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INDEX
Sl.No. TOPICS PAGE NO.
1.
Chapter 1:Overview of GST Concepts; Elements of Levy and different
types of GST
1-21
2. Chapter 2:Levy of CGST/SGST vs Levy of IGST; Customs and Levy
of IGST relationship
22-39
3. Chapter 3:Place of Supply of Goods & Services 40-52
4. Chapter 4:Time of Supply of Goods & Services 53-59
5. Chapter 5:Classification and exemptions with examples 60-82
6. Chapter 6:Concept of Composition Scheme 83-87
7. Chapter 7: Concept of Reverse Charge Mechanism 88-92
8. Chapter 8: Input Tax Credit - Eligibility, Procedure for availing 93-106
9. Chapter 9: Valuation provision with examples 107-118
10. Chapter 10: Stock transfer, Job work 119-127
11. Chapter 11: Import and Export of goods & Service 128-136
12. Chapter 12: Maintenance of Books and records, e-way bills;
Documentation.
137-155
13. Chapter 13: Payment and filing of Monthly Returns- GSTR1,
GSTR3B,GSTR4-Penalties for non-compliance
156-173
14. Chapter 14: Reconciliations and issues in returns 174-177
15. Chapter 15: Filing of Annual Returns (GSTR - 9 and GSTR – 9A) 178-181
16. Chapter 16: Applicability of TDS and TCS 182-190
17. Chapter 17: Preparation for GST Audit & Reconciliation Statement 191-219
18. Chapter 18: Advance Ruling 220-223
19. Chapter 19:Common Errors (Question & Answers) 224-235
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Chapter 1: Overview of GST Concepts; Levy and Types of GST
Introduction:
Under the earlier indirect tax system, various types of taxes were being levied and collected
at multiple rates both by Central and State Governments on different activities undertaken.
The international best tax practices in indirect taxes look for, easing out the complications
and cumbersome confusing compliances including reducing the interaction with different
statutory authorities. Similar thought process was started in India to consolidate number of
taxes in to one system of taxation uniformly across the country in late 1970s.
Constitutional Amendment for GST and introduction of GST
There was a requirement of amendment to Constitution whereby the powers to levy GST
concurrently by both Union and States had to be provided for. Accordingly, 101st
Constitution Amendment Act was enacted with the changes made in the constitution under
the GST regime, concurrent jurisdiction for levy and collection was given both Centre and
State to tax the supply of goods and/or services within the State, whereas Centre would
have jurisdiction to tax inter-state supply of goods and/or services.
After the enactment of the ConstitutionalAmendment Act, the same was made effective
from that date to remove the powers of Union and State to levy indirect taxes such as sales
tax, service tax etc. in light of introduction of GST.
Further as a part of the constitutional amendment, for the introduction of GST there was a
requirement of constitution of GST Council wherein all the States along with Union have
representation, and the matters relating to GST are discussed and decided therein before
being recommended or implemented. The GST Council was constituted on 12th September
2016.
In that direction, Central Goods and Services Tax Act, 2017, Integrated Goods and Services
Tax Act, 2017, Union Territory Goods and Services Tax 2017 were enacted and have come
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into effect from 1st July 2017, though some procedural provisions were made effective earlier
and also little later.
Similarly, all the States were required to enact the respective State Goods and Services Tax
Acts in their respective States, which also have been done. These laws enacted by States are
based on the model SGST law given by the GST Council in similar line with CGST Act.
Pre-GST Taxes:
In Pre-GST era, State Governments were levying and/or collecting taxes such as Sales Tax
(VAT), Entry Tax, Entertainment Tax, Luxury Tax etc. Similarly, Union Government was
levying and collecting taxes such as Central Excise Duty, Service Tax, Additional Customs
Duty, Special Additional Customs Duty and various types of Cesses in the nature of Excise
duties/Service Tax. Among them the major types of taxes on business transactions can be
tabulated as follows:
Tax Levied on - Collected by -
State VAT Sales or purchases effected
within the State
Respective State Governments
Central Sales Tax
(CST)
Sales or purchases effected in
inter-State trade or commerce
State Government from where
sales are done.
State Excise Manufacture of Alcoholic
brewages in the State
State Government where
manufacture happens.
Central Excise Manufacture of Excisable Goods
in India.
Union government
Service Tax Providing of taxable service in
taxable territory (India
excluding J & K)
Union government
Additional Customs
Duties
On goods imported into India Union government
GST Model:
The GST model replacing the earlier taxation model is as follows:
a) There are four types of Tax as follows:
Type of Leviable on Supply of Goods or Services or Levied by
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Tax both
SGST Supply within the State Respective State Government
UTGST Supply within the Union Territory Central Government
CGST Supply within the State Central Government
IGST Supply in the course of interstate trade or
commerce
Central Government
b) In other words, going by the types of transactions –
Type of Transaction (Supply of Goods or Services or
both)
Type of Tax Levied by
Supply within the State (Same transaction would suffer
both types of tax)
SGST Respective SG
CGST CG
Supply within the Union Territory (Same transaction
would suffer both types of tax)
UTGST CG
CGST
Supply in course of interstate trade or commerce IGST CG
Import of Goods or Services or Both IGST CG
c) The IGST collected by the Centre is distributed between State and Centre as per section
17 of Integrated Goods and Services Tax Act, 2017. From the business entity perspective
this may not have direct implications, since the distribution is internally done by the
Government mechanism.
