taxable Registered Taxable 15th of the next month goods and/or services effected Recipient claiming input tax credit. GSTR-3 Monthly return on the basis of Registered Taxable 20th of the next month finalization of details of outward supplies and inward supplies along with the payment of amount of tax. Person GSTR-4 Quarterly return for compounding taxable person. Composition Supplier 18th of the month succeeding quarter 97

105 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX GSTR-5 Return for Non-Resident foreign taxable person Non-Resident Person Taxable 20th of the next month GSTR-6 Return for Input Service Distributor Input Service Distributor 13th of the next month GSTR-7 Return for authorities deducting tax Tax Deductor 10th of the next month at source. GSTR-8 Details of supplies effected through E-commerce 10th of the next month e-commerce operator and the Operator/Tax Collector amount of tax collected GSTR-9 Annual Return Registered Taxable 31st December of next Person financial year GSTR-10 Final Return Taxable person whose Within three months of registration has been the date of cancellation surrendered, or or date of cancellation cancelled. order, whichever is later. GSTR-11 Details of inward supplies to be furnished by a person having UIN Person having UIN and claiming refund 28th of the month following the month for which statement is filed GSTR-1 Who need to file Every taxable person registered under GST need to file GSTR-1 about the supplies made by him during the previous month. GSTR-1 needs to be filed by 10 th of the next month. As per Notification No. 57/2017- CT, any registered person having aggregate turnover upto Rs. 1.5 crore in the preceding financial year or current year as the case may be shall file their return GSTR-1(details of outwards supply) quarterly. As per Notification No. 58/2017- CT, any registered person having aggregate turnover of more than Rs. 1.5 Crore in the preceding financial year or current year shall file their return GSTR-1from November 2017 onwards on or before 10th of the month succeeding next month. GSTR-1 of all months prior to November 2017 shall be filed by 31st of December. Components of GSTR-1 1) GSTIN It will get auto populated at the time of return filling. 2) Name of the taxpayer It will get auto populated at the time of login to the GST common portal. 3) Gross Turnover of the Taxpayer in the previous FY This heading is needs to be manually filed for the first year only. It will get auto populated from 2 nd year onwards based on the return filed. 4) Tax Period, Month, and Year The taxpayer needs to select the relevant period for which the return is need to be filed. 5) Taxable outward supplies to a registered person All the supplies made to the registered dealer will be made under such head. The dealer needs to input invoice-wise details of all the invoices with GSTIN of the counterparty so that it will reflect in the GSTR-2A of the counterparty. In case of inter-state supply IGST will be entered and in case of intra-state supply CGST & SGST will be entered. Under the GST law the taxpayer has an option to enter details of NIL and exempt supplies as well, or he can enter such details of supplies later in the return under a different head. The sales need to be reported under: a) For supplies relating to other than reverse charge/made through e-commerce portal, rate-wise. b) For supplies relating to reverse charge, rate-wise. c) For supplies made through e-commerce operator attracting TCS, operator wise and rate wise. 6) Amendments to details of outward supplies made to a registered person Under GST law the previous returns filed cannot be rectified but any modification, addition or deletion regarding the earlier period about the outward supplies made can be done under this head. 98

106 RETURNS 7) Taxable Outward supplies to a consumer Under this head invoice-wise only those supplies will be entered that satisfy the below two conditions: a) It should be inter-state supply b) The invoice value should be more than Rs. 2, 50,000. For this purpose we will see the total invoice value is more than Rs. 2, 50,000 that means inclusive of IGST. 8) Amendments of taxable outward supplies to a consumer Any modification made in the current period of the earlier period can be made under this head. 9) Zero rated supplies and Deemed Exports All such nature supplies affected by the registered dealer will be shown under this head with full information of invoice and Shipping Bill. The exports must contain full 8- digist HSN code. Under this head the supplies will be shown under: a) Exports: The GSTIN of recipient will not be reported under this case. Exports made without payment of IGST (under Bond/Letter of Undertaking) need to be reported 0 under the tax head. b) Supplies made to SEZ unit or SEZ Developer c) Deemed Exports 10) Amendments to supplies exported Any change in the exports of earlier period will be under this head. 11) Taxable Outward supplies to consumer (other than point 7 above) All the intra-state supplies and interstate supplies (below Rs. 2.5 lakhs) will be entered in this heading in aggregate amount bifurcated on the basis of the state of the recipient. The supplier has a choice also to input details of the entire NIL and exempt supplies under this head. 12) Amendments to taxable outward supplies to consumer of earlier period Any change in the supplies made to consumer of earlier return can be made here. 13) Details of Debit/credit notes It contains details of all the debit/credit note issued by him to any registered dealer and all the debit/credit note received by him from any registered dealer in the tax period of the return. 14) Amendments of details of debit/credit note of earlier period any amendments made to debit/credit notes relating to period of which return has been filed will be made under this head. 15) NIL rated, Exempt, and Non-GST Outward Supplies Under such head all NIL rated, exempt and non-gst supplies need to be shown based on: a) Inter-state supplies to registered person b) Intra-state supplies to registered person c) Inter-state supplies to consumer d) Intra-state supplies to consumer However, if the NIL and Exempt supplies have already be shown under point 5, 7, or 9 then only Non-GST supplies need to be entered under this heading. 16) Consolidated statement of Advance Received/Advance adjusted in the current tax period/amendments of information furnished in earlier tax Under this head the advance received from the registered under or the un-registered dealers need to be reported. They must be shown separately for which tax invoice has not been issued during the tax period and advance earlier received for which invoice has been issued and included in the supplies shown above. 17) Amendments of Consolidated statement of Advance Received/Advance adjusted in the current tax period/amendments of information furnished in earlier tax Under such head any modification made will be reported of any earlier tax period. 18) HSN-wise summary of outward supplies Under this head the summary of all supplies made will be reported based on HSN code. Firms having Rs. 1.5 crore needs not to report HSN code but need to report description of the goods supplied. 19) Documents issued during tax period Under this head all the invoices issued and cancelled needs to be reported under the tax period of the return. Such documents are: a) Invoices for outward supplies b) Invoices for inward supplies from unregistered person c) Revised Invoice d) Debit Note e) Credit Note f) Receipt Voucher g) Payment Voucher h) Refund Voucher 99

107 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX i) Delivery Challan for job work j) Delivery Challan for supply on approval k) Delivery Challan in case of liquid gas l) Delivery Challan in cases other than by way of supply (excluding at S. No. i to k) How will it display in to other taxable person The details filed under Form GSTR-1 will get available to the following taxable person by way of forms available on the GST common portal: 1. To the taxable person registered as a normal taxpayer (recipient) in the form GSTR-2A. 2. To the taxable person registered as a composite dealer in the form GSTR-4A. 3. To an Input Service Distributor (ISD) in the form GSTR-6A. Such details made to the following taxable person can be added, cancelled, or modified by the taxable person in their respective forms before due date of filling of such forms. Correction made by the recipient of GSTR-1 The recipient while filing GSTR-2, GSTR-4, or GSTR-6 can modify the details filed by the suppliers. Such modification made will be available to the supplier after such the respective due dates of the forms in the GST common portal in the form GSTR-1A. The supplier can also either accept or reject the modification made by the recipients. 100

108 RETURNS GSTR-2 Who need to file Every taxable person registered under GST need to file GSTR-2 about the inward supplies received by him during the previous month. GSTR-2 needs to be filed by 15 th of the next month. Components of GSTR-2 1) GSTIN It will get auto populated at the time of return filling. 2) Name of the taxpayer It will get auto populated at the time of login to the GST common portal. 3) Tax Period, Month, and Year The taxpayer needs to select the relevant period for which the return is need to be filed. 4) Inward supplies from Registered Taxable person This information will get auto populated by the counterparty filling of GSTR-1 and GSTR-5. Even if some of the invoices that don t get auto populated can be manually inputted by the dealer if he has the tax invoice copy with him. Inward supplies attracting reverse charge will be shown separately. If the goods are received in lots of the same invoice then the input of such invoice will only be claimed when the last lot is received. 5) Amendments of inward supplies made from Registered Taxable person from earlier period Any modification in the input claimed of the earlier tax period can be made under this head. 6) Goods/Capital Goods received from Overseas (Import of goods) All the imports made will be reported under this head with full information of Bill of entry with 8-digit HSN code. In GST law imports are treated same as inter-state supply thus IGST will be applicable on such imports. IGST will be claimed for the month as per the input rules. Any imports made from SEZ unit need to report separately under such head only. 7) Amendments in Goods/Capital Goods received from Overseas of earlier period All the modification regarding the import of any earlier tax period can be under this head along with the adjusted IGST being claimed. 8) Services received from a Supplier Located outside India (Imports of Services) Any kind of service received from outside India will be reported under this head. GST law need the recipient of such services to pay GST under Reverse Charge Mechanism of GST and thus GST paid under reverse charge must also be reported here. 9) Amendments of services received from a Supplier Located outside India of earlier tax period Any modification in the value of invoice relating to earlier period can be made under such head. Reduction in the value of service will result in refund of excess GST paid earlier. 10) Details of Debit/Credit Notes All the debit/credit note received or issued by the dealer will be reported under this head. Debit/Credit note relating to transaction falling under reverse charge will get auto populated. 11) Amendments of details of debit/credit notes of earlier tax period Any modification made to debit/credit note relating to transaction attracting reverse charge need to be reported while any modification relating to debit/credit other than these will get auto populated. 101

109 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 12) Supplies received from unregistered person - Aggregate value of inward supplies received will be reported under this heading bifurcated on thus basis of inter-state and intra-state shown separately as supplies made from: a) Compounding Taxable Person b) Any exempt supply received c) Any NIL rated supply received d) Non GST supply 13) ISD credit received The input credit received from the head office will get auto populated by the counterparty filling of GST-5. The dealer can manually input if the input don t get auto populated only if he is in possession of documents to claim input from its head office. 14) TDS credit received The dealer can also claim TDS deducted on IGST, CGST or SGST as the case may be as input. This heading will get auto populated as per filling of GSTR-7 by the counterparty. This head cannot be updated manually. 15) TCS credit received This heading to only applicable on the merchants registered with the e-commerce operator. This head need not to be filled, as it will get auto populated as the counterparty filling of GSTR-8. If the data is not auto populated then the details can be manually input. 16) Consolidated Statement of Advances paid/advance adjusted on account of receipt of supply Any advance paid on such supplies relating to reverse charge on which shall be reported under such head. The dealer need to disclose the advance amount paid and GST paid on such amount. Under the same head only, advance need to disclose on such invoice received during the tax period. Such invoice will be included on the purchases reported above in the return. 17) Amendments to Consolidated Statement of Advances paid/advance adjusted on account of receipt of supply Any modification or correction relating to advance paid or on invoice on which advance was paid will be reported under this head. 18) ITC Reversal All kinds of input tax reversal will be reported here. A drop down list will to available to select the reason of such reversal. This head also include ITC reversed on account of exempt and nonbusiness supplies. 19) Amendments to ITC Reversal Any modification to ITC reversed in any earlier return will be made under this head. 20) Addition and reduction of amount in output tax for mismatch and other reasons Under such head it will display the additional liability or reduction in the liability due to mismatch of invoices on the basis of the returns filled by the other parties. 21) HSN summary of inward supplies This head will contain the summary of all the inward supplies made during the tax period on the basis of HSN code. Components of GSTR-2A GSTR-2A will be divided 4 different parts where each part will get auto populated from different returns filed and will be available on the GST common portal. 1. Part A It will contain the details of the all the purchase invoices and debit/credit notes as filed by the supplier through his GSTR-1 and in GSTR-5 against such purchaser s GSTIN. 2. Part B It will contain details of ISD credit received by the purchaser as filed by an ISD through a form GSTR Part C It will contain details of TDS deducted on the taxpayer as filed by a TDS deductor through his GSTR-7. It will also contain details of TCS deducted on the taxpayer as filed by e-commerce operator through his GSTR-8. GSTR-3 Who need to file Every taxable person registered under GST who has filled GST-1 and GSTR-2 will also file GSTR-3 the monthly return which will combine details of both GSTR-1 and GSTR-2 filed earlier in the same month with net tax liability with details of its payment. GSTR-3 needs to be filed by 20 th of the next month. Components of GSTR-3 1) GSTIN It will get auto populated at the time of return filling. 102

110 RETURNS 2) Name of the taxpayer It will get auto populated at the time of login to the GST common portal. 3) Address Business address of the registered dealer will get auto populated under this head. 4) Tax Period, Month, and Year The taxpayer needs to select the relevant period for which the return is need to be filed. 5) Turnover Details This head will include consolidate turnover of all types of supplies. Gross turnover needs to be bifurcated between: a) Taxable turnover b) Zero rated supply on payment of Tax c) Zero rated supply without payment of Tax d) Deemed Exports e) Exempted f) Nil Rated g) Non-GST turnover h) Total turnover (sum of above all) 6) Outwards supplies All the information filed under GSTR-1 will get auto populated under such head. Under such head the supplies reported will be net of invoices, debit/credit notes and advance received. These will get auto populated under subheadings which are: a) Inter-state supplies i) Taxable Supplies (other than reverse charge and zero rated supply) ii) Supplies attracting reverse charge iii) Zero rated supply made with payment of IGST iv) Supplies made through an e-commerce operator attracting TCS b) Intra-state i) Taxable supplies (other than reverse charge) ii) Supplies attracting reverse charge iii) Supplies made through an e-commerce operator attracting TCS c) Tax effect of amendments made in respect of outward supplies: Under thus sub-head it will contain all the amendments made in the form GSTR-1 filled earlier. It will also be shown under the head in subhead (a) and (b). 7) Inward Supplies attracting reverse charge including imports of services Similar to the outward supplies every registered dealer had filled information about the inward supplies in his GSTR-2. Under this head all the inward supplies made which attract reverse charge will be reported on the basis of it being intra-state or inter-state. All the amendments reported in GSTR-2 will also get displayed under the same head only. 8) Input tax credit This head will also get auto populated on the basis of the GSTR-2 filled earlier for the tax period. It includes all the ITC available to the dealer net of invoices and debit/credit notes received during the current tax period. The amendments reported will also get auto populated. It will be reported under the following heads: a) Input b) Input Services c) Capital Goods 9) Addition and reduction of amount in output tax for mismatch and other reason Under this head it will report the increase or decrease in the tax liability due to mismatch of the invoices reported by the dealer. 10) Total Tax liability Under this head GSTN portal will auto calculate the net liability that needs to be paid by the registered dealer. Net liability will be shown differently for IGST, CGST and SGST. It will be calculated under and displayed under the following heads: a) On outward supplies b) On inward supplies attracting reverse charge c) On account of Input Tax Credit Reversal/reclaim d) On account of mismatch/rectification/other reasons 11) TDS credit received during the month If the registered dealer had provided credit of TDS deducted on him in his GSTR-2 filled earlier then this heading will get auto populated. 12) TCS credit received during the month Same as per above head this head will also get auto populated based on the information provided in GSTR-2 by the registered dealer. 13) Interest liability Under this head the return will auto calculate the interest liability relating to the dealer on the basis mismatch of output liability, reversal of ITC, mismatch of ITC claimed earlier, etc. 103

111 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 14) Late fees Under this head late fee will be displayed of it is applicable on the dealer. The late fees will need to be paid by the dealer before filling of the return or it will be not a valid return. 15) Tax Payable and paid This head falls under Part B of the return, it will report the net tax liability that needs to be paid and the amount paid through amount of E-cash ledger and though ITC ledger. 16) Interest, late fees, and other amount payable and paid Under this head the liability relating to interest and late filling arising, if any will get auto populated and such must be paid by using E-cash ledger only. 17) Refunds claimed from cash ledger Input credit in excess of the tax liability will be flow to this head. The taxpayer can claim refund of such amount displayed under this head to his registered bank account. 18) Debit entry in electronic cash/credit ledger for tax/interest payment This head will get auto populated after payment of tax liability and submission of the return. The amount used in the payment of the liability will be debited through the E-cash ledger and the ITC ledger. GSTR-3 form if uploaded with discharge of the outstanding liability displayed as such in the return will not be treated as valid return. If later the taxpayer intends to discharge liability of the return filled earlier, then he needs to file Part B of GSTR-3 again. Refund can only be claimed if all the outstanding liabilities have been paid by the tax payer. 104

112 RETURNS GSTR-4 Who need to file Any dealer registered under the composition scheme of GST need to file a quarterly return of the sales and purchase in the form GSTR-4 till 18 th of the month succeeding the quarter. Any composition dealer needs to file 5 return yearly (4 quarterly return and an annual return under GSTR-9A) instead of 37 returns which are needed to be filed by a normal taxpayer. Components of GSTR-4 1) Name of the Taxable person It will get auto populated at the time of login. 2) Address It will get auto populated at the time of login. 3) Period of Return The taxable person need to input the quarter for which return is to be filed. 4) Aggregate Turnover in the preceding FY The composition dealer need to report the turnover of the previous FY and from next year onwards it will get auto populated. 5) Aggregate Turnover April to June 2017 The composition dealer need to report the turnover of 1 st quarter of FY ) Inward supplies including supplies received from unregistered dealers Supplies from registered dealers will be auto populated and same must be checked by the dealer. Supplies from unregistered dealer will be needed to input manually. Supplies attracting reverse charges needed to be shown separately under the same head. 7) Amendments to details of inward supplies Any changes of supplies of the earlier period can be done under this head. 8) Services received from a supplier located outside India All services revived from outside India must be reported under this head invoice wise along with SAC code. 9) Amendments in services received from a supplier located outside India Any modification to the input services of earlier tax period can be under this head. 10) Tax on outward Supplies made All the supplies made during that quarter will be reported in aggregate value along with CGST and SGST payable on such supplies based on the compounding rate. The turnover reported will be net of advance and goods returned. 11) Amendments in outwards supplies made Any kind of changes in outward supplies will be made here along with the new compounding tax amount. 12) Details of Credit/Debit Notes issued and received All the debit/credit notes issued and received by the composition dealer will be reported under this heading. 13) Amendments to details of Credit/Debit notes Any modification in earlier issued or received debit/credit notes will be made under such head. 14) Consolidated Statement of Advances paid/advance adjusted on account of receipt of supply All the advances paid will be reported under this head. Advance paid will needs to be reported which falls under the reverse charge and for which invoice has not being received. We also need to disclose the advance amount which was paid on the invoice which is received during the tax period. Any amendments made to the advance reported earlier will also be reported under the same head only. 15) TDS credit received Such heading will be auto populated by the return filled by the counterparty deducting TDS. Under such head manually input is not possible and the deductee can only take claim of the TDS if it get auto populated in his return. 16) Tax Payable and paid This head will report the net tax liability that needs to be paid and the amount paid through amount of E-cash ledger only. 17) Interest, late fees, and other amount payable and paid Under this head the liability relating to interest and late filling arising, if any will get auto populated and such must be paid by using E-cash ledger only. 18) Refunds claimed from Electronic cash ledger Input credit in excess of the tax liability will be flow to this head. The taxpayer can claim refund of such amount displayed under this head to his registered bank account. 19) Debit entry in electronic cash/credit ledger for tax/interest payment This head will get auto populated after payment of tax liability and submission of the return. The amount used in the payment of the liability will be debited through the E-cash ledger and the ITC ledger. 105

113 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Components of GSTR-4A GSTR-4A will be available for the compounding dealer on the GST common portal. He can download the form and match the auto populated form with the purchases made by him. It will include 2 Parts in the returns that are: 1. It will contain the details of all the purchases and debit/credit notes as shown in the form GSTR-1 and GSTR-5 by the counterparty. 2. It will contain the details of TDS deducted on the GSTIN of the compounding dealer and it will get auto populated from the counterparty GSTR-7. GSTR-5 Who need to file Every registered non-resident taxable person is required to file GSTR-5. A non-resident taxable person takes registration for a specific period only. Thus he needs to file the return with 20days from the end of the tax period (i.e. end of the month) or within 7 days from the last date of validity of such registration. Non-Resident Foreign Taxpayer is those suppliers who don t have a business establishment in India and came for a short duration to make supplies in India. Such person needs to file details of all the supplies in GSTR-5. Components of GSTR-5 1) GSTIN GSTIN of the foreign taxpayer will get auto populated while filling of the return. 2) Name of the taxable person It will be auto populated at the time of login. 3) Address - It will be auto populated at the time of login. 4) Period of Return State the period for which return is to be filed. 5) Goods Imported - Details of goods imported with Bill entry number and date, 8-digist HSN code must also be stated. 6) Amendments in Goods imported of earlier tax period Any modification in the Goods imported of earlier tax period and its impact on IGST can be made here. 106

114 RETURNS 7) Taxable outward suppliers made to registered person The Foreign taxpayer must provide details of outward suppliers made with their GSTIN, if any along with complete break-up of CGST, SGST & IGST. 8) Taxable outward inter-suppliers made to un-registered person where invoice value is more than Rs. 2.5 lacs Under this head the Foreign Taxpayer needs to report all the sales made to consumer or any un-registered dealer outside state issuing invoice of more than Rs. 2.5 lakhs. 9) Taxable supplies to unregistered persons other than the supplies mentioned above Under such head all the other supplies made to un-registered dealer will be reported. Such supplies need to be reported consolidate and rate-wise. 10) Amendments to details of Outward supplies Any modification about supplies of earlier tax period can be made. 11) Details of Credit/Debit Note All the debit/credit received or raised by the foreign taxpayer must be shown in this table. 12) Amendments to Details of Credit/Debit Note of earlier tax period Any modification in debit/credit note of earlier period can be made in this table. 13) Total tax liability Under this head the return will auto calculate the tax liability on the account of all the outward supplies made and if any amount payable due to the negative amount in the amendments made during in the return. 14) Tax Payable and paid This head will report the net tax liability that needs to be paid and the amount paid through amount of E-cash ledger and also through ITC Ledger. 15) Interest, late fees, and other amount payable and paid Under this head the liability relating to interest and late filling arising, if any will get auto populated and such must be paid by using E-cash ledger only. 16) Refunds claimed from Electronic cash ledger Input credit in excess of the tax liability will be flow to this head. The taxpayer can claim refund of such amount displayed under this head to his registered bank account. 17) Debit entry in electronic cash/credit ledger for tax/interest payment This head will get auto populated after payment of tax liability and submission of the return. The amount used in the payment of the liability will be debited through the E-cash ledger and the ITC ledger. GSTR-6 Who need to file All the registered dealers registered as Input Service distributors needs to file GSTR-6 by 13 th of the next month. This return will contain details regarding the tax invoices on which credit has been received and which are being transferred to the other branches. Components of GSTR-6 1) GSTIN GSTIN of the taxpayer will get auto populated at the time of filling of the return. 2) Name of the taxable person It will be auto populated at the time of login. 3) Period of Return State the period for which return is to be filed. 4) Input tax credit received for distribution All the input invoices claimed will be auto populated by counter party filling of GSTR-1 & GSTR-5. Any new invoice can be added if the Input Service Distributor (ISD) is in possession of such invoice. 5) Total ITC/Eligible ITC/Ineligible ITC to be distributed for tax period Under this head the summary of the total amount available will be reported as total amount of ITC, eligible ITC, and ineligible ITC. 6) Distribution of input tax credit The ISD will distribute the ITC available with it to its branches. It will issue ISD invoices to it branches and report their GSTIN with such invoices to distribute ITC to them. 7) Amendments to details of inward supplies Any modification of earlier period can be done in this table. All details regarding revised and original invoice must be filled along with revised IGST, CSGT and SGST. 8) Details of Credit/Debit Notes All the credit/debit notes received and raised by ISD will be reported under this heading. Differential taxable value and differential tax will also get calculated here. 9) Amendments to details Credit/Debit Notes Any modification in debit/credit note of earlier period need to be reported under this head. 10) Input tax credit miss-matches and reclaims to be distributed in the tax period This head will get auto populated based on the mismatch of the ITC claimed by the ISD to distribute. It will also display input tax credit reclaimed on the basis of rectification of miss-match. 107

115 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 11) Redistribution of ITC distributed to a wrong recipient Any revision of credit given in earlier can be done under this heading. Input Service Distributor need to submit details of original and revised invoice along with GSTIN of the credit receiver along with distribution of ISD. 12) Late Fees It will display the amount of late fees to be paid by the ISD due to late filling of returns. 13) Refunds claimed from Electronic cash ledger Input credit in excess of the tax liability will be flow to this head. The taxpayer can claim refund of such amount displayed under this head to his registered bank account. Components of GSTR-6A GSTR-6A will be made available to the Input Service Distributor on his login of the GST common portal. This form will get auto populated by the GSTR-1 form filed by the counterparty and will be made available before the due date of GSTR-6. If ISD is in possession of any invoice which didn t get auto populate he manually input the invoice and such modification will be made available to the counterparty in his GSTR-1A. GSTR-7 Who need to file Following people are required to deduct TDS: a. A department or establishment of the Central or State Government, or b. Local authority, or c. Governmental Agencies, or d. Such persons or category of persons as may be notified, by the Central or State Government on the recommendations of the Council. They need to deduct 1% TDS under GST if the total value of supply under a contract exceeds Rs. 2.5 lakhs. They need to deposit such TDS and file the return for the same before 10 th of the next month. Components of GSTR-7 1) GSTIN GSTIN of the taxpayer will get auto populated at the time of login in the GST common portal. 2) Name of the taxable person It will be auto populated at the time of login. 3) Period of Return State the period for which return is to be filed. 4) TDS details Under this heading the TDS deductor must provide various details: a) GSTIN of the deductee b) Value on which TDS is to be deducted c) Rate and amount of TDS deducted on CGST, SGST & IGST 5) Revision in TDS details Any revision of all the details above of the earlier period will be made here. This modification will accordingly revise the TDS Deduction Certificate in Form GSTR-7A. 6) Tax deduction at source and paid TDS liability will get auto populated on the basis of above information provided. This head will only include the amount of tax deducted and amount paid. 7) Interest, late fees payable and paid Under this head the return will also auto calculate the amount of late fees payable and the amount of late fees. 8) Refund Claimed from Electronic cash ledger Any amount received into bank account from Electronic Cash Ledger will get auto populated here. 9) Debit entry in electronic cash for TDS/interest payment This head will get auto populated after payment of tax liability and submission of the return. The amount used in the payment of the liability will be debited through the E-cash ledger. This return cannot be filled without payment of the full amount of tax liability. Components of GSTR-7A GSTR-7A is the TDS certificate that is proof of the TDS deducted on the GSTIN of the taxpayer. This TDS certificate contains the details of TDS deducted and the paid to the government and the counterparty can avail the input of such TDS after receipt of such certificate. GSTR-8 Who need to file Every e-commerce operator, who is required to collect tax at source (TCS) under GST, shall furnish a statement in the Form GSTR-8 before 10 th of the next month. 108

116 RETURNS Components of GSTR-8 1) GSTIN GSTIN of the e-commerce operator will get auto populated at the time of return filling. 2) Name of the taxable person It will be auto populated at the time of login. 3) Period of Return State the period for which return is to be filed. 4) Details of the supplies to Registered Taxable Person The merchant providing e-commerce facilities to the registered taxable person must provide the following details: a) GSTIN of supplier b) Gross value and Taxable Value of Goods c) HSN/SAC code d) Rate and Amount of IGST, CGST & SGST 5) Amendments to details of supplies Any modification to the above information about the previous period can be made here. 6) Details of supplies to unregistered persons All the supplies made by the e-commerce operator to unregistered person will be made under this head. The following details will be needed to be disclosed: a) GSTIN of supplier b) Taxable Value c) Rate and Amount of IGST, CGST & SGST 7) Amendments to details of supplies to unregistered persons Any modification in the value of supplies made to unregistered person relating to an earlier tax period will be made under this head. 8) Details of interest Under this head it will display the amount of default and any interest due on such amount. 9) Tax payable and paid This heading will display the amount of TCS payable by the e-commerce operator. This will get auto calculated from the details reported in the above head. The e-commerce operator will be required to pay his liability by using his E-cash ledger. He will pay the outstanding liability by debiting his E-cash ledgers. 10) Interest, late fees payable and paid Under this head the return will also auto calculate the amount of late fees payable and the amount of late fees. 11) Refund Claimed from Electronic cash ledger Any amount received into bank account from Electronic Cash Ledger will get auto populated here. 12) Debit entry in electronic cash for TCS/interest payment This head will get auto populated after payment of tax liability and submission of the return. The amount used in the payment of the liability will be debited through the E-cash ledger. GSTR-9 Who need to file All the registered taxable person is required to file an Annual return in the From GSTR-9. Any taxable person registered under composition scheme will be required to file Annual return through Form GSTR-9A. Any taxpayer whose aggregate turnover during a financial year is more than one crore will need to get his account audited. They are required to furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in the Form GSTR-9B. The last date of filing of Annual return is 31 st December of the next financial year. Components of GSTR-9 1) GSTIN GSTIN of the taxpayer will get auto populated at the time of return filling. 2) Name of the taxable person This detail will be auto populated at the time of login. 3) Whether liable to Statutory Audit This head will be applicable if the turnover exceeds Rs. 1 crore in the financial of which return is filled. 4) Auditors If the Turnover exceeds the threshold limit then the details of appointed auditor must be entered. 5) Details of Expenditure Under this head the taxpayer need to furnish information of purchase of goods and services and must be bifurcated between goods and services along with HSN and SAC codes respectively. a) Total value of purchase on which ITC availed (inter-state) b) Total value of purchase on which ITC availed (intra-state) c) Total value of purchase on which ITC availed (Imports) 109

117 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX d) Other purchase in which no ITC availed e) Sales Return f) Other Expenses (Expenditure other than purchases) 6) Details of Income All the supplies made during the tax period must be stated under this head and differentiated between goods and services. a) Total value of supplies on which GST paid (inter-state) b) Total value of supplies on which GST paid (intra-state) c) Total value of supplies on which GST paid (Exports) d) Values of other supplies on which no GST paid e) Purchase Return f) Other Income (Income other than supplies) 7) Return reconciliation statement When all the information is furnished in the above head the system will auto reconcile and auto calculate any amount payable under IGST, CGST or SGST along with interest payable on such liability arising. 8) Other Amounts This head have two parts: a) Arrears (Audit/Assessment etc.) This will get auto populated which will have information about any other amount payable by the taxpayer to the government along with interest or penalty on it and the current status of such order. b) Refunds This head will also get auto populated and will display report on all the refunds made during the tax period and the refunds pending with their amount and current status. 9) Profit as per the Profit and Loss Statement Every registered taxpayer needs to report a breakup of gross profit, profit after tax and net profit under this head for the tax year for which return is filed. Components of GSTR-9A 1) GSTIN GSTIN of the taxpayer will get auto populated at the time of return filling. 2) Name of the taxable person This detail will be auto populated at the time of login. 3) Period of Return State the period for which return is to be filed. 4) Turnover Details Under this head the taxpayer registered under composition scheme is need to file turnover on: a) Gross Turnover (GSTIN) b) Gross Turnover (Entity) 5) Details of Expenditure Under this head the composite dealer will report all the purchase made by him including the purchase made from the unregistered dealer net of purchase return. The purchase must be bifurcated under such headings: a) Local Purchases net of purchase return i) Goods (other than attracting reverse charge) ii) Goods (reverse charge) iii) Services (other than attracting reverse charge) iv) Services (reverse charge) b) Total value of purchase (imports) i) Goods ii) Services c) Other expenditure (Expenditure other than purchases) Under this head all the expenditures must be reported with their head and their amount as per their Profit and Loss Statement. 6) Details of Income Under such head total supplies must be reported with their taxable amount with compounding tax rate and compounding tax amount. They have to be reported under following head: a) Outward supplies made net off sales return i) Intra-state supplies (goods) ii) Intra-state supplies (supplies) iii) Exempted supplies iv) Nil rated supplies v) Non-GST supplies vi) Export b) Other income (income other than from supplies) 110

