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Study Guidelines by ICAI - for May, 2019 examination

Final (New) Course Paper 8: Indirect Tax Laws

List of topic-wise exclusions from the syllabus

(1) (2) (3)

S. No. in the syllabus

Topics of the syllabus Exclusions (Provisions which are excluded from the corresponding topic of the syllabus)

1(ii) Levy and collection of CGST and IGST – Application of CGST/IGST law; Concept of supply including composite and mixed supplies, inter-State supply, intra-State supply, supplies in territorial waters; Charge of tax; Exemption from tax; Composition levy

CGST Act, 2017 & IGST Act, 2017 (i) Rate of tax prescribed for supply of goods* (ii) Rate of tax prescribed for supply of services* (ii) Exemptions for supply of goods

1(v) Input tax credit Manner of reversal of credit of additional duty of customs in respect of Gold dore bar

1(vii) Procedures under GST – All procedures including registration, tax invoice, credit and debit notes, electronic way bill, accounts and records, returns, payment of tax including reverse charge, refund, job work

CGST Act, 2017 and CGST Rules, 2017 (i) Furnishing of GSTR-2, GSTR-1A, GSTR-3, GSTR-7,

GSTR-8 (ii) Claim of input tax credit and provisional acceptance

thereof (iii) Matching, reversal & reclaim of input tax credit (iv) Matching, reversal & reclaim of reduction in output tax

liability (v) Categories of supply of goods, tax on which is

payable on reverse charge basis under section 9(3)

IGST Act, 2017 • Categories of supply of goods, tax on which is

payable on reverse charge basis under section 5(3)

1(xvi) Other Provisions Transitional Provisions *Rates specified for computing the amount payable under composition levy are included in the syllabus. Notes: (1) Only the following sections of the CGST (Amendment) Act, 2018, which have become retrospectively effective from 1st July,

2017, are applicable for May, 2019 examination: (i) Section 3 of the CGST Amendment Act, 2018 amending section 7 of the CGST Act, 2017, and

(ii) Section 31 of the CGST Amendment Act, 2018 amending Schedule II to the CGST Act, 2017.

Section 28 of the CGST Amendment Act, 2018 which has amended section 140 of the CGST Act, 2017, though effective from 1st July, 2017, is not applicable for May, 2019 examination as section 140 covered under “Chapter XX – Transitional Provisions” has been excluded from the syllabus by way of Study Guidelines as mentioned above. It may be noted that all the remaining provisions of the CGST Amendment Act, 2018 have not been made effective till 31.10.2018 and hence, are not applicable for May, 2019 examination.

(2) In the above table, in respect of the topics of the syllabus specified in column (2) the related exclusion is given in column (3). Where an exclusion has been so specified in any topic of the syllabus, the provisions corresponding to such exclusions, covered in other topic(s) forming part of the syllabus, shall also be excluded.

(3) October, 2018 edition of the Study Material is relevant for May, 2019 and November, 2019 examinations. The amendments in Part-II: Customs & FTP - made after the issuance of this Study Material - to the extent covered in the

Statutory Updates for May, 2019 examination alone shall be relevant for the said examination. The Statutory Updates shall be hosted on the BoS Knowledge Portal.

(4) The entire content included in the October, 2018 edition of the Study Material, except the exclusions mentioned in the table above, and the Statutory Updates for May, 2019 examination shall be relevant for the said examination.

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Relevant Legal Provisions Section Rules Section Subject Matter Rule Subject Matter

CGST Sec. 35 Accounts and other records Rule 56 Maintenance of accounts by registered persons

Rule 57 Generation and maintenance of e-records

Rule 58 Records to be maintained by (Owner/Operator of a godown/warehouse) and (transporter) (Such records to be maintained irrespective of such person being registered or unregistered under GST)

Sec. 36 Period of retention of accounts

IGST Sec 20 Application of provisions of CGST Act, 2017

Rule 2 Application of provisions of CGST Rules, 2017

- Sec 35 & 36 have been made applicable

- Related rules have been made applicable

Relevant Definitions CGST 2 (85) Place of business 2 (94) Registered person 2 (89) Principal place of business 2 (13) Audit

Relevant Definitions

Sec 2 (85) Place of Business “Place Of Business” includes— (a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable

person stores his goods, supplies or receives goods or services or both; or (b) a place where a taxable person maintains his books of account; or (c) a place where a taxable person is engaged in business through an agent, by whatever name called;

Sec 2 (89) Principal Place of Business “Principal Place Of Business” means the place of business specified as the principal place of business in the certificate of

registration;

Sec 2 (94) Registered Person “Registered Person” means a person who is registered under section 25 but does not include a person having a Unique Identity Number Author : 1. Registered person = Person registered u/Sec 25 (whether u/Sec 22 or section 24) = basically, holder of GSTIN

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Accounts: Who shall maintain & where 1. Should every registered person required to maintain books of account?