d) Taxes/Levies subsumed in GST:
Central tax/levies State taxes / levies
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▪ Central Excise Duty
▪ Additional Excise Duties
▪ Excise Duty levied under Medicinal &
Toiletries Preparation Act
▪ Service Tax
▪ Additional Customs Duty - CVD
▪ SAD of Customs – 4% (SAD)
▪ CST (Administered by States)
▪ Surcharges
▪ Cesses
▪ VAT/Sales tax
▪ Entertainment tax
▪ Luxury tax
▪ Taxes on lottery, betting & gambling
▪ State Cesses & Surcharges in so far as they
relate to supply of goods and services
▪ Entry tax
e) In addition to the CGST, SGST, UTGST, IGST as the case may be, there is an additional
levy in the form of GST Compensation Cess on the above taxes in order to create fund
for giving the compensation to States for loss of revenue due to implementation of GST,
the said compensation cess is for the period of five years. The said cess is levied on
supplies that may be notified by Central Government on the recommendation of GST
Council. Accordingly, certain goods notified are aerated waters, pan masala, tobacco and
its products including Cigarettes and few types of Motor Vehicles.
f) The levy of GST is on supply of goods, or of services, or both. The different aspects of
taxation to levy and collect taxes like manufacture and removal of goods; sale of goods;
provision of service; luxuries; betting and gambling, entertainment etc., are replaced by
the concept of ‘Supply’ of goods or services or both.
Ambit of ‘supply’ under GST
The taxable event under GST is ‘supply’ of goods or services or both. The term ‘supply’
covers within its ambit –
a. All forms of supply such as sale, transfer, barter, exchange, license, rental, lease or
disposal, which are made or agreed to be made for a consideration by a person in the
course or furtherance of business.
Surcharges and cesses
as far as they relate to
supply of Goods and
services
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b. As per the above, there should be a consideration for supply and it should be in the
course of furtherance of business. However, there are specified activities set out in
Schedule I to the CGST/SGST Act which are considered as supply even when there
is no consideration. They are as follows:
i. Permanent transfer of business assets on which ITC was availed;
ii. Supply of goods/services between the related parties and within the same
entity between two registrations obtained under GST;
iii. Supply of goods between the Principal and Agent supplying/procuring on
behalf of Principal;
iv. Import of services from related or his establishments outside India
c. Schedule II to CGST or SGST Act contains list of activities which are either to be
treated as supply of services or goods as provided in the schedule. wouldActivities
such as transfer of right to use goods; renting, lease, tenancy, easement, license etc.,
of land or building; Job-work; sale of under construction properties, temporary
transfer of intellectual property rights, works contracts, transfer of right to use any
goods and development, design, programming, upgradation, customization etc., of
software, permitting the use of assets of the business for other than business use;
supply of food and beverages for human consumption by way or as part of as
services where such supply is for cash, deferred payment or other valuable
consideration would be considered as supply of service.
An activity of transfer of title in goods is to be treated as supply of goods.
GST applicability to Specific Products:
Though GST is to consolidate tax code on all products considering various political aspects
of our country, certain specific products are dealt separately. The highlights of the same are
as follows:
a) Manufacture of alcoholic beverages for human consumption are kept out of GST.
State Excise duty and Sales Tax/VAT would continue to be levied by the respective
State Government on them.
b) On the other hand, on Tobacco and Tobacco products Central Government would
continue to levy Central Excise Duty in addition to GST.
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c) Levy of GST on specified Petroleum products are postponed till that time the GST
council recommends for its inclusion in GST. Till then States would continue to levy
Sales tax and Centre would continue to levy Central Excise duty. The specified
petroleum products are as follows :–
i. Crude petroleum;
ii. Diesel (HSD);
iii. Petrol (motor spirit);
iv. Natural gas; and
v. Aviation turbine fuel
Note: All other fuels and petroleum products other than these five would be covered under
GST from the day one.
Set off / Adjustment/ Credit:
Main objective of the GST scheme is to avoid double taxation and cascading effect of
different taxes levied by States and Centre. Therefore, it becomes essential that set off /
adjustment / credit of all taxes paid on both goods and services which are received is
available to be used against the liability to be paid on goods and services supplied.
However as is put across in the GST law, such seamless credit set off/adjustment/credit
have not been fully given effect and held back in certain cases. The permissible set off
mechanism is as follows:
Type of
Tax Paid
Input Tax credit (ITC) can be adjusted against (within the same registration)
SGST Adjusted against respective SGST and surplus if any adjusted towards IGST
UTGST Adjusted against respective UTGST and surplus if any adjusted towards IGST
CGST Adjusted against CGST and surplus if any adjusted towards IGST
IGST Adjusted against IGST and if balance then either against CGST or SGST in any
order
Note: CGST credit cannot be used to pay SGST and vice-versa. All eligible credits after the
set-off and reversals if any can be carried forward without any limit.