118 RETURNS Under this head all the incomes made by the compounding dealer must be reported with the name of the income head and the amount. 7) Return reconciliation Statement This head will be get auto populated by the system. It will show turnover as per all the quarters and also any difference in tax payable regarding any quarter with its respective interest. It will also show all the amount payable and paid under reverse charge mechanism in terms of SGST, CGST and IGST. 8) Other Amounts This head have two parts: a) Arrears (Audit/Assessment etc.) This will get auto populated which will have information about any other amount payable by the taxpayer to the government along with interest or penalty on it and the current status of such order. b) Refunds This head will also get auto populated and will display report on all the refunds made during the tax period and the refunds pending with their amount and current status. 9) Profit as per the Profit and Loss Statement Every registered taxpayer needs to report a breakup of gross profit, profit after tax and net profit under this head for the tax year for which return is filed. GSTR-10 Who need to file Registered taxpayers who applied for cancelation for their GSTIN will be required to file a final return as form GSTR-10. Such form will be required to be filed with 3 months of the date of cancellation or date of cancellation order, whichever is earlier. Components of GSTR-10 1) GSTIN It will get auto populated at the time of login. 2) Legal Name - It will get auto populated at the time of login. 3) Business Name - It will get auto populated at the time of login. 4) Address - It will get auto populated at the time of login. 5) Application Reference number ARN is needs to be furnished in case the cancellation order had been passed. 6) Effective date of Surrender/Cancellation This will require the date of cancellation as it appears in the order. 7) Whether cancellation order has been passed Taxpayer need to specify whether the return is being filed on the basis of cancellation order or on a voluntary basis. 8) If Yes, Unique ID of Cancellation order Unique ID will be provided by the authorities at the time of passing of cancellation order. 9) Date of cancellation order This will the date on which the GST authorities passed the cancellation order. 10) Particulars of Closing Stock Taxpayer need to furnish details of closing stock held at the time of ceasing the business. Any amount of credit lying in such stock needs to be paid along with this return. 11) Amount of Tax Payable on Closing Stock - As mentioned above, credit lying in input and/or capital goods needs to be paid to the administration. This amount is auto-computed under this head on the basis of the declaration of closing stock of goods. GSTR-11 Who need to file Every person who has been issued a UIN (Unique Identity Number) and claims a refund of tax paid on the on his inward supplies, shall furnish details of such input in the Form GSTR-11 by 28 th of the next month. UIN is a special classification made for foreign diplomatic missions and embassies which are not liable to taxes in Indian Territory. Any amount of tax collected from such bodies is refunded back to them. Components of GSTR-11 1) UIN Such UIN will get auto populated at the time of login into the portal. 2) Name of the Government Entity Under this head, name of the government entity will get auto populated from the records from the records. 3) Period The taxable person need to select the return period for which such GSTR-11 is being filed. 111

119 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 4) Details of Purchases made for consumption or use Under this head all the purchases made on which tax has been paid will get auto populated. Such purchases must be for consumption or for use by UIN. If the details don t get auto populated the UIN can input the details manually if he is in possession of such taxable invoice. Note- As per Notification No. 55/2017- CT, a new rule been inserted wherein manual filing of application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as will be made available for providing ease of filing to taxpayers. Matching concept of invoices under GST Supplier will upload GSTR-1 GSTR-2A of recipient will be auto generated by it. Recipient will generate GSTR-2 by accepting/ rejecting/ modifying details from GSTR-2A Net Tax will be calculated after this which is carried forward in GSTR-3 supplier will accept modifications made by recipient by 17th Recipient will add missing invoices if any Explanation:- Details of inward supply furnished by recipient are required to be matched by him with the outward supply furnished by supplier in his return. In case the invoices are matched they are finally accepted by the recipient. Conditions when mismatch of invoice can occur:- 1. Where ITC claimed by recipient is more than tax declared by supplier. 2. ITC claimed by recipient but outward supply not shown by supplier. 3. Where ITC on same invoice is claimed twice by the recipient. 4. Reduction in output tax liability by supplier is more than reduction in ITC by recipient 5. Credit note not declared by the recipient. 6. Where output tax liability is reduced twice by supplier on same credit note. In case of point no. (1),(2),(4) & (5) discrepancy shall be communicated to both supplier and recipient to rectify the same in the return of the month in which the same is communicated. In case of point no. (3) Discrepancy shall be communicated only to the recipient as the fault is on his side only and excess amount of tax shall be added to the output liability of the month in which such discrepancy is communicated. In case of point no. (6) Discrepancy shall be communicated only to the supplier and excess amount of tax shall be added to the output liability of the month in which such discrepancy is communicated. If discrepancy is not rectified in case of point no. (1) & (2), it shall be added to the output tax liability:- 112

120 RETURNS 1) And recipient of supply is required to pay excess ITC so availed in the month succeeding the month in which discrepancy was communicated along with interest from the date of availing of credit till the corresponding additions made in his return. 2) But, if, supplier later on rectifies the discrepancy, the amount of excess tax so paid by the recipient can now be reduced from output tax liability which was added earlier and the amount of interest will be refunded to the recipient. If discrepancy is not rectified in case of point no. (4) & (5), it shall be added to the output tax liability:- 1) And discrepancy shall be added to the output tax liability of supplier for the month succeeding the month in which such discrepancy was communicated to the supplier. 2) If later on recipient of supply rectifies such discrepancy, supplier shall be eligible to reduce the outward tax liability which was added in his return and interest paid will also be refunded. DETAILS OF MISMATCHED INVOICES, DEBIT AND CREDIT NOTES HOW TO BE SHOWN ON FORMS:- 1. Details of invoices, debit and credit notes that were shown in the return of august filed by 20th Sept. that were found to have been mismatched will be rectified in the return of September to be filed by 20th Oct. 2. Details of invoices, debit and credit notes that were shown in the return of July and before but not earlier than April of previous financial year and that were found to have been mismatched will be rectified in the return of September to be filed by 20th Oct. 3. Details of invoices, debit and credit notes that were shown in the return of august but mismatch was not rectified in the return for the month of September filed by 20th October and will become payable in the return for month of October to be filed 20th November. 4. Details of Invoices, Debit and Credit Notes of the month of September that have been found to have mismatched and may become payable in the return for November to be filed by 20th December in case mismatch not rectified in the return for October to be filed by 20th November Note: - Form related to correction of mismatch is yet to be notified by the government. Communication and Rectification of discrepancy in claim of input tax credit and reversal of claim of input tax credit [Sec. 42(3) & 42(5) with Rule- 71 of Return Rules]: Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of the tax declared by the supplier for the same supply or the outward supply is not declared by the supplier in his valid returns, the discrepancy shall be communicated to both such persons in such manner as may be prescribed. -Sec. 42(3) 1. Any discrepancy in the claim of input tax credit in respect of any tax period u/s 42(3), and the details of output tax liable to be added u/s 42(5) of the said section on account of continuation of such discrepancy, shall be made available to the recipient making such claim electronically in FORM GST MIS-1 and to the supplier electronically in FORM GST MIS-2 through the common portal on or before the last date of the month in which the matching has been carried out. 2. A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the statement of outward supplies to be furnished for the month in which the discrepancy is made available. 3. A recipient to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the statement of inward supplies to be furnished for the month in which the discrepancy is made available. 4. Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of discrepancy shall be added to the output tax liability of the recipient in his return to be furnished in FORM GSTR-3 for the month succeeding the month in which the discrepancy is made available. Explanation 1 - Rectification by a supplier means adding or correcting the details of an outward supply in his valid return so as to match the details of corresponding inward supply declared by the recipient. Explanation 2 - Rectification by the recipient means deleting or correcting the details of an inward supply so as to match the details of corresponding outward supply declared by the supplier. Claim of input tax credit on the same invoice more than once [Sec. 42(4) with Rule-72 of Return Rules]: Duplication of claims of input tax credit in the details of inward supplies shall be communicated to the registered person in FORM GST MIS-1 electronically through the Common Portal. 113

121 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX GOODS AND SERVICE TAX PRACTITIONERS (SEC. 48 WITH RULE 83 OF RETURN RULES): The 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 shall be as follows: 1. Any person who is a citizen of India, is of sound mind, is not adjudicated as insolvent and has not been convicted by a competent court, may apply for enrollment as a Goods and service Tax Practitioner in Form GST PCT-01 if he satisfies any of the following conditions: a. He is a retired officer of Commercial Tax Department of any state, or CBEC, who had worked in a post not lower than that of a group- B gazette officer for a period of not less than 2 years, OR b. He has been enrolled as a sales tax practitioner or tax return preparer under the existing law for a period of not less than 5 years. c. He has passed: i. A graduate or PG degree in commerce, law, banking or business administration etc. ii. A degree of any foreign university is recognized by any Indian University as equivalent to above. iii. Any other examination notified by the govt. iv. Final examination of ICAI, ICSI or Institute of Cost Accountants of India. 2. On receipts of application, the P.O. may enroll the applicant as a GST practitioner and issue a certificate in Form GST PCT Any practitioner found guilty of misconduct may be disqualified to function as a GST Practitioner u/s Any registered person may, at his option, authorise a goods and services tax practitioner on the Common Portal in FORM GST PCT-05 or, at any time, withdraw such authorisation in FORM GST PCT-05 and the goods and services tax practitioner so authorised shall be allowed to undertake such tasks as indicated in the said authorization during the period of authorisation. 5. A GST Practitioner can undertake following activities on behalf of the registered person: a. furnish the details of outward and inward supplies; b. furnish monthly, quarterly, annual or final return; c. make deposit for credit into the electronic cash ledger; d. file a claim for refund; and e. File an application for amendment or cancellation of registration. 6. Any registered person shall, before confirming submission of any statement prepared by the goods and service tax practitioner, ensure that the facts mentioned in the return are true and correct. The responsibility for correctness of any particulars shall continue to rest with the registered person. 7. A goods and services tax practitioner attending on behalf of a registered or an unregistered person in any proceedings under the Act before any authority shall produce before such authority, if required, a copy of the authorisation given by such person in FORM GST PCT

122 CHAPTER-10 PAYMENT OF TAX PERSON LIABLE TO PAY TAX Person - As defined under CGST act 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 under companies act, (h) Anybody 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. (k) Central Government or State Government (l) Society as defined under the Societies Registration Act, 1860 (m) Trust and (n) Every artificial juridical person, not falling within any of above. RATES IN GST: Currently, there are four major tax rates under GST depending on the type of good/service. The four rates are 5%, 12%, 18%, and 28%. 1. PAYMENT OF TAX WILL BE MADE ELECTRONICALLY - no generation of paper at any stage. 2. Under GST, 4 types of Taxes to be paid- CGST, IGST, UTGST and SGST. GST INTRA-STATE MOVEMENT INTER-STATE MOVEMENT CENTRAL GST (CGST) STATE GST (SGST) INTEGRATED GST (IGST) Fig. 1: Taxes under GST 115

123 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX i. CGST & SGST -The GST to be levied by the Centre on intra-state supply of goods and/or services is Central GST (CGST) and that by the States is State GST (SGST). ii. IGST - On inter-state supply of goods and services, Integrated GST (IGST) will be collected by Centre. IGST will also apply on imports. 3. MODE OF PAYMENT- Three Modes of Payment (Mode I) _ Electronic including CC/DC (Mode II) _ Over the Counter Payment (for Payments upto Rs. 10,000/-) (Mode III) _ Payment through RTGS/NEFT For e.g.: A dealer in Maharashtra sold goods to the consumer in Maharashtra worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%, in such case the dealer collects Rs and Rs. 900 will go to the central government and Rs. 900 will go to the Maharashtra government. Now, if the dealer in Maharashtra had sold goods to a dealer in Gujarat worth Rs. 1, 00,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 18,000 as IGST. This IGST will go to the Centre. 4. Electronically generated Challan from GSTN (GOODS AND SERVICE TAX NETWORK) for all 3 modes containing a unique 14-digit Common Portal Identification Number (CPIN) for each challan. Certain key details like name, address, , GSTIN of payer to be auto-populated. 5. Provided further that the challan in FORM GST PMT-06 generated at the Common Portal shall be valid for a period of fifteen days. [EXPLANATION: Taxpayer after calculating its liability can generate the challan after furnishing all the required information regarding output tax and input tax without making the payment of any tax liability same can be paid after, till the expiry of 15 days] Payment of tax [SECTION 49] Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer (NEFT) or Real Time Gross Settlement (RTGS) or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger. (Sec-49(1)). Rule 87 of Payment of Tax Electronic Cash Ledger 1- The electronic cash ledger shall be maintained in FORM GST PMT-05 for each person liable to pay tax, interest, penalty, late fee or any other amount for crediting the amount deposited and debiting the payment there from towards tax, interest, penalty, fee or any other amount. 2- Any person, or a person on his behalf, shall generate a challan in FORM GST PMT-06 towards tax, penalty, interest, fees or any other amount. Provided further that the challan in FORM GST PMT-06 generated at the Common Portal shall be valid for a period of fifteen days. 3- Any payment required to be made by a person who is not registered shall be made on the basis of a temporary identification number generated. 4- On successful credit of the amount, a Challan Identification Number (CIN) will be generated. Where no Challan Identification Number (CIN) is generated, the said person may represent electronically in FORM GST PMT Where a person has claimed refund of any amount from the electronic cash ledger, the said amount shall be debited to the electronic cash ledger. 6- If the refund so filed is rejected, either fully or partly, the amount debited as above, to the extent of rejection, shall be credited to the electronic cash ledger by the proper officer by an order made in FORM GST PMT A registered person shall, upon noticing any discrepancy in his electronic cash ledger in FORM GST PMT

124 PAYMENT OF TAX The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger. (Section 49(2)) Rule 86 of Payment of Tax Electronic Credit Ledger 1- The electronic credit ledger shall be maintained in FORM GST PMT-02 for each registered person eligible for input tax credit every claim of input tax credit under the Act shall be credited to the said Ledger. 2- The electronic credit ledger shall be debited to the extent of discharge of any liability in accordance with section Where a registered person has claimed refund of any unutilized amount in accordance with the provisions of section 54, the amount to the extent of the claim shall be debited in the said ledger. 4- If the refund so filed is rejected, either fully or partly, the amount debited under sub-rule (3), to the extent of rejection, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT No entry shall be made directly in the electronic credit ledger under any circumstance. 6- A registered person shall, upon noticing any discrepancy in his electronic liability ledger in FORM GST PMT-04. Explanation. A refund shall be deemed to be rejected, if the appeal is finally rejected or if the claimant gives an undertaking to the proper officer that he shall not file an appeal. The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable. The amount available in the electronic credit ledger may be used for making any payment towards output Tax of CGST and IGST. The credit would be permitted to be utilized in the following manner: a) ITC of CGST allowed for payment of CGST & IGST in that order; b) ITC of SGST allowed for payment of SGST & IGST in that order; c) ITC of UTGST allowed for payment of UTGST & IGST in that order; d) ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in that order. ITC of CGST cannot be used for payment of SGST/UTGST and vice versa. [ Sec 49(5)] Some basic requirements for ITC [The law has laid down conditions to avail GST input tax credit on supply of goods or services. All of the following conditions need to be satisfied to avail GST Input credit: The dealer should be in possession of Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a supplier registered under GST Act. Returns (GSTR-3) have been filed. The tax charged has been paid to the government by the supplier. The tax charged has been paid to the government by the supplier.] The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance with the provisions of section 54. [EXPLANATION: SECTION 54 A registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.] All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic liability register in such manner as may be prescribed. (Sec 49(7) Rule-85 of Payment of Tax Rules Electronic Liability Register 1- The electronic liability register specified shall be maintained in FORM GST PMT

125 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 2- The electronic liability register of the person shall be debited by the amount payable towards tax, interest, late fee or any other amount payable as per the return furnished by the said person or as determined by a proper officer in pursuance of any proceedings under the Act or as a result of mismatch under section 42 or section 43 or section 50 or any amount of interest that may accrue from time to time. 3- A registered person shall, upon noticing any discrepancy in his electronic liability ledger in FORM GST PMT-04. INTEREST ON DELAYED PAYMENT OF TAX [SECTION 50] Every person who is liable to pay tax, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at the rate eighteen per cent. The interest shall be calculated from the day succeeding the day on which such tax was due to be paid. * If a taxable person who makes an undue or excess claim of input tax credit or undue or excess reduction in output tax liability shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at the rate of twenty-four per cent. TAX DEDUCTED AT SOURCE IN GST [SECTION 51] 1. The Government may mandate, a) A department or establishment of the Central Government or State Government; or b) Local authority; or c) Governmental agencies; or d) Such persons or category of persons as may be notified by the Government on the recommendations of the Council, (Hereafter in this section referred to as the deductor ), to deduct tax at the rate of one per cent from the payment made or credited to the supplier (hereafter in this section referred to as the deductee ) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees: Provided that 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. Explanation. For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice. 2. The amount deducted as tax under this section shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made, in such manner as may be prescribed. For example: X department of Central Government deducts from Y on 5 August 2017 then it is liable to make payment by 10 September The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed. If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees. 4. The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor. 5. If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the 118

126 PAYMENT OF TAX amount of tax deducted. [EXPLANATION: Interest as per sub section 1 of section 50 is at the rate not exceeding 18%] 6. The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance WITH SECTION 54. Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee. As per sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-state supplies of goods or services or both received by a deductor under section 51 of the said Act, from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the said Act, subject to the condition that the deductor is not liable to be registered otherwise than under sub-clause (vi) of section 24 of the said Act. Example: Where an unregistered dealer is supplying goods to any dept. or agency of Central Govt. of worth Rs. 3,00,000 on which, such dept. is required to deduct tax at 1% and is also required to pay tax on purchases of such goods on reverse charge basis. GST council by issuing notification has exempted such deductors (specified in section 51) from payment of whole of such tax, if those deductors are not required to be registered under any other section except section 24(vi) of this act. COLLECTION OF TAX AT SOURCE UNDER GST A clause has been inserted under GST law for all the e-commerce aggregators. E-commerce aggregators are made responsible under the GST law for deducting and depositing tax at the rate of 1% from each of the transaction. Any dealers/traders selling goods/services online would get the payment after deduction of 1% tax. It is a significant change which would increase a lot of compliance and administration cost for online aggregators like Flip kart, snapdeal, Amazon etc. They would need to deposit the tax deducted by the 10th day of the next month. All the traders/dealers selling goods/services online would need to get registered under GST even if their turnover is less than 20 Lakhs for claiming the tax deducted by aggregators. COLLECTION OF TAX AT SOURCE [SECTION 52] Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the operator ), not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., 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. [Explanation. For the purposes of this sub-section, the expression net value of taxable supplies shall mean the aggregate value of taxable supplies of goods or services or both made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month]. The amount collected as TCS shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made, in such manner as may be prescribed. FOR EXAMPLE; Mr. X is a trader who sells his ready-made clothes online on Amazon India. He receives an order for Rs 10, 000 inclusive of tax and commission. Amazon charges a commission of Rs 200. Amazon would therefore need to deduct 1% tax (TCS) on the amount, excluding the money paid as commission (Rs. 200) and GST (Rs when Amazon would thus be deducting tax for Rs 80 (1% of Rs. 8000). Every operator who collects the amount specified in sub-section (1) shall furnish a statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) 119

127 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX during a month, in such form and manner as may be prescribed, within ten days after the end of such month. Every operator who collects the amount specified in sub-section (1) shall furnish an annual statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under the said sub-section during the financial year, in such form and manner as may be prescribed, before the thirty first day of December following the end of such financial year. The supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator, in such manner as may be prescribed. The details of supplies furnished by every operator under sub-section (4) shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act in such manner and within such time as may be prescribed. Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under section 37, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed. The amount in respect of which any discrepancy is communicated under sub-section (9) 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 in such manner as may be prescribed. The concerned supplier, in whose output tax liability any amount has been added, shall pay the tax payable in respect of such supply along with interest, at the rate specified under sub-section (1) of section 50[ [i.e. not exceeding 18%] on the amount so added from the date such tax was due till the date of its payment. 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 relating to (a) supplies of goods or services or both effected through such operator during any period; or (b) Stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, as may be specified in the notice. Every operator on whom a notice has been served shall furnish the required information within fifteen working days of the date of service of such notice. Any person who fails to furnish the information required by the notice served shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to twenty-five thousand rupees. 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. FORMS UNDER PAYMENT RULES S. No. FORM NAME DESCRIPTION 1 GST PMT- 01 Electronic Tax Liability Register of Taxpayer 2 GST PMT- 02 Electronic Credit Ledger 3 GST PMT- 03 Order for re-credit of the amount to electronic credit ledger if refund rejected 4 GST PMT- 04 Communicating discrepancy in electronic credit register to proper officer 5 GST PMT- 05 Electronic Cash Ledger 6 GST PMT- 06 Challan for Deposit of Goods and Services Tax 7 GST PMT- 07 Application for credit to Bank when CIN not generated. 120

128 CHAPTER-11 REFUND PROCESS UNDER GST Currently, the refund for the excess of VAT/CST paid is claimed annually. Refund on the excess of excise duty paid is paid through the duty drawback scheme. There are a lot of delays under the current system in providing the refund for excise/vat/cst. SECTION 54- REFUND Any person claiming refund of any tax and interest, if any, 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 such form and manner as may be prescribed. A registered person may claim refund of any unutilized input tax credit at the end of any tax period. Provided that no refund of unutilised input tax credit shall be allowed in cases other than i. zero rated supplies made without payment of tax; ii. 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. Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty: Provided also that no refund of input tax credit shall be allowed, 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. Following is the procedure for processing of refund claimed-: 1. Application form for claiming refund can be filed through the GSTN portal. FORM GST RFD An acknowledgement number would be provided to the applicant via SMS or , once the application is filed electronically. 3. Adjustment would be made to return and cash ledger and reduce the carry-forward input tax credit automatically, Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49 may also be made through the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7 4. Refund application and documents submitted shall be scrutinized within a period of 60 days of filing the refund application. 5. Concept of unjust enrichment would be examined for reach refund application. If it does not qualify, then the refund would be transferred to CWF (consumer welfare fund). 6. If refund claimed exceeds the predetermined amount of refund then it will go through pre-audit process for sanctioning the refund.(2 LAKH RUPEES) 7. Refund will be credited electronically to the account of applicant via ECS, RTGS or NEFT. 8. Application for refund can be made at end of each quarter. 9. No refund shall be provided for an amount of less than Rs 1000, 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 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 (a) 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; (b) refund of unutilised input tax credit under sub-section (3); 121

129 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX (c) 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; (d) refund of tax in pursuance of section 77; (e) 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 (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify As per notification no. 15/2017 issued by the council no refund of unutilsed input tax credit shall be allowed in case of supply of services in form of construction of a complex building or a civil structure. Provided notification will mutatis mutandis be applicable on IGST & UTGST. RULE : 89 APPLICATION OF REFUND 1. Any person claiming refund of any tax, interest, penalty, fees or any other amount paid by him, may file an application in FORM GST RFD- 01. Claim for refund relating to balance in electronic cash ledger u/s 49(6) may also be made through return furnished for the relevant tax period. In case of export of goods, application for refund shall be filed only after the export manifest or an export report is delivered u/s 41 of Customs Act, As per Notification No. 47/2017 -CT, in respect of supplies regarded as deemed exports, the application may be filed bya) the recipient of deemed export supplies, or b) the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund. 2. The application shall be accompanied by any of the following documentary evidence as applicable: a. The reference number and copy of order passed by the P.O. or appellate authority. b. A statement containing the number and date of shipping bills or bills of export and the number and date of relevant export invoices in case of export of goods. c. a statement containing the number and date of invoices and the relevant Bank Realization Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of export of services; d. a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports; e. the reference number of the final assessment order and a copy of the said order in a case where the refund arises on account of finalisation of provisional assessment; f. a declaration to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed does not exceed two lakh rupees. g. A Certificate in Annex 2 of FORM GST RFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed a refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds two lakh rupees. 3. Where the application relates to refund of input tax credit, the electronic credit ledger shall be debited by the applicant in an amount equal to the refund so claimed. 4. In case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, refund of input tax credit shall be granted as per the following formula: Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC Adjusted Total Turnover 122

130 REFUND PROCESS UNDER GST Where,- A) "Refund amount" means the maximum refund that is admissible; B) "Net ITC" means input tax credit availed on inputs and input services during the relevant period; C) "Turnover of zero-rated supply of goods" means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking; D) "Turnover of zero-rated supply of services" means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:- Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period; E) "Adjusted Total turnover" means the turnover in a State or a Union territory, as defined under subsection (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period; F) Relevant period means the period for which the claim has been filed. 5. In case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula: Maximum Refund Amount = {(Turnover of inverted rated supply of goods) x Net ITC Adjusted Total Turnover} minus tax payable on such inverted rated supply of goods. RULE: 90 ACKNOWLEDGEMENTS (a) Where the application relates to a claim for refund from the electronic cash ledger, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the Common Portal electronically, clearly indicating the date of filing of the claim for refund and the time period specified in sub-section (7) of section 54 shall be counted from such date of filing. (b) The application for refund, other than claim for refund from electronic cash ledger, shall be forwarded to the proper officer who shall, within fifteen days of filing of the said application, scrutinize the application for its completeness and where the application is found to be complete in terms of sub-rule (2), (3) and (4) of rule 1, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the Common Portal electronically, clearly indicating the date of filing of the claim for refund and the time period specified in sub-section (7) of section 54 shall be counted from such date of filing. 4 Provided that where the claim for refund of integrated tax is on account of export of goods, the acknowledgment shall be issued within a period of three days of filing of such claim. (c) Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-03 through the Common Portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies. (d) Where deficiencies have been communicated in FORM GST RFD-03 under the GST Rules of the State, the same shall also deemed to have been communicated under this Rule along with deficiencies communicated under sub-rule (3). Provisional Refund (Sec 54(6)): The proper officer may, in the case of any claim for refund on account of zero-rated supply made by registered persons, refund on a provisional basis, ninety per cent 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 for final settlement of the refund claim after due verification of documents furnished by the applicant. RULE- 91 GRANT OF PROVISIONAL REFUND: 1. The provisional refund shall be granted subject to the condition that the person claiming refund has, during any period of five years immediately preceding the tax period to which the claim for refund 123

131 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX relates, not been prosecuted for any offence under the Act or under an existing law where the amount of tax evaded exceeds two hundred and fifty lakh rupees; 2. The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and on being prima facie satisfied that the amount claimed as refund is due to the applicant, shall make an order in FORM GST RFD-04, sanctioning the amount of refund due to the said applicant on a provisional basis within a period not exceeding seven days from the date of acknowledgement. The proper officer shall issue a payment advice in FORM GST RFD-05 for the amount sanctioned under subrule (2) and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund. RULE: 92 ORDER SANCTIONING REFUND (a) Where, upon examination of the application, the proper officer is satisfied that a refund under subsection (5) of section 54 is due and payable to the applicant, he shall make an order in FORM GST RFD- 06, sanctioning the amount of refund to which the applicant is entitled, mentioning therein the amount, if any, refunded to him on a provisional basis under sub-section (6) of section 54, amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable: (b) Where the proper officer is satisfied, for reasons to be recorded in writing, that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant, he shall issue a notice in FORM GST RFD-08 to the applicant, requiring him to furnish a reply in FORM GST RFD-09 within fifteen days of the receipt of such notice and after considering the reply, make an order in FORM GST RFD-06, sanctioning the amount of refund in whole or part, or rejecting the said refund claim. INTEREST ON DELAYED REFUNDS [SECTION 56] If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under subsection (1) of that section, interest at the rate of six per cent. as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax: Provided that 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 application filed consequent to such order, interest at the rate of nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund. Where a refund is withheld u/s 54(11), the taxable person shall, notwithstanding section 56, be entitled to interest at the rate of 6 per cent, if as a result of the appeal or further proceedings he becomes entitled to refund. RULE 95: REFUND OF TAX TO CERTAIN PERSONS- 1. Any person eligible to claim refund of tax paid by him on his inward supplies shall apply for refund in FORM GST RFD-10 once in every quarter along with a statement of the inward supplies of goods or services or both in FORM GSTR-11, prepared on the basis of the statement of the outward supplies furnished by the corresponding suppliers in FORM GSTR An acknowledgement for the receipt of the application for refund shall be issued in FORM GST RFD The refund of tax paid by the applicant shall be available ifa. The inward supplies of goods or services or both were received from a registered person against a tax invoice and the price of the supply covered under a single tax invoice exceeds Rs excluding tax paid, b. Name and GSTIN or Unique Identity Number of the applicant is mentioned in the tax invoice, and c. Such other restrictions or conditions as may be specified. 124

132 REFUND PROCESS UNDER GST 4. The provisions of Rule 92 shall, mutatis mutandis, apply for the sanction and payment of refund under this rule. 5. Where an express provision in a treaty or other international agreement is inconsistent with the provisions of this Chapter, such treaty or international agreement shall prevail. CONSUMER WELFARE FUND [SECTION 57] The Government shall constitute a Fund, to be called the Consumer Welfare Fund and there shall be credited to the Fund, (a) the amount referred to in sub-section (5) of section 54; (b) any income from investment of the amount credited to the Fund; and (c) Such other monies received by it, in such manner as may be prescribed. All sums credited to the Fund shall be utilized by the Government for the welfare of the consumers in such manner as may be prescribed. All credits to the Consumer Welfare Fund shall be made under sub-rule (4) of rule 4. Any amount, having been credited to the Fund, ordered or directed as payable to any claimant by orders of the proper officer, appellate authority or Appellate Tribunal or court shall be paid from the Fund. Any utilization of amount from the Consumer Welfare Fund under sub-section (1) of section 58 shall be made by debiting the Consumer Welfare Fund account and crediting the account to which the amount is transferred for utilization. The [Central/State] Government shall, by an order, constitute a Standing Committee with a Chairman, a Vice- Chairman, a Member Secretary and such other members as it may deem fit and the Committee shall make recommendations for proper utilization of the money credited to the Consumer Welfare Fund for welfare of the consumers. The Committee shall meet as and when necessary, but not less than once in three months. Any agency or organisation engaged in consumer welfare activities for a period of three years registered under the Companies Act, 2013 (18 of 2013) or under any other law for the time being in force, including village or mandal or samiti level co-operatives of consumers especially Women, Scheduled Castes and Scheduled Tribes, or any industry as defined in the Industrial Disputes Act, 1947 (14 of 1947) recommended by the Bureau of Indian Standards to be engaged for a period of five years in viable and useful research activity which has made, or is likely to make, significant contribution in formulation of standard mark of the products of mass consumption, the Central Government or the State Government may make an application for a grant from the Consumer Welfare Fund: Provided that a consumer may make application for reimbursement of legal expenses incurred by him as a complainant in a consumer dispute, after its final adjudication. All applications for grant from the Consumer Welfare Fund shall be made by the applicant Member Secretary, but the Committee shall not consider an application, unless it has been inquired into in material details and recommended for consideration accordingly, by the Member Secretary. FORMS UNDER REFUND RULES S. No. FORM NAME DESCRIPTION 1 GST RFD- 01 Refund Application Form. Annexure 1- Details of Invoices, Annexure 2- Certificate by CA/CMA 2 GST RFD- 02 Acknowledgement of refund claim 3 GST RFD- 03 Deficiency Memo 4 GST RFD- 04 Provisional Refund Order 5 GST RFD- 05 Payment Advice 6 GST-RFD- 06 Refund Sanction/ Rejection Order 7 GST RFD- 07 Order for Complete adjustment of claimed Refund/ order for withholding of 125