(IDTC FAQ) Ans. Yes. As per Section 35 of the Act, every registered person is required to keep and maintain books of account.

Note: 1. Accounts maintenance

Status of person Accounts to be maintained Registered Person (having GSTIN)

Sec 35(1): Accounts to be maintained by Registered Person

Unregistered Person Sec 35(2): Accounts to be maintained by • (Owner/Operator of a godown/warehouse) and • (transporter)

(Such records to be maintained irrespective of such person being registered or unregistered under GST)

Status of person Accounts to be maintained Registered Person (having GSTIN)

Maintain Accounts

Unregistered Person (not having GSTIN)

Get enrolled on Portal [Submit GST ENR-01 (details regarding business to be furnished) details furnished will be validated Unique Enrollment Number (UEN) shall be granted]

• Grant of UEN does not make any person a ‘taxable person’ as defined in Sec 2(94).

• Enrollment u/Sec 35(2) read with Rule 58 and Registration u/Sec 25 read with Rule 8, 9 & 10 – are altogether two different concepts.

More discussion at then end of this chapter .

Maintain Accounts

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2. Where are the books of account liable to be maintained?

(IDTC FAQ) Ans. The books of account are to be maintained at principal place of business as mentioned in the certificate of registration. .

Further, where his registration certificate is covering multiple place of business (e.g., a supplier operating from multiple place of business within a State / Union Territory), then accounts relating to each such additional place of business shall also be kept at each such additional place of business.

Note: 1. Single Entity with multiple place of businesses

Registration Accounts to be maintained Multiple Registration (GSTINs)

Each GSTIN = DDP Separate compliances required. Each registered unit shall maintain its account separately.

Single Registration (GSTIN)

Single place of business – maintain accounts at such place Multiple place of business – maintain accounts at principal place of business and also at each additional place of business **

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Relaxation from maintenance of accounts at Additional Place of Business – CBIC Circular Tea/ Coffee manufacturer selling tea/coffee through Auction Issue, difficulty and solution

o Bring their tea/coffee from business premise to warehouse/godown registered with Tea Board of India o Such storage place = Place of business o Tea/Coffee manufactures shall declare this place of business as his additional place of business (alternatively,

auctioneer may declare such place as his additional place of business) o For either manufacturer or auctioneer maintenance of records at such place was difficult. o Considering that difficulty, it has been clarified by CBIC that such manufacturer/ auctioneer may simply

maintain books of accounts relating to such additional place of business at their principal place of business instead of such additional place.

Circular No. 47/21/2018-GST Dated: 8 June, 2018 Issue: In case of auction of tea, coffee, rubber etc., whether the books of accounts are required to be maintained at every

place of business by the principal and the auctioneer? Clarification: • Warehouse where tea/coffee is stored = Additional place of business (either of supplier or of auctioneer):

For the purpose of auction of tea, coffee, rubber, etc, the principal and the auctioneer may declare the warehouses, where such goods are stored, as their additional place of business. The buyer is also required to disclose such warehouse as his additional place of business if he wants to store the goods purchased through auction in such warehouses.

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Records of supply from Warehouse (Additional PoB)- may be maintained at principal place of business The principal and the auctioneer for the purpose of auction of tea, coffee, rubber etc., are required to maintain the books of accounts relating to each and every place of business in that place itself in terms of the first proviso to section 35(1) of the CGST Act.

However, in case difficulties are faced in maintaining the books of accounts, it is clarified that they may maintain the books of accounts relating to the additional place(s) of business at their principal place of business instead of such additional place(s).

• In such case, they shall intimate their jurisdictional officer in writing about the maintenance of books of accounts relating to the additional place(s) of business at their principal place of business.

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3. Whether accounts can be maintained in the electronic form?

(IDTC FAQ) Ans. Yes, the registered person may keep and maintain such accounts and other particulars in the electronic form, in the manner

as may be prescribed.

Note: 1. Rule 57 of CGST Rules provides for following:

• Proper back-up of e-records shall be maintained. • Upon demand, registered person shall make available records in hard copy or e-copy. • Upon demand, access to e-records shall be provided and passwords shall be shared.

GST Audit 4. Whether the accounts maintained by the registered person needs to be audited?

(IDTC FAQ) Ans. Yes, Sec 35 (5) of CGST Act, 2017 provides that every registered person whose turnover during a financial year

exceeds the prescribed limit of Rs. 2 crore, shall get his accounts audited by a chartered accountant or a cost accountant.