Statutes under GST:
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For levy of CGST and IGST,the law is formulated by Parliament for levy and collection of
CGST and IGST respectively through enactment of CGST Act, 2017 and IGST Act, 2017 by
Central Government. As far as UTGST Act, 2017 is concerned,it is also enacted by
Parliament to be applied in Union Territory in place of SGST Act. Further GST
(Compensation to States) Act, 2017, is enacted for levy and collection of Compensation Cess.
These CGST, IGST, UTGST and Compensation Cess enactments would be applicable for
entire country. However, from administration perspective the CGST or IGST credits of the
respective States have to be maintained separately registration wise (which would be one
per State unless a person opts to have more than one registration if he has multiple business
units within same State).
As regards to levy of SGST, each State has enacted the law for their respective States based
on the model law formulated by GST council. The levy and collection would be by the
respective State legislation. Unless the States follow the GST law in its true spirit, it may
create disparities in the laws of different States, leading to different treatment of tax in
different States.
Rate of GST and threshold exemption limit:
One of the essential aspects of GST is rate of GST. The rate of tax on goods under GST is
generally based on recommendations of the Council with reference to classification as per
First Schedule to Customs Tariff Act, 1975. The said classification is based on Harmonized
System of Nomenclature (HSN)wise coding Under GST, unless specifically referred,such
classification is adopted only up to four digit coding. However, in certain cases six digit as
well as eight digits is also mentioned to cover specific goods for identifying the applicable
rates.
As far as the rate of tax on services are concerned, scheme of classification of services are
notified vide Annexure to Notification No. 11/2017-CT(R) dated 28th June 2017 wherein the
different type of services classification is provided with respective coding. Earlier these
codes were nomenclated as SAC. However subsequently when the final law was framed,
even services were considered with HSN code with first two digits starting from 99 and
further digits are based on the services as listed in the said annexure to the notification
mentioned supra.The said scheme of classification is based on United Nations Central
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Product Classification. TheExplanatory notes for the said Scheme of Classification of
Services is based on the explanatory notes to the UNCPC, and as recommended by the
committee constituted for the purpose. CBIC has published the same in its official website
wherein it is stated that it can be used as a guiding tool. The said explanatory notes is also
available at official website www.cbec.gov.in.
Different notified rates (both SGST & CGST together or IGST, as the case may be) are Nil,
0.25%, 3%, 5%, 12%, 18%, 28% added with compensation cess on certain goods and services.
The rates of taxes are notified vide different notifications like 01/2017-CT(R) dated 28th June
2017 for goods, Notification No. 11/2017-CT(R) dated 28th June 2017 for services. The rates
are also available at official website www.cbic.gov.in.
The exports and supply to SEZ are considered as zero-rated supplies whereby the supplier
has the option either to supply without payment of IGST by following the prescribed
procedure or to supply with payment of IGST for claim of refund. Against such
supply/export, though no tax is paid, the benefit of input tax and refund of accumulated
credit on inputs and input services would be available.
As regards to threshold limit, unlike Income Tax, Central Excise or Service Tax,there is no
threshold limit for payment of tax, instead under GST the threshold limit is for registration,
which is fixed as 20 Lakhs on all India PAN basis and for the States of Arunachal Pradesh,
Assam, J&K, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh
& Uttarakhand it is fixed as 10 Lakhs. It is provided (from the date to be notified) that the
said limit can be enhanced by the government on the recommendation of GST Council with
such conditions and limitations. There have been few changes made from April 2019 with
regard to limits. The below-mentioned table provides State-wise threshold limits for obtaining
registration for different category of suppliers making supply in such States w.e.f.1st April 2019:
I. Supplier exclusively engaged in the supply of goods other than Ice cream and other edible ice,
whether or not containing cocoa; Pan masala; Tobacco and manufactured tobacco substitutes.
Threshold limit States under threshold limit
Rs. 10 lacs Special category States:Manipur, Mizoram, Nagaland, Tripura.
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Rs. 20 lacs Special category States: Arunachal Pradesh, Meghalaya, Sikkim,
Uttarakhand.
Union territory: Puducherry
Other States: Telangana.
Rs. 40 lacs
Special category States: Assam. Himachal Pradesh, Jammu & Kashmir.
Union territory: Andaman & Nicobar Islands, Chandigarh, Dadra & Nagar
Haveli, Daman & Diu, Delhi, Lakshadweep.
Other States: Andhra Pradesh, Bihar, Chhattisgarh, Goa, Gujarat,
Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra,
Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal.
II. Supplier engaged in supply of goods & services
Threshold limit States under threshold limit
Rs. 10 lacs Special category States: Manipur, Mizoram, Nagaland, Tripura.
Rs. 20 lacs Special category States: Arunachal Pradesh, Assam, Himachal Pradesh,
Jammu & Kashmir, Meghalaya, Sikkim, Uttarakhand.