133 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX refund 8 GST RFD- 08 Show Cause Notice 9 GST RFD- 09 Reply to SCN 10 GST RFD- 10 Refund application form for Embassy/UN Agencies 11 GST RFD- 11 Statement of supplies by Embassy/ UN Agencies 12 GST RFD- 01A (Manual) Casual taxable person or non-resident taxable person, tax deductor tax collector and other applicable person can claim refund. 13 GST RFD- 01B Refund Order Note- 1. As per Notification No. 55/2017- CT, New Form GST RFD-01A (Manual) has been inserted in which casual taxable person or non-resident taxable person, tax deductor tax collector and other applicable person can claim refund. Grounds for claiming refund can be- Excess balance in electronic cash ledger. Exports of services- with payment of tax Exports of goods / services- without payment of tax (accumulated ITC) ITC accumulated due to inverted tax structure (i.e. rate on input goods and services is higher as compared to rate on output supplies which leads to accumulation of ITC) On account of supplies made to SEZ unit/ SEZ developer(with payment of tax) On account of supplies made to SEZ unit/ SEZ developer (without payment of tax) Recipient of deemed export 2. FORM GST RFD-01B Refund order is given under the law in this form wherein the details of reason of refund, year for which refund is provided, GSTIN of dealer and remarks etc. would be provided. It will also provide the dealer with the details of :- Refund amount claimed Refund amount sanctioned Remaining amount of Refund Amount of Refund that is inadmissible Gross amount of Refund and interest if any on the said amount Amount that is adjusted against any demand outstanding on the assessee from the amount of refund. DOCTRINE OF UNJUST ENRICHMENT : Unjust Enrichment: A benefit obtained from another, not intended as a gift and not legally justifiable, for which the beneficiary must make restitution or recompose. The principle of unjust enrichment simply states that A person who has been unjustly enriched at the expense of another is required to make restitution to the other. So the basic meaning is that it would be unjust to allow one person to retain a benefit received at the expense of another person. There is a legal maxim also that Nemo Debet Locupletari ex AlienaJactura which means that no one should grow rich out of another person s loss. The unjust enrichment has been stated to have three things: - That the defendant has been enriched by the receipt of benefit. - He must have been enriched at the expense of plaintiff and - Allowing defendant to keep the benefit will be unjust. In GST, if the supplier of goods and services has recovered tax from recipient, it means he has passed on the burden to the recipient. In such cases, refund of excess GST paid will amount to excess and undeserved profit to supplier. Refund, if any, should be paid to the customer who has borne the burden of GST. However, it is not practicable to identify individual consumer in each case. At the same time, the GST is illegally collected and hence cannot be retained by govt. Hence, refund will be normally paid in Consumer Welfare Fund, and not paid to the taxable person who has applied for refund. Sec 54(5). 126

134 REFUND PROCESS UNDER GST How to avoid the doctrine of unjust enrichment: If the burden has been passed to the customer, there is no point in applying for refund of GST. In other cases, to establish that burden has not passed on to customer, the amount should be shown as claim receivable in books of account and should not be charged to profit and loss account. If tax amount is refunded by cheque or credit note to recipient, there cannot be unjust enrichment. 127

135 CHAPTER-12 ASSESSMENT AND AUDIT ASSESSMENT [SECTION 59] Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39. EXPLANATION Every registered person, other than an Input Service Distributor or A non-resident taxable person or a person paying tax under the provisions of sec. 10, sec. 51 or sec. 52 * On or before the twentieth day of the month succeeding every calendar month or part thereof. A registered person paying tax under the provisions of section 10 shall * Within eighteen days after the end of such quarter Every registered person required to deduct tax at source under the provisions of section 51 shall * within ten days after the end of the month in which such deduction is made. Every taxable person registered as an Input Service Distributor shall * Within thirteen days after the end of every month. PROVISIONAL ASSESSMENT [SECTION 60 with rule 98] Every registered person requesting for payment of tax on a provisional basis shall furnish an application in FORM GST ASMT-01, along with the documents in support of his request, electronically through the Common Portal. The proper officer may, on receipt of the application under sub-rule (1), issue a notice in FORM GST ASMT-02 requiring the registered person to appear in person or furnish additional information or documents in support of his request and the applicant shall file a reply to the notice in FORM GST ASMT 03. The proper officer shall issue an order in FORM GST ASMT-04, either rejecting the application, stating the grounds for such rejection or allowing payment of tax on provisional basis indicating the value or the rate or both on the basis of which the provisional assessment is to be made and the amount for which the bond is to be executed and security to be furnished not exceeding twenty five percent of the amount covered under the bond. The final assessment will be done within 6 months of the provisional assessment. This can be extended for 6 months by the Joint/Additional Commissioner. However, the Commissioner can extend it for further 4 years as he seems fit. Interest on additional tax payable and refunds The tax payer will have to pay interest on any tax payable under provisional assessment which was not paid within the due date. Interest period will be calculated from the day when tax was first due on the goods/services (and not the date of provisional assessment) till the actual payment date, irrespective of payment being before or after final assessment. Rate of interest will be maximum 18%. If the tax as per final assessment is less than provisional assessment then the taxable person will get a refund. He will also get interest on refund. Rate of interest will be maximum 6%. SCRUTINY OF RETURNS [SECTION 61] Where any return furnished by a registered person is selected for scrutiny, the proper officer shall scrutinize the same in accordance with the provisions of section 61 with reference to the information available with him, and in case of any discrepancy, he shall issue a notice to the said person in FORM GST ASMT-10, informing him of such discrepancy and seeking his explanation thereto within such time, not exceeding 128

136 ASSESSMENT AND AUDIT fifteen days from the date of service of the notice, as may be specified in the notice and also quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy. ASSESSMENT FOR NON FILERS OF RETURN [SECTION 62] Where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates. Where the registered person furnishes a valid return within thirty days of the service of the assessment, the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or for payment of late fee under section 47 shall continue. ASSESSMENT OF UNREGISTERED PERSONS [SECTION 63] Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of section 29 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 judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates: Provided that no such assessment order shall be passed without giving the person an opportunity of being heard. FORMS UNDER ASSESSMENT RULES: Sr. No. FORM NAME DESCRIPTION 1 FORM GST ASMT-01 Application for provisional assessment u/s 60 2 FORM GST ASMT-02 Notice for Seeking Additional Information / Clarification / Documents for provisional/ Final assessment 3 FORM GST ASMT-03 Reply to notice seeking additional information. 4 FORM GST ASMT- 04 Order of Acceptance or Rejection of Provisional Assessment Order 5 Form GST ASMT 05 Furnishing of Security 6 Form GST ASMT 06 Notice for Seeking Additional Information / Clarification / Documents for final assessment 7 Form GST ASMT 07 Final Assessment Order 8 Form GST ASMT 08 Application for Withdrawal of Security 9 Form GST ASMT 09 Order for release of security or rejecting the application 10 Form GST ASMT 10 Notice for intimating discrepancies in the return after scrutiny 11 Form GST ASMT 11 Reply to the notice issued u/s 61 intimating discrepancies in the return. 12 Form GST ASMT 12 Order of acceptance of reply against the notice issued u/s Form GST ASMT - 13 Assessment order u/s Form GST ASMT 14 Show Cause Notice for assessment u/s Form GST ASMT - 15 Assessment order u/s Form GST ASMT 16 Assessment order u/s Form GST ASMT 17 Application for withdrawal of assessment order issued u/s Form GST ASMT 18 Acceptance or Rejection of application filed u/s 64 (2) AUDIT BY TAX AUTHORITIES [SECTION 65] (1) The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake audit of any registered person for such period, at such frequency and in such manner as may be prescribed. 129

137 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX (2) The officers referred to in sub-section (1) may conduct audit at the place of business of the registered person or in their office. (3) The registered person shall be informed by way of a notice not less than fifteen working days prior to the conduct of audit in such manner as may be prescribed. (4) The audit under sub-section (1) shall be completed within a period of three months from the date of commencement of the audit: Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within three months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding six months. During the course of audit, the authorised officer may require the registered person, - To afford him the necessary facility to verify the books of account or other documents as he may require; - To furnish such information as he may require and render assistance for timely completion of the audit. (5) On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings. (6) Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under section 73 or section 74. SPECIAL AUDIT [SECTION 66] 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, is of the opinion that the value has not been correctly declared or 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. The chartered accountant or cost accountant so nominated shall, within the period of ninety 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: Provided that the 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 ninety days. The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit under sub-section (1) 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 under sub-section (1), including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final. Where the special audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under section 73 or section 74. FORMS UNDER AUDIT RULES: Sr. No. FORM NAME DESCRIPTION 1 GST ADT- 01 Notice for conducting audit 2 GST ADT-02 Audit Report u/s 65(6) 3 GST ADT-03 Communication to the registered person for conduct of special audit u/s 66 4 GST ADT-04 Information of findings upon special audit. 130

138 CHAPTER-13 INSPECTION, SEARCH, SEIZURE AND ARREST Power of inspection, search and seizure [Section 67] (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place. (2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things: Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer: Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act. (3) The documents, books or things referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice. (4) The officer authorised under sub-section (2) shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied. (5) The person from whose custody any documents are seized under sub-section (2) shall be entitled to make copies thereof or take extracts there from in the presence of an authorised officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation. (6) The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be. (7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months. (8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed. 131

139 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX (9) Where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of such goods in such manner as may be prescribed. (10) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word Magistrate, wherever it occurs, the word Commissioner were substituted. (11) Where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution. (12) The Commissioner or an officer authorised by him may cause purchase of any goods or services or both by any person authorised by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier. Inspection of goods in movement [Section 68] The Government may require the person in charge of a conveyance carrying any consignment of goods of value exceeding such amount as may be specified to carry with him such documents and such devices as may be prescribed. The details of documents required to be carried under sub-section (1) shall be validated in such manner as may be prescribed. Where any conveyance referred to in sub-section (1) is intercepted by the proper officer at any place, he may require the person in charge of the said conveyance to produce the documents prescribed under the said subsection and devices for verification, and the said person shall be liable to produce the documents and devices and also allow the inspection of goods. Power to arrest [Section 69] Where the Commissioner has reasons to believe that a person has committed any offence he may, by order, authorise any officer of central tax to arrest such person. Where a person is arrested under sub-section (1) for an offence the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty-four hours. Subject to the provisions of the Code of Criminal Procedure, 1973, Where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate; in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station. Power to summon persons to give evidence and produce documents [Section 70] (1) The proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, (2) Every such inquiry referred to in sub-section (1) shall be deemed to be a judicial proceedings within the meaning of section 193 and section 228 of the Indian Penal Code. 132

140 INSPECTION, SEARCH, SEIZURE AND ARREST Access to business premises [Section 71] (1) Any officer under this Act, authorised by the proper officer not below the rank of Joint Commissioner, shall have access to any place of business of a registered person to inspect books of account, documents, computers, computer programs, computer software whether installed in a computer or otherwise and such other things as he may require and which may be available at such place, for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue. (2) Every person in charge of place referred to in sub-section (1) shall, on demand, make available to the officer authorized under sub-section (1) or the audit party deputed by the proper officer or a cost accountant or chartered accountant nominated under section 66 (i) such records as prepared or maintained by the registered person and declared to the proper officer in such manner as may be prescribed; (ii) trial balance or its equivalent; (iii) statements of annual financial accounts, duly audited, wherever required; (iv) cost audit report, if any, under section 148 of the Companies Act, 2013; (v) the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961; and (vi) any other relevant record, for the scrutiny by the officer or audit party or the chartered accountant or cost accountant within a period not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by the said officer or the audit party or the chartered accountant or cost accountant. Officers to assist proper officers [Section 72] (1) All officers of Police, Railways, Customs, and those officers engaged in the collection of land revenue, including village officers, officers of State tax and officers of Union territory tax shall assist the proper officers in the implementation of this Act. (2) The Government may, by notification, empower and require any other class of officers to assist the proper officers in the implementation of this Act when called upon to do so by the Commissioner. List of Forms under Inspection, Search and Seizure Rules Sr. No. FORM NAME DESCRIPTION 1 FORM GST INS-01 Authorisation for Inspection or Search 2 FORM GST INS-02 Order of Seizure 3 FORM GST INS-03 Order of Prohibition 4 FORM GST INS-04 Bonds for Release of Goods Seized 5 FORM GST INS-05 Order of release of goods/ things of perishable or hazardous nature 133

141 CHAPTER-14 DEMANDS AND RECOVERIES Situations other than fraud or any willful misstatement or suppression of facts [Section 73] (1) Where it appears to the proper officer that 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, he 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 utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. (2) The proper officer shall issue the notice under above sub-section at least three months prior to the time limit specified in sub-section (10) for issuance of order. (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 utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax. (4) The service of such statement shall be deemed to be service of notice on such person under 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. (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 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. (6) 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 payable under the provisions of this Act or the rules made thereunder. (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. (8) Where any person chargeable with tax under sub-section (1) or 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 notice shall be deemed to be concluded. (9) 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 equivalent to ten percent of tax or ten thousand rupees, whichever is higher, due from such person and issue an order. (10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within three years from the date of erroneous refund. (11) 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. Situations involving fraud, or any willful misstatement or suppression of facts [Section 74] 1) Under this section also the proper officer will issue a show cause notice as to why the person chargeable to tax should not pay the amount specified in notice along with interest payable thereon and a penalty equal to tax specified in the notice. 2) The proper officer shall issue notice within six months prior to time limit specified in sub-section (10) for issuance of order. 134

142 DEMANDS AND RECOVERIES 3) The proper officer may issue a statement, containing details of tax not paid or short paid or erroneously refunded or input tax credit wrongfully availed or utilized other than those covered under sub-section(1), on the person chargeable with tax. 4) The statement issued under above sub-section shall be deemed to be notice under sub-section(1) of section 73 5) The person chargeable with tax before service of such notice pay the amount of tax along with 15% of interest on tax assessed by him or by the proper officer and inform the proper officer in writing. 6) The proper officer on receipt of such information shall not serve any notice in respect of tax so paid or penalty payable under the provisions of this act. 7) Where the proper officer is of the opinion that amount paid under sub-section (5) is less than actual amount payable, he shall proceed to issue the notice. 8) Where any person chargeable with tax pays the said tax along with interest and penalty equivalent to 25% of such tax within thirty days of issuance of notice, all proceedings in respect of the said notice shall be deemed to be concluded. 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. 10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilized relates to or within five years from the date of erroneous refund. 11) Where any person chargeable with tax pays the said tax along with interest and penalty equivalent to 50% of such tax within thirty days of issuance of notice, all proceedings in respect of the said notice shall be deemed to be concluded. General provisions relating to determination of tax [Section 75] 1) Where the 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 sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74, as the case may be. 2) 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 willfulmisstatement or suppression of facts to evade tax has not been established against the person to whom the notice was issued, the proper officer shall determine the tax payable by such person, deeming as if the notice were issued under sub-section (1) of section 73. 3) Where any 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. 4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. 5) 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. 6) The proper officer, in his order, shall set out the relevant facts and the basis of his decision. 7) 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. 8) 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. 135

143 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 9) The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability. 10) The adjudication proceedings shall be deemed to be concluded, if the order is not issued within three years as provided for in sub-section (10) of section 73 or within five years as provided for in sub-section (10) of section ) 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 Appellate Authority 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. 12) 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 ) 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. Tax collected but not paid to government [Section 76] 1) Every person who has collected any tax from other person under the said 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. 2) Where the amount required to be paid under above sub-section has not been so paid to the government, the proper officer may serve a notice on the person so required to pay such amount requiring him to show cause as to why the said amount is not paid by him to the government. 3) 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. 4) The person referred in above sub-sections shall in addition to paying amount referred above shall also pay interest at rate specified from the date such amount was collected by him to the date of such amount is paid by him to government. 5) 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. 6) The proper officer shall issue an order within one year from the date of issue of the notice. 7) 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. 8) The proper officer, in his order, shall set out the relevant facts and the basis of his decision. 9) 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). 10) 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. 11) The person, who has borne the incidence of the amount, may apply for the refund of the same. 136

144 DEMANDS AND RECOVERIES Tax wrongfully collected and paid to Central Govt. or State Govt. [Section 77] 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 maybe 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. Initiation of recovery proceedings [Section 78] 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 three months from the date of service of such order failing which recovery proceedings shall be initiated: Provided that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him. Recovery of tax [Section 79] 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. (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; 137

145 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX (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 beheld 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; 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, property can also be sold for satisfying the amount and any surplus thereof shall be paid to the taxable 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; 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. Payment of tax and other amount in installments [Section 80] On an application filed by a taxable person, the Commissioner may, for reasons to be recorded in writing, extend the time for payment or 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 installments not exceeding twenty four, subject to payment of interest under section 50 and subject to such conditions and limitations as may be prescribed: Provided that where there is default in payment of any one installment 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. Transfer of property to be void in certain cases [Section 81] 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 favor 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. Tax to be first charge on property [Section 82] 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, any amount payable by a taxable person or any other 138

146 DEMANDS AND RECOVERIES 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. Provisional attachment to protect revenue in certain cases [Section 83] 1) Where during the pendency of any proceedings under section 62 or section 63or 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. 2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1). Continuation and validation of certain recovery proceedings [Section 84] 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 139

147 CHAPTER-15 LIABILITY TO PAY IN CERTAIN CASES Liability in case of transfer of business [SECTION 85] Where a taxable person, liable to pay tax under this Act, transfers his business in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever, the taxable person and the person to whom the business is so transferred shall, jointly and severally, be liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxable person upto the time of such transfer, whether such tax, interest or penalty has been determined before such transfer, but has remained unpaid or is determined thereafter. Where the transferee of a business referred to above Para carries on such business either in his own name or in some other name, he shall be liable to pay tax on the supply of goods or services or both effected by him with effect from the date of such transfer and shall, if he is a registered person under this Act, apply within the prescribed time for amendment of his certificate of registration. Liability of agent and principal [SECTION 86] Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall, jointly and severally, be liable to pay the tax payable on such goods under this Act. Liability in case of amalgamation or merger of companies [SECTION 87] When two or more companies are amalgamated or merged in pursuance of an order of court or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods or services or both to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly. Notwithstanding anything contained in the said order, for the purposes of this Act, the said two or more companies shall be treated as distinct companies for the period up to the date of the said order and the registration certificates of the said companies shall be cancelled with effect from the date of the said order. Liability in case of company in liquidation [SECTION 88] When any company is being wound up whether under the orders of a court or Tribunal or otherwise, every person appointed as receiver of any assets of a company (hereafter in this section referred to as the liquidator ), shall, within thirty days after his appointment, give intimation of his appointment to the Commissioner. The Commissioner shall, after making such inquiry or calling for such information as he may deem fit, notify the liquidator within three months from the date on which he receives intimation of the appointment of the liquidator, the amount which in the opinion of the Commissioner would be sufficient to provide for any tax, interest or penalty which is then, or is likely thereafter to become, payable by the company. When any private company is wound up and any tax, interest or penalty determined under this Act on the company for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of such company at any time during the period for which the tax was due shall, jointly and severally, be liable for the payment of such tax, interest or penalty, unless he proves to the satisfaction of the Commissioner that such non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. 140

148 LIABILITY TO PAY IN CERTAIN CASES Liability of directors of private company [SECTION 89] Notwithstanding anything contained in the Companies Act, 2013, where any tax, interest or penalty due from a private company in respect of any supply of goods or services or both for any period cannot be recovered, then, every person who was a director of the private company during such period shall, jointly and severally, be liable for the payment of such tax, interest or penalty unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. Where a private company is converted into a public company and the tax, interest or penalty in respect of any supply of goods or services or both for any period during which such company was a private company cannot be recovered before such conversion, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax, interest or penalty in respect of such supply of goods or services or both of such private company: Provided that nothing contained in this subsection shall apply to any personal penalty imposed on such director. Liability of partners of firm to pay tax [SECTION 90] Notwithstanding any contract to the contrary and any other law for the time being in force, where any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of the firm shall, jointly and severally, be liable for such payment: Provided that where any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said partner to the Commissioner by a notice in that behalf in writing and such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date: Provided further that if no such intimation is given within one month from the date of retirement, the liability of such partner under the first proviso shall continue until the date on which such intimation is received by the Commissioner. Liability of guardians, trustees, etc. [SECTION 91] Where the business in respect of which any tax, interest or penalty is payable under this Act is carried on by any guardian, trustee or agent of a minor or other incapacitated person on behalf of and for the benefit of such minor or other incapacitated person, the tax, interest or penalty shall be levied upon and recoverable from such guardian, trustee or agent and all the provisions of this Act or the rules made thereunder shall apply accordingly. Liability of courts of Wards etc. [SECTION 92]: Where the estate or any portion of the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable under this Act is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager (including any person, whatever be his designation, who in fact manages the business) appointed by or under any order of a court, the tax, interest or penalty shall be levied upon and be recoverable from such Court of Wards, Administrator General, Official Trustee, receiver or manager in like manner and to the same extent as it would be determined and be recoverable from the taxable person as if he were conducting the business himself, and all the provisions of this Act or the rules made thereunder shall apply accordingly. Special provisions regarding liability to pay tax, interest or penalty in certain cases [Sec. 93]: Save as otherwise provided in the insolvency and Bankruptcy Code, 2016:- 1. Where a person liable to pay tax, interest or penalty under this Act dies then, a. If the business is continued by his legal representative or other person, then such legal representative or other person shall be liable to pay the amount due from such person, and b. If the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act, 141

149 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death. 2. Where a taxable person is an HUF or an AOP and its property is partitioned amongst its members or group of members then, each member or group of members shall be jointly and severally liable to pay the tax, interest or penalty due from the taxable person under this Act up to the time of the partition whether such tax, penalty or interest has been determined before partition but has remained unpaid or is determined after the partition. 3. Where the taxable person is a firm and it is dissolved then, every person who was a partner shall, jointly and severally, be liable to pay the tax, interest or penalty due from the firm under this Act up to the time of dissolution whether such tax, interest or penalty has been determined before the dissolution, but has remained unpaid or is determined after dissolution. 4. Where a taxable person liable to pay tax, interest or penalty under this Acta. is the guardian of a ward on whose behalf the business is carried on by the guardian; or b. is a trustee who carries on the business under a trust for a beneficiary, then, if the guardianship or trust is terminated, the ward or the beneficiary shall be liable to pay the tax, interest or penalty due from the taxable person upto the time of the termination of the guardianship or trust, whether such tax, interest or penalty has been determined before the termination of guardianship or trust but has remained unpaid or is determined thereafter. Liability in other cases [SECTION 94]: 1. Where a taxable person is a firm or an A.O.P. or an H.U.F. and such firm, association or family has discontinued businessa. The tax, interest or penalty payable under this Act up to the date of such discontinuance may be determined as if no such discontinuance had taken place, and b. Every person who, at the time of such discontinuance, was a partner of such firm, or a member of such association or family, shall, notwithstanding such discontinuance, jointly and severally, be liable for the payment of tax and interest determined and penalty imposed and payable by such firm, association or family, whether such tax and interest has been determined or penalty imposed prior to or after such discontinuance and subject as aforesaid, the provisions of this Act shall, so far as may be, apply as if every such person or partner or member were himself a taxable person. 2. Where a change has occurred in the constitution of a firm or an association of persons, the partners of the firm or members of association, as it existed before and as it exists after the reconstitution, shall, without prejudice to the provisions of section 90, jointly and severally, be liable to pay tax, interest or penalty due from such firm or association for any period before its reconstitution. 3. The provisions of sub-section (1) shall, so far as may be, apply where the taxable person, being a firm or association of persons is dissolved or where the taxable person, being a Hindu Undivided Family, has effected partition with respect to the business carried on by it and accordingly references in that subsection to discontinuance shall be construed as reference to dissolution or to partition. 142

150 CHAPTER-16 OFFENCES AND PENALTIES Penalty for certain offences [SECTION 122] 1) Where a taxable person who:- (i) Supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply; (ii) Issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; (iii) Collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (iv) Collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (v) Fails to deduct the tax in accordance with the provisions or deducts an amount which is less than the amount required to be deducted or where he fails to pay to the Government thereof, the amount deducted as tax; (vi) Fails to collect tax in accordance with the provisions or collects an amount which is less than the amount required to be collected or where he fails to pay to the Government the amount collected as tax; (vii) Takes or utilizes input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder; (viii) Fraudulently obtains refund of tax under this Act; (ix) Takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; (x) Falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act (xi) Is liable to be registered under this Act but fails to obtain registration; (xii) Furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) Obstructs or prevents any officer in discharge of his duties under this Act; (xiv) Transports any taxable goods without the cover of documents as may be specified in this behalf; (xv) Suppresses his turnover leading to evasion of tax under this Act; (xvi) Fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder; (xvii) Fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act; (xviii) Supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (xix) Issues any invoice or document by using the registration number of another registered person; (xx) Tampers with, or destroys any material evidence or document; (xxi) Disposes off or tampers with any goods that have been detained, seized, or attached under this Act, he shall be liable to pay Ten thousand rupees or an amount equivalent to tax evaded or tax not deducted or short deducted or deducted but not paid to the government or tax not collected or short collected or collected but not paid to the government or input tax credit distributed irregularly or refund claimed fraudulently, whichever is higher. 2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilized, a) For any reason, other than the reason of fraud or any willful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher; 143

151 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX b) For reason of fraud or any willful misstatement or suppression of facts to evade tax, shall be liable to a penalty equal to ten thousand rupees or the tax due from such person, whichever is higher. 3) Any person who- (a) Aids or abets any of the offences specified in above clauses of sub-section (1); (b) Acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (c) Receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (d) Fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry (e) Fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account, Shall be liable to a penalty which may extend to twenty-five thousand rupees. Penalty for failure to furnish information or return [SECTION 123]:- If a person who is required to furnish an information return under section 150 fails to do so within the period specified in the notice issued under sub-section (3) thereof, the proper officer may direct that such person shall be liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish such return continues: Provided that the penalty imposed under this section shall not exceed five thousand rupees. As per Notification No. 64/2017- CT, the penalty for filing GSTR-3B after due date for the month of October 2017 onwards has been reduced to RS. 25 per day. Where the tax payable in such return is nil, the penalty for not filing GSTR-3B within due date is lowered to Rs. 10 per day for every day during which the failure continues. Fine for failure to furnish statistics [SECTION 124]:- If any person required to furnish any information or return u/s 151 (a) Without reasonable cause fails to furnish such information or return as may be required under that section, or (b) Willfully furnishes or causes to furnish any information or return which he knows to be false, He shall be punishable with a fine which may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to one hundred rupees for each day after the first day during which the offence continues subject to a maximum limit of twenty-five thousand rupees. General Penalty [Sec. 125]:- Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees. General Disciplines related to Penalty [Sec. 126]:- 1. No penalty for minor breaches: No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence. Herea. A breach shall be considered a minor breach if the amount of tax involved is less than five thousand rupees. b. An omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record. 2. Penalty commensurate with severity of breach: - The penalty imposed under this Act shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach. 144

152 OFFENCES AND PENALTIES 3. No penalty without hearing: - No penalty shall be imposed on any person without giving him an opportunity of being heard. 4. Nature of breach shall be specified while imposing penalty:- The officer under this Act shall while imposing penalty in an order for a breach of any law, regulation or procedural requirement, specify the nature of the breach and the applicable law, regulation or procedure under which the amount of penalty for the breach has-been specified. 5. Lower penalty if breach voluntarily disclosed: - When a person voluntarily discloses to an officer under this Act the circumstances of a breach of the tax law, regulation or procedural requirement prior to the discovery of the breach by the officer under this Act, the proper officer may consider this fact as a mitigating factor when quantifying a penalty for that person. 6. The provisions of this section shall not apply in such cases where the penalty specified under this Act is either a fixed sum or expressed as a fixed percentage. Separate notice and order if offence not covered under any other provision [SECTION. 127]: - Where a person is liable to penalty but the same is not covered u/s 62, 63, 64, 73, 74, 129 or 130, the proper officer may issue an order levying such penalty after giving a reasonable opportunity of being heard. Power to waive penalty or fee or both [SECTION 128]: - The Government may, by notification, waive in part or full, any penalty referred to in section 122 or section 123 or section 125 or any late fee referred to in section 47 for such class of taxpayers and under such mitigating circumstances as may be specified therein on the recommendations of the Council. Detention of goods and conveyances, and levy of penalty [SECTION 129]: - 1. Where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, a. In case of taxable goods- on payment of applicable tax and penalty equal to 100% of the tax payable on such goods. In case of exempted goods- on payment of an amount equal to 2% of value of goods or Rs. 25,000, whichever is less. Where owner comes forward for payment of such tax and penalty. b. In case of taxable goods- on payment of the applicable tax and penalty equal to 50% of the value of goods reduced by tax paid thereon In case of exempted goods- on payment of an amount equal to 5% of value of goods or Rs. 25,000, whichever is less. Where the owner of the goods does not come forward for payment of such tax and penalty. c. upon furnishing a security equivalent to the amount payable under clause (a)or clause (b) in such form and manner as may be prescribed: Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods. 2. Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of section 130: Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer. Confiscation of goods or conveyances and levy of penalty [SECTION 130]: 1. Notwithstanding anything contained in this Act, if any person a. supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or b. does not account for any goods on which he is liable to pay tax under this Act; or c. supplies any goods liable to tax under this Act without having applied for registration; or 145

153 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX d. contravenes any of the provisions of this Act or the rules made there under with intent to evade payment of tax; or e. uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty u/s Whenever confiscation of any goods or conveyance is authorised by this Act, the officer adjudging it shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the said officer thinks fit: - Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon: - Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under sub-section (1) of section 129: - Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon. 3. Where any fine in lieu of confiscation of goods or conveyance is imposed, the owner of such goods or conveyances or the person u/s (1) shall be liable to any tax, penalty and charges payable in respect of such goods or conveyance. 4. No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard. 5. Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government. 6. The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession. 7. The proper officer, after satisfying himself that confiscated goods or conveyance are not required for further proceedings after giving reasonable time not exceeding 3 months to pay fine in lieu of confiscation, shall dispose of such goods or conveyance. CONFISCATION DOES NOT PREVENT IMPOSITION OF OTHER PUNISHMENT [SECTION 131]: No confiscation made or penalty imposed under the provisions of this Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of this Act or under any other law. PUNISHMENT FOR CERTAIN OFFENCES [SECTION 132]:- 1. Whoever commits any of the following offencesa. supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax; b. issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax; c. avails input tax credit using such invoice or bill referred to in clause (b); d. collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; e. evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d); f. falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act; g. obstructs or prevents any officer in the discharge of his duties under this Act; 146

154 OFFENCES AND PENALTIES h. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; i. receives or is in any way concerned with the supply of or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; j. tampers with or destroys any material evidence or documents; k. fails to supply any information which he is required to supply under this Actor the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or l. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section, Shall be punishable in the following manner- S No. Amount under Default Punishment 1 More than Rs. 500 Lakhs Imprisonment up to 5 years with fine 2 More than Rs. 200 Lakhs up to Rs. 500 Lakhs Imprisonment up to 3 years with fine 3 More than Rs. 100 Lakhs up to Rs. 200 Lakhs Imprisonment up to 1 years with fine Where any person commits or abets the commission of an offence specified in clause (f), (g), or (j), he shall be punishable with imprisonment not exceeding 6 months and fine. 2. Where the person is convicted for the offence for second time or subsequently he shall be punishable with imprisonment for a term which may extend to five years and with fine. SECTION 132(4) & (5) OFFENCES NON-COGNIZABLE AND BAILABLE All offences specified under the act except in case of sub-section(5) OFFENCES COGNIZABLE AND NON-BAILABLE Offences specified in sub-section (1) (a) or (b) or (c) or (d) and punishable under clause (i) of that subsection. OFFENCES BY COMPANIES [SECTION 137]:- 1) Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. 2) where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 3) Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall, mutatis mutandis, apply to such persons. 4) Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. COMPOUNDING OF OFFENCES [Sec. 138]:- 1) Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed: Provided further that any compounding allowed under the provisions of this section shall not affect the proceedings, if any, instituted under any other law: 147

155 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Provided also that compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences. 2) Following offences cannot be compounded [First Proviso to Sec. 138(1)]: a. a person who has been allowed to compound once in respect of any of the offences specified in clauses (a) to (f) of sub-section (1) of section 132 and the offences specified in clause (l) which are relatable to offences specified in clauses (a) to (f) of the said sub-section; b. a person who has been allowed to compound once in respect of any offence, other than those in clause (a), under this Act or under the provisions of any SGST Act or the UTGST Act or the IGST Act in respect of supplies of value exceeding one crore rupees; c. a person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force; d. a person who has been convicted for an offence under this Act by a court; e. a person who has been accused of committing an offence specified in clause (g)or clause (j) or clause (k) of sub-section (1) of section 132; and f. Any other class of persons or offences as may be prescribed. 3) The amount for compounding of offences under this section shall be such as maybe prescribed, subject to the minimum amount not being less than ten thousand rupees or fifty per cent of the tax involved, whichever is higher, and the maximum amount not being less than thirty thousand rupees or one hundred and fifty per cent of the tax, whichever is higher. 4) On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated. 148