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He shall submit following with the Annul return filed by him: 1) Copy of the audited statement of accounts; 2) Reconciliation statement (Form GSTR-9C) ; and 3) Other prescribed documents.

Note: 1. First FY of GST in India = FY 2017-18 2. Due date of filing of Annual Return (GSTR-9) = 31st Dec, 2018 -- this due date has been extended till 31st March, 2019

Unaccounted for stock – PO entitled to treat them as ‘deemed supplied’ [imp] 5. Can the provisions of Sections 73 or 74 be made applicable for not maintaining books of account?

Note: Section 73 & 74 are the demand-related provisions under the Act. (IDTC FAQ)

Ans. Yes, Sec 35(6) of CGST Act provides that where the registered person fails to account for the goods and/or services in

accordance with Section 35(1), the proper officer shall determine the amount of tax payable on the goods and/or services that are not accounted for, as if such goods and/or services had been supplied by such person and in this regard, and the provisions of Sections 73 or 74, as the case may be, shall apply, mutatis mutandis, for determination of such tax.

Note: 1. Department conducted search on GST registered person (say, a trader supplier) – found following

Purchase invoices reflecting purchase of 10,000 units (ITC availed on purchase) Sales Invoices reflecting sales of 9000 units (GST liability booked in books) Physical stock verification – No stock found Missing stock of 1,000 units – treatment thereof – In terms of Sec 35(6), PO may treat this unaccounted stock as ‘deemed

supply’ and accordingly, raised GST demand on such GST registered person in terms of Sec 73 or Sec 74. SCN will be issued asking supplier to justify/ show cause why PO shall not treat unaccounted goods as ‘deemed

supply’. In absence of satisfactory reply, PO shall be entitled to pass demand order.

However, it shall be noted that if registered person replies that 1000 units of stock was lost by fire or was lost due to theft and provides satisfactory evidence too, then he shall be relieved of any demand. But even in that case, he shall be required to reverse his ITC availed on such quantity. This is due to the reason that Sec 17(5)(h) blocks availment of ITC in respect of quantity lost or destroyed.

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[imp] 6. What are the consequences if taxable goods are found in a place other than those declared without valid

documents? (IDTC FAQ)

Ans. The proper officer is free to determine the amount of tax payable on such goods as if the goods have been supplied by the registered person. [Rule 56(6) of CGST Rules, 2017]

Preservation of records 7. Generally, what is the time period during which the maintenance of accounts and records is mandatory for the

registered person? (IDTC FAQ)

Ans. Yes, as per section 36 every registered person is required to keep and maintain books of account or other records as prescribed under Section 35(1) and retain them until the expiry of 72 months from the due date for filing of Annual Return for the year pertaining to such accounts and records.

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Note: 1. FY 2017-18: Due date of filing of annual return is 31st Dec, 2018 2. Records relating to FY 2017-18: shall be preserved for 6 years (72 months) from 31st Dec, i.e., upto 31st Dec, 2024

8. What is the time period prescribed for maintenance of accounts and records if the registered person is a party

to an appeal or revision? (IDTC FAQ)

Ans. A registered person, who is a party to an appeal or revision or any other proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or by the Commissioner, or is under investigation for an offence, shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceedings or investigation for the later of the following period:

(a) a period of one year after final disposal of such appeal or revision or proceedings or investigation, or (b) the general period of 72 months from due date of final of annual return for the period to which such accounts

or records pertain. [imp] 9. Mala Services Ltd. is a supplier of management consultancy services. It has approached you to ascertain the

period for which the books of accounts or other records need to be maintained? Ans. Section 36 of the CGST Act stipulates that every registered person required to keep and maintain books of account or other

records in accordance with the provisions of section 35(1) shall retain them until the expiry of 72 months from the due date of furnishing of annual return for the year pertaining to such accounts and records.

However, a registered person, who is a party to an appeal or revision or any other proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or by the Commissioner, or is under investigation for an offence, shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceedings or investigation for the later of the following period:

(a) a period of one year after final disposal of such appeal or revision or proceedings or investigation, or (b) the general period of 72 months from due date of final of annual return for the period to which such accounts

or records pertain.

Records to be maintained: General records 10. What are the basic accounts required to be maintained by a person at the principal place of business?

(IDTC FAQ) OR

Essel Groups has started making taxable supplies. You are required to advice it about the accounts and records required to be maintained by it as required under section 35(1) of the CGST Act, 2017.