Union territory: Andaman & Nicobar Islands, Chandigarh, Dadra & Nagar
Haveli, Daman & Diu, Delhi, Lakshadweep, Puducherry.
Other States: Andhra Pradesh, Bihar, Chhattisgarh, Goa, Gujarat,
Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra,
Orissa, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, West
Bengal.
As stated above, the exemption limit is not for payment of tax, instead the limit of
exemption is for obtaining registration. Once registrationis taken for any reasons (either
mandatory as per law or voluntarily)irrespective of the actual turnover, the registered
person would become taxable person and would be liable to pay tax. would
Composition Scheme:
The composition scheme is mainly meant for supplier of goods with exception to supply of
foods and beverages as service or part of service, though it is service. The composition
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scheme could be opted by a registered person who has taxable turnover equal or less than
Rs. 1.5 Crore. From February 2019, the manufacturers or traders or restaurants/ caterers
were given the option to opt for composition scheme for other services as well. However,
this was subject to condition that the value of such other service not exceeds ten per cent. of
turnover in a State or Union territory in the preceding financial year or five lakh rupees,
whichever is higher.
With effect from 1st April 2019, all service providers and goods sellers have got the option of
opting for composition scheme with GST amount of 6% in total for first supply of goods or
services upto Rs.50 lakh. This is subject to several conditions such as turnover should not
exceed Rs.50 lakh in previous financial year, there should be no inter-State supplies, no
collection of GST from customers etc. This scheme would not be applicable in case goods
involved are ice cream. Tobacco products and pan masala.
Different composition tax rate is fixed for different types of registered person which are as
follows:
• Manufacturer(Other than manufacturers of Goods as notified by the Government) -
1% (0.5% CGST & 0.5% SGST/UTGST) of the turnover in State/Union territory w.e.f
01.01.2018, previous 2% (1% CGST & 1% SGST/UTGST).
• In case of supply of foods and beverages as service or part of service in any other
manner whatsoever other than alcoholic liquor for Human Consumption - and 5%
(2.5%CGST + 2.5% SGST/UTGST) of the turnover in State/Union territory.
• Suppliers of other services could pay 6% on first 50 lakh turnover (3% CGST & 3%
SGST) subject to condition that previous FY turnover is less than Rs.50 lakh.
The scheme would be subject to conditions and procedure as set out in the Rules. Following
are important points to be kept in mind as to eligibility of composition scheme:
a. The Registered person should not be engaged –
i. in making inter-state supplies;
ii. in supply of services except for supply of foods and beverages as service or
part of service;
iii. in making of supply of goods which are not leviable to GST like alcoholic
beverages, specified petroleum products etc.,
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iv. in making supplies through e-commerce operator who is required to collect
tax at source.
b. Registered person is not a casual taxable person or non-resident taxable person.
c. Registered person is not the manufacturer of notified goods (Presently notified goods
are ice cream and other edible ice falling under heading 2105 00 00; Pan Masala
falling under 2106 90 20; Tobacco and manufactured tobacco substitutes falling
under Chapter 24)
d. Registered Person who is having business in different places and separately
registered all of them should opt for composition scheme. In other words, a
registered person cannot be in composition in one registration and outside
composition in another registration.
e. Registered Person opting for composition scheme cannot collect tax;
f. Registered Person opting for composition scheme is not entitled to any input tax
credit.
g. The option has to be exercised at the beginning of financial year. In case of migrated
registered persons, there was option for exercising the same limit set. If it was not
opted for then they have been given extended time upto 31.03.2018 to opt for the
scheme.
h. Once the turnover cross the composition limit, they would be falling into regular
scheme.
Registration:
As regards to the registration, following points are to be noted:
• Any person who has aggregate turnover in a financial year (on all India PAN basis) more
than 20 / 40 Lakhs as applicable (specified States 10 lakhs), then he is required to take
registration in a State from where he makestaxable supplies.
• Every person who held a valid registration under the pre-GST laws as on the notified
date is also required to be migrated to GST.
• In the following cases irrespective of turnover, registration has to be taken by a person:
a. Making Inter-state taxable supply of goods. Howeverexemption is given from
registration to the following in case of inter-state supply as well.
o Job worker (w.e.f. 14.09.2017) with few exceptions;
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o Notified handicraft goods (w.e.f. 14.09.2017);
o Supplier of service(w.e.f. 13.10.2017);
b. Making Taxable supply being a casual taxable person; However exemption is given
from registration to in case of supply of notified handicraft goods (w.e.f. 15.089.2017)
by casual taxable person.
c. Who is required to pay tax under reverse charge;
d. Who is an e-commerce operator where service tax is to be paid on reverse charge;
e. Who is non –resident taxable person and making taxable supply;
f. Persons required to deduct tax u/s 51;
g. Who is e-commerce operator;
h. Supplying goods of other person as an agent or otherwise;
i. Who is an Input Service Distributor.
j. Who supplies goods and/or services through e-commerce operator. However
exemption is provided for suppliers of services made through e-commerce operator
who has turnover less than registration limit.
k. Supplying online information and database access or retrieval services from outside
India to unregistered person in India.
l. Being persons notified by Government in this regard.