156 CHAPTER-17 TRANSITIONAL PROVISIONS MIGRATION OF EXISTING TAXPAYERS [SECTION 139] 1. Every person registered under any existing law and having a valid PAN shall be issued a Registration Certificate on provisional basis which shall be cancelled if prescribed conditions are not complied with. 2. The final registration certificate shall be granted to replace the provisional certificate in such form and manner as may be prescribed. 3. The provisional certificate shall be deemed to have not been issued if such person files an application that he was not liable to registration u/s 22 or 24. TRANSITIONAL ARRANGEMENTS FOR INPUT TAX CREDIT [SECTION 140] A. CARRY FORWARD OF CENVAT CREDIT [SECTION 140(1) & (2)]: a. A registered person, other than a person opting for compounding scheme, shall be entitled to carry forward in his e-credit ledger, the amount of CENVAT credit shown in the return furnished under existing law for the period ending on the day prior to the appointed day. No credit shall be allowed in the following casesi. Where the said amount of credit is not admissible under this Act, or ii. Where all the returns under existing law have not been furnished for 6 months prior to the appointed day, or iii. Where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as govt. may notify. b. A registered person, other than a person opting for compounding scheme, shall be entitled to carry forward in his e-credit ledger, the amount of unavailed CENVAT credit on capital goods which has not been carried forward in the returns furnished under the earlier laws, subject to the condition that such credit is admissible under the earlier laws and the GST Act. Unavailed CENVAT credit= Amount credit admissible under existing law Amount of CENVAT credit availed. B. CREDIT OF GOODS HELD IN STOCK IN CERTAIN CASES [SECTION 140 (3)]: a. A registered person, who was not liable to be registered under existing law, or was engaged in manufacture of exempted goods or provision of exempted services or who was providing work contract service and was availing benefit of notification No. 26/2012- Service Tax, dated 20 th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take credit of eligible duties of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditionsi. Such inputs or goods are used or intended to be used for making taxable supplies under this Act, ii. The said registered person is eligible for input tax credit on such inputs under this Act, iii. The said registered person is in possession of invoice or other documents evidencing payment of tax under earlier laws, iv. Such invoices or prescribed documents were issued not earlier than 12 months immediately preceding the appointed day, v. The supplier of services is not eligible for any abatement under this Act b. Such credit shall also be allowed to any registered person other than a manufacturer or supplier of services, who is not in possession of an invoice or any other document evidencing payment of duties in respect of inputs, subject to such conditions as may be prescribed. 149

157 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX C. PERSONS ENGAGED IN EXEMPTED AND TAXABLE ACTIVITIES [SECTION 140(4)]: A registered person who was engaged in the manufacture of exempted and non-exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Finance Act, 1994 shall be allowed to carry forward in his e-credit ledgera. The balance of CENVAT credit shown in the return furnished under the existing law for the period ending on the day prior to the appointed day b. The amount of CENVAT credit in respect of inputs held in stock and contained in semi-finished or finished goods on the day before the appointed day as per above provisions. D. IN CASE OF INPUTS RECEIVED AFTER THE APPOINTED DAY [SECTION 140(5)]: a. A registered person shall be entitled to take credit of eligible duties and taxes in respect of inputs and input services received after the appointed day on which tax has been paid before the appointed day, subject to the condition that invoice or any other document evidencing payment of tax was recorded in the books of account of such person within 30 days from the appointed day. b. The period of 30 days may be extended for further 30 days, by the commissioner on sufficient cause being shown. c. The said registered person shall furnish a statement in respect of credit taken as above, in such manner as may be prescribed. E. CREDIT TO A TAXABLE PERSON SWITCHING OVER FROM COMPOSITION SCHEME UNDER EXISTING LAW [SECTION 140(6)]- A registered person who was paying tax at a fixed rate or paying a fixed amount in lieu of tax payable under the existing law (referred to as composition taxpayer) shall be entitled to take CENVAT credit of eligible duties in respect of inputs held in stock or contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions: a. Such inputs or goods are used for making taxable supplies under CGST Act, b. The said registered person is not paying under composition scheme in CGST Act, c. The said person is eligible for ITC on such inputs under CGST Act, d. The said person has an invoice or other document evidencing payment of duty under the existing law in respect of inputs, which was issued not earlier than 12 months immediately preceding the appointed day. F. OTHER TRANSITIONAL PROVISIONS RELATING TO CENVAT CREDIT [SECTION 140(7), (8) & (9)]: a. In case of an Input Service Distributor, input tax credit in respect of any services received prior to the appointed day shall be eligible for distribution under this Act, even if invoices in this regard are received after the appointed day. b. Under the earlier laws, a service provider providing services from multiple locations in the country having centralized registration had one pool of CENVAT credit. However, under GST laws he shall be required to obtain registration in each State from where he makes taxable supplies. In such a scenario, the common credit balance carried forward from the earlier laws can be used to set off output tax liability in any State in the country. c. Where any CENVAT credit availed on input services under the earlier laws is reversed on account of nonpayment of consideration within a period 3 months, such credit can be reclaimed under the GST Act provided the taxable person has paid the consideration in respect of such input services within 3 months from the appointed day. G. TAX OR DUTY CARRIED FORWARD UNDER ANY EXISTING LAW OR ON GOODS HELD IN STOCK ON THE APPOINTED DAY [RULE-117 OF TRANSITION RULES]: a. Every registered person entitled to take credit of input tax u/s 140 shall, within 90 days of the appointed day, submit an application electronically in FORM GST TRAN- 1, specifying therein the amount of tax or duty to the credit of which the said person is entitled under said section. Credit of inputs received from EOU or Electronic Hardware Technology Park shall be allowed to the extent as provided in Rule 3(7) of the CENVAT Credit Rules,

158 TRANSITIONAL PROVISIONS NOTE- The commissioner may on recommendation of council extend the period of ninety days by a further period not exceeding ninety days. b. Every application as above shalli. In case of claim u/s 140(2) specify separately the amount of tax or duty availed and utilized and yet to be availed or utilized by way of ITC under each of the existing laws till the appointed day. ii. In case of claim in respect of inputs held in stock and inputs contained in semi-finished and finished goods held in stock, shall specify separately details of stock held on the appointed day. iii. In case of a claim u/s 140(5), shall furnish the following details: 1. The name of supplier, serial number and date of issue of invoice 2. The description, quantity and value of the goods or services 3. The amount of eligible taxes and duties 4. The date on which the receipt of goods or services is entered in books of account of the recipient. c. (a) A registered person, who was no registered under existing law, availing credit u/s 140(3) shall be allowed to avail ITC on goods held in stock on the appointed day in respect of which he is not in possession of any document evidencing payment of central excise duty. i. Such credit shall be allowed at the rate 60% on goods which attract central 9% or above and 40% for other goods after the appointed date and shall be credited after the central tax payable on such supply has been paid. Note: - Provided that where integrated tax is paid on such goods, the amount of credit shall be allowed at the rate of thirty percent and twenty percent respectively of the said tax ii. The scheme shall be available for 6 tax periods from the appointed date. (b) Such credit of central tax shall be availed subject to satisfying the following conditionsi. Such goods were not wholly exempt from duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated. ii. Document for procurement of such goods is available with the registered person. iii. Registered person shall submit a statement in FORM GST TRAN - 2at the end of each of the 6 tax periods during which the scheme is in operation indicating there in the details of supplies of such goods affected during the tax period. iv. The amount of credit allowed shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT- 2 on the common portal. v. The stock of goods on which the credit is availed is so stored that it can be easily identified by the registered person. d. The amount of credit specified in the application in FORM GST TRAN- 1 shall be credited to the electronic credit ledger of the applicant maintained in FORM GST PMT- 2 on the common portal. TRANSITIONAL PROVISIONS RELATING TO JOB WORK [SECTION 141]: Where goods have been removed from a factory for further processing to a job worker prior to the appointed day i.e. under current tax regime and received back after GST roll-out: a. No tax shall be paid if such inputs are returned to the factory within 6 months from the appointed day, b. Time limit of 6 months can be increased by the govt. for a further period not exceeding 2 months on sufficient cause being shown, c. If such inputs are not returned within the specified period, the input tax credit shall be liable to be recovered in accordance with sec. 142(8) (a). d. The tax shall not be payable only if the manufacturer and job worker declare the details of such inputs held in stock in the last return under the current regime. Similarly, in case of semi-finished or finished goods, a job worker is not required to pay tax if such goods are returned to the original manufacturer s place of business within 6 months from the appointed day. 151

159 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX DECLARATION OF STOCK HELD BY PRINCIPAL [RULE-119 OF TRANSITION RULES]: Every person to whom the provisions of section 141 shall apply, within 90 days of the appointed day, submit an application electronically in FORM GST TRAN- 1, specifying therein, the stock or capital goods held by him on the appointed day, details of stock or capital goods held by him as principal at the place/ places of business of his agents/ branch, separately agent- wise/ branch- wise. MISCELLANEOUS TRANSITIONAL PROVISIONS [SECTION 142]: A. TAX ON GOODS RETURNED AFTER GST [SECTION 142(1)]: The provision is applicable ifa) Goods have been removed within 6 months prior to the appointed day. b) Goods have been returned within 6 months from the appointed day. c) Such goods are identifiable to the satisfaction of the proper officer. Where any goods on which duty has been paid under the existing law at the time of removal, are returned to any place of business on or after the appointed day, the registered person shall be eligible for refund of the duty paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business subject to the following conditions: Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply. Returned by a registered Person DEEMED SUPPLY Duty Paid Goods Returned Returned by an unregistered person REFUND OF DUTY B. TREATMENT IN CASE OF CHANGE IN PRICES [SECTION 142(2)]: The provision is applicable if- There is revision in price (upward/ downward). The revision is in relation to goods and/or services supplied prior to the appointed day and The revision is pursuant to a contract entered into prior to the appointed day CASE-1: Upward revision in price on/after the appointed day: 1. The supplier shall issue a supplementary invoice or debit note within 30 days of such upward revision in price. 2. Such supplementary invoice or debit note shall be deemed to have been issued in respect of an outward supply made under this Act. CASE-2: Downward revision in price on/after the appointed day: 1. The supplier shall issue a credit note to the recipient within 30 days of such downward revision in price 2. Such credit note shall be deemed to have been issued in respect of an outward supply made under this Act. 3. Such supplier shall be allowed to reduce his tax liability only if the recipient of such credit note has reduced his input tax credit corresponding to such reduction of tax liability. C. REFUND OF TAXES PAID UNDER EXISTING LAWS [SECTION 142(3) 142(6)]: These provisions tend to detach GST from all pending refund applications made under existing law: 1. Every claim for refund filed before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount under existing law shall be disposed of in accordance with the existing law and any amount eventually accruing to him shall be paid in cash. 152

160 TRANSITIONAL PROVISIONS Provided that where any claim for refund of CENVAT credit is fully or partially rejected, such rejected amount shall lapse. Provided further that 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. Sec 142(3) 2. 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 the existing law. Provided that where any claim for refund of CENVAT credit is fully or partially rejected, such rejected amount shall lapse. Provided further that 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. Sec 142(4) 3. 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. Sec 142(5) 4. 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 shall be disposed of in accordance with the existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash and the amount rejected, if any, shall not be admissible as input tax credit under this Act: Provided that 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. Sec 142(6) (a) D. PROCEEDINGS RELATED TO OUTPUT TAX LIABILITY [SEC. 142(6) (b) 142(9)]: 1. If any amount becomes recoverable as a result of an appeal, review or reference relating to CENVAT credit on or after the appointed day under the existing law, the same shall, unless recovered under existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. 2. If any amount becomes recoverable as a result of an appeal, review or reference relating to the output tax liability whether initiated before, on or after the appointed day under existing law, shall, unless recovered under existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. 3. If any amount is found to be admissible to the claimant pursuant to any appeal, review or reference relating to the output tax liability shall be refunded to him in cash. 4. Where, as result of any assessment proceedings instituted before, on or after the appointed day under the existing law, any amount of tax, interest, fine or penalty becomes recoverable, same shall be recovered as an arrear of tax under this Act, unless recovered under existing law, and the amount so recovered shall not be admissible as input tax credit under this Act. 5. Where in pursuance of proceedings as above, any amount of tax, interest, fine or penalty become refundable to the taxable person; the same shall be refunded to him in cash. 6. Where any return furnished under existing law, is revised after the appointed day and any amount is found recoverable or any amount of CENVAT credit is found inadmissible, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. 7. Where pursuant to revision as above any amount is found to be refundable or CENVAT credit is found to be admissible, the same shall be refunded to him in cash. E. GOODS SENT ON APPROVAL BASIS [SEC. 142(12)]: 1. Where any goods sent on approval basis, maximum 6 months before the appointed day, are rejected and returned to the seller on or after the appointed day, then no tax will be payable. Goods should be returned within 6 months from the appointed day. The period of 6 months might be extended for a maximum of 2 months if there is sufficient cause. 2. GST will be payable by the person returning goods after 6 months if those goods are liable to tax under this Act. The seller must also pay GST on the goods returned after 6 months. 3. Every person who has sent goods on approval basis under existing law will submit details of such goods in FORM GST TRAN- 1 within 90 days of the appointed day. [Rule- 120 of Transition Rules]. 153

161 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX F. OTHER PROVISIONS [SEC. 142(10), (11) & (13)]: 1. The goods or 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 the provisions of this Act. 2. No tax shall be payable on the goods under this Act to the extent tax was leviable on the said goods under State VAT notwithstanding Sec No tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Finance Act, Where both VAT and Service tax was paid on any supply, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of VAT or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed. Sec 142(11)(c) 5. 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. 6. Every person to whom the provision of Sec.142 (11) (c) applies, shall within a period of ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1 furnishing the proportion of supply on which Value Added Tax or service tax has been paid before the appointed day but the supply is made after the appointed day, and the Input Tax Credit admissible thereon. [Rule- 118 of transition Rules] RECOVERY OF CREDITWRONGLY AVAILED [RULE- 121 OF TRANSITION RULES]: The amount of credit under rule 1(3) may be verified and proceedings u/s 73 or sec. 74 shall be initiated in respect of any credit wrongly availed, whether wholly or partly. 154

162 CHAPTER-18 CLASSIFICATION OF GOODS AND SERVICES: HSN CODES AND ACCOUNTING CODES The Harmonized Commodity Description and Coding System generally referred to as Harmonized System of Nomenclature or HSN is a multi-purpose international product nomenclature developed by World Customs Organisation (WCO). It comprises about 5,000 commodity groups, each identified by a six digit code, arranged in a legal and logical structure. The system is used by more than 200 countries. In India adapted HSN coding is currently used under Excise and Customs for classification of products. Sections, Chapters and Headings in Tariff: 1. A section is a grouping of a number of chapters which codify a particular class of goods. E.g. Section I is Animal Products. Central Excise Tariff is divided in 20 sections, while there are 21 sections in case of Customs Tariff. 2. Each section is divided into various chapters and each chapter contains goods of one class. For e.g. Section XI relates to Textile and Textile Articles and within that Section, Chapter 50 is Silk, Chapter 51 is Wool and so on. 3. Some chapters are divided into sub-chapters e.g. Chapter 72 (Iron and Steel) is divided into I- Primary Materials, II-Iron and Non-Alloy Steel, III-Stainless Steel and IV- Other Alloy Steel. 4. Each chapter and sub-chapter is further divided into various headings depending on different types of goods belonging to same class of products. 5. In the HSN, commodities are arranged in a fixed pattern with the duty rates specified against each of them. The pattern of arrangement of goods is in increasing degree of manufacture of commodities in the sequence of natural products, raw materials, semi-finished goods and fully manufactured goods/articles/ machinery etc. Under GST, govt. shall continue the concept of classification based on HSN but a slightly modified version will be implemented wherein turnover of taxpayers will play a pivotal role in determining coding: a) Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digit codes. b) Taxpayers whose turnover is Rs. 5 Crores and above shall use 4 digit code, and c) Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices. d) Any taxpayer, irrespective of his turnover, may use HSN code at 6- digit or 8-digit level if he so desires. e) To start with, compounding dealers may not be required to specify HSN at 2-digit level also. f) HSN Codes at 8-digit level and Accounting Codes for services will be mandatory in case of exports and imports. g) Prescribed Accounting code will be mandatory for those services for which Place of Supply Rules are dependent on nature of services to apply the destination principle, irrespective of turnover. h) SAC means Service Accounting Code used to classify services. The GSTC has proposed a new scheme of classification of services dividing services into following broad categoriesi. Construction Services ii. Distributive Trade Services, Accommodation, Food and Beverage Service, Transport Services, Gas and Electricity Distribution Services. iii. Financial and Related Services, Real Estate Services, and Rental and Leasing Services. iv. Business and Production Services. v. Community, Social and Personal Services and other miscellaneous services. 155

163 CHAPTER-19 INPUT SERVICE DISTRIBUTOR Under current tax regime the definition of ISD includes: An office of the manufacturer or producer of final products or provider of output service Which receives invoices issued under rule 4A of Service Tax Rules, 1994 towards purchase of input services Issue invoice, bill or challan for the purpose of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider. Hence, the available CENVAT to ISD is distributed by it to its units and outsourced manufacturers. Under GST, Input Service Distributor means: an office of the supplier of goods and / or services which receives tax invoices issued u/s 31 towards receipt of input services and Issues a prescribed document for the purpose of distributing credit of CGST/SGST/IGST/UTGST paid on the said services to a supplier of taxable goods or services or both having the same PAN as that of the said office. Hence, unlike existing model, credit cannot be distributed to outsourced manufacturers or service providers. The reason could be due to the shift of taxable event from manufacture to supply. The tax liability would arise at the time of supply which would be ultimately paid by ISD on utilization of available input tax credit. REGISTRATION AND FILING OF RETURNS: An Input Service Distributor requires a separate registration as per Sec. 24. Migration of existing registration will not apply to ISD. Separate registration number will be provided for ISD. ISD has to file monthly return by the 13 th of the following month. [Sec. 39(4)] Monthly return is not required, if there is no transaction during a month. [Sec. 39(8)] TAX INVOICE BY ISD [RULE-54(1) OF INVOICE RULES]: An ISD invoice or ISD credit note issued by an input service distributor shall contain the following: o Name, address and GSTIN of the ISD o A consecutive serial number, unique for a FY o Date of its issue o Name, address and GSTIN of the recipient to whom the credit is distributed o Amount of the credit distributed o Signature of ISD Provided that where the Input Service Distributor is an office of a banking company or a financial institution, including a non-banking financial company, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as prescribed above. MANNER OF DISTRIBUTION OF CREDIT BY ISD [SEC. 20]: 1. The credit of CGST, IGST and SGST shall be distributed in the following manner:- CGST as IGST as SGST as CGST IGST IGST CGST SGST SGST IGST -Sec. 20(1) 156

164 INPUT SERVICE DISTRIBUTOR 2. Conditions for distribution of credit as per Sec. 20(2): a. The credit can be distributed to the recipients against a document containing such details as may be prescribed, b. The amount of credit distributed shall not exceed the amount of credit available for distribution, c. The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient, d. The credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro-rata on the following basis: Available credit* Turnover of such recipient during the relevant period Turnover of all such recipients during the 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 on the following basis: Available credit* Turnover of such recipient during the relevant period Turnover of all such recipients during the relevant period. For the purpose of this section- The relevant period shall beo if the recipients of credit have turnover in their States or Union Territories in the FY preceding the year during which credit is to be distributed, the said FY, or o if some or all recipients of the credit do not have any turnover in their States or Union Territories in the FY preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all recipients are available, previous to the month during which credit is to be distributed The expression Recipient of credit means the supplier of goods or services or both having the same PAN as that of the ISD. MANNER OF RECOVERY OF CREDIT DISTRIBUTED IN EXCESS [SECTION 21]: Where the Input Service Distributor 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 recipients along with interest, and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of amount to be recovered. PROCEDURE FOR DISTRIBUTION OF ITC BY ISD [RULE-39 OF ITC RULE]: 1. An ISD shall distribute ITC in the following manner:- a. The ITC available for distribution in a month shall be distributed in the same month and details furnished in Form GSTR-6 in accordance with Return Rules. b. The ISD shall separately distribute the amount ineligible as ITC u/s 17(5) and the amount eligible as ITC, according to clause (d). c. The ITC on account of central tax, state tax, union territory tax and integrated tax shall be distributed separately in accordance with provisions of clause (d). d. The ITC required to be distributed to one of the recipients R1 shall be the amount C1 calculated as follows: C1= (t1/t)*c Where, C is the amount of credit to be distributed, t1 is the turnover of R1 during the relevant period T is the aggregate of the turnover of all recipients during the relevant period. e. The ITC on account of integrated tax shall be distributed as ITC of integrated tax to every recipient f. The ITC on account of Central Tax and Sales Tax shall, i. In respect of a recipient located in the same state in which the ISD is located, be distributed as ITC of central tax and state tax respectively 157

165 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX ii. in respect of a recipient located in a State other than that of the Input Service Distributor, be distributed as integrated tax and the amount to be so distributed shall be equal to the aggregate of the input tax credit of central tax and State tax. g. The Input Service Distributor shall issue an ISD invoice clearly indicating in such invoice that it is issued only for distribution of input tax credit. h. The Input Service Distributor shall issue an ISD credit note for reduction of credit in case the input tax credit already distributed gets reduced for any reason. i. Any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor by the supplier shall be distributed in the manner and subject to the conditions specified in clauses (a) to (g) and the amount attributable to any recipient shall be calculated in the manner provided in clause (d) above and such credit shall be distributed in the month in which the debit note has been included in the return in FORM GSTR-6. j. Any input tax credit required to be reduced on account of issuance of a credit note to the Input Service Distributor by the supplier shall be apportioned to each recipient in the same ratio in which input tax credit contained in the original invoice was distributed in terms of clause (d) above, and the amount so apportioned shall be,- i. reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR-6; and ii. Added to the output tax liability of the recipient and where the amount so apportioned is in the negative by virtue of the amount of credit to be distributed is less than the amount to be adjusted. 2. If the amount of input tax credit distributed by an Input Service Distributor is reduced later on for any other reason for any of the recipients, including that it was distributed to a wrong recipient by the Input Service Distributor, the process prescribed in sub-rule (1)(j) shall, mutatis mutandis apply for reduction of credit. 3. Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the ISD credit note, issue an ISD Invoice to the recipient entitled to such credit and include the ISD credit note and the ISD Invoice in the return in FORM GSTR-6 for the month in which such credit note and invoice was issued. 158

166 CHAPTER-20 REVERSE CHARGE MECHANISM Normally, tax is payable by supplier of goods or services or both. However, in some cases, the recipient is made liable to pay tax. This is termed as reverse charge. Current Scenario:- At present, similar provisions of Reverse Charge are available in Service Tax for the services like insurance agent, manpower supply; goods transport agencies, non-resident service providers, any service involving aggregators etc. Currently there is no reverse charge mechanism in supply of goods. Reverse Charge under GST: Reverse charge means the liability to pay tax by the person receiving goods and/or services instead of the supplier of such goods and/or services u/s 9(3) or 9(4) of CGST Act. The govt. may notify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both 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. - Sec 9(3) The central tax in respect of the 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 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. Sec 9(4) The Government may, on the recommendations of the Council, by notification specify categories of services the tax on intra-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: Provided that 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: Provided further that 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. - Sec 9(5) Aggregate turnover does not include value of supplies on which tax is levied under reverse charge. Sec 2(6) Situations where Reverse Charge will apply: 1. Unregistered dealer selling to a registered dealer: In such situation, the registered dealer has to pay GST on the supply. [sec 9(4)] 2. Services through an e-commerce operator: If an e commerce operator supplies services u/s 9(5), he will be liable to pay GST. 3. Other categories of supply as the govt. may notify. [Sec. 9(3)] *As per Notification No. 38/2017- CTR, Reverse Charge Mechanism u/s 9(4) shall remain partially suspended till and will be reviewed by a committee of experts. It may be noted in this regard that there is no change on reverse charge provisions under Section 9(3) of CGST/ SGST Acts, Section 7(3) of UTGST Act and Section 5(3) of the IGST Act, relating to GTA, Legal Services provided by an Advocate, etc. and for that reason it s just a partial suspension of RCM, only. 159

167 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Registration: All persons who are required to pay tax under reverse charge have to register for GST irrespective of the threshold. Time of Supply of Goods [Section 12(3)]: 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 following 30 days from the date of issue of invoice by the supplier. If it is not possible to determine T.O.S. as above, the time of supply shall be the date of entry in the books of account of the recipient. *date of payment shall be earlier of:- i. The date on which recipient entered the payment in his books, or ii. The date on which payment is debited from his bank account. Time of supply of services [Section 13(3)]: 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 following 60 days from the date of issue of invoice by the supplier. If it is not possible to determine T.O.S. as above, the time of supply shall be the date of entry in the books of account of the recipient. 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. Tax Invoice: A registered person who is liable to pay tax u/s 9(3) or 9(4) 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. {Sec. 31(3)(e)} A registered person who is liable to pay tax u/s 9(3) or 9(4) shall issue a payment voucher at the time of making payment to the supplier. {Sec. 31(3)(g)} 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. Reverse Charge in case of certain Goods: S.No. Description of supply of Goods Supplier of goods Recipient of supply 1. Cashew nuts, not shelled or peeled Agriculturist Any registered person 2. Bidi wrapper leaves (tendu) Agriculturist Any registered person 3. Tobacco leaves Agriculturist Any registered person 4. Silk yarn Any person who Any registered person manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn 5. Supply of lottery State Government, Union Territory or any local authority 160 Lottery distributor or selling agent. Explanation.- For the purposes of this entry, lottery distributor or selling agent has the same meaning as

168 REVERSE CHARGE MECHANISM As per Notification No. 36/ Used vehicles, seized and confiscated goods, old and used goods, waste and scrap Central Govt., State Govt., UT or a local authority. assigned to it in clause (c) of Rule 2 of the Lotteries (Regulation) Rules, 2010, made under the provisions of sub section 1 of section 11 of the Lotteries (Regulations) Act, 1998 (17 of 1998). Any registered person. As per Notification No. 43/ Raw Cotton Agriculturist Any registered person. Services under reverse charge as approved by GST Council: Under all the following cases of reverse charge 100% tax is payable by recipient of services, in case of recipient of services is located in taxable territory. S.No. Category of Services Supplier of Services Recipient liable to pay tax 1. Services provided by Goods Goods Transport Agency a. Factory registered under or Transport Agency (GTA) for (GTA) governed by the Factories Act, transportation of goods. 1948; b. Any society registered under the Societies Registration Act, 1860 or under any other law; c. Any co-operative society d. Any person registered under CGST/ SGST/ UTGST/IGST Act; e. Anybody corporate f. Any partnership firm whether registered or not including association of persons. 2. Legal Services provided by an individual advocate or firm of advocates, directly or indirectly. 3. Services provided by an arbitral tribunal An individual advocate or firm of advocates An arbitral tribunal b. Casual taxable person. Any business entity. Any business entity. 4. Sponsorship services Any person Any body corporate or partnership firm. 5. Services provided by Government Government or local Any business entity. or local authority, except 1. Renting of immovable property, 2. Services specified belowi. Services by the Department of Posts by way of speed post, authority. express parcel post, life insurance, and agency services provided to a person other than Government; ii. Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; iii. Transport of goods or passengers. 161

169 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 6. Services provided by director of a company or body corporate to company or a body corporate 7. Services provided by an insurance agent to any person carrying on insurance business. 8. Services provided by recovery agent to a banking company or a financial institution or NBFC 9. Transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical or artistic works A director of a company or a body corporate. A company or a body corporate. An insurance agent Any person carrying on insurance business. A recovery agent Author or music composer, photographer, artist, etc. As per Notification No. 33/2017- CTR, Following entry shall be inserted in the above table: 10. Supply of services by the members of Overseeing Committee to RBI RBI Members of Overseeing Committee constituted by the RBI A banking company or a financial institution or a NBFC. Publisher, Music company, Producer 162

170 CHAPTER-21 E-COMMERCE OPERATOR Electronic Commerce means the supply of goods or services or both, including digital products over digital or electronic network. Sec 2(44) Electronic Commerce Operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. Sec 2(45) In e-commerce business customer places order for supply through online portal. The e-commerce companies pass these orders to actual suppliers of goods and services. As E-commerce operators were not selling goods hence VAT or CST was not levied on them. However, services provided by such online portals were covered under Service Tax net. Under GST, e-commerce operators selling goods are being made liable to collect 1% GST at source. Sec 52(1) In case of supply of specified services, the e-commerce operator will be liable to pay entire GST on such services. Sec 9(5) The supplier who has supplied the goods or services or both through e-commerce operator shall claim credit of the amount collected and reflected in the statement of the operator. Sec 52(7) The amount collected by e-commerce operator u/s 52(1) shall be paid to the credit of the govt. by the operator within 10 days after the end of the month in which such collection is made. Sec 52(3) Every e-commerce operator shall furnish a statement of all amounts collected towards outward supplies of goods or services or both effected through it, including supplies of goods or services or both returned to it, and the amount collected u/s 52(1), within 10 days after the end of such month. Sec 52(4) The e-commerce operator is required to file Annual Statement before 31 st December of the following financial year, giving specified details. Sec 52(5) The statement u/s 52(4) can be rectified by e-commerce operator. He is required to pay tax with interest in such case. However, such rectification is not possible after due date of furnishing statement. Sec 52(6) The details of supplies furnished by operator u/s 52(4) shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act. Sec 52(8) Where the details of outward supply, on which tax has been collected, as declared by operator do not match with the corresponding details declared by the supplier, the discrepancy shall be communicated to both persons in prescribed manner. Sec 52(9) If discrepancy is not rectified, it shall be added to the output liability of the supplier for the month succeeding the month in which discrepancy is communicated. Sec 52(10) The concerned supplier shall be liable to pay the tax payable on in respect of such supply along with interest on the amount so added from the date such tax was due till the date of its payment. Sec 52(11) 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 relating to o supplies of goods or services or both effected through such operator during any period; or o stock of goods held by the suppliers making supplies through such operator in the go downs or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, As may be specified in the notice. Sec 52(12) Every operator on whom a notice has been served under sub-section (12) shall furnish the required information within 15 days of the date of service of such notice. Sec 52(13) Any person who fails to furnish the information required by the notice served under sub-section (12) shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to twenty-five thousand rupees. 163

171 CHAPTER-22 JOB WORK Job work can be understood as the processing or working on goods supplied by the principal to complete a part or whole of the process. The work may be in the initial process, intermediate process, assembly, packing or any other completion process. The goods sent for job work maybe raw material, component parts, semifinished goods and even finished goods. The resultant goods could also be a variation of the same or the complete product. TAX LIABILITY UNDER CURRENT REGIME: In case, if the process undertaken by the job worker amounts to manufacture/ deemed manufacture, the job worker would be liable to pay the duty of excise on the goods so manufactured. However, the principal manufacturer who has supplied the goods for job work may furnish a declaration based on which job worker would not be required to charge duty of excise. This declaration exempts goods manufactured by a job worker from the duty of excise as per notified provision. This declaration also puts certain condition on principal manufacturer which are: 1. The goods must be used in manufacturing process by principal manufacturer, and 2. It should result in a dutiable product on which duty of excise can be charged. The activity undertaken by job worker would not be liable to service tax as well because process amounting to manufacture or production of goods is covered by the Negative list of Services Tax. JOB WORK UNDER GST REGIME: 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. Sec 2(68) JOB WORK PROCEDURE [SECTION- 143] 1. A registered person (principal) may under intimation, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, a. bring back inputs, after completion of job work or otherwise, 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; b. supply such inputs, after completion of job work or otherwise, 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: Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case i. Where the job worker is registered under section 25; or ii. Where the principal is engaged in the supply of such goods as may be notified by the Commissioner. 2. The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal. 3. Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, 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. 4. Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of three years of their being sent out, it shall be deemed that such 164