(ICAI Study Material) OR

Mr. Bala, a registered person at Chennai wants to maintain proper accounts and records relating to GST. Advise him about the accounts and other records to be maintained under Section 35(1) of the CGST Act, 2017.

(CA Final, May 2018- 4 marks) Ans. As per Section 35 of the Act read with Rule 56 CGST Rules, every registered person shall keep and maintain a true and correct

account of: (a) Production or manufacture of goods; (b) Inward or outward supply of goods or services of both; (c) Stock of goods; (d) Input tax credit availed; (e) Output tax payable and paid;

(f) other prescribed particulars*; The records are to be maintained at principal place of business. However, where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business should be kept at such places of business.

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The records may be maintained electronically. Note: 1. Other prescribed particulars (Illustrative)

1. Goods or services imported or exported;

2. Supplies attracting reverse charge along with documents; 3. Advances received, paid and adjustments thereto; 4. names and complete addresses of suppliers from whom he has received the goods or services; 5. names and complete addresses of the persons to whom he has supplied the goods or services; and 6. the complete addresses of the premises where the goods are stored by him, including goods stored during transit

along with the particulars of the stock stored therein. .

Relaxation for Composition supplier 11. Swad Restaurant has opted for composition scheme in the current financial year. Discuss the records which are

not to be maintained by a supplier opting for composition levy as enumerated in rule 56 of the CGST Rules. Ans. Following records are not required to be maintained by a supplier who has opted for composition scheme: (I) Stock of goods: Accounts of stock in 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.

(II) Details of tax: 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.

12. Is an agent (as referred to in section 2(5)) required to maintain any set of books of accounts?

(IDTC FAQ) OR

ABC Manufacturers Ltd. engages Raghav & Sons as an agent to sell goods on its behalf. For this purpose, ABC Manufacturers Ltd. has supplied the goods to Raghav & Sons located in Haryana. Enumerate the accounts required to maintained by Raghav & Sons as per rule 56(11) of the CGST Rules, 2017.

(ICAI Study Material) Ans. Yes, as per Rule 56(11) of CGST Rules, 2017 every agent referred in section 2(5) shall maintain accounts containing: 1. particulars of authorization received by him from each principal to receive or supply goods or services on behalf

of such principal separately; 2. particulars including description, value and quantity (wherever applicable) of goods or services received on behalf

of every principal; 3. particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every

principal; 4. details of accounts furnished to every principal; and 5. tax paid on receipts or on supply of goods or services effected on behalf of every principal*.

Note: 1. Agent referred to in section 2(5) = Agent to whom any supply made by principal is treated supply even though there is no

consideration + Subsequent supply by such agent will make such agent liable to pay GST 13. Is there any specific set of details to be maintained by a supplier of service?

(IDTC FAQ) Ans. Yes. As per Rule 56(13) of CGST Rules, 2017, a supplier of service is required to maintain quantitative details of goods

used in provision of each service, details of input service utilized and services supplied.

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Records to be maintained: Special records

14. Is there any specific set of records to be maintained by the provider of works contract service? (IDTC FAQ)

Ans. Yes as per Rule 56(14) of CGST Rules, 2017 the registered person providing works contract service shall maintain the accounts showing-

1. the names and addresses of the persons on whose behalf the works contract is executed; 2. description, value and quantity (wherever applicable) of goods or services received for the execution of works

contract; 3. description, value and quantity (wherever applicable) of goods or services utilized in the execution of each

works contract; 4. the details of payment received in respect of each works contract; and 5. the names and addresses of suppliers from whom he has received goods or services

15. Is there any specific record to be maintained by custodian of goods? (IDTC FAQ)

Ans. Yes, as per Rule 56(17) of CGST Rules, 2017, 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.

Records (even if person is unregistered) 16. Does the law require an owner/ operator of a warehouse or godowns/ transporter to maintain books of account?

(IDTC FAQ) Ans. Yes, as per Sec. 35(2) read with Rule 58(4) every owner/ operator of warehouse or godowns or any other place used for

storage of goods and every transporter (whether registered or not) needs to maintain records of consigner, consignee and other relevant details as under:

1. For Transporter: • Goods transported • Goods delivered • Goods stored in transit by him and branches

2. For owner/ operator of a warehouse or godowns: • Accounts related to that period for which goods remain in the warehouse • Details of dispatch, movement, receipt and disposal

Further, owner/ operator of warehouse or godowns should store the goods in such a way that identification item-wise and owner-wise is possible and facilitates physical verification/ inspection.