• In case of transfer of business of registered taxable person under this Act as a going
concern, the transferee is liable to be registered from the date of transfer/succession.
• In the cases of scheme of amalgamation or demerger by an order of High Court, the
transferee is liable to be registered from the date on which ROC issues Certificate of
Incorporation.
• In the following cases registration is not required even though they are covered under
any of the above cases where they were required to have been registered -
a. Supplier exclusively engaged in the business of supplying goods and/ or services
that are not liable to tax or wholly exempt from GST.
b. Agriculturist to the extent of supply of produce out of cultivation of land.
c. Other notified person where Government gives exemption from registration. The
exemptions from registration mentioned above were all issued under this provision.
• The person who is required to be registered has to apply for registration, within 30 days
of becoming liable for registration in every State in which he is liable for registration. The
procedure for registration is provided separately in other part of this booklet.
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• Voluntary registration is also permitted.
• Registration shall be based on PAN, a TAN issued under Income Tax Act, 1961.
• Application for registration can be rejected, subject to giving notice of show cause and
giving the person reasonable opportunity to be heard.
• Grant of registration under CGST is deemed to be grant of registration under SGST and
vice versa.
• Registration has to be obtained State-wise and not on all India basis. However, within a
State if there is multiple places of business ,option is given to register the same
separately. would
• The taxability is determined based on registration treating them as separate entity for
supply of goods/services. Separate registration would be accorded by State Government
and Central Government in each State, with mutual co-ordination among them.
Casual Taxable person and Non-resident taxable person
For the purpose of GST, any person who occasionally carry-out any transaction in a State
where he is not having place of business is treated as casual taxable person in that State.
Similarly, if such person is not having any place of business in India, then he is referred to as
non-resident taxable person.
They are also required to obtain registration in the State where they supply goods or
services or both. They are required to apply for registration 5 days before commencement of
business in that State. Other points in this regard are as follows:
• The registration is valid for 90 days and in case if any earlier date is specified in the
application then it is valid till then.
• The period of 90 days can be extended by proper officer.
• Tax liability for such period has to be estimated and deposited in advance during
submission of application.
• If extension sought additional tax liability to be paid on estimation.
• Amount deposited would be credited to electronic cash ledger and such an amount can
be utilised for payment of tax liability.
Cancelation of registration
1. Officer on his own or by receiving application from registered person may cancel the
registration under following circumstances.
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• The business has been transferred/ discontinued/ amalgamated/ De-merged/
disposed off.
• Change in the constitution of business.
• No longer liable to be registered other than person registered on voluntary basis.
2. Officer may cancel the registration including retrospectively under following
circumstances after giving opportunity of being heard.
• Contravened the provision of Act or Rule.
• A composition dealer who has not filed 3 consecutive returns.
• A registered person other than composition dealer who has not filed 6 consecutive
returns.
• Person who his voluntary registered but not commenced the business within 6
months from the date of registration.
• Registration obtained by fraud, would full misstatement or separation of facts.
3. The cancellation of registration would not affect any liability of the person to pay tax.
Revocation of cancellation of registration
• Revocation of cancellation of registration can be sought within 30 days from the
date of service of the cancellation order.
• The proper officer may accept or reject the application after giving proper
opportunity of being heard.
During the pendency of the proceedings relating to cancellation of registration, the proper
officer may suspend the registration for such period and in such manner as may be
prescribed. During such suspension period, there could be no need to file any returns by the
registered person till the registration certificate is cancelled.
Records to be maintained by a registered person:
The records though to be maintained as per the needs of the business, since GST is
technology based, all the transaction details relating to GST is required to be uploaded into
GST portal on periodical basis. Though lot of practical difficulties were being faced for
uploading of the returns in the initial period, it is gradually getting resolved and also further
expected that the same would be completely resolved for the success of GST
implementation.
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Section 35 (1) of the GST Act, the taxable person should keep the books for the following
transactions:
1. Production or manufacture of goods
2. Inward and outward supply of goods and/ or services,
3. Stock of goods,
4. Input tax credit availed,
5. Output tax payable and paid,
6. Such other particulars as may be prescribed (Rule 56 to Rule 58 to be referred)
Apart from the above, the following records may also require to be maintained for other
purposes:
1. Records for receipt of goods and services from registered person.
2. Records for receipt of goods and services from non-registered person + applicability
of reverse charge (if any).
3. Import of goods bill of entry and other related documents.
4. Returns, payment challans, debit note and credit notes.
5. Financial statements.
6. Input Tax Credit register with segregation as to inputs, input services and capital
goods.Bank statements and pay-in slips.
7. Records for manner of computation of GST liability.
8. Records for availment and utilisation of credit.
9. Daily sales record along with sales invoices.
10. GST reconciliation statement (Workings vs. Financials).
11. Electronic records of:-
a. Tax liability register;
b. Credit ledger;
c. Cash ledger;
12. Agreements.
13. Job work register.
14. Delivery Challans.
15. Security Register.
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Further, also there is requirement of matching of credits to the supplier’s output tax to get
the benefit of credit. However, the process has been kept on hold.The registered persons are
expected to match the credits with inward entries available in GSTR-2A form which gets
generated based on GSTR-1 outward supply form submitted by suppliers.