172 JOBWORK capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out. 5. Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap 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. [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.] It is impractical to give intimation in every case. INPUT TAX CREDIT IN RESPECT OF INPUTS AND CAPITAL GOODS SENT FOR JOB WORK [SEC- 19] (1) The principal shall, subject to such conditions and restrictions as may be prescribed, are allowed input tax credit on inputs sent to a job worker for job work. (2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job work without being first brought to his place of business. (3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise or are not supplied from the place of business of the job worker in accordance with clause (a) or clause (b) of sub-section (1) of section 143 within one year of being sent out, 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: Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker. (4) The principal shall, subject to such conditions and restrictions as may be prescribed, are allowed input tax credit on capital goods sent to a job worker for job work. (5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be 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 being first brought to his place of business. (6) Where the capital goods sent for job work are not received back by the principal within a period of three years of being sent out, 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: Provided that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker. (7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work. Explanation. For the purpose of this section, principal means the person referred to in section 143. TRANSITIONAL PROVISIONS RELATING TO JOB WORK [SEC. 141]: Where goods have been removed from a factory for further processing to a job worker prior to the appointed day i.e. under current tax regime and received back after GST roll-out: a. No tax shall be paid if such inputs are returned to the factory within 6 months from the appointed day, b. Time limit of 6 months can be increased by the govt. for a further period not exceeding 2 months on sufficient cause being shown, c. If such inputs are not returned within the specified period, the input tax credit shall be liable to be recovered in accordance with sec. 142(8) (a). d. The tax shall not be payable only if the manufacturer and job worker declare the details of such inputs held in stock in the last return under the current regime. Similarly, in case of semi-finished or finished goods, a job worker is not required to pay tax if such goods are returned to the original manufacturer s place of business within 6 months from the appointed day. Delivery Challan: For the purpose of transportation of goods for job work the consigner may issue a delivery challan, serially numbered, in lieu of invoice at the time of removal of goods for transportation, containing the following details: 165

173 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX i. Date and number of delivery challan ii. Name, address and GSTIN of the consigner iii. Name, address and GSTIN of the consignee iv. HSN code and description of goods v. Quantity vi. Taxable value vii. Tax rate and tax amount viii. Place of supply in case of inter-state movement ix. Signature. 166

174 CHAPTER-23 WORK CONTRACT Problem under Existing Law: Currently, both VAT and Service tax is applicable on works contract service activities. This has not only resulted in higher tax burden but also in numerous litigations for infrastructure projects on the issue of whether different contracts have to be treated as supply of goods or provision of service contracts, or could they be treated as a composite works contract involving supply of both goods and services. Transfer of property in goods involved in the execution of Works Contract is the Sale Element. Service Portion in the execution of a works contract is the Service Element WORKS CONTRACT Illustration: - M/s Rohit Builders is engaged in construction of a residential complex for Divine Homes Pvt. Ltd. The particulars are as follows: Contract Price (excluding VAT) Rs. 1,25,00,000 Excise Duty Paid on Capital Goods used in providing service Rs. 4,00,000 Excise Duty paid on inputs used in providing service Rs. 48,000 Service tax paid on input services used in providing service Rs. 75,000 Calculate the value of service tax payable in following two cases:- Case- 1: the aforesaid contract involves the transfer of property in goods involved in construction worth Rs. 2, 50,000. VAT of Rs. 10,000 has been paid on the said goods. Solution: Gross Amount Charged (excluding VAT) 1,25,00,000 Taxable Value (40% of amount charged for original works) 50,00,000 Service 7,50,000 Less: 1-CENVAT credit of capital goods (50%) (2,00,000) 2- CENVAT credit of inputs Not Allowed 3- Service Tax on input services (75,000) Net Service Tax Payable 4,75,000 Case- 2: The aforesaid does not involve any transfer of property in goods involved in construction. The contract price does not include cost of land. The cost of land is Rs. 15, 00,000. Solution: Gross Amount Charged (including cost of land) 1,40,00,000 Less: 70% 98,00,000 Taxable Value 42,00,000 Service 15% 6,30,000 Less: 1-CENVAT credit of capital goods (50%) (2,00,000) 2- CENVAT credit of inputs Not Allowed 3- Service Tax on input services (75,000) Net Service Tax Payable 3,55,

175 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Provision under GST Act: What is Works Contract:- 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. Sec 2(119) What is not Works Contract:- 1) The contract that is merely for supply of goods is not a works contract. Like supply of material only for construction is pure supply of goods which attracts provision of supply of goods. 2) The contract that is merely for supply of labor is also not works contract which attract provision of supply of service. Therefore Architect who only provides design for construction is not works contract. As per Schedule- II 5(b) and 6(a) following shall be treated as supply of services: 1) 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. [*Construction includes additions, alterations, replacements or remodeling of any existing civil structure.] Analysis: A Construction Contract in relation to building, complex or any civil structure is treated as supply of service if it is sold before completion of construction. However, if the entire consideration has been received after issuance of completion certificate by the competent authority or after its first occupation, then it becomes sale of immovable property and no GST is leviable on it. 2) Composite supply of works contract as u/s 2(119). Analysis: This covers Works Contract where transfer of property in goods is involved. CONSTRUCTION SERVICES WORKS CONTRACT CONSTRUCTION CONTRACT It is supply of service GST LEVIABLE Supply after completion of construction. It is sale of immovable property. Supply before completion of construction. It is supply of construction service. NO GST GST LEVIABLE Tax Rate: Composite supply of Works contract as defined in clause 119 of section 2 of CGST Act Construction of a complex, building, civil structure or a part thereof, intended for sale to a buyer, wholly or partly. [The value of land is deemed to be one-third of the total amount charged for such supplies] 18% With Full ITC 12% With Full ITC but no refund of overflow of ITC 168

176 WORK CONTRACT Illustration-: M/s Rohit Builders is engaged in construction of a residential complex for Divine Homes Pvt. Ltd. Contract price Rs. 45, 00,000. The particulars are as follows: Particulars CGST SGST GST Paid on Capital Goods used in providing service Rs. 20,000 Rs. 20,000 GST paid on inputs used in providing service Rs. 9,000 Rs. 9,000 GST paid on input services used in providing service Rs. 12,500 Rs. 12,500 Calculate the value of GST payable in following two cases:- Case- 1: It is a composite supply of Works Contact Service. Solution: Particulars CGST SGST Gross Amount Charged 45,00,000 45,00,000 CGST & 9% each 4,05,000 4,05,000 Less: 1- ITC on Capital Goods (20,000) (20,000) 2- ITC on inputs (9,000) (9,000) 3- ITC on input services (12,500) (12,500) Net CGST & SGST Payable 3,63,500 3,63,500 Case- 2: The aforesaid does not involve any transfer of property in goods involved in construction. Solution: Particulars CGST SGST Gross Amount Charged 45,00,000 45,00,000 Less: Cost of Land(1/3 rd of the gross amount charged) (15,00,000) (15,00,000) Net Amount Charged for Construction Service 30,00,000 30,00,000 CGST & SGST 6% each 1,80,000 1,80,000 Less: 1- ITC on Capital Goods (20,000) (20,000) 2- ITC on inputs (9,000) (9,000) 3- ITC on input services (12,500) (12,500) Net CGST & SGST Payable 1,38,500 1,38,500 Time of Supply: Time of supply of service in case of normal charge: The date of issue of invoice by the supplier or last date on which he is required to issue invoice, or The date of receipt of payment, Whichever is earlier. Place of Supply: Place of supply in case of Work Contract shall be the location of immovable property. In case, the immovable property is situated in the same state as that of registration, CGST and SGST shall be levied and in case the immovable property is situated outside the state in which registration is obtained, IGST will be levied. Composition Scheme: Under GST regime, there is no provision of composition scheme for Works Contractors. Sec 10(2) states that a person engaged in supply of services other than restaurant services is not eligible for composition scheme. This will be a big blow to the small sub-contractors as they will be forced to register for normal taxation scheme increasing their compliances and costs. Input tax credit shall not be available in respect of the following, namely: 1. 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 (subcontract). Analysis: When a registered person, engaged in construction of an immovable property, takes input in the form of work contract service from another person, he shall not be able to claim input tax credit in respect of the amount of input tax paid on such work contract services. However, where the person is providing works contract service he can claim ITC on the amount of input tax paid on works contract service used as an input for provision of such service. 169

177 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 2. 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. Analysis: No person shall avail credit of any input tax paid on goods or services used in construction of an immovable property on his own account even if the said goods are used in the course of his business. Explanation. The expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property. Sec 17(5) Works Contract Service Input for Construction of Immovable Property (except Plant & Machinery) Input for further supply of Work Contract Service No ITC of input tax paid on Works Contract service used as input. Full ITC of input tax paid on Works Contract service used as input. Illustration: - M/s Gaur Builders are engaged in construction of a residential complex for Amrapali Homes. Contract Price is Rs. 60, 00,000. Gaur Builders avail services of M/s Raj Constructions for the installation of lift in the building for Rs. 10, 00,000. CGST and SGST paid being Rs. 90,000 respectively. Calculate the value of GST payable in the following two cases: Case- 1: Rohit builders are providing work contract service. Solution: In this case, Rohit Builders are simply sub-contracting a part of the main contract to M/s Raj constructions. Hence, they can avail ITC of such work contract services used as an input. Particulars CGST SGST Gross Amount Charged 60,00,000 60,00,000 CGST & 9% 5,40,000 5,40,000 Less: ITC on Work Contract used as input services (90,000) (90,000) Net GST payable 4,50,000 4,50,000 Case- 2: The contract does not involve transfer of property in goods used in the construction, i.e. M/s Rohit Builders are only providing construction services to Amrapali Homes. In the course of provision of such services, they avail work contract services from M/s Raj Construction. Solution: In this case, Rohit Builders can not avail ITC of work contract services received from Raj Construction. Particulars CGST SGST Gross Amount Charged 60,00,000 60,00,000 Less: Cost of Land [1/3 rd of the Gross Amount Charged] 20,00,000 20,00,000 Net Amount Charged for Construction Service 40,00,000 40,00,000 CGST & 6% 2,40,000 2,40,000 Less: ITC on Work Contract used as input services - - Net GST payable 2,40,000 2,40,000 Exemptions in Service Tax to Continue in GST: 1. Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex. 2. Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the Beneficiary-led individual house construction / enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY); 170

178 WORK CONTRACT Transition Provisions: A registered person who was providing works contract service and was availing benefit of notification No. 26/2012- Service Tax, shall be entitled to take credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, in his e-credit ledger, subject to the following conditions: 1. Such inputs or goods are used or intended to be used for making taxable supplies under this Act; 2. The said registered person is eligible for input tax credit on such inputs under this Act; 3. The said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs; 4. Such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day; and 5. The supplier of services is not eligible for any abatement under this Act: Conclusion: It can be said that the provisions under CGST Act have simplified the multiple compliance procedures for works contractors. Also, free and smooth flow of input tax credit will create a positive impact on this sector. On the other hand, there is no provision of composition scheme for works contractor which will be a big blow to small sub-contractors. 171

179 CHAPTER-24 RETAIL TRADER A trader is an individual who engages in the buying and selling of goods either locally or in another state. Thus any trader can be bifurcated in certain cases given below: Case 1: Intra-state purchase and intra-state sales. Case 2: Inter-state purchase and intra-state sales. Case 3: Inter-state purchase and inter-state sales. Case 4: Intra-state purchase and Inter-state sales. Case 5: Intra-state and inter-state purchase and inter-state and intra-state sales. Under GST a trader can also opt for composition scheme under which he will not able to claim input tax paid on purchases but will only need to file a single return quarterly on a decreased tax rate. A trader can only opt for composition scheme if he fulfills the following conditions: 1. The aggregate turnover should not be more than Rs Crore in the preceding financial year. 2. He will be required to pay 0.5% on the value of the taxable sales. 3. They cannot do inter-state sales or make sales through an e-commerce operator. 4. He will not be eligible to make imports or inter-state purchase. Thus in the above mentioned Cases only trader in case 1 can opt for such composition scheme and in all other cases the trader cannot avail the benefit of such composition scheme. Case 1: Intra-state purchase and sales How to get registered? Under GST there is a threshold limit of Rs. 20 lakhs, a trader whose aggregate turnover exceeds this threshold limit will be required to get registered under GST and will be needed to file the return and pay the outstanding GST amount before the due date. Procedure of getting registered is given below: 1. The trader who wants to get registered under GST must submi0074 his PAN number, his mobile number, address and state in the Part A of the form GST REG After verification of details given in Part A, a reference number will be generated and the Part B of Form GST REG-02 must be filled up and submitted signed digitally on the GST common portal with the required documents. 3. On receipt of From GST REG-01, an acknowledgment will be generated electronically in the Form GST REG The proper officer on receipt of such registration request will examine all the forms and after being satisfied by the details provided will approve such registration with three working days from the date of receipt of request of registration. 5. After approval from the proper officer a certificate of registration will be issued under Form GST REG- 06. Under the current VAT scenario, the registration process is different in each states of India and takes time to get registered. Under GST, there will be registrations only through electronic mode and thus this will bring transparency in the registration and will speed up the process and is more cost effective than it was under VAT. Which taxes are applicable? Under GST there are IGST, CGST, and SGST/UTGST. If trader s purchases are inter-state then he will pay CGST and SGST charged in the invoice issued to him. On the sales affected by him he will charge CGST and SGST from the customers or the registered dealer. Thus he will have CGST and SGST both as input and as payable. He can use input of CGST to pay liability of CGST only, he can use input of SGST to pay liability of SGST only, and thus CGST cannot be used to pay liability of SGST and vice-versa. 172

180 RETAIL TRADER Which returns to be filled? Any trader who purchase and sales intra-state will be required to file GSTR-1, GSTR-2 and GSTR-3 monthly. The registered trader will be needed to file 3 returns monthly about sales, purchase and both. The summary of details to be filed in different forms is as under: GSTR-1 1. GSTR-1 contains total of all the sales affected by the registered trader during a month. 2. It must be submitted by 10 th of the next month. 3. If the sales are made to any registered dealer the GSTIN must be entered in the return with invoice wise details of all the sales made to the registered dealers. 4. Sales made to customer must be reported in aggregate on the basis of the HSN code of the goods sold. 5. Total amount of GST payable before taking any input will get calculated under such form. GSTR-2 1. GSTR-2 will contain all the purchase made by the registered trader during the month. 2. It must be submitted by 15 th of the next month. 3. This form will get auto populated from the GSTR-1 filed by the counterparty. Thus it must only be checked by the registered dealer and make any modification if applicable to be made. 4. Total amount of ITC to be availed will be calculated through this form only. GSTR-3 1. GSTR-3 is the monthly form that combines sales given in GSTR-1 and purchases given in GSTR It must be submitted by 20 th of the next month. 3. This form will also get auto populated with the data of GSTR-1 and GSTR-2 filled earlier the registered trader. 4. It will itself calculate the net tax liability to be paid with the interest and penalty, if any. 5. Challan paid through the GST common portal must be entered to pay the arising liability. How return filling is different from that from VAT? There are various differences between return filling under GST and return filling under VAT as such: 1. The last return filed under VAT can be revised before filling the next return. Though under, GST there is no scope of revision of returns filed. Though any mistake made in any pervious return filed can be made in the return of the next tax period and the liability created on such modification will also be subject to interest. 2. Only 1 monthly return needed to be filed under VAT regime, but under GST a registered trader will need to file 3 returns per month. 3. Under VAT a trader need to file 13 returns yearly but he will need to file 37 returns yearly which will increase the compliance cost. 4. Under VAT to claim the input we need the proper tax invoice issued to us but in GST to claim the input we need not only the proper tax invoice but also we require the seller to deposit the GST paid by us on the purchase and show such purchase in the return filled by him or we will not be able to claim the ITC thought paid by us. This will also increase the problem for the trader. Advantages for opting for composition dealer Any trader who purchases and sales locally and have aggregate turnover not exceeding Rs Crore can opt for composition scheme and thus will have the following advantages: 1. Instead of filling 12 returns in a quarter he will need to file a single quarterly return. Under composition scheme, he needs to file a single return GSTR-4 before 18 th of the next month succeeding the quarter. 2. GSTR-4 will compose of all the purchases and sales affected by him in the quarter for which the return is being filed. All the purchase made from the registered dealer is recorded invoice wise only. Sales made must be reported in aggregate value and the tax payable will be calculated with compounding rates. 3. During the first year no HSN need to be reported in case of compounding dealer and from the 2 nd year onwards 2-digit HSN code need to be reported. Disadvantages for opting for composition dealer 173

181 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Though composition scheme reduces the compliance to be done by a registered trader but it also has it disadvantages, such as: 1. The dealer cannot take input of the tax paid on purchase made from the registered dealer. 2. He will be labile to pay the tax under reverse charge same as he his is a normal taxpayer. 3. The tax paid on sales at the compounding rates will be paid through the pocket of the trader only; he cannot include the amount of tax in the invoice issued to consumers. Returns to be filed by a compounding dealer Any registered dealer registered under composition scheme will not file GSTR-1, GSTR-2 or GSTR-3 monthly but they will be required to file GSTR-4 every quarter. Important points taken into consideration while filing GSTR-4 is as under: 1. It will include all the purchase made during the quarter and all the sales affected by him during the quarter. 2. The last of filling of GSTR-4 is 18 th of the month succeeding the quarter. 3. Purchase from the registered dealer must be reported under the concerning head with all the purchases made from the unregistered dealer on whom tax is paid on the reverse charge. 4. Sales are also reported in the concerning head with the tax liability to be paid on the compounded rates. Illustration 1. Mr. X a trader deals in table. He purchases all his table in the local market and pay tax on it and then sales the same to consumers in the local market only. Thus if he purchase 100 units of Rs. 2,000 each and sold all the Rs.2, 500 in the same month thus under such case: Solution: Particulars Current Regime GST Regime Purchase of tables 2,00, ,00, Add: 12.5% 25, Add: 2% 4, Add: 6% - 12, Add: 6% - 12, Total Cost 2,29, ,24, Sales of tables 2,50, ,50, Add: 12.5% 31, Add: 2% 5, Add: 6% - 15, Add: 6% - 15, Total Sales 2,86, ,80, VAT/GST payable after claiming of setoff 7, , Case 2: Inter-state purchase and Intra-state sales How to get registered? The registration process for any trader falling under any of the cases is same so the process is same as directed in Case 1 above. Which taxes are applicable? If the trader makes purchases out of the state then he will pay IGST on those purchases made from any registered dealer and if purchase made from any unregistered trader then he need to pay IGST under reverse charge. Thus, he will have input of IGST only. Sales are being made locally and thus the tax liability ledger of the trader will show CGST and SGST payable. Under GST, the liability of CGST or SGST both can be paid by the input of IGST. Thus the input of IGST can be fully utilized in the payment of tax liability. This is different from the current scenario of VAT, where the purchase made from other states attracts CST whose input is not available for setoff. Thus the goods will become cheaper under GST due to availability of IGST to set off. 174

182 RETAIL TRADER Which returns to be filled? Any trader who purchase from outside the state and sales within the state will also be required to file GSTR-1, GSTR-2 and GSTR-3 monthly. The registered trader will be needed to file 3 returns monthly about sales, purchase and both. The summary of details to be filed in different forms is as under: GSTR-1 1. GSTR-1 contains total of all the sales affected by the registered trader during a month. 2. It must be submitted by 10 th of the next month. 3. If the sales are made to any registered dealer the GSTIN must be entered in the return with invoice wise details of all the sales made to the registered dealers. 4. Sales made to customer must be reported in aggregate on the basis of the HSN code of the goods sold. 5. Total amount of GST payable before taking any input will get calculated under such form. GSTR-2 1. GSTR-2 will contain all the purchase made by the registered trader during the month. 2. It must be submitted by 15 th of the next month. 3. This form will get auto populated from the GSTR-1 filed by the counterparty. Thus it must only be checked by the registered dealer and make any modification if applicable to be made. 4. Total amount of ITC to be availed will be calculated through this form only. GSTR-3 1. GSTR-3 is the monthly form that combines sales given in GSTR-1 and purchases given in GSTR It must be submitted by 20 th of the next month. 3. This form will also get auto populated with the data of GSTR-1 and GSTR-2 filled earlier the registered trader. 4. It will itself calculate the net tax liability to be paid with the interest and penalty, if any. 5. Challan paid through the GST common portal must be entered to pay the arising liability. 6. The arising liability of CGST and SGST can be paid through using input tax ledger or E-cash ledger of the registered trader. How return filling is different from that from VAT? Points under this head will be same as in Case 1 above. Scope of composition scheme To avail the benefit of the composition dealer the registered dealer must fulfill certain requirements and one of those restrictions is to make purchase locally only. As under the current case the registered trader is purchasing outside the state only and thus he is not eligible to claim the benefit of the composition dealer. Illustration 2. Mr. X a trader deals in table. He purchases all his table from the market outside the state and pays tax on it and then sales the same to consumers in the local market only. Thus if he purchase 100 units of Rs. 2,000 each and sold all the Rs.2, 500 in the same month thus under such case: Solution: Particulars Current Regime GST Regime Purchase of tables 2,00, ,00, Add: 2% 4, Add: 12% - 24, Total Cost 2,04, ,24, Sales of tables 2,50, ,50, Add: 12.5% 31, Add: 2% 5, Add: 6% - 15, Add: 6% - 15,

183 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Total Sales 2,86, ,80, VAT/GST payable after claiming of setoff 36, , Input of CST paid is not available to set off against any VAT or SAT liability. Case 3: Inter-state purchase and Inter-state sales How to get registered? The registration process for any trader falling under any of the cases is same so the process is same as directed in Case 1 above. Which taxes are applicable? Under this case, the registered trader make purchases from outside of state any also make sales outside of the state, thus in both the situations there arise IGST, as input and also as payable. Thus the trader can claim full input of such IGST paid to set off his liability of IGST payable. Such setoff was not possible in current VAT scenario as the CST cannot be used to pay another CST, thus the value of CST paid gets included in the cost increasing the value of the goods, and thus creating cascading effects. Which returns to be filled? Any trader who purchase from outside the state and sales outside the state will also be required to file GSTR- 1, GSTR-2 and GSTR-3 monthly. The registered trader will be needed to file 3 returns monthly about sales, purchase and both. The summary of details to be filed in different forms is as under: GSTR-1 1. GSTR-1 contains total of all the sales affected by the registered trader during a month. 2. It must be submitted by 10 th of the next month. 3. If the sales are made to any registered dealer the GSTIN must be entered in the return with invoice wise details of all the sales made to the registered dealers, with the state code of the registered dealer as the state of the buyer and seller is different. 4. Sales made to customer must be reported in aggregate on the basis of the HSN code of the goods sold. Any sale made to consumer having a value of more than Rs. 2 lakhs would be reported on the basis of the invoice. All invoices issued of more than Rs. 50,000 must contain the address of the consumer. 5. Sales made through the e-commerce portal need to get reported separately under the concerning head. Such sales are included in the above head but are reported again later and thus must not be excluded while filling the data in the above heads of the return. 6. Total amount of GST payable before taking any input will get calculated under such form. GSTR-2 1. GSTR-2 will contain all the purchase made by the registered trader during the month. 2. It must be submitted by 15 th of the next month. 3. This form will get auto populated from the GSTR-1 filed by the counterparty. Thus it must only be checked by the registered dealer and make any modification if applicable to be made. 4. Total amount of ITC to be availed will be calculated through this form only. GSTR-3 1. GSTR-3 is the monthly form that combines sales given in GSTR-1 and purchases given in GSTR It must be submitted by 20 th of the next month. 3. This form will also get auto populated with the data of GSTR-1 and GSTR-2 filled earlier the registered trader. 4. It will itself calculate the net tax liability to be paid with the interest and penalty, if any. 5. Challan paid through the GST common portal must be entered to pay the arising liability. 6. The arising liability of IGST can be paid through using input tax ledger or E-cash ledger of the registered trader. How return filling is different from that from VAT? 176

184 RETAIL TRADER Points under this head will be same as in Case 1 above. Scope of composition scheme To avail the benefit of the composition dealer the registered dealer must fulfill certain requirements and one of those restrictions is to make sale locally only. As under the current case the registered trader is purchasing and selling outside the state only and thus he is not eligible to claim the benefit of the composition dealer. Illustration 3. Mr. X a trader deals in table. He purchases all tables from the market outside the state and pays tax on it and then sells the same to consumers in the market outside the state of the trader. Thus if he purchase 100 units of Rs. 2,000 each and sold all the Rs.2, 500 in the same month thus under such case: Solution: Particulars Current Regime GST Regime Purchase of tables 2,00, ,00, Add: 2% 4, Add: 12% - 24, Total Cost 2,04, ,24, Sales of tables 2,50, ,50, Add: 2% 5, Add: 12% - 30, Total Sales 2,55, ,80, VAT/GST payable after claiming of setoff 5, , The CST paid on the purchase is not available for the setoff under VAT. Case 4: Intra-state purchase and Inter-state sales How to get registered? The registration process for any trader falling under any of the cases is same so the process is same as directed in Case 1 above. Which taxes are applicable? Under this case, the traders purchase the goods locally and then sell them in different states. Thus he will have input of CGST and SGST paid on such purchases made and will have liability of IGST outstanding in his tax liability ledger. Under GST, the input of CGST and SGST can be used to pay the liability of IGST payable. Thus the trader will be able to use the full amount of input available. Under the current VAT scenario, the input available with the trader of VAT and SAT paid don t get used, as liability of CST arising on the purchases cannot be paid using the input available with the trader. Which returns to be filled? Any trader who purchase from outside the state and sales outside the state will also be required to file GSTR- 1, GSTR-2 and GSTR-3 monthly. The registered trader will be needed to file 3 returns monthly about sales, purchase and both. The summary of details to be filed in different forms is as under: GSTR-1 1. GSTR-1 contains total of all the sales affected by the registered trader during a month. 2. It must be submitted by 10 th of the next month. 3. If the sales are made to any registered dealer the GSTIN must be entered in the return with invoice wise details of all the sales made to the registered dealers, with the state code of the registered dealer as the state of the buyer and seller is different. 177

185 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 4. Sales made to customer must be reported in aggregate on the basis of the HSN code of the goods sold. Any sale made to consumer having a value of more than Rs. 2 lakhs would be reported on the basis of the invoice. All invoices issued of more than Rs. 50,000 must contain the address of the consumer. 5. Sales made through the e-commerce portal need to get reported separately under the concerning head. Such sales are included in the above head but are reported again later and thus must not be excluded while filling the data in the above heads of the return. 6. Total amount of GST payable before taking any input will get calculated under such form. GSTR-2 1. GSTR-2 will contain all the purchase made by the registered trader during the month. 2. It must be submitted by 15 th of the next month. 3. This form will get auto populated from the GSTR-1 filed by the counterparty. Thus it must only be checked by the registered dealer and make any modification if applicable to be made. 4. Total amount of ITC to be availed will be calculated through this form only. GSTR-3 1. GSTR-3 is the monthly form that combines sales given in GSTR-1 and purchases given in GSTR It must be submitted by 20 th of the next month. 3. This form will also get auto populated with the data of GSTR-1 and GSTR-2 filled earlier the registered trader. 4. It will itself calculate the net tax liability to be paid with the interest and penalty, if any. 5. Challan paid through the GST common portal must be entered to pay the arising liability. 6. The arising liability of IGST can be paid through using input tax ledger or E-cash ledger of the registered trader. How return filling is different from that from VAT? Points under this head will be same as in Case 1 above. Scope of composition scheme To avail the benefit of the composition dealer the registered dealer must fulfill certain requirements and one of those restrictions is to make sale locally only. As under the current case the registered trader is selling outside the state and thus he is not eligible to claim the benefit of the composition dealer. Illustration 4. Mr. X a trader deals in table. He purchases all table in the local market and pay tax on it and then sells the same to consumers in the market located outside the state. Thus if he purchase 100 units of Rs. 2,000 each and sold all the Rs.2, 500 in the same month thus under such case: Solution: Particulars Current Regime GST Regime Purchase of tables 2,00, ,00, Add: 12.5% 25, Add: 2% 4, Add: 6% - 12, Add: 6% - 12, Total Cost 2,29, ,24, Sales of tables 2,50, ,50, Add: 2% 5, Add: 12% - 30, Total Sales 2,55, ,80, VAT/GST payable after claiming of setoff 5, , The VAT and SAT is available as input but to pay VAT and SAT only and cannot be used to pay the outstanding liability of CST. Under GST, the outstanding liability of IGST can be paid through the input of CGST and SGST. 178

186 RETAIL TRADER Case 5: Intra-state and Inter-state purchase and Intra-state and Inter-state sales How to get registered? The registration process for any trader falling under any of the cases is same so the process is same as directed in Case 1 above. Which taxes are applicable? As under this case the trader deals with purchases and sales made within the state and even outside the state and thus he will have input of IGST, CGST and SGST and even the liability of IGST, CGST and SGST. Thus he will be able to set off the liability by the use of input available as per the ITC Rules as such: 1. The liability of IGST can be paid through the input of IGST, CGST and SGST. 2. The liability of CGST can be paid through the input of CGST and IGST. 3. The liability of SGST can be paid through the input of SGST and IGST. Under the current scenario of VAT the input of CST paid at the time of purchase made from outside the state is not available for setoff thus increasing the cost of the goods purchased. We can avail the input of VAT and SAT paid on the purchase to set off the liability of VAT and SAT payable but the liability of CST payable will have to pay in cash only. Which returns to be filled? Any trader who purchase from outside the state and sales outside the state will also be required to file GSTR- 1, GSTR-2 and GSTR-3 monthly. The registered trader will be needed to file 3 returns monthly about sales, purchase and both. The summary of details to be filed in different forms is as under: GSTR-1 1. GSTR-1 contains total of all the sales affected by the registered trader during a month. 2. It must be submitted by 10 th of the next month. 3. If the sales are made to any registered dealer the GSTIN must be entered in the return with invoice wise details of all the sales made to the registered dealers, with the state code of the registered dealer whenever the state of the buyer and seller is different. 4. Sales made to customer must be reported in aggregate on the basis of the HSN code of the goods sold. Any sale made to consumer having a value of more than Rs. 2 lakhs would be reported on the basis of the invoice. All invoices issued of more than Rs. 50,000 must contain the address of the consumer. 5. Sales made through the e-commerce portal need to get reported separately under the concerning head. Such sales are included in the above head but are reported again later and thus must not be excluded while filling the data in the above heads of the return. 6. Total amount of GST payable before taking any input will get calculated under such form. GSTR-2 1. GSTR-2 will contain all the purchase made by the registered trader during the month. 2. It must be submitted by 15 th of the next month. 3. This form will get auto populated from the GSTR-1 filed by the counterparty. Thus it must only be checked by the registered dealer and make any modification if applicable to be made. 4. Total amount of ITC to be availed will be calculated through this form only. GSTR-3 1. GSTR-3 is the monthly form that combines sales given in GSTR-1 and purchases given in GSTR It must be submitted by 20 th of the next month. 3. This form will also get auto populated with the data of GSTR-1 and GSTR-2 filled earlier the registered trader. 4. It will itself calculate the net tax liability to be paid with the interest and penalty, if any. 5. Challan paid through the GST common portal must be entered to pay the arising liability. 6. The arising liability of IGST can be paid through using input tax ledger or E-cash ledger of the registered trader. 179

187 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX How return filling is different from that from VAT? Points under this head will be same as in Case 1 above. Scope of composition scheme To avail the benefit of the composition dealer the registered dealer must fulfill certain requirements and one of those restrictions is to make sale locally only. As under the current case the registered trader is purchasing outside the state and also selling outside the state and thus he is not eligible to claim the benefit of the composition dealer. Illustration 5. Mr. X a trader deals in table. He purchases all table both from the local market and from outside the state and pay tax on it and then sells the same to consumers both in the local market and outside the state also. Thus if he purchase 100 units of tables (50 from local market and 50 from outside the Rs. 2,000 each and sold all the units (50 to local market and 50 to the market outside the Rs.2,500 in the same month thus under such case: Solution: Particulars Current Regime GST Regime Local Purchases 1,00, ,00, Other than local purchases 1,00, ,00, Add: 12.5% 12, Add: 2% 2, Add: 2% 2, Add: 6% - 6, Add: 6% - 6, Add: 12% - 12, Total Cost 2,16, ,24, Local Sales 1,25, ,25, Other than local sales 1,25, ,25, Add: 12.5% 15, Add: 2% 2, Add: 2% 2, Add: 6% - 7, Add: 6% - 7, Add: 12% - 15, Total Sales 2,70, ,80, VAT/GST payable after claiming of setoff 6, ,