17. What is UEN (Unique Enrollment Number)? (IDTC FAQ)

Ans. UEN (Unique Enrollment Number) refers to enrollment number which is given to following unregistered persons: (a) owner/ operator of a godown or warehouse; (b) Transporter In terms of Sec 35(2) of CGST Act, unregistered owner/ operator of a godown or warehouse and Transporter are required to maintain certain records under GST. For that purpose, these are required to get themselves enrolled under GST as per provisions of Rule 58(1) of CGST Rules, 2017. For enrollment, they shall submit their business details over portal in FORM GST ENR-01. The details furnished are verified and validated and thereupon UEN is generated and communicated to such person.

Note: 1. GST unregistered transporter- but enrolled over portal and assigned UEN

Using such UEN, such transporter completes the process of EWB (e-way bill) generation. [try to link this with EWB Chapter]

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2. GSTIN vs UEN

GSTIN UEN GSTIN = Goods and Services tax Identification Number .

UEN = Unique Enrollment Number

Granted pursuant to registration as per provisions of Sec 25 (read with Rule 8, 9 & 10 of CGST Rules, 2017) .

Granted pursuant to enrollment as per provisions of Rule 58 CGST Rules, 2017

GSTIN Holder = Registered person (Sec 2(94)) = Taxable Person (i.e., liable to pay GST)

UEN Holder = Not Registered person (Sec 2(94)) = Not Taxable Person (i.e., not liable to pay GST)

GSTIN Holder = Registered person – required to file GST Returns [GSTR-1, 2, 3 / 3-B etc]

UEN Holder = Not Registered person – not required to file any GST Returns

A transporter is allotted UEN so that he can complete EWB generation (EWB is generated as per Rule 138 whenever there is movement of goods of value exceeding Rs 50,000) .

GSTIN is allotted state wise For each state / union territory, separate GSTIN

shall be obtained.

UEN is not required for each state/ union territory. If Enrolled in any state/UT, then such person is deemed to

enrolled in other state/UT. (refer Rule 58(2) below) Hence, these unregistered persons have a common

enrollment on PAN India basis. ..

Rule 58: : Records to be maintained by owner or operator of godown/warehouse & transporters (1) Unregistered W/H owner or transporter: submit details electronically

Every person required to maintain records and accounts in accordance with the provisions of section 35(2), if not already registered under the Act, … shall submit the details regarding his business electronically on the common portal in FORM GST ENR-

01, either directly or through a Facilitation Centre notified by the Commissioner and, … upon validation of the details furnished, a unique enrolment number shall be generated and communicated

to the said person.

(2) Enrolled in one state/UT = deemed enrolled in other state/UT The person enrolled under sub-rule (1) as aforesaid in any other State or Union territory shall be deemed to be enrolled in the State or Union territory.

[Expected] 18. Whether GST registered transporter can obtain UEN? If yes, what is the benefit of such UEN?

Ans. Recently, Rule 58 of CGST Rules, 2017 has been amended to allow GSTIN registered transporter to obtain UEN. Sub-rule (1A) has been inserted in Rule 58 to allow a GST registered transporter, registered in more than one State/ UT to apply for UEN by submitting Form GST ENR-02. He shall submit Form GST ENR-02 by using his any one of the GSTINs. He will be assigned a Unique common enrollment number. This common enrollment will be for use by him for generation of EWB. Such GST registered transporter shall now generate EWB using this UEN. He shall not use his GSTIN for EWB purposes.

Note: Rule 58: : Records to be maintained by owner or operator of godown/warehouse & transporters (1A) Transporter (GST registered in multiple State/UT): May opt for Unique Common Enrollment

[inserted by N/N 28/2018-CT dated 19th June, 2018] .

For the purposes of Chapter XVI of these rules, (i.e., generation of EWB as per Rule 138) A transporter who is registered in more than one State or Union Territory having the same PAN may apply for a unique common enrolment number by submitting the details in FORM GST ENR-02 using any one of his GSTINs, and upon validation of the details furnished, a unique common enrolment number (UEN) shall be generated and communicated to the said transporter

UEN taken: now GSTIN cannot be used for EWB Provided that

where the said transporter has obtained a unique common enrolment number, he shall not be eligible to use any of the GSTINs for the purposes of the said Chapter XVI.

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Author: Ease of compliance Generation of EWB (e-way bill) by a transporter registered in multiple States was seen as an difficult task, as the transporter was required to login with the respective GSTINs in various States to generate the bills. With the latest amendment (sub-rule (1A) inserted in Rule 58), such GST registered transporters can now obtain Common UEN (by submitting Form GST ENR-02 on the portal) and use this common UEN for their PAN-India activities. .

Crux: The amendment will lead to considerable saving of effort and time, as transporters can generate EWB for customers across India through a central team, doing away with multiple registrations at the e-way bill portal..

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