Returns
Every registered dealer is required to file return for the prescribed tax period. A Return
needs to be filed even if there is no business activity (i.e. Nil Return) during the said tax
period of return; Government entities / PSUs, etc. not dealing in GST supplies or persons
exclusively dealing in exempted / Nil rated / non –GST goods or services would neither be
required to obtain registration nor required to file returns under the GST law.
• Filing of returns would only be through online mode. Facility of offline generation
and preparation of returns is also available. The returns prepared in the offline mode
would have to be uploaded.
• As against pre-GST few returns, number of statements and returns have to be filed in
GST. However now only GSTR-1 only is activated and others are still not activated.
• There isa common summary return in form GSTR-3B for CGST, SGST, IGST, though
which information pertaining to the same are to be separately disclosed.
• A registered tax payer shall file GST Return at GST Common Portal either by himself
or through his authorised representative;
There is no provision for revision of Returns.
Job work transactions
The principal has the option to send taxable goods without payment of GST to a job worker
and bring it back, after processing, to any of his own place of business, for supplying such
goods on payment of GST or export it. The principal also has the option to directly supply
final products to end customers on payment of GST or export from the premises of job
worker itself, subject to fulfillment of applicable conditions. GST credit is allowed in case of
direct receipt of inputs or capital goods by the job worker, subject to receipt of goods back
by the principal within specified period. (One year for inputs, three years for capital goods
other than moulds and dies, Jigs and fixtures or tools for which there is no time limit)
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- If inputs sent for job-work has not received back by the principal within 1 year, it
shall be deemed that such inputs were supplied by principal to the job-worker on the
day when the said inputs were sent out.
- If capital goods sent for job-work has not received back by the principal within 3
years,it shall be deemed that such capital goods were supplied by principal to the
job-worker on the day when the said capital goods were sent out.
- Principal may dispatch the goods on payment of appropriate tax directly from the
place of job worker if the job-worker is registered. If job worker is not registered, the
principal has to add job-worker place as his additional place of business.
Assessments, audits and demands
“Assessment” means determination of tax liability under this Act and includes self-
assessment, re-assessment, provisional assessment, summary assessment and best judgment
assessment – clause 2(11) of CGST Act, 2017.
Hence the scheme of separate assessments, audits and demands existed under erstwhile
different laws are going to go and only assessment, audit and demand notice would be
under GST law would be there. The tax administration would have powers to audit and re-
assess the taxpayers on a selective basis.
The Commissioner of CGST/Commissioner of SGST or any officer authorised by him, by
way of a general or a specific order, may undertake audit of the business transactions of any
taxable person for such period, at such frequency and in such manner as may be prescribed.
Special audit by Chartered/Cost Accountant can be ordered if the officer is of the opinion
with prior approval of Commissioner.
Overall Impact
a) Change in law and procedure: Since it is a major indirect tax reform in India, the
entities have to comply with new legislations requirements and new procedures. would
b) Change in tax-rates: The standard rate of 12.50% for central excise, service tax, along
with residuary rate of VAT at 12.5-14.5% brings the overall rate to 25%-30%. When the
tax rates are increased it could lead to tax evasion as well. But, post GST, it is in the
range of 5%-12%-18%-28%; a net gain of almost 2%- 6%-10%. Most of the dealers and
consumers would experience the change in tax rates, either significantly or marginally.
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c) GST based on HSN: The central excise tariff based classification would no longer be
applicable. GST would be based on HSN It would reduce the interpretational issues in
respect of class of commodities.
d) Near seamless availment of tax credit: GST would facilitate seamless credit across the
entire supply chain and across all States under a common tax base. Earlier no cross
credit were available across central excise/service tax to local VAT/sales tax. Under the
GST law, the input tax credit (ITC) (set off) is given for interstate taxes like IGST Central
GST against CGST and the States would give input tax credit (ITC) SGST to SGST.
Cross-utilization of credit between Central GST and State GST would not be allowed.
e) Credit availment based on vendors invoices: The credit of excise duty / VAT was
available only based on invoice. In GST, in addition to this, there is a need to uploading
information by vendor. The challenge would be to ensure that the vendor uploads the
details of invoices to enable the recipient to avail input tax credit. Though presently the
matching concept is not fully activated, the revenue officer may insist upon the same as
was uploaded by vendor in his GSTR-1 which would get reflected in GSTR-2A.
f) Avoidance of Double Taxation: Earlier, several transactions suffered VAT as well as
Service Tax such as in case of works contract or licensing of software etc. This is
partially resolved in GST by redefining the meaning / classifying few litigated activities
such as software as either goods or service. The impact of this change would completely
depend upon the quantum of ITC which the business would be actually entitled and
availed.