188 CHAPTER-25 SMALL MANUFACTURER Provisions of taxation on manufacturer under current scenario and under GST (A comparative analysis):- CASE 1: LEVY OF TAX Under current scenario excise duty is levied on manufacturer or producer of goods in respect of commodities produced by him. Under current scenario BASIC EXCISE DUTY is levied on all manufactures except on manufacture of petroleum products at the rate of 12.5% and NCCD is levied on pan masala, branded chewing tobacco, cigarettes, domestic crude oil and mobile phones. And an Additional Duty of Excise is levied by way of surcharge on pan masalas and tobacco. Suppose a manufacturer produces shirts by taking cloth, threads, buttons and other necessary items as raw materials. Excise duty will be levied on the shirts so produced by him when the same are removed out of the factory or warehouse where shirts are stored after manufacture. In addition to the excise duty recipient of goods is also required to pay VAT/CST as applicable on him and at such rates as specified. Illustration- XYZ Pvt. Ltd. Produces shirt as specified above. In one batch 5,000 shirts are produced which cost 5, 00,000 to the manufacturer. After adding 15% profit on the cost of goods so produced he sells the goods to the dealers. Which means total value of goods produced by manufacturer will be 5, 75,000. Now when the manufacturer removes these goods from factory for sale to dealer excise duty will be levied on the 12.5%. Suppose in our illustration dealer is within the same state in which the manufacturer in given example is. So the dealer is required to pay 12.5% and 2%. So the invoice issued by manufacturer to the dealer will be in the following manner:- Total value of goods manufactured 5,75,000 Excise duty on the goods so manufactured ( 5,75,000*12.5%) 71,875 Total cost to the dealer of manufactured goods 6,46,875 VAT paid by the dealer on the same ( 6,46,875*12.5%) 80,860 SAT paid by the dealer on the same ( 6,46,875*2%) 12,938 Total amount to be paid by dealer 7,40673 Under GST, tax is levied only when supply of goods takes place. So manufacturers will be liable to pay GST on goods only when they supply goods manufactured by them. This can be better understood with the help of following illustration. Illustration- XYZ Pvt. Ltd. Produces shirt as specified in above illustration. Total value of shirts produced by it is Rs. 5, 75,000. Now since excise duty is subsumed under GST. Dealer to whom such goods are sold is required to pay GST at such rate as is applicable on intra-state supply of such goods. Suppose GST is 12% on such goods, so here tax will be levied as follows:- Value of manufactured goods 5,75,000 CGST to be paid by the dealer on purchase of such goods ( 5,75,000*6%) 34,500 SGST to be paid by the dealer on purchase of such goods ( 5,75,000*6%) 34,500 Total amount to be paid by the dealer on purchase of such goods 6,44,000 Case 2: TAXABLE EVENT FOR LEVY OF TAX Taxable event for levy of excise duty is when manufacture of goods takes place. Conditions required to be met for levy of excise duty:- 181

189 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 1. There is manufacture. 2. Manufacture is done in India. 3. Manufacture must result in goods. 4. Such goods are excisable goods. Under current scenario excise duty is levied when goods are removed out of the factory for sale but the same was not levied when the goods were transferred by manufacturer to his own warehouse (whether within the same state or in different state) where goods were stored before being sold. Taxable event for levy of GST is supply of goods, i.e., whenever goods are supplied GST will be levied. Since supply of goods includes transfer of goods to warehouse, other units, depots so under GST tax will be levied when manufacturer transfers goods outside the state. This will enable government to realize the revenue at early stages even when no sale is made, but will cause stress on pockets of manufacture because they have to pay tax out of pocket even before realization of consideration on sale. This will create a serious impact on working capital of manufacturers because a considerable amount of cash will be blocked until the sale is made. Case 3: EXEMPTIONS AVAILABLE FOR SMALL SCALE MANUFACTURERS Exemptions available for manufacturer under current scenario:- Manufacturers having turnover not exceeding 4 Crore in previous year can opt for SMALL SCALE INDUSRTY EXEMPTION. Under the scheme named above a manufacturer having turnover not exceeding Rs. 4 Cr. In the previous year does not have to pay any tax on turnover up to Rs. 1.5 Cr. in the current financial year. Certain conditions must be complied with for opting the scheme specified above:- 1. Goods manufactured must be the goods specified in the SSI Exemption Notification. 2. Exemption is not available to those businesses that are manufacturing the goods under the brand name of some other person. Exemptions available for manufacturer under GST:- Manufacturers whose aggregate turnover does not exceed Rs Crore in the previous financial year may opt to pay tax under COMPOSITION SCHEME, where they are liable to pay 1% on goods manufactured by them. This can be better understood with the help of following illustration:- Illustration- A manufacturer of candies whose turnover in the previous year was Rs. 45 Lakhs opts to pay tax under composition scheme. In the current financial year, he purchased input raw material worth Rs. 25 Lakhs on which GST paid by 5%. He further made payment to labour of Rs. 12 lakhs on which GST is paid by 18%. By using these inputs, candies of value 42 Lakhs is produced by him. Solution- Manufacturer is required to pay tax under composition scheme in the following manner:- GST on inputs paid by manufacturer:- On purchase of input raw material ( 25,00,000*5%) 1,25,000 On payment made to labour ( 12,00,000*18%) 2,16,000 Since, manufacturer has opted to pay tax under composition scheme he cannot collect tax from customers and is required to pay 1% on his total turnover. GST on total turnover to be paid by the manufacturer ( 42,00,000*1%) 4,20,000 So, under composition scheme total tax that is required to be paid by the manufacturer is (1, 25,000+2, 16,000+4, 20,000) 7, 61,000. Case 4: REGISTRATION OF MANUFACTURERS Registration under current scenario:- Every person who is engaged in manufacture of goods or hold private store room or warehouse is required to get himself register. Only those persons who are engaged in production of goods that attract nil rate of excise duty or persons who are availing SSI Exemption are not required to register themselves under this law. Persons availing SSI Exemption are required to file a declaration when their turnover exceeds Rs. 90 lakhs. 182

190 SMALL MANUFACTURER Registration under GST:- Every person who is currently registered under excise law is required to migrate to GST through the GST migration procedure under which every migrating body will be allotted a GST Identification Number that will be a unique identity for identifying that particular body and payment of tax. New businesses: - Those business bodies that have started their work after application of GST are required to register themselves only when their turnover exceeds Rs. 20 lakhs (10 lakhs in case of businesses in north eastern states). Registration forms to be filed by manufacturer for getting registration under GST S. No. Form Name Description 1 GST REG- 01 Application for Registration 2 GST REG- 02 Acknowledgement of application 3 GST REG- 03 Notice seeking additional information/ clarification relating to application for registration 4 GST REG- 04 Filing clarification / additional information for Registration 5 GST REG- 05 Order of rejection of registration application 6 GST REG- 06 Registration Certificate Case 5: RETURNS TO BE FILED BY MANUFACTURERS Returns to be filed by manufacturers under current scenario Form of return Category of assessee Periodicity Due date of filing return ER-1 ER-3 ER-4 All assesses except Small Scale Industries All assesses opting Small Scale Industry Exemption For those assesses who are paying duty equal to or more than 1 Cr. Monthly 10 th of every month following relevant month. Quarterly 10 th of the month following relevant quarter Annually 30 th November of every succeeding year Returns to be filed by manufacturers under GST Form of return Category of assessee Periodicity Due date of filing return GSTR-1 GSTR-2 GSTR-3 GSTR-4 GSTR-9 GSTR-9A All assesses except those opting composition scheme for furnishing details of sales All assesses except those opting composition scheme for furnishing details of purchase Form is auto-populated from GSTR-1 and GSTR-2 for calculating final liability of assessee. Filed by assesses opting to pay tax under composition scheme Filed by all assesses except those opting composition scheme to provide yearly details of sales and purchase. Filed by assesses opting composition scheme to provide yearly details of sales and purchase. Monthly Monthly Monthly Quarterly Yearly Yearly 10 th of every month following relevant month. 15 th of every month following relevant month. 20 th of every month following relevant month. 18 th of month succeeding every quarter. 31 st of December of the year succeeding the relevant year 31 st of December of the year succeeding the relevant year 183

191 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Case 6: JOB WORK Under current scenario there are various conditions as to when job worker will be considered as the manufacturer of the goods in spite of actual manufacturer of goods who has given goods on job work:- 1. When the goods have been supplied by someone else and production is carried on as per the specifications provided by the person supplying such goods. 2. Where large manufacturer get their goods manufactured from small manufacturers by providing designs and exercising quality controls. Under both the conditions job worker is required to pay excise duty and claim CENVAT Credit on the amount so paid. Under GST, provisions are specified as to when job worker will be liable to pay tax under GST, and when manufacturer will be liable to pay tax, those conditions are defined as follows:- 1. In the case of job work the principal is entitled to take credit of inputs even if the inputs are directly sent to job worker for job work without being first brought to his place of business. 2. Where the inputs sent by principal to job worker are not received by the principal after completion of the job work or are not supplied from the place of business of job worker within one year of being sent out, 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 inputs were directly sent to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker. 3. In the case of job work the principal is entitled to take credit on capital goods even if the capital goods are directly sent to job worker for job work without being first brought to his place of business. 4. Where the capital goods sent by principal to job worker are not received by the principal after completion of the job work within three year of being sent out, 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. Where capital goods were directly sent to a job worker, the period of three year shall be counted from the date of receipt of capital goods by the job worker. 184

192 CHAPTER-26 EXPORT RULES Treatment of Imports in GST: Current Regime: In the current regime, a person who imports goods has to pay customs duty, countervailing duty (CVD), and special additional duty (SAD). CVD is levied at a rate equivalent to the rate of Excise on such goods, if they had been manufactured in India. SAD is equivalent to VAT on the goods in India. CVD and SAD are imposed to bring the imported product s price to its true market price in India. If the importer uses the imported goods to manufacture dutiable goods in India or provide taxable services, CVD paid on inputs is available as tax credit. If the importer is just a trader, CVD on imports is not available as credit. SAD paid on import is eligible for refund, subject to conditions. However, no credit is given on customs duty paid and it becomes a cost for the importer. A person who imports services has to pay Service Tax on the imported service at the Service tax rate applicable in India. The importer can claim tax credit of the Service Tax paid on imports. GST Regime: CVD and SAD levied on imports in the current regime have been replaced by IGST. In the GST regime, a person who imports goods has to pay customs duty and IGST. An importer can claim full tax credit of IGST paid on imports. Hence, importers who were unable to claim credit of CVD or SAD in the current regime can now claim full tax credit of the IGST paid on imports. However, no tax credit will be given on customs duty paid and it remains a cost for the importer under GST also. Particulars Current Regime (INR) GST Regime (INR) T-shirts (200 pieces) 10,00,000 10,00,000 Add: Customs Duty (@10%) 100, ,000 Add: Cess (@ 3%) 3,000 3,000 Total 11,03,000 11,03,000 Add: 12.5% Sub Total Add: 4% Add: Total Cost of Import ITC available Treatment of Exports in GST: Current Regime: In the current regime, export of goods and services is zero rated, i.e. rate of tax on exports is 0%. An exporter can also claim refund of the tax paid on inputs used to manufacture/ purchase/ provide the exported goods or services. GST Regime: A. Registration: Any person exporting goods from India has to obtain registration under IGST Act in Form GST REG- 01. A person registered under any existing law shall be migrated to GST in accordance with Rule- 16 of Registration Rules. B. Invoice: An exporter of goods shall, before or at the time of supply of goods, issue a tax invoice containing following details: a) Name, address and GSTIN of supplier b) Serial number c) Date of issue d) Name, address and GSTIN or UIN of recipient, if registered 185

193 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX e) Name, address of recipient, address of delivery and name of the country of destination f) HSN codes or SAC g) Description of goods or services, quantity of goods, taxable value thereof h) Rate of tax, amount of tax charged i) The invoice shall carry an endorsement SUPPLY MEANT FOR EXPORT ON PAYMENT OF INTEGRATED TAX or SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX. Invoice shall be prepared in triplicate for export of goods: INVOICE ORIGINAL FOR RECIPIENT DUPLICATE FOR TRANSPORTER TRIPLICATE FOR SUPPLIER Case- 1: Intra-state Purchase, Export sales: Illustration- 1: M/s Shine Textiles of Lucknow, U.P., procure cotton yarn from Kanpur, U.P. for Rs. 12, 60,000. Rate of CGST and SGST being 2.5% each. They manufactured 15,000 cotton shirts during a month which were exported to U.A.E. for Rs. 25 Lakhs. Rate of IGST on inter-state supply being 12%. Explain the implications of GST Act in this case. Solution: Particulars Amount (Rs.) Central Tax on intra-state purchase of inputs 31,500 State Tax on intra-state purchase of inputs 31,500 Integrated tax payable on supply of similar goods within India 3,00,000 In this case, the exporter has two options: a) As per option 1, he can export these goods without payment of integrated tax under a bond/ Letter of Undertaking. In this case, entire amount of tax paid on inputs (i.e. 63,000) shall be available as unutilised ITC which shall be refunded to him in accordance with Rule-1 of Refund Rules. b) The exporter has another option under which he can pay the amount of integrated tax which would be leviable on inter-state supply of similar goods (i.e. Rs. 300,000). In this case, exporter will be able to claim credit of tax paid on inputs (Rs. 63,000) and pay the balance amount of integrated tax (Rs. 2,37,000). He can claim refund of such integrated tax paid by him. Returns to be filed: 1. GSTR- 1: information about the supplies made during the previous month. GSTR-1 needs to be filed by 10 th of the next month. All the export affected by the registered dealer will be shown with full information of invoice and Shipping Bill. The exports must contain full 8-digist HSN code. They are also need to be shown separately based on where GST has been paid on such exports and where no GST has been paid. 2. GSTR- 2: details about the inward supplies received during the previous month. GSTR-2 needs to be filed by 15th of the next month. All inward supplies from registered taxable persons will get auto populated by the counter-party filing GSTR- 1 and GSTR- 5. Even if some of the invoices that don t get auto populated can be manually inputted by the dealer if he has the tax invoice copy with him. Inward supplies attracting reverse charge will be shown separately. 186

194 EXPORT RULES 3. GSTR- 3: Every taxable person registered under GST who has filled GST-1 and GSTR-2 will also file GSTR-3 the monthly return which will combine details of both GSTR-1 and GSTR-2 filed earlier in the same month with net tax liability with details of its payment. GSTR-3 needs to be filed by 20 th of the next month. 4. GSTR- 9: All the registered taxable person is required to file an Annual return in the From GSTR-9. Case- 2: Inter-State Purchase, Export sales: Illustration- 2: M/s Shine Textiles of Lucknow, U.P., procure cotton yarn from Ahmadabad, Gujarat for Rs. 12, 60,000. Rate of IGST on cotton yarn being 5% each. They manufactured 15,000 cotton shirts during a month which were exported to U.A.E. for Rs. 25 Lakhs. Rate of IGST on cotton shirts being 12%. Explain the implications of GST Act in this case. Solution: Particulars Amount (Rs.) Integrated tax paid on inter-state purchase of inputs 63,000 Integrated tax payable on supply of similar goods within India 3,00,000 In this case, the exporter has two options: a) As per option 1, he can export these goods without payment of integrated tax under a bond/ Letter of Undertaking. In this case, entire amount of integrated tax paid on inputs (i.e. 63,000) shall be available as unutilised ITC which shall be refunded to him in accordance with Rule-1 of Refund Rules. b) The exporter has another option under which he can pay the amount of integrated tax which would be leviable on inter-state supply of similar goods (i.e. Rs. 300,000). In this case, exporter will be able to claim credit of integrated tax paid on inputs (Rs ) and pay the balance amount of integrated tax (Rs ). He can claim refund of such integrated tax paid by him. Returns to be filed: 1. GSTR- 1: information about the supplies made during the previous month. GSTR-1 needs to be filed by 10 th of the next month. All the export affected by the registered dealer will be shown with full information of invoice and Shipping Bill. The exports must contain full 8-digist HSN code. They are also need to be shown separately based on where GST has been paid on such exports and where no GST has been paid. 2. GSTR- 2: details about the inward supplies received during the previous month. GSTR-2 needs to be filed by 15th of the next month. All inward supplies from registered taxable persons will get auto populated by the counter-party filing GSTR- 1 and GSTR- 5. Even if some of the invoices that don t get auto populated can be manually inputted by the dealer if he has the tax invoice copy with him. Inward supplies attracting reverse charge will be shown separately. 3. GSTR- 3: Every taxable person registered under GST who has filled GST-1 and GSTR-2 will also file GSTR-3 the monthly return which will combine details of both GSTR-1 and GSTR-2 filed earlier in the same month with net tax liability with details of its payment. GSTR-3 needs to be filed by 20 th of the next month. 4. GSTR- 9: All the registered taxable person is required to file an Annual return in the From GSTR-9. Case- 3: Import of Goods for Export Sales: Illustration- 3: M/s Shine Textiles of Lucknow, U.P., procure 20,000 cotton shirts from NYC, USA for Rs. 24, 60,000. Rate of Basic customs duty on such import is 10%, cess being 3%. IGST on such import is 18% in addition to BCD. They exported above cotton shirts to U.A.E. for Rs. 36 Lakhs. Rate of IGST on cotton shirts being 18%. Explain the implications of GST Act in this case. Solution: In this case, the M/s Shine textiles have paid following on import of goods: Particulars Amount Cost of Shirts imported 24,60, Add: Basic Customs 2,46,

195 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Add: 7, Total 27,13, Add: 4,88, Total Cost of Import 32,01, In this case, M/s Shine textiles can avail any of the following two options while exporting goods: a) As per option 1, he can export these goods without payment of integrated tax under a bond/ Letter of Undertaking. In this case, entire amount of integrated tax paid on inputs (i.e ) shall be available as unutilised ITC which shall be refunded to him in accordance with Rule-1 of Refund Rules. b) The exporter has another option under which he can pay the amount of integrated tax which would be leviable on inter-state supply of similar goods (i.e. Rs. 648,000) in the following manner: Particulars Amount Integrated tax payable on inter-state supply of similar goods 6,48, Integrated tax paid on import of inputs 4,88, Net Integrated tax to be paid 1,59, The net amount of integrated tax paid by him shall be refunded to him in accordance with Refund Rules. Returns to be filed: 1. GSTR- 1: information about the supplies made during the previous month. GSTR-1 needs to be filed by 10 th of the next month. All the export affected by the registered dealer will be shown with full information of invoice and Shipping Bill. The exports must contain full 8-digist HSN code. They are also need to be shown separately based on where GST has been paid on such exports and where no GST has been paid. 2. GSTR- 2: details about the inward supplies received during the previous month. GSTR-2 needs to be filed by 15th of the next month. All the imports made will be reported with full information of Bill of entry with 8-digit HSN code. In GST law imports are treated same as inter-state supply thus IGST will be applicable on such imports. IGST will be claimed for the month as per the input rules. 3. GSTR- 3: Every taxable person registered under GST who has filled GST-1 and GSTR-2 will also file GSTR-3 the monthly return which will combine details of both GSTR-1 and GSTR-2 filed earlier in the same month with net tax liability with details of its payment. GSTR-3 needs to be filed by 20 th of the next month. 4. GSTR- 9: All the registered taxable person is required to file an Annual return in the From GSTR-9. Case- 4: Import of Inputs for Export Sales: Illustration- 4: M/s Shine Textiles of Lucknow, U.P., procure Denim Fabric from NYC, USA for Rs. 20, 00,000. Rate of Basic customs duty on such import is 10%, cess being 3%. IGST on such import is 12% in addition to BCD. They manufactured denim jeans of worth Rs. 28, 00,000 from above raw material which were exported to UAE. Rate of IGST on inter-state supply of similar goods is 12%. Explain the implications of GST Act in this case. Solution: In this case, the M/s Shine textiles have paid following on import of goods: Particulars Amount Cost of Shirts imported 20,00,000 Add: Basic Customs 2,00,000 Add: 6,000 Total 22,06,000 Add: 2,64,720 Total Cost of Import 24,70,720 In this case, M/s Shine textiles can avail any of the following two options while exporting goods: 188

196 EXPORT RULES a) As per option 1, he can export these goods without payment of integrated tax under a bond/ Letter of Undertaking. In this case, entire amount of integrated tax paid on inputs (i.e ) shall be available as unutilised ITC which shall be refunded to him in accordance with Rule-1 of Refund Rules. b) The exporter has another option under which he can pay the amount of integrated tax which would be leviable on inter-state supply of similar goods (i.e. Rs ) in the following manner: Particulars Amount Integrated tax payable on inter-state supply of similar goods 3,36,000 Integrated tax paid on import of inputs 2,64,720 Net Integrated tax to be paid 71,280 The net amount of integrated tax paid by him shall be refunded to him in accordance with Refund Rules. Returns to be filed: 1. GSTR- 1: information about the supplies made during the previous month. GSTR-1 needs to be filed by 10 th of the next month. All the export affected by the registered dealer will be shown with full information of invoice and Shipping Bill. The exports must contain full 8-digist HSN code. They are also need to be shown separately based on where GST has been paid on such exports and where no GST has been paid. 2. GSTR- 2: details about the inward supplies received during the previous month. GSTR-2 needs to be filed by 15th of the next month. All the imports made will be reported with full information of Bill of entry with 8-digit HSN code. In GST law imports are treated same as inter-state supply thus IGST will be applicable on such imports. IGST will be claimed for the month as per the input rules. 3. GSTR- 3: Every taxable person registered under GST who has filled GST-1 and GSTR-2 will also file GSTR-3 the monthly return which will combine details of both GSTR-1 and GSTR-2 filed earlier in the same month with net tax liability with details of its payment. GSTR-3 needs to be filed by 20 th of the next month. 4. GSTR- 9: All the registered taxable person is required to file an Annual return in the From GSTR-9. Case- 5: Comprehensive Scenario: Illustration: M/s Shine Textiles, Lucknow, U.P. purchased fabric dyes worth Rs. 5 Lakhs from Kanpur, U.P. They procured Cotton Yarn from Ahmadabad, Gujarat for Rs. 25 Lakhs. It also imported machinery costing Rs. 10 Lakhs from Japan to be used in production of Cotton Shirts. Rates of CGST and SGST for Fabric Dyes 2.5% each Rate of IGST for Cotton Yarn 5% BCD on import of Machine 10% + 3%(cess) IGST on import of Machine 12% It manufactured 50,000 shirts costing Rs. 50 lakhs which were exported to USA. Rate of IGST on similar products is Rs. 12%. Explain how provisions of GST will apply in this case. Solution: Amount of Input Tax shall be calculated as follows: Particulars Intra-state purchase Inter-State Purchase Import Product Purchased Fabric Dyes Cotton Yarn Machinery Cost of Input 5,00,000 25,00,000 10,00,000 Add: BCD - - 1,00,000 Add: Cess - - 3,000 Total Cost 5,00,000 25,00,000 11,03,000 Add: 12, Add: 12, Add: - 1,25,000 - Add: - - 1,32,360 Total Value of Inputs 5,25,000 26,25,000 12,35,360 In this case, M/s Shine textiles can avail any of the following two options while exporting goods: 189

197 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX a) As per option 1, he can export these goods without payment of integrated tax under a bond/ Letter of Undertaking. In this case, entire amount of integrated tax, central tax and State tax paid on inputs shall be available as unutilised ITC which shall be refunded to him in accordance with Rule-1 of Refund Rules. b) The exporter has another option under which he can pay the amount of integrated tax which would be leviable on inter-state supply of similar goods in the following manner: Particulars Option- 1 (IGST Paid) Option- 2 (IGST Not Paid) Cost of goods exported 50,00,000 50,00,000 Output (A) 6,00,000 NA ITC of Inputs:- 1) IGST of machinery 1,32,360 1,32,360 2) IGST of Cotton Yarn 1,25,000 1,25,000 3) CGST of Fabric Dyes 12,500 12,500 4) SGST on Fabric Dyes 12,500 12,500 Total Amount of ITC 2,82,360 2,82,360 ITC availed (B) 2,82,360 NIL Unutilised ITC NIL 2,82,360 Net IGST Payable (A-B) 3,17,640 NIL Amount of refund to be claimed 3,17,640 2,82,360 Returns to be filed: 1. GSTR- 1: information about the supplies made during the previous month. GSTR-1 needs to be filed by 10 th of the next month. All the export affected by the registered dealer will be shown with full information of invoice and Shipping Bill. The exports must contain full 8-digist HSN code. They are also need to be shown separately based on where GST has been paid on such exports and where no GST has been paid. 2. GSTR- 2: details about the inward supplies received during the previous month. GSTR-2 needs to be filed by 15th of the next month. All the imports inter-state and intra-state inward supplies made will be reported with full information of Bill of entry/ Tax Invoice with HSN code. 3. GSTR- 3: Every taxable person registered under GST who has filled GST-1 and GSTR-2 will also file GSTR-3 the monthly return which will combine details of both GSTR-1 and GSTR-2 filed earlier in the same month with net tax liability with details of its payment. GSTR-3 needs to be filed by 20 th of the next month. 4. GSTR- 9: All the registered taxable person is required to file an Annual return in the From GSTR-9. Zero Rated Supply (Sec. 16(1)): 1. 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 an SEZ developer or a SEZ unit. 2. Input tax credit may be availed for making zero-rated supplies notwithstanding that such supply may be an exempt supply. 3. 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 without payment of integrated tax and claim refund of unutilised input tax credit; or b. He may supply goods or services or both on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of CGST Act. A. Refund of Unutilised Input Tax Credit (Sec. 54(3) of CGST Act): 1. Refund of unutilised input tax credit shall be allowed in case of zero rated supplies made without payment of tax. 2. No refund of unutilised ITC shall be allowed goods exported out of India are subject to export duty. 190

198 EXPORT RULES 3. No refund of ITC shall be allowed 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. B. Procedure for Refund (Rule- 89): a. Any exporter claiming refund shall file an application in Form GST RFD- 01 only after the export manifest or an export report is delivered u/s 41 of Customs Act, b. In respect of supplies regarded as deemed exports, the application shall be filed by the recipient of deemed export supplies. c. In case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with Sec 16(3) IGST Act, refund of input tax credit shall be granted as per the following formula: Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC Adjusted Total Turnover* [Where, Adjusted Total Turnover means the aggregate value of all taxable supplies and exempt supplies, exports of goods or services or both and inter-state supplies of goods or services or both made from the State or U.T. excluding value of exempt supplies other than Zero rated supplies during the relevant period.] d. Where the application for refund is found to be complete, an acknowledgement in FORM GST RFD- 02 shall be made available to the applicant. C. Provisional Refund (Sec. 54(6) with Rule-91): 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, refund on a provisional basis, 90% of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, and thereafter make an order u/s 54(5) for final settlement of the refund claim after due verification of documents furnished by the applicant. 1. The provisional refund shall be granted subject to the condition that the person claiming refund has, during any period of five years immediately preceding the tax period to which the claim for refund relates, not been prosecuted for any offence under the Act or under an existing law where the amount of tax evaded exceeds 250 lakh rupees; 2. The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and on being prima facie satisfied that the amount claimed as refund is due to the applicant shall make an order in FORM GST RFD-04, sanctioning the amount of refund due to the said applicant on a provisional basis within a period not exceeding seven days from the date of acknowledgement. 3. The proper officer shall issue a payment advice in FORM GST RFD-05 for the amount sanctioned and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund. D. Manner of Refund (Sec. 54(8) of CGST Act): The refundable amount shall be paid to the applicant, instead of being credited to the Fund, if such amount relates 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 u/s 54(3). E. Deemed Exports (Sec. 147 of CGST Act): The govt. may notify certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received in Indian Rupees or convertible foreign exchange, if such goods are manufactured in India. At present, as per DGFT Laws, supplies to EOU is considered as deemed exports. Supplies to EOU may be specified as deemed exports in GST Law also. As per Notification No. 48/2017- CT, the Central Govt. has notified the supplies of goods listed below as deemed exports- 191

199 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 1. Supply of goods by a registered person against Advance Authorization. 2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization. 3. Supply of goods by a registered person to Export Oriented Unit. 4. Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017- Customs, dated 30 th June, 2017 (as amended) against Advance Authorization. For the purpose of this notification- Advance Authorization means an authorization issued by the DGFT for import or domestic procurement of inputs on pre-import basis for physical exports. Export Promotion Capital Goods Authorization means an authorization issued by the DGFT for import of capital goods for physical exports. Export Oriented Unit means an EOU or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-Technology Park Unit approved in accordance with the provisions of Foreign Trade Policy Notification No. 49/2017- CT: Evidences which are required to be produced by the supplier of deemed export supplies for claiming refund- Acknowledgement by the jurisdictional tax officer of the AA holder or EPCG Authorization holder, that the said deemed export supplies have been received, or a copy of the tax invoice under which such supplies have been made by the supplier duly signed by the recipient EOU that said deemed export supplies have been received by it. An undertaking by the recipient of deemed export supplies that no ITC on such supplies has been availed of by him. An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund. Conclusion: The treatment of taxes in case of imports and exports largely remain the same under GST in comparison with the existing laws. In case of an importer, full input credit will be available on the IGST paid on imports and additional input credit will be available on the GST paid on all types of inputs used or intended to be used in the course of or for the furtherance of business. Similarly, in the case of an exporter, refund will be given on the tax paid on all inputs used in the course of business. All in all, costs of import and export shall reduce under GST and compliance shall become easier with the convergence of multiple tax laws into one law. 192

200 CHAPTER-27 EXEMPTED SUPPLIES UNDER GST "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. It thus includes the supply of following type of goods and services: (a) Non-taxable supply; (b) Supply attracting nil rate of tax; (c) Supplies exempt under Section 11 of the GST Act excluding IGST and under Section 6 of the IGST Act; The scope of each of the term is given below: (a) Non-taxable supply The Schedule III & activities or transaction notified by Government under section 7(2) (b) of the CGST Act defines the transactions which are neither considered as supply of goods nor supply of service. The activities described therein will not be chargeable to GST. Hence, they will be considered as a non-taxable supply. (b) Supply attracting nil rate of tax NIL rates means that the goods or services are taxable but at nil rate. (c) Supplies exempt under Section 11 of the GST Act excluding IGST and under Section 6 of the IGST Act; It includes non-taxable supply and supply which have been exempt under section 11. As discussed above, non-taxable supplies are goods on which no tax is levied under section 9 of GST Act. The Government has power under section 11 to specify by notification products which are exempt either absolutely or subject to conditions the goods or services from the whole or part of tax levied thereon. The section further provides that such goods or services will be exempted on the recommendation of GST Council. It, therefore, appears that identical goods or services will be exempt in all the States. Once GST Council recommends exemption from payment of tax on any goods or services, the same will be applicable to all the States and Union Territory of the country. However, each State will have to issue notification for the purpose of exempting goods or services from payment of GST under the respective SGST Act. Other than exempt supplies there are also zero-rated supplies which are taxable but will be charged at 0% rate of tax. On such supplies made input credit can be availed. As per the proposed GST zero rated supply means any of the following taxable supply of goods/services namely: (a) exports of goods and/or services, or (b) supply of goods and/or services to a Special Economic Zone developer or an Special Economic Zone Unit Thus it means that in case of exports of goods/services no tax will be charged will be charged. Additionally, credit of input tax paid on the inputs goods and services will be refunded in case of input paid on exports. In case of SEZ units, the supply made to them will be zero-rated supplies and thus input tax credit will be refunded. 193