g) Changes in the Accounting Software: Dealers and service providers need to
modify/replace the accounting and taxation software. Though initially there could be
investment costs, costs of training in GST of people at each level starting from
junior/mid to higher level managerial staff, management group/stakeholders. Though
many entities have gone for some software irrespective of its cost and brand, if it is not
configured to the concerned business and also not with support for changes in law, it
would be difficult for the entities to comply with the procedural aspects of law and
reporting requirements under the law.
h) Training: Comprehensive training would be required to the staff members of the
business community, both at senior level and also at junior level. Further, the scope of
such training should be extended to the marketing personnel, apart from accountants
and legal department. For a period of say another two years, there exists requirement
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for continuous updating of the changes otherwise of which the impact of changes might
not have been given effect to by them leading to non-compliances.
i) Competent Professionals: There are specialized consultants for Excise Duty, Service
Tax and VAT. With the GST, only a single consultant maybe required who can handle
all GST matters. Compliance for the SME may necessitate competent tax preparers who
are semi qualified.
would
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Chapter 2: Levy of CGST/SGST vs Levy of IGST; Customs and
Levy of IGST relationship
Background for levy of GST and supply:
According to Article 265 of Indian constitution, no tax shall be levied or collected except by
authority of law. Law making power is derived from Constitution by the Parliament and
State Legislatures.
Article 246 of Constitution empowers the Parliament and State legislatures to make laws to
collect taxes on items listed in list I, II and III in the seventh schedule. In exercise of these
powers, tax laws have been framed and several taxes were being collected with clear
demarcation among states and Centre. For instance, during pre-GST regime, Centre had the
power to levy excise duty on manufacture, service tax on services while state government
had powers to levy sales tax on sale of goods within the State including levy of entry tax on
entry of goods.
As Indian law makers chose to adopt dual GST structure wherein both Centre and state
impose tax, 101st Amendment Act, 2016 amended the provisions of constitution to facilitate
levy and collection of GST by the Union Government and the States. Unlike earlier, GST is
the first tax law that was framed with concurrent jurisdiction by Centre and states. The
relevant amendments made in the constitution are briefly explained as under:
Article 246A of Constitutionenabled both parliament and state legislatures with concurrent
powers to make laws with respect togoods and services tax (GST). Parliament is given
exclusive power to legislate on inter-State trade or commerce and the GST to be levied and
collected on such transactions is called Integrated Goods and Services Tax (IGST).
Article 269 of Constitution enabled the Parliament to make GST related laws for inter-State
trade / commerce.
Article 269A enabled levy and collection of tax in case of the inter-State by the Government
of India and shared between the Union and States as per recommendation of the GST
Council.
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Article 279A of Constitution required formation of a GST Council by President within sixty
days from the day the Article coming into force. This Article also provides details about
formation, functions and powers of GST Council.
Article 268 was amended for omitting the levy of excise duty on medicinal and toilet
preparation from the state list and it would be subsumed in GST.
Article 268A which was introduced to facilitate levy of service tax but was never made
effective, and has been repealed. Now service tax is subsumed in GST.
Definitions in Constitution relevant to GST
Before proceeding to discuss levy of the new tax, the GST, it would be appropriate to know
the definitions of goods and services and some other important expressions in the
Constitution and the GST law.
Article 366 of the Constitution gives the meaning of some important expressions used.
According to this Article,
(i) “goods” includes all materials, commodities, and articles;
(ii) “goods and services tax” mean any tax on supply of goods, or services or both
except taxes on the supply of the alcoholic liquor for human consumption;
(iii) “Services” means anything other than goods;
Some important definitions in GST law
Section 2(52) of CGST Act, 2017 “goods’’ means every kind of movable property other than
money and securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed before supply or
under a contract of supply;
Section 2(102) of the CGST Act, 2017 “Services’’ means anything other than goods, money
and securities but includes activities relating to 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.For this purpose, 'services'
includes facilitating or arranging transactions in securities.
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It can be seen that the definition of goods in the constitution has a major difference when
compared to the definition of goods in the GST law. Goods include actionable claims in GST
law but the definition in Constitution does not include actionable claim.
GST Council
Under the GST model introduced, the Indian Constitution has given a pivotal role to the
GST council which is also a creation of the constitution.
The GST Council aims to develop a harmonized national market of goods and services.
Union Finance Minister is the chairman of the council and Minister of State for Finance and
a Minister nominated by each State would be members of the Council. The decisions of the
GST Council would be made by three-fourth majority of the votes cast. The centre shall have
one-third of the votes cast, and the States together shall have two-third of the votes cast. The
GST Council would make recommendations on: 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; 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.
IGST levied and collected in the course of inter-State trade is shared between the Union and
States as per recommendation of the GST Council.
For convenience CGST and SGST provisions have been considered as same and the term
‘GST law’ has been used in this chapter.
Power to levy different types of GST
• Parliament has the power to make laws for collection of CGST (Central Goods and
Services Tax) and IGST (Integrated Goods and Services Tax) and the State Legislatures
have been given the power to make laws for collection of SGST / UTGST(Union
Territory Goods and service tax or State Goods and Services Tax) after the
amendments made to the constitution in 101st Constitution Amendment Bill were
approved by the Parliament and more than half of the State legislatures.