201 CHAPTER-28 VAT CONCEPTS AND ITS APPLICATION IN GST BASIC CONCEPTS OF VAT Generally, any tax is related to the selling price of the product or the services. In the modern production technology, raw material passes through a number of stages before it can reach the ultimate consumer. The output for the 1 st manufacturer becomes input for the 2 nd manufacturer till it reaches the ultimate consumer. For example, Details A B C D Purchase Value Added Sub-Total Add 10% Total Thus charging tax at the every stage creates cascading effect that increases the cost of the product, the cost of the production will increase as more stages of production are added to the product. VAT was developed to avoid such cascading effect of taxes. The basic principle of VAT is to charge tax only on value addition and not on the selling price of each stage. Thus by giving the input credit of VAT paid on the purchase the buyer can take credit of VAT already paid by him thus he charge VAT only on value added by him. Thus the above example will be re-worked as follows in VAT: Details A B C D Purchase Value Added Sub-Total Add 10% Total Missing Trader or hawala in GST Missing trader is a trader who makers a sale or provides services, collects the tax and then disappear. The purchaser taker the credit of input paid by him unknown of the fact that the seller has not paid any tax to the government. This is also called hawala trade. Suppose in the above illustration the manufacturer A collects the tax and disappears, B takes the credit of the input assuming that A had paid tax to the government. Thus at the last stage D exports the goods and get the refund of the tax paid to the government. Thus D gets the refund of the tax not actually paid by A. By the time government works out that A didn t paid any tax A has disappeared. The refund of the tax cannot be disallowed to D as he is a innocent dealer and cannot be penalized by the default of A In some cases it was held that set off will not be available if the seller dealer has not paid the tax amount. This provision has been held valid. This principle has been incorporated in CGST Act. In GST, invoices of supplier and recipient will be matched through computer network. The recipient can avail input tax credit only if supplier has actually paid tax. Highlights of scheme of GST The highlights of scheme of GST relating to input tax credit are as follows: 194

202 VAT CONCEPTS & ITS APPLICATION IN GST Input tax credit Manufacturer or service providers will be entitled to claim input tax credit of tax paid by them on inputs and on input services used by them in the manufacturing process. Credit will be available of CGST and SGST paid on input procured and input services received within State and input of IGST will be available of IGST on input procured and input services received outside State. Entire Input tax credit available even if part of input goes in by-product or waste Entire input will be available to set off the tax liability, even if part of input goes in by-product or waste like sludge that is not taxable. Credit of tax paid on capital goods Credit will be available of GST paid on purchase of any Capital goods. Such GST paid can be utilized to pay off tax liability as per ITC Rules of GST. Instant Credit Credit will be available for set off as soon as the input or input services are received. It is not necessary to wait will these are utilized or sold. One to one correlation not required GST does not require one to one correlation between invoices of sales and purchase. The entire input tax credit is a common pool that can be utilized to pay off the outstanding tax liability. 195

203 CHAPTER-29 INTEGRATED GOODS AND SERVICE TAX ACT, 2017 INTRODUCTION Integrated goods and service tax act is an act to make a provision for levy and collection of tax on inter-state supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. This act shall extend to whole of India. *The IGST (Extension to Jammu & Kashmir) Act, 2017 provides for the extension of IGST Act to the state of Jammu & Kashmir. ADMINISTRATION Section 3: Central tax officers can be appointed for exercising powers under the Integrated Goods and Service tax act. Section 4: Officers appointed under State Goods and Service Tax Act or the Union Territory Goods and Services Tax Act are authorized to be proper officer for the purpose of this act. LEVY AND COLLECTION OF TAX [SECTION 5] 1) IGST shall be levied on all inter-state supply of goods or services or both, except on the supply of alcoholic liquor for human consumption at such rates not exceeding40% as may be notified by the government on the recommendations of the Council. Integrated tax on import of goods into India shall be levied on the value of goods including custom duties paid on it. The proposed levy of IGST would subsume the current levy of countervailing duty ( CVD ) and additional duty of customs ( SAD ) Incidence of tax will follow the destination principle in case of imports and SGST will accrue to the state where the imported goods and services are consumed 2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), and natural gas and aviation turbine fuel shall be levied with effect from its date of notification. 3) The government, on the recommendation of council shall specify categories of supply of goods and services on which tax is to be paid by recipient of such supply of goods or services under reverse charge basis. 4) The Integrated tax in respect of supply of taxable goods or services or both by an unregistered supplier to registered person shall be paid by such registered person on reverse charge basis as the recipient. 5) The government, on the recommendation of council shall specify categories of services, the tax on inter- State supply of which is to be paid by the Electronic Commerce Operator if such services are provided through it. Where such electronic commerce operator does not have physical presence in the taxable territory, any person representing him for any purpose shall be liable to pay tax. Where such electronic commerce operator does not have a representative in taxable territory, he shall appoint a person in the taxable territory for paying tax and such person shall be liable for payment of tax. POWER TO GRANT EXEMPTION UNDER CERTAIN CASES [SECTION 6] Where the government is satisfied that it is in public interest, it may grant exemption either absolutely or subject to some conditions on goods or services or both of any specified description from the whole or part of tax leviable thereon with effect from such date as may be specified in notification. DETERMINATION OF NATURE OF SUPPLY [SECTION 7] 196

204 INTEGRATED GOODS AND SERVICE TAX ACT, ) Supply of goods shall be treated as supply of goods in course of inter-state trade or commerce where the location of the supplier and the place of supply are in two different states or union territories or in between a state or union territory. 2) In case of import of goods, supply shall be treated in course of inter-state trade or commerce till the goods have crossed custom frontiers of India. 3) Supply of services shall be treated as supply of services in course of inter-state trade or commerce where the location of the supplier and the place of supply are in two different states or union territories or in between a state or union territory. 4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-state trade or commerce. 5) Following are some of the conditions where supply of goods or services or both shall be treated in course of inter-state trade or commerce:- a) Where the supplier is located in India and place of supply is outside India. b) Where the goods or services or both are supplied to or by the Special Economic Zone developer or a Special Economic Zone unit. c) Where supply is in taxable territory, not being an intra-state supply and not covered elsewhere in this section. INTRA-STATE SUPPLY [SECTION 8] Here are certain exceptions to the condition that goods supplied within same state or same union territory shall be treated as intra-state supply:- (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. Explanation 1- Following establishment shall be treated as establishment of distinct person, 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. 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. SUPPLIES IN TERRITORIAL WATERS [SECTION 9] a) Where the location of supplier is in territorial waters, the location of such supplier, or b) Where the place of supply is in territorial waters, the place of such supply, shall for the purpose of this act, to be deemed to be in the coastal State or Union Territory where the nearest point or appropriate baseline is located. PLACE OF SUPPLY OF GOODS OR SERVICES OR BOTH [SECTION 10] Place of supply of goods, other than in case of export or import shall be determined as under:- a) Where supply involves movement of goods, either by supplier or recipient or any other person, place of supply shall be location of goods at the time at which movement of goods terminates. b) Where goods are delivered by supplier to the recipient or any other person on direction of third person, whether acting as agent or otherwise before or during the movement of goods, either by way of transfer of documents of title to the goods or otherwise, the place of supply shall be principal place of business of recipient or such other person. 197

205 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX c) Where supply does not involves movement of goods, either by supplier or recipient, place of supply shall be location of goods at the time of delivery to the recipient. d) where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly e) Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board. Illustration-1:Mr. A is a manufacturer of locks in Aligarh, U.P. He entered into a contract for supply of digital locks to Mr. X in Jaipur, Rajasthan. Solution: As per sec. 10(1) (a), where supply involves movement of goods by supplier or recipient, place of supply shall be the location where the movement of goods terminate for delivery to recipient. Hence, the place of supply in above case shall be Jaipur, Rajasthan. Illustration- 2: M/s Mega Sales (Lucknow, U.P.) enters into a contract with M/s Amrapali Biotech (Yamunanagar, Haryana) for purchase of 10,000 bottles of ketchup. It directs the supplier to deliver the above goods to the Godown of Big Bazaar situated in Varanasi, U.P. Solution: As per sec. 10(2)(b), where the goods are delivered to recipient or any person on the direction of third person by way of transfer of title or otherwise, it shall be deemed that the third person has received the goods and place of supply shall be principal place of business of such person. Hence, the place of supply in the above case shall be the principal place of business of Mega Sales i.e. Lucknow, U.P. Illustration- 3: Sun Motors (Lucknow, U.P.) open a showroom in Bengaluru, Karnataka. They decide to purchase the generator already installed in the premises. Solution: As per Sec 10(1) (c), where the supply does not involve movement of goods, the place of supply shall be the location of such goods at the time of delivery to the recipient. In the above case, the supply of the generator does not require its movement. Hence, the place of supply is Bengaluru, Karnataka. Illustration- 4: M/s ABC of Lucknow, U.P. make purchase of a lift from M/s Orion Elevators of New Delhi to be installed at its new office in New Delhi. Solution: As per Sec 10(1) (d), where goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly. Hence, in the above case, the place of supply shall be New Delhi. Illustration- 5: Mr. Mehta is travelling on a cruise liner from Goa to Kerala. He purchases a book from the inhouse store in the cruise liner. These books were on boarded from Goa. Registered place of business of the book shop is in Goa. Solution: As per Sec 10(1) (e), where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board. Hence, the place of supply in the above case shall be Goa. PLACE OF SUPPLY OF GOODS IMPORTED INTO, EXPORTED FROM INDIA [SECTION 11] PLACE OF SUPPLY IN CASE OF IMPORTS AND EXPORTS:- a) In case of imported goods, place of supply shall be location of Importer. b) In case of goods exported from India, shall be the location outside India. Illustration- 1: M/s Vortex gaming lounge purchase 5 Xbox One S (gaming console) from Microsoft, USA. Solution: Here, the place of supply shall be the location of importer i.e. USA. Sec. 11 (a) Illustration- 2: M/s ABC exported 50 metric ton of Polished Basmati Rice to U.A.E. Solution: As per Sec. 11(b), the place of supply of goods exported from India shall be the location outside India. Hence, here the place of supply shall be U.A.E. PLACE OF SUPPLY OF SERVICES WHERE LOCATION OF SUPPLIER AND RECIPIENT IS IN INDIA [SECTION 12] 198

206 INTEGRATED GOODS AND SERVICE TAX ACT, ) The provisions of this section shall apply where the location of supplier of services and the location of recipient of services is in India. 2) The place of supply of services, except in the circumstances defined in sub-section hereafter:- a) Made to a registered person, shall be the location of such person. b) Made to person other than registered person shall be:- (i) Where the location of recipient exists on record, be the location of recipient. (ii) In other cases, is the location of supplier of services. 3) The place of supply of service:- a) In relation to 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, by whatever name called, and including a house boat or any other vessel; or c) by way of accommodation in any immovable property for organising 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 above shall be location of immovable property or boat or vessel. Provided that if immovable property or boat or vessel is located outside India, the place of supply shall be location of recipient of services. 4) The place of supply of restaurant and catering services, personal grooming, fitness beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed. 5) The place of supply of services in relation to training and performance appraisal to:- a) a registered person, shall be the location of such person b) Other than registered person, shall be the location where the services are actually performed. 6) The place of supply of services provided by way of admission to a cultural artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other place is located. 7) The place of supply of services provided by way of, a) organisation of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or b) services ancillary to organisation of any of the events or services referred to in above clause, or assigning of sponsorship to such events, (i) to a registered person, shall be the location of such person (ii) To a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient. 8) The place of supply of services by way of transportation of goods, including by mail or courier to, a) a registered person, shall be the location of such person b) A person other than a registered person shall be the location at which such goods are handed over for their transportation. 9) The place of supply of passenger transportation service to, a) a registered person, shall be the location of such person 199

207 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX b) A person other than a registered person, shall be the place where the passenger embarks (begins his journey) on the conveyance for a continuous journey. Provided that where the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage, the place of supply of such service shall be determined in accordance with the provisions of sub-section (2). Provided that return journey shall be treated as a separate journey, even if the right to passage for outward and return journey is issued at same time. 10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey. 11) The place of supply of telecommunication services including data transfer, broadcasting, cable and direct to home television services to any person shall, a) In case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services. b) in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of billing address of the recipient of services on the record of the supplier of services c) in cases where mobile connection for telecommunication, internet service and direct to home television services are provided on pre-payment basis through a voucher or any other means, (i) through a selling agent or a re-seller or a distributor of subscriber identity module card or recharge voucher, be the address of the selling agent or re-seller or distributor as per the record of the supplier at the time of supply; or (ii) by any other person to the final subscriber, be the location where such pre-payment is received or such vouchers are sold; d) in other cases, be the address of the recipient as per the records of the supplier of services and where such address is not available, the place of supply shall be location of the supplier of services: 12) The place of supply of banking and other financial services, including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services: Provided that if the location of recipient of services is not on the records of the supplier, the place of supply shall be the location of the supplier of services. 13) The place of supply of insurance services shall, a) To a registered person, is the location of such person. b) To a person other than a registered person, is the location of the recipient of services on the records of the supplier of services. Illustration- 1: Mr. P, being fashion designers in New Delhi, provide fashion designing services to Amencer Apparels (Lucknow, U.P.) being registered person. Solution: As per Sec. 12(2) (a), the place of supply services made to a registered person shall be the location of such person. Hence, the place of supply shall be Lucknow, Uttar Pradesh. Illustration- 2: Mr. P, being fashion designers in New Delhi, provide fashion designing services to Amencer Apparels who are not registered under this Act. Solution: As per Sec. 12(2) (b), the place of supply shall be 1) The location of the recipient where the address on record exists. Hence, if there is record of address of Amencer Apparels, place of supply shall be its location. 2) The location of the supplier of services in other cases. Hence, where address of Amencer Apparels is not known, place of supply shall be location of Mr. P i.e. New Delhi. 200

208 INTEGRATED GOODS AND SERVICE TAX ACT, 2017 Illustration- 3: M/s Smart Interiors, interior designers from Bengaluru, Karnataka, are hired by Ad link Media Pvt. Ltd. (Bengaluru, Karnataka) for designing their new office situated in Lucknow, U.P. Solution: In case of supply of services directly in relation to an 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, place of supply shall be the location at which the immovable property is located or intended to be located. Sec 12(3) (a) Hence, place of supply in this case shall be Lucknow. Illustration- 4: Mr. P (Lucknow, India) books a banquet hall in New Delhi for a promotional event related to his business. He also hires famous musical band for the same. Solution: The place of supply, pursuant to Sec. 12(3) (c), (d) shall be the location of such banquet hall i.e. New Delhi. Illustration- 5: M/s Star Fisheries (Goa) organizes a cruise carnival where the location of the cruise ship shall be outside India. Solution: The place of supply of services related to such carnival shall be the location of the recipient in accordance with proviso to Sec. 12(3) (d). Illustration- 6: Ms. Ayesha (Indore, M.P.) avails services of a renowned cosmetic surgeon in New Delhi for removal of her birth mark. Solution: In this case, place of supply of service shall be the location where the services are actually performed i.e. New Delhi as per Sec. 12(4). Illustration- 7: A famous international singer is going to perform in an event organized by ABC Ltd. (Mumbai). Tickets for this show are being sold all over the country through various platforms. Solution: As per sec. 12(6), the place of supply of services provided by way of admission to a cultural, artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other place is located. Hence, the place of supply shall be Mumbai. Illustration- 8: A renowned literature society based in Dehradun, Uttarakhand wishes to organize a Poetry and Literature Festival in New Delhi in the honour of a famous Poet. It contracts with Ayesha Event Management Pvt. Ltd., an event management company from Lucknow, U.P. The event management co. further approaches Raj Caterers (Kashipur, Uttarakhand) for providing food related services at the event. Solution: In accordance with Sec. 12(7) (a) and (b), where such services are provided to a registered person, the place of supply shall be the location of such person. Here, place of supply of services shall be Dehradun, Uttarakhand, if the society is registered under this Act. Where such services are provided to a person other than a registered person, place of supply shall be the place where the event is actually held. Hence, the place of supply shall be New Delhi if the society is not registered under this Act. Illustration- 9: If in the above case, the event is being organized at a place outside India, say New Jersey, U.S.A. the place of supply shall be determined as follows: Solution: As per Sec. 12(7), if the event is held outside India, the place of supply shall be the location of the recipient which is Dehradun, Uttarakhand in above case. Illustration- 10: M/s Mega Sales (Lucknow, U.P) purchased goods worth Rs. 1.5 Lakh from ABC Pvt. Ltd. situated in Rourkela, Orissa. It avails services of a goods transport agency for transportation of the said goods from the godown of the Company in Puri, Orissa. Solution: As per Sec. 12(8) (a), in case of a registered person, the place of supply by way of transportation of goods shall be the location of such person. In the given case, the place of supply shall be Lucknow, U.P. Illustration- 11: Mr. Shyam (New Delhi) purchases certain goods for personal use from Amritsar, Punjab. The said goods are delivered through courier by Blue dart. 201

209 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Solution: As per Sec. 12(8) (b), in case of an unregistered person, place of supply shall be the location at which goods are handed over for their transportation. In this case, the place of supply shall be Amritsar, Punjab where goods are handed over to Blue dart for transportation. Illustration- 12: ABC Ltd. (Lucknow) books air travel ticket from Air India for journey of its Director Mr. P from Lucknow to Bangalore for attending a business meeting. Solution: As per Sec. 12(9) (a), the place of supply of passenger transportation service to a registered person, shall be the location of such person. In the above case, place of supply shall be the location of ABC Ltd. i.e. Lucknow. Illustration- 13: Mr. A books an air ticket from Air India for journey from Lucknow to Bangalore. Solution: As per Sec. 12(9) (b), the place of supply to a person other than a registered person, shall be the place where the passenger embarks on the conveyance for a continuous journey. In the given case, place of supply shall be Lucknow being the place of embarkation. Illustration- 14: Air India provides a movie-on-demand on board as an entertainment against a charge during the Kolkata to Delhi leg of the Kolkata-Delhi-Lucknow flight. Solution: In accordance with Sec. 12(10), the place of supply of services shall be the location of the first scheduled point of departure of that conveyance for the journey. The first schedule point of departure is Kolkata which shall be the place of supply. Illustration- 15: Dr. M.K. Singh, a pediatrician, has installed a TV in the waiting room of his clinic in Gurgaon for availing telecommunication services through a cable antenna/ dish antenna. Solution: The place of supply of telecommunication services in respect of such TV shall be the location where the cable connection or dish antenna is installed for receipt of services i.e. clinic in Gurgaon as per Sec. 12(11)(a). Illustration- 16: BSNL provides mobile post-paid services to its users. Mr. Harish availed mobile post-paid services and each month an invoice/bill is sent at the address provided by him to the company which is B-12 Eldeco colony, Lucknow. Determine the place of service in the specified case. Solution: As per Section 12(11)(b) place of supply of service in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of billing address of the service recipient, i.e., B-12 Eldeco colony, Lucknow in the given illustration. Illustration- 17: A distributor of subscriber identity module card or re-charge voucher sells pre-paid re-charge vouchers to the customers. What would be the place of supply in the given condition? Solution: As per Section 12(11) (c) (i) the place of supply shall be the registered place of that distributor as per the records of supplier of these vouchers. Illustration- 18: Mr. A makes pre-payment for mobile telecommunication through Paytm, a digital payment platform. Here the place of supply of service shall be determined as follows: Solution: As per second proviso to Sec. 12(11) (d), the location of the recipient of service on the record of the supplier of services shall be the place of supply of such services. As such, in the above case, the place of supply of services shall be the address of Mr. A as in the records of supplier i.e. Paytm. Illustration- 19: Mr. X, Lucknow, wants to invest in mutual funds. He approaches ICICI Prudential (an AMC) for availing such services. Determine the place of supply in the given scenario. Solution: As per Sec. 12(12), the place of supply of banking and other financial services, including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services: Provided that if the location of recipient of services is not on the records of the supplier, the place of supply shall be the location of the supplier of services. Hence, in the given case, place of supply of the said financial service shall be the location of recipient as in the records of ICICI Prudential i.e. Lucknow. 202

210 INTEGRATED GOODS AND SERVICE TAX ACT, 2017 Illustration- 20: ABC Ltd. (Bangalore, Karnataka), registered under this Act, get their stock insured from XYZ Ltd. an insurer. Determine the place of supply in respect of the insurance services. Solution: In accordance with Sec. 12(13) (a), where insurance services are supplied to a registered person, the place of supply of service shall be the location of such person i.e. Bangalore, Karnataka. Illustration- 21: Mr. A gets a term insurance plan on his life from LIC of India. The place of supply shall be determined as follows. Solution: As per Sec. 12(13) (b), where insurance services are provided to a person other than a registered person, the place of supply shall be the location of recipient as in the records of supplier. Hence, the place of supply of life insurance service shall be the location of Mr. A as in the records of LIC of India. Illustration- 22: The G.O.I. has launched BetiBachao, BetiPadhao, a scheme to correct the declining number of girl child and to provide better educational facilities for girl child. Govt. avails services from Adlink Media Ltd. (New Delhi), an advertisement agency, for promotion of this scheme in the States of Haryana, Punjab, Rajasthan, Uttar Pradesh and Bihar. Determine the place of supply in this case. Solution: As per Sec. 12(14), the place of supply of advertisement services to the govt. shall be taken as being in each of such State or U.T. and the value of supply to each state shall be determined in proportion to the service attributable to each State or U.T. Hence, the place of supply of advertisement services in above case shall be each state where such services are being provided, namely, Haryana, Punjab, Rajasthan, Uttar Pradesh and Bihar. PLACE OF SUPPLY OF SERVICES WHERE LOCATION OF SUPPLIER OR LOCATION OF RECIPIENT IS OUTSIDE INDIA [SECTION 13] 1) Provisions under this section shall apply for determining place of supply where either supplier or recipient of service is located outside India. 2) The place of service shall be the location of recipient of the service except in the cases specified in clauses below. Provided where the address of recipient of service is not available in the ordinary course of business, the place of supply shall be location of supplier of service. 3) Place of supply shall be the place where services were actually performed under following cases:- a) Where the goods are physically required to be made available by recipient of service to supplier of service on which service is required to be performed. When such services are provided from remote locations by way of electronic means, place of supply is location where such goods are situated at the time of supply. This provision shall not apply on goods that are temporarily imported in India for repairs and are exported after repairs without being put to use for any other purpose. b) Services supplied to an individual, either recipient of service or person acting on behalf of recipient of service, which require physical presence of such persons as well as of the supplier. 4) Service related to immovable property such as services of experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, place of service shall be the place where the immovable property is located or intended to be located. 5) In case of organizing of event and services related therewith by way of admission to, or organization of a cultural, artistic, sporting, scientific, and educational or entertainment event, or a celebration conference, fair and exhibition or similar events, place of service shall be the place where the event is actually held. 6) Where services referred in above clause are provided at more than one location, including a location in taxable territory, its place of supply shall be the location in the taxable territory. 203

211 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 7) Where services referred above are provided in more than one State or Union Territory, the place of supply shall be taken as being in each place in proportion to the value of service separately collected. 8) The place of supply of the following services shall be the location of the supplier of services, namely: a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; b) intermediary services; c) Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. 9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods. 10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks (begins) on the conveyance for a continuous journey. 11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey. 12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. 13) In order to prevent double taxation or non-taxation of the supply of a service the Government notifies any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service. Illustration- 1: ABC Ltd., fashion designers situated in Mumbai, Maharashtra, provide designing services to Mr. X in Cannes, France. The place of supply shall be determined as follows. As per Sec. 13(2), the place of supply shall be the location of recipient i.e. Cannes, France. Solution: In case the location of recipient is not available, place of supply shall be location of supplier i.e. Mumbai Maharashtra. Illustration- 2: ABC Pvt. Ltd. (New Delhi) has a factory in Ludhiana, Punjab. It hires services of Mr. Peter (Tokyo, Japan) for repair of machinery installed in the said factory. The place of supply in this case shall be determined as follows. Solution: As per Sec. 13(3) (a), the place of supply shall be the location where the services are actually performed where goods are made available by the recipient to the supplier for performance of such services. Hence, in the above case, the place of supply shall be Ludhiana, Punjab where goods are made available for performance of the service. Illustration- 3: Mr. X, resident of Bangladesh comes to Mumbai, India for a heart surgery. The team of doctors for this surgery is headed by Dr. A from New Delhi. The place of supply shall be as follows: Solution: As per Sec 13(3) (b), where performance of a service requires physical presence of the recipient or the person acting on his behalf, the place of supply of service shall be the location where the services are actually performed. In the above case, service is performed in Mumbai which will be the place of supply. Illustration- 4: M/s PQR (Lucknow) are constructing a new office in Bangalore. For the purpose of which they hire the services of an Australian Architect Mr. Andrew. Determine the place of supply in this case. Solution: In accordance with Sec. 13(4), place of supply of services supplied in relation to an immovable property shall be the place where such property is located. Accordingly, in the above case place of supply shall be Bangalore. Illustration- 5: M/s XYZ (Jaipur) are organizing an Indian Crafts Festival in U.K. for which they avail the services of an Event Manager located in New Delhi. 204

212 INTEGRATED GOODS AND SERVICE TAX ACT, 2017 Solution: As per Sec. 13(5), the place of supply of such services shall be the place where the event is actually held i.e. UK. Illustration- 6: M/s XYZ (Jaipur) are organizing an Indian Crafts Festival in New Jersey- USA, Tokyo- Japan and New Delhi. They avail services of an Event Manager from Mumbai. Solution: As per Sec. 13(6), where such services are supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory. In this case, event is being organized at multiple places one of which is in the taxable territory. Hence, the place of supply of the entire service shall be New Delhi which comes in the taxable territory. Illustration- 7: Mr. X, residing in Mumbai, has an account in City Bank, New York, USA. Place of supply of services in relation to the account shall be determined as follows. Solution: As per Sec. 13(8) (a), in case of services supplied by a banking company, or a financial institution, or an NBFC, to account holders; place of supply shall be the location of supplier of services i.e. New York, USA. Illustration- 8: ABC Ltd. (Mumbai) purchases goods from a New York based firm which are being shipped to Mumbai by XYZ Shipping Co. place of supply of such transportation services shall be determined as follows. Solution: As per Sec. 13(9), the place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods i.e. Mumbai. Illustration-9: Mr. Andrew books an air ticket from JetGo Airways for journey from Melbourne, Australia to New Delhi, India. Place of supply of such passenger transport service shall be as follows. Solution: As per Sec. 13(12), the place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey i.e. Melbourne. Illustration- 10: JetGo Airways provides a movie-on-demand on board as an entertainment against a charge during the Melbourne to New Delhi leg of the Melbourne-New Delhi-Dubai flight. Solution: In accordance with Sec. 13(11), the place of supply of such services shall be the location of the first scheduled point of departure of that conveyance for the journey. The first schedule point of departure is Melbourne which shall be the place of supply. Illustration- 11: Mr. P, resident of Pune, Maharashtra, avails online database access services for playing online games provided by a supplier located in Tokyo, Japan. Place of supply in this case shall be determined as follows. Solution: As per Sec. 13(12), the place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Hence, in the present case, place of supply of online gaming services shall be Pune, Maharashtra. SPECIAL PROVISION FOR PAYMENT OF TAX BY A SUPPLIER OF ONLINE INFORMATION AND DATABASE ACCESS OR RETRIEVAL SERVICES [SECTION 14] Where online information and database access or retrieval services are provided by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of the service shall be liable for payment of taxes. Such supplier is required to take a single registration for himself under this Simplified Registration Scheme to be notified by government. Provided that any person representing such supplier shall get him registered and pay integrated tax on behalf of the supplier. Illustration- : Mr. A acquires his foreign bank account details from online portals of the said banks. Place of supply shall be determined as follows: Solution: As per Sec. 14(1), on supply of Online Information and Database Access or Retrieval Services (OIDAR) by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services. 205

213 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX Hence, the supplier of online information shall be liable for integrated tax. REFUND OF INTEGRATED TAX TO INTERNATIONAL TOURIST [SECTION 15] Integrated tax paid by International tourist on any supply of goods taken out of India, shall be refunded to him in manner and subject to conditions as may be prescribed. Explanation- Tourist means a person not normally resident in India, who enters India for a stay of not more than six months for lawful purposes. ZERO RATED SUPPLY [SECTION 16] 1) Means following supply of goods and services or both:- 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 2) Credit of input tax for zero rated supplies can be availed, notwithstanding that such supply may be an exempt supply. 3) A registered person making zero rated supply can avail refund under any of the following options:- 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. Refund of integrated tax paid on goods exported out of India [Rule- 96]: 1. 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 whena. 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 b. The applicant has furnished a valid return in FORM GSTR- 3 or FORM GSTR- 3B, as the case maybe. 2. The details of the relevant export invoices contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India. 3. The system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill or bill or export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities. 4. The claim for refund shall be withheld wherea. A request has been received from the jurisdictional Commissioner of Central tax, State tax or U.T. tax to withhold refund due to the claimant, or b. The proper officer of Customs determines that the goods were exported in violation of provisions of Customs Act, Where refund is withheld in accordance with sub-rule (4)(a) above, the proper officer of integrated tax at the Customs station shall intimate the applicant and the jurisdictional Commissioner of central tax, State tax or Union territory tax, as the case may be, and a copy of such intimation shall be transmitted to the common portal. 206

214 INTEGRATED GOODS AND SERVICE TAX ACT, Upon transmission of the intimation under sub-rule (5), the proper officer of central tax or State tax or Union territory tax, as the case may be, shall pass an order in Part B of FORM GST RFD Where the applicant becomes entitled to refund of the amount withheld under clause (a) of sub-rule (4), the concerned jurisdictional officer of central tax, State tax or Union territory tax, as the case may be, shall proceed to refund the amount after passing an order in FORM GST RFD The Central Government may pay refund of the integrated tax to the Government of Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the integrated tax. Refund of integrated tax paid on export of goods or services under bond or Letter of Undertaking [Rule 96A] notification no. 15/2017 (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 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest within a period of (a) 15 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) 15 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. (4) The export as allowed under bond or Letter of Undertaking withdrawn in terms of sub-rule (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. 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. As per Notification No. 37/2017- CT, CBEC hereby specifies conditions and safeguards for furnishing Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax- All registered persons shall be eligible to furnish a Letter of Undertaking in place of a bond except those who have been prosecuted for any offence under CGST Act or the IGST Act or any of the existing laws in force in a case where the amount of tax evaded exceeds 250 lakh Rupees. The Letter of Undertaking shall be furnished on the letter head of the registered person in duplicate for a financial year, and it shall be executed by the working partner, MD, or the CS or the proprietor or by a duly authorised person. Where the registered person fails to pay the tax along with interest as per CGST Rules, the facility of export without payment of integrated tax will be deemed to have been withdrawn. The same facility shall be restored if the aforementioned amount is paid. The provisions of this notification shall mutatis mutandis apply in respect of zero-rated supply of goods or services or both made by a registered person (including SEZ) to a SEZ developer or SEZ unit without payment of integrated tax. 207

215 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX APPORTIONMENT OF TAX AND SETTLEMENT OF FUNDS [SECTION 17] 1) Out of Integrated tax paid to Central Government:- a) in respect of inter-state supply of goods or services to an unregistered person or to a registered person paying tax under composition scheme under CGST Act b) in respect of inter-state supply of goods or services or both where registered person is not eligible for input tax credit c) in respect of inter-state supply of goods or services or both made in financial year to a registered person where he does not avail of the input tax credit in that period d) in respect of import of goods or services or both by an unregistered person or by a registered person paying tax under composition scheme under CGST Act e) in respect of import of goods or services or both where the registered person is not eligible for input tax credit; f) In respect of imports of goods or services or both made in financial year to a registered person where he does not avail of the input tax credit in that period. The amount of tax calculated at the rate equivalent to central tax shall be apportioned to Central government. 2) The balance of integrated tax remaining in integrated tax account for which apportionment in above clause has been done, shall be apportioned to: a) State where such supply takes place; and b) Central Government where such supply takes place in a Union territory: 3) The manner of apportionment as specified above shall also be applicable on interest, penalty compounding amount realized in connection with the tax so apportioned. 4) The amount so apportioned above be reduced from Integrated tax and Central Government shall transfer to the central tax account or union territory tax account the amount so apportioned by central government, and shall transfer to the state tax account an amount equal to amount apportioned to state. 5) Any amount considered refundable after apportionment shall be reduced from apportioned tax. As per Notification No. 12/2017- Integrated Tax, following rules are inserted in Integrated Tax Rules- The proportion of value attributable to different states in case of supply of advertisement services to the Central Govt., State Govt., local authority or a statutory body, in the absence of any contract between supplier and recipient of service shall be determined in following manner- 1. In case of advertisement in form of newspaper and publications, amount payable for publishing advertisement in all editions should be considered as value of service and attributable to the dissemination in such state or union territory where such newspaper and publications are published. 2. In case of printed material like pamphlets, diaries or T-shirts amount payable for distribution of specific number of such material will constitute value of advertisement service. Amount of service will be disseminated in such state or union territory where amount is paid for distribution of such advertisement material. 3. In case of hoardings other than on train amount payable for hoardings is the value of advertisement service and the same will be disseminated in each state or union territory on the basis of location of hoardings. 4. In case of advertisement placed on trains the amount payable for such advertisement is the value of service and the same will be disseminated in each state or union territory on the basis of breakups (i.e. ratio of length of railway tracks in each state for that train). 5. In case of advertisement on the back of utility bills of oil and gas companies the amount payable for such advertisement is the value of service and the same will be disseminated in such states or union territories on the basis of billing address of the customer on bill. 208

216 INTEGRATED GOODS AND SERVICE TAX ACT, In case of advertisement on railway tickets the value of advertisement shall be disseminated on the basis of Railway Stations in each state or union territory. 7. In case of advertisement over Radio Stations the value of advertisement shall be equal to amount payable to such railway stations and the same shall be disseminated on the basis of its name belonging to particular state or union territory. 8. In case of advertisement on television channel, the amount attributable to value of advertisement service disseminated in a state shall be calculated on the basis of viewership of such channel in that state or union territory. 9. In case of advertisement at cinema halls the value of advertisement service shall be attributed to the state or union territory on the basis of amount payable for advertisement to cinema hall or multiplex in that state or union territory. 10. In case of advertisement over internet the value of advertisement shall be disseminated in state or union territory on the basis of internet subscribers in that state or union territory 11. In case of advertisement through short messaging service the value of advertisement shall be disseminated in a state or union territory on the basis of telecommunication subscriber in such state or union territory. TRANSFER OF INPUT TAX CREDIT [SECTION 18] On utilization of credit of Integrated tax availed for payment of:- a) Central tax, the amount shall be reduced from integrated tax equal to the credit to be utilized and central government shall transfer said amount from integrated tax account to central tax account b) Union territory tax, the amount shall be reduced from integrated tax equal to the credit to be utilized and central government shall transfer said amount from integrated tax account to union territory tax account c) State tax, amount shall be reduced from integrated tax equal to the credit to be utilized and central government shall transfer said amount from integrated tax account to state tax account. TAX WRONGFULLY COLLECTED AND PAID TO CENTRAL GOVERNMENT OR SATE GOVERNMENT SECTION 19 1) Where a registered person has paid integrated tax on supply considered being inter-state supply by him, but which subsequently intra-state supply is, the amount of tax so paid by him is refunded and he shall not be liable to pay interest on further payment of central tax or state tax. 2) Where a registered person has paid central tax and state tax on supply considering it to be intra-state supply, but which is subsequently inter-state supply, the amount of tax paid by him shall be refunded and he shall not be liable to pay interest on further payment of integrated tax. As per Notification No. 40/2017- CTR, the Central Govt. exempts the intra-state supply of taxable goods by a registered supplier to a registered recipient for export, from so much of the central tax leviable thereon under section 9 of the said Act, as is in excess of the amount calculated at the rate of 0.05 per cent., subject to fulfillment of the following conditions, namely: - 1. The registered supplier shall supply the goods to the registered recipient on a tax invoice; 2. The registered recipient shall export the said goods within a period of ninety days from the date of issue of a tax invoice by the registered supplier; 3. The registered recipient shall indicate the GSTIN of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be; 4. The registered recipient shall be registered with an Export Promotion Council or a Commodity Board recognized by the Department of Commerce; 209

217 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 5. The registered recipient shall place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier; 6. The registered recipient shall move the said goods from place of registered supplier a. directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or b. directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; 7. If the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported; 8. In case of situation referred to in condition (7), the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and 9. When goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of GSTIN and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier. 2. The registered supplier shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice. 210

218 CHAPTER-30 STATE GOODS AND SERVICE TAX ACT, 2017 Application of provisions of CGST Act on states:- The provisions of CGST shall similarly apply to States Goods and Service Tax Act unless otherwise notified by the government from time to time. All the provisions named hereunder are already explained above under CGST Act. Following provisions of CGST Act shall, mutatis mutandis, apply to this SGST Act: (1) Scope of supply (2) Composition levy (3) Composite and mixed supply (4) Time and value of supply (5) Input tax credit (6) Registration (7) Tax invoice, credit and debit notes (8) Accounts and records (9) Returns (10) Payment of tax (11) Tax deduction at source (12) Collection of tax at source (13) Assessment (14) Refunds (15) Audit (16) Inspection, search, seizure and arrest (17) Demands and recovery (18) Liability to pay in certain cases (19) Advance ruling (20) Appeals and revision (21) Presumption as to documents (22) Offences and penalties (23) Job work (24) Electronic commerce (25) Settlement of funds (26) Transitional provisions and Miscellaneous provisions including the provisions relating to the imposition of interest and penalty. 211

219 CHAPTER-31 THE UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017 [UTGST] PRELIMINARY Act for levy and collection of tax on intra-state supply of goods or services or both by the Union Territories and incidental matters. It extends to the following Union Territories: 1. Andaman and Nicobar Islands 2. Lakshadweep 3. Dadra and Nagar Haveli 4. Daman and Diu 5. Chandigarh 6. Other territory Appointed Day means the date on which the provisions of this Act shall come into force. ADMINISTRATION 1) The administrator may appoint Commissioners and such other officers as may be required and such officers shall be deemed to be Proper Officers. Officers appointed under the existing law shall be deemed to be the officers appointed under this Act. (sec. 3) 2) The administrator may authorise any officer to appoint officers below the rank of Assistant Commissioner of UT tax for administration purpose. (Sec. 4) 3) An officer of the UT tax may exercise powers and discharge the duties conferred or imposed on him under this Act. [Sec 5(1)] 4) An officer of the UT tax may exercise the powers and discharge the duties conferred or imposed on any subordinate officer. [Sec 5(2)] 5) The commissioner may delegate his powers to any other officer subordinate to him. [Sec 5(3)] 6) An appellate authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of UT tax. [Sec 5(4)] 7) The officers appointed under the CGST Act are authorised to be the proper officers for this Act subject to conditions as the govt. may notify. [Sec 6(1)] 8) Subject to conditions as the govt. may notify: a. Where any P.O. issues an order under this Act, he shall also issue an order under the CGST Acts authorised by the said Act under intimation to the jurisdictional officer of central tax; b. Where a P.O. under CGST Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the P.O. under this Act on the same subject matter. Any proceedings for rectification, appeal and revision of any order passed by an officer appointed under this Act, shall not lie before an officer appointed under the CGST Act. [Sec 6(3)] LEVY AND COLLECTION OF TAX 1. There shall be levied a tax called UT tax on all intra-state supplies of goods or services or both (except on supply of alcoholic liquor for human consumption), on the value determined in accordance with the provisions of Sec 15 of the CGST Act at such rates, not exceeding 20%, as the govt. may notify. -Sec 7(1) 2. The UT tax on the supply of petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel shall be levied w.e.f. such date as may be notified by the govt. Sec 7(2) 3. The govt. may specify categories of supply on which tax shall be paid on reverse charge basis by the recipient and all the provisions of this Act shall apply to such recipient. Sec 7(3) 4. In case of supply of taxable goods or services or both by an unregistered supplier to a registered person, UT tax shall be paid by such registered recipient on reverse charge basis and all the provisions of this Act shall apply to such recipient. Sec 7(4) 212

220 THE UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017 [UTGST] PRELIMINARY 5. The govt. may specify categories of services the tax on intra-state supplies of which shall be paid by the E- commerce operator if such services are supplied through it and all provisions of this Act shall apply to such e-commerce operator. Where e-commerce operator does not have physical presence in the taxable territory, he shall appoint a representative in such territory for tax purposes. Sec 7(5) 6. Govt. may exempt by notification, any goods or services or both from the whole or any part of tax leviable thereon where it is necessary to do so in public interest. Sec 8(1) 7. Where it is necessary in public interest, govt. may exempt from payment of tax any goods or services or both on which tax is leviable, by special order in each case. Sec 8(2) PAYMENT OF TAX The amount of ITC available in the electronic credit ledger on account ofa. Integrated tax shall be utilized towards payment of integrated tax, central tax and State tax/ UT tax in that order. b. The UT tax shall be first utilized towards payment of UT tax, and any remaining amount may be utilized towards payment of integrated tax. c. The UT tax shall not be utilized towards payment of Central tax. SECTION 10- TRANSFER OF ITC: When ITC of UT tax is utilized for payment of integrated tax dues as per Sec 49(5) of CGST Act, the amount collected as UT tax shall stand reduced by an amount equal to such credit so utilized and the govt. shall transfer an amount equal to the amount so reduced from the UT tax to the integrated tax account in such manner and within such time as may be prescribed. INSPECTION, SEARCH, SEIZURE AND ARREST [SECTION 11] 1. All officers of Police, Railways, Customs, and those engaged in collection of land revenue, including village officers, and officers of Central tax and State tax shall assist the proper officer in the implementation of this Act. 2. The govt. may, by notification, empower and require any other class of officers to assist proper officers in the implementation of this Act when called upon to do so by the Commissioner. DEMANDS AND RECOVERY [SECTION 12 & 13] 1. A registered person who has paid the Central tax and the UT tax on transaction considering it 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 as may be prescribed. [Sec.12(1)] 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 the central tax and the Union territory tax payable. [Sec 12(1)]Where any tax, interest or penalty is payable under this Act, the proper officer of central tax may recover the said amount as if it were an arrear of central tax and credit the amount so recovered to the account of the govt. under the appropriate head of UT tax. [Sec. 13(1)] 3. Where the amount recovered as above is less than the amount due to the govt. under this Act and CGST Act, the amount shall be credited in proportion to the amount due as UT tax and Central tax. [Sec. 13(2)] TRANSITIONAL PROVISIONS MIGRATION OF EXISTING TAX PAYERS [SECTION-17] 1. Every person registered under any existing law and having a valid PAN shall be issued a registration certificate on provisional basis which, unless replaced by a final certificate of registration, shall be liable to be cancelled if prescribed conditions are not complied with. 2. The final certificate of registration shall be granted in such form and manner as may be prescribed. 213

221 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 3. Provisional certificate shall be deemed to have not been issued if said registration is cancelled in pursuance of application filed by such person that he was not liable for registration u/s 22 or 24 of the CGST Act. TRANSITIONAL ARRANGEMENTS FOR INPUT TAX CREDIT [SECTION- 18] A. CARRY FORWARD OF CREDIT OF VAT AND ENTRY TAX [SEC. 18(1)] A registered person, other than a person opting for compounding scheme, shall be entitled to take credit of VAT and Entry Tax carried forward in the return under the existing law for the period ending on the day immediately preceding the appointed day, not later than 90 days after the said day. No credit shall be allowed in following cases: i. Where the said amount is not admissible as ITC under this Act, or ii. Where he has not furnished all the returns under existing law for the period of six months immediately preceding the appointed day, or iii. Where the amount of credit relates to goods sold under exemption notification notified by govt. Where the credit relates to Central Sales Tax Act, 1956 and is not substantiated in the time and manner prescribed in Rule 12 of CST (Registration and Turnover) Rules, 1957, such amount shall not be eligible to be credited to the e-credit ledger. Amount equivalent to the credit as specified above shall be refunded under the existing law when the said claims are substantiated in the manner prescribed in Rule 12. A registered person, other than a person opting for compounding scheme, shall be entitled to take credit of the unavailed ITC in respect of capital goods, not carried forward in a return furnished under existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed. Provided that, credit shall not be allowed unless it was admissible under existing law as well as under this Act. Unavailed input tax credit= Amount credit admissible under existing law Amount of credit availed. B. CREDIT OF GOODS HELLD IN STOCK IN CERTAIN CASES [SEC. 18(3)]: A registered taxable person who was not liable to be registered under existing VAT laws or was engaged in the sale of exempted goods which are liable to tax under this Act, shall be allowed the credit of VAT and Entry Tax paid on goods held in stock as on the appointed day subject to the following conditions:- i. Such inputs or goods are used or intended to be used for making taxable supplies under this Act ii. The said registered person is eligible for ITC on such inputs under this Act iii. The said registered person is in possession of invoice or other prescribed document evidencing payment of tax under the existing law in respect of such inputs; and iv. Such invoices or other prescribed documents were not issued earlier than 12 months immediately preceding the appointed day. Such credit shall also be allowed to any registered person other than a manufacturer or supplier of services, who is not in possession of an invoice or any other document evidencing payment of duties in respect of inputs, subject to such conditions as may be prescribed. C. PERSONS ENGAGED IN EXEMPTED AND TAXABLE SUPPLIES [SEC. 18(4)]: A person engaged in sale of taxable as well as tax free goods under the existing law, liable to tax under this Act, shall be entitled to take in his e-credit ledgeri. The amount of credit of the VAT and Entry Tax carried forward in a return furnished under the existing law ii. The amount of credit of VAT and Entry Tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on appointed day relating to such exempted or tax free goods. 214

222 THE UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017 [UTGST] PRELIMINARY D. IN CASE OF INPUTS RECEIVED AFTER THE APPOINTED DAY [SEC. 18(5)]: A registered person shall be entitled to take credit of VAT or entry tax in respect of inputs received on or after the appointed day tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other taxpaying document of the same was recorded in the books of account of such person within 30 days from the appointed day. The period of 30 days may be extended for a further period not exceeding 30 days on sufficient cause being shown. The said registered person shall furnish a statement in respect of credit taken under this sub-section. E. CREDIT TO A TAXABLE PERSON SWITCHING OVER FROM COMPOSITION SCHEME UNDER EXISTING LAW [SEC. 18(6)]: 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, referred to as composition taxpayer, shall be entitled to take, in his electronic credit ledger, credit of value added tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely: a. such inputs or goods are used or intended to be used for making taxable supplies under this Act; b. the said registered person is not paying tax under section 10 of the Central Goods and Services Tax Act; c. the said registered person is eligible for input tax credit on such inputs under this Act; d. the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of inputs; and e. Such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day. TRANSITIONAL PROVISIONS RELATING TO JOB WORK [SECTION- 19] Where goods have been removed from a factory for further processing to a job worker prior to the appointed day i.e. goods were removed under current tax regime however received back after GST roll-out: 1. No tax shall be payable if such inputs are returned to the said factory within six months from the appointed day, 2. Time limit of 6 months can be increased by the govt. for a further period not exceeding 2 months on sufficient cause being shown, 3. If such inputs are not returned within a period of 6 months or extended period, the input tax credit shall be liable to be recovered in accordance with Sec. 142(8)(a) of CGST Act, 4. Tax shall not be payable only if the person dispatching goods and the job worker declare the details of the inputs or goods held in stock by the job worker on behalf of the said person on the appointed day in such form and manner as may be prescribed. Similarly in case of Semi-finished or Finished goods, a job worker is not required to pay tax under GST, if such goods are returned to original manufacturer s place of business within a period of 6 months from the GST applicable date. MISCELLANEOUS TRANSITIONAL PROVISIONS [SECTION-20] A. TAX ON GOODS RETURNED AFTER GST [SEC. 20(1)]: a. Where any goods on which tax has been paid under the existing law at the time of sale, not being earlier than 6 months from the appointed day, are returned to any place of business on or after the appointed day, the registered person shall be eligible for refund of the tax paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business within a period of six months from the appointed day and such goods are identifiable to the satisfaction of the proper officer: Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply. B. TREATMENT IN CASE OF CHANGE IN PRICES [SEC. 18(2)]: 1) Where in pursuance of a contract entered into prior to the appointed day: 215

223 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX a. The price of any goods is revised upwards on or after the appointed day, the registered person who had sold such goods shall issue to the recipient a supplementary invoice or debit note, containing such particulars as may be prescribed, within 30 days of such price revision and for the purposes of this Act, such supplementary invoice or debit note shall be deemed to have been issued in respect of an outward supply made under this Act. b. The price of any goods is revised downwards on or after the appointed day, the registered person who had sold such goods may issue to the recipient a credit note, containing such particulars as may be prescribed, within 30 days of such price revision and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act: Provided that the registered person shall be allowed to reduce his tax liability on account of issue of the credit note only if the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability. C. REFUND OF TAXES PAID UNDER EXISTING LAWS: 1) PENDING CLAIMS UNDER EXISTING LAWS [SEC. 18(3)]: 1. Disposal of such applications in terms of the earlier law: all pending applications for refund shall be disposed of in terms of the provision contained earlier laws. 2. Refund in cash: any amount of credit or duty found admissible to the claimant shall be refunded in cash. 3. Unjust enrichment: the application must satisfy the principle of unjust enrichment. 4. Refund application: if any claim for refund is fully or partially rejected, the amount so rejected shall lapse. It is not clear whether appeal will be allowed against such rejection or not. 5. Carry forward of balance: claim shall not be allowed of any amount of credit where the balance of such amount as on the appointed day has been carried forward under this Act. 2) CLAIMS FILED AFTER THE APPOINTED DAY [SEC. 18(4)]: a. Every claim for refund filed after the appointed day for refund of tax paid under existing law in respect of goods and/or services exported before or after the appointed day shall be disposed of in accordance with the provisions of the existing law. b. Where any claim for refund of input tax credit is fully or partially rejected, the amount so rejected shall lapse. c. No refund shall be allowed where the balance of ITC as on the appointed day has been carried forward under this Act. 3) REFUND OF TAX OR ANY OTHER AMOUNT: a. If any amount of credit is found to be admissible to the claimant pursuant to any appeal, revision, review relating to a claim for ITC initiated before, on or after the appointed day, it shall be refunded to him in cash in accordance with existing law. Sec 18(5)(b) b. If any amount becomes admissible to the claimant pursuant to any appeal, revision, review relating to any output tax liability initiated before, on or after the appointed day, it shall be refunded to him in cash in accordance with existing law. Sec 18(6)(b) c. Where 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, the same shall be refunded to him in cash under the said law and the amount rejected, if any, shall not be admissible as input tax credit under this Act. Sec 18(7)(b) d. Where any return furnished under existing law, is revised after the appointed day but within the time limit specified for such revision under existing law, any amount found to be refundable or ITC admissible shall be refunded in cash under existing law and the amount rejected, if any, shall not be admissible as input tax credit under this Act. Sec 18(8)(b) 4) RECOVERY OF TAX OR ANY OTHER AMOUNT: a. If any amount of credit becomes recoverable as a result of appeal, revision, review or reference related to a claim for ITC initiated before, on or after the appointed day, the same shall, unless 216

224 THE UNION TERRITORY GOODS AND SERVICES TAX ACT, 2017 [UTGST] PRELIMINARY recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. Sec 18(5)(a) b. If any amount becomes recoverable from the claimant pursuant to any appeal, revision, review relating to any output tax liability initiated before, on or after the appointed day, it shall unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. Sec 18(6)(a) c. Where 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 recoverable from the taxable person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. Sec 18(7)(a) d. Where any return furnished under existing law, is revised after the appointed day, any amount found to be recoverable or ITC inadmissible shall unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. Sec 18(8)(a) 5) GOODS SENT ON APPROVAL BASIS [SEC. 18(11)]: a. Where any goods sent on approval basis, maximum 6 months before the appointed day, are rejected and returned to the seller on or after the appointed day, then no tax will be payable. Goods should be returned within 6 months from the appointed day. The period of 6 months might be extended for a maximum of 2 months if there is sufficient cause. b. GST will be payable by the person returning goods after 6 months if those goods are liable to tax under this Act. The seller must also pay GST on the goods returned after 6 months. c. Every person who has sent goods on approval basis under existing law will submit details of such goods in FORM GST TRAN- 1 within 90 days of the appointed day. [Rule- 120]. 6) Where a supplier has made any sale of goods in respect of which tax was required to be deducted at source under any existing law relating to sale of goods and has also issued an invoice for the same before the appointed day, no deduction of tax at source under section 51 of the Central Goods and Services Tax Act, as made applicable to this Act, shall be made by the deductor under the said section where payment to the said supplier is made on or after the appointed day. Explanation. for the purposes of this Chapter, the expression capital goods shall have the same meaning as assigned to it in any existing law relating to sale of goods. MISCELLANEOUS APPLICATION OF PROVISIONS OF CGST ACT [SECTION- 21] Following provisions of CGST Act shall, mutatis mutandis, apply to this Act: (27) Scope of supply (28) Composition levy (29) Composite and mixed supply (30) Time and value of supply (31) Input tax credit (32) Registration (33) Tax invoice, credit and debit notes (34) Accounts and records (35) Returns (36) Payment of tax (37) Tax deduction at source (38) Collection of tax at source (39) Assessment (40) Refunds (41) Audit 217

225 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX (42) Inspection, search, seizure and arrest (43) Demands and recovery (44) Liability to pay in certain cases (45) Advance ruling (46) Appeals and revision (47) Presumption as to documents (48) Offences and penalties (49) Job work (50) Electronic commerce (51) Settlement of funds (52) Transitional provisions and (53) Miscellaneous provisions including the provisions relating to the imposition of interest and penalty. POWER TO MAKE RULES [SECTION- 22] 1) The Central Govt. may make rules for carrying out the provisions of this Act. 2) The Central Govt. may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be or may be made by rules. 3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on which the provisions of this Act come into force. 4) Any rules made under sub-section (1) may provide that a contravention thereof shall be liable to a penalty not exceeding ten thousand rupees. 5) The Board may, by notification, make regulations consistent with this Act and the rules made thereunder to carry out the purposes of this Act. Sec 23. LAYING OF RULES, REGULATIONS AND NOTIFICATIONS [SECTION- 24] Every rule made by the Central Government, every regulation made by the Board and every notification issued by the Central Government under this Act, shall be laid, as soon as may be, after it is made or issued, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or in the notification, as the case may be, or both Houses agree that the rule or regulation or the notification should not be made, the rule or regulation or notification, as the case may be, shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation or notification, as the case may be. POWER TO ISSUE INSTRUCTIONS OR DIRECTIONS [SECTION- 25] The Commissioner may, if he considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the Union territory tax officers as he may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act shall observe and follow such orders, instructions or directions. REMOVAL OF DIFFICULTIES [SECTION- 26] 1) If any difficulty arises in giving effect to any provision of this Act, the Central Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act or the rules or regulations made thereunder, as may be necessary or expedient for the purpose of removing the said difficulty: Provided that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act. 2) Every order made under this section shall be laid, as soon as may be, after it is made, before each House of Parliament. 218

226 CHAPTER-32 THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, 2017 This Act may be called the Goods and Services Tax (Compensation to States) Act, It extends to the whole of India. It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. DEFINITIONS:- In this Act, unless the context otherwise requires, a. Central Tax means the central goods and services tax levied and collected under the Central Goods and Services Tax Act; b. Central Goods and Services Tax Act means the Central Goods and Services Tax Act, 2017; c. Cess means the goods and services tax compensation cess levied under section 8; d. Compensation means an amount, in the form of goods and services tax compensation, as determined under section 7; e. Council means the Goods and Services Tax Council constituted under the provisions of article 279A of the Constitution; f. Fund means the Goods and Services Tax Compensation Fund referred to in section 10; g. Input Tax in relation to a taxable person, means, h. Cess charged on any supply of goods or services or both made to him; i. Cess charged on import of goods and includes the cess payable on reverse charge basis; j. Integrated Goods and Services Tax Act means the Integrated Goods and Services Tax Act, 2017; k. Integrated tax means the integrated goods and services tax levied and collected under the Integrated Goods and Services Tax Act; l. Prescribed means prescribed by rules made, on the recommendations of the Council, under this Act; (k) Projected growth rate means the rate of growth projected for the transition period as per section 3; (l) Schedule means the Schedule appended to this Act; m. State 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 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; n. State tax means the State goods and services tax levied and collected under the respective State Goods and Services Tax Act; o. 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; p. Taxable Supply means a supply of goods or services or both which is chargeable to the cess under this Act; q. Transition Date 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; r. Transition Period means a period of five years from the transition date; and s. Union Territories Goods and Services Tax Act means the Union Territories 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. 219

227 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX The projected nominal growth rate of revenue subsumed for a State during the transition period shall fourteen per cent per annum. be 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. BASE YEAR REVENUE 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; [54 of List-II (State List)--Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-state trade or commerce or sale in the course of international trade or commerce of such goods] b. The central sales tax levied under the Central Sales Tax Act, 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 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; [entry 62 of List-II (State List)---Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.] 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, 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,

228 THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, 2017 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. [sub-clause (g) of clause (4) of article 279A:- special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand. The base year revenue shall be calculated 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. PROJECTED REVENUE FOR ANY YEAR [SECTION 6] 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 CALCULATION AND RELEASE OF COMPENSATION [SECTION 7] 1. The compensation under this Act shall be payable to any State during the transition period. 2. 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. 1. 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, 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; 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 prorata basis as a percentage of the total projected revenue for any financial year during the transition period. 221

229 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX 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 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 sub-section (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 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, 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. LEVY AND COLLECTION OF CESS 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 interstate 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: EXPLANATION: sub section (1) of section 9 of the Central Goods and Services Tax Act Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra- State supplies of goods or services or both, exception the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. sub section (1) of section 5 of the Integrated Goods and Services Tax Act Subject to the provisions of subsection (2), there shall be levied a tax called the integrated goods and services tax on all inter-state supplies of goods or services or both; except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person 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. 222

230 THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) ACT, 2017 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 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, at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962, on a value determined under the Customs Tariff Act, RETURNS, PAYMENTS AND REFUNDS Every taxable person, making a taxable supply of goods or services or both, shall (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. 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. The proceeds of the cess leviable under section 8 and such other amounts as may be recommended by the Council, shall be credited to a non-lapsable Fund known as the Goods and Services Tax Compensation Fund, which shall form part of the public account of India and shall be utilised for purposes specified in the said section. All amounts payable to the States shall be paid out of the Fund. (Compensation) Fifty percent of the amount remaining unutilised in the Fund at the end of the transition period shall be transferred to the Consolidated Fund of India as the share of Centre, and the balance fifty percent shall be distributed amongst the States in the ratio of their total revenues from the State tax or the Union territory goods and services tax, as the case may be, in the last year of the transition period. The accounts relating to Fund shall be audited by the Comptroller and Auditor General of India or any person appointed by him at such intervals as may be specified by him and any expenditure in connection with such audit shall be payable by the Central Government to the Comptroller and Auditor-General of India. The accounts of the Fund, as certified by the Comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be laid before each House of Parliament. Provided that the input tax credit in respect of cess on supply of goods and services leviable under section 8 shall be utilised only towards payment of said cess on supply of goods and services leviable under the said section. THE SCHEDULE S. Description of supply of goods or No. services Tariff item, heading, sub-heading, Chapter, or supply of goods or services, as the case The maximum rate at which goods and services tax compensation cess may be collected 223

231 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX may be 1 Pan Masala One hundred and thirty-five percent ad valorem. 2 Tobacco and manufactured tobacco 24 Four thousand one hundred and substitutes, including tobacco seventy rupees per thousand sticks products. or two hundred and ninety percent ad valorem or a combination thereof, but not exceeding four thousand one hundred and seventy rupees per thousand sticks plus two hundred and ninety percent ad valorem. 3 Coal, briquettes, ovoids and similar solid fuels manufactured from coal, 2701, 2702 or 2703 Four hundred rupees per tonne. lignite, whether or not agglomerated, excluding jet, peat (including peat litter), whether or not agglomerated. 4 Aerated waters Fifteen per cent. ad valorem 5 Motor cars and other motor vehicles 8703 Fifteen per cent. ad valorem principally designed for the transport of persons (other than motor vehicles for the transport of ten or more persons, including the driver), including station wagons and racing cars. 6 Any other supplies Fifteen percent ad valorem. 224

232 CHAPTER-33 SHORTCOMINGS/ DRAWBACKS OF THE LAW GST implementations will slower the rate of growth in Cement industry where Excise Duty is 12.5% and State VAT (in U.P.) is around 4%. With GST, the rate is proposed to be 28%, effectively increasing the tax rate. Petroleum products form a majority import value in India. However, key petroleum products like crude oil, natural gas, high speed diesel and ATF have been kept out of the GST ambit. Tax credit for inputs will therefore not be available to related industries like the plastic industry which are heavily dependent on petroleum products. Petrol and diesel are required to run factory machinery and unavailability of input tax credit on petroleum products will most probably push up the final price of all manufactured goods. The Banking & Financial Sector (including insurance) will take a hit as currently the effective tax rate is 14% (levied on Fee component, not interest, of the transaction) which will increase to 18-20%. Hence, there will be a moderate increase in the cost of financial services such as loan processing fees, debit/ credit card charges, insurance premium etc. GST will make life, health and motor insurance products more expensive. Since IGST will be payable on inter-state branch transfers and stock transfers, finance will be blocked and interest burden of dealers having inter-state transactions will increase considerably. Implementation of GST is going to be a huge task for Government as its administration will be predominantly based on Information Technology. Invoice-wise matching of Input Tax Credit per month on a mass scale will require huge data processing capabilities. Here system is master. If system fails, whole mechanism of input tax credit and adjustment of taxes fails. Compromised GST: The GST system is a result of deliberations of committee of representatives from 29 States, each having its own views and peculiarities. Hence, having a uniform nationwide GST is very difficult and some compromises/ adjustments are inevitable. Most businesses use accounting softwares or ERPs for filing tax returns which have excise, VAT, and service tax already incorporated in them. The change to GST will require them to change their ERPs, too, leading to increased costs of purchasing new software and training employees. The Goods & Service Tax has been implemented from 1st July So, for the fiscal year business will follow the old tax structure for the first 3 months, and GST for the rest of the time. It is impossible to cross over from one tax structure to the other in just a day, and hence businesses will end up running both tax systems in parallel, resulting in more confusion and compliance issues. Under current indirect tax regime, a small taxpayer has to file a monthly return (in VAT). While in GST, three returns will be filed every month apart from annual returns, i.e. 37 returns in a FY as against a total of 13 returns in VAT leading to increased hassles in compliance. Under GST, input tax credit can be availed by the supplier only when the recipient has paid the tax on such receipts which can lead to loss for innocent dealers in case of fraudulent recipients. GST requires businesses to register in all the states they are operating in. This will increase the burden of compliances. Nowadays, many SMEs operate through their own online shopping websites or through third party websites to sell to different parts of India. Under GST, they will be required to register for all the states. Not only that, they will not be eligible for composition scheme and will be required to pay taxes like any large organization. 225

233 SCHOLAR S GUIDE TO GOODS AND SERVICES TAX E-commerce facilitators are now required to collect TCS under GST which will lead to increased complications and compliances. Composition scheme is available for only businesses selling goods. It is not available to service providers or for online sellers. This sets SMEs at par with large organizations in an unfair move. 226

234 About the Author Dr. Saurabh N. Gaur completed his Chartered Accountancy in He completed his Ph.D on the topic New Approaches of Valuation of Financial Aspects of Joint Stock Companies from Lucknow University in He has been practicing Chartered Accountant for the last 16 years and is an active member of the teaching fraternity for the past 23 years. His fields of interest include especially, the various aspects of national and international taxation, including the continuous developments taking place in the fields of Taxation, Financial Accounting, Cost Accounting and Financial Management and has been working in these fields for a long time. Being a practicing professional and also, a teacher, Dr. Gaur has been the resources person for enlightening students, on the skill of combining their knowledge with professional practice, in several seminars, conferences and conventions organised by various professional bodies including ICAI. He can be reached at saurabhgaur_co@rediffmail.com. PUBLICATIONS: Website: etaxplanning.org Id: aitataxmgt@gmail.com