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• These taxes are collectively called Goods and Services Tax (GST). GST is collected on
supplies of goods and services.
• CGST collected is for the Union Government, SGST /UTGST collected is for the States
or Union Territory and IGST is collected on supplies in the course of inter-State trade
&imports and is shared by Union and the States.
Apportionment of tax and settlement of dues
Section 17 of IGST Act 2017 deals with the issue of apportionment of IGST between the
Central government and the States. The section provides for apportionment of the amount
equivalent to the CGST component of IGST to the Central government.
• In the case of supplies of goods or services to/or imports by an unregistered person
or taxable person availing composition scheme, amount equal to CGST payable on
intra state supply of goods or services would be apportioned to the Central
Government;
• Where a receiver of goods or services or an importer is not eligible for input credit or
where he does not avail the credit within the time limit stipulated or before the
annual return is filed in respect of imports made in a year, amount calculated
equivalent to CGST payable on similar intra state supply shall be apportioned to the
Central Government;
• Balance amount remaining after apportionment as per the provisions above, shall be
apportioned to the State where such supply takes place as per sections 7, 8, 9 and 10
(Provisions relating to place of supply in the IGST Act – discussed in detail in
relevant chapters).
• Where the place of such supply made by any taxable person cannot be determined
separately, the said balance amount shall be apportioned to each of the States to
which such taxable person has made supplies during the financial year in the
proportion of the total supplies made to each of such States.
• In case taxable person making such supplies cannot be determined, the amount
would be paid to the States as per the orders of the President under Article 270(2) of
the Constitution. (Article 270(2) of the Constitution provides that where the Finance
Commission has made recommendations, President would issue the order after
considering the recommendations of the Finance Commission.)
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• Above principles for apportionment shall mutatis mutandis apply to the
apportionment of interest, penalty and compounding amount realized in connection
with the tax so apportioned.
• Amounts apportioned to the Central government and States shall be transferred to
the CGST account and SGST account of the respective State by the Central
government.
• Time and manner of such transfer are to be prescribed.
• If any refund of IGST is granted, the amount transferred to the State shall be reduced
to that extent. Again Time and manner of such reduction are to be prescribed.
What is meaning and scope of supply?
GST is levied on ‘supply’, so it is important to understand the scope and meaning of the
same. Though the constitution provided that GST is tax levied on supply of goods/services
but not defined the word ‘supply’. The same has been defined in the GST law which is
discussed as below:
➢ The term supply is defined to include:
• all forms of supply of goods and/or services: such as sale, transfer, barter, exchange,
license, rental, lease or disposal, made or agreed to be made for consideration by a
person in course of or furtherance of business
• Import of service, for a consideration, whether or not in the course or furtherance of
business
• Activities specified in Schedule I (provided in Annexure-I to this chapter) and
• Where certain activities or transactions are constituted as supply, then they shall be
treated as Supply of goods and services as referred to in Schedule II. (Provided in
Annexure – II to this chapter). wouldwould
Activities or transactions specified in Schedule III; or such activities or transactions
undertaken by the Central Government, a State Government or any local authority in which
they are engaged as public authorities, as may be notified by the Government on the
recommendations of the Council, shall be treated neither as a supply of goods nor a supply
of services (Provided in Annexure – III to this chapter)
Further it is provided that the Central or a State Government may, upon recommendation
of the Council, specify, by notification, the transactions that are to be treated as—
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(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods; or
The tax liability on a composite or a mixed supply:
(a) 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;
(b) a mixed supply comprising two or more supplies shall be treated as supply of that
particular supply which attracts the highest rate of tax.
Definitions relevant for composite and mixed supply:
Composite Supply:
Section 2(30) - “Composite supply” means a supply made by a taxable person to a recipient
comprising two or more taxable supplies of goods or services, 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;
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 the
principal supply.
Mixed Supply:
Section 2(74) - “Mixed supply” means two or more individual supplies of goods or services,
or any combination thereof, made in conjunction with each other by a taxable person for a
single price where such supply does not constitute a composite supply;
Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes,
dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply.
Each of these items can be supplied separately and is not dependent on any other. It shall
not be a mixed supply if these items are supplied separately
Non Composite Supply.
Other than the above one may order for a list of products which are to be supplied.
Housewife buying groceries and home needs. Or a contractor buying construction items
from a hardware shop. In this case each supply would be liable to tax at the rate applicable.
Annexure-I :
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SCHEDULE - I : ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE
WITHOUT CONSIDERATION
1. Permanent transfer / disposal of business assets where input tax credit has been
availed on such assets.
2. Supply of goods or services 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 Rs 50,000 in value in a financial year by an
employer to an employee shall not be treated as supply of goods or services both
3. Supply of goods –
a) By a principal to his agent where the agent undertakes to supply such goods
on behalf of the principal, or
b) By an agent to his principal where the agent undertakes to receive such goods
on behalf of the principal.
4. Import of services by a person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.
Annexure-II :
SCHEDULE – II: ACTIVITIES OR TRANSACTIONS1 TO BE TREATED AS SUPPLY OF
GOODS OR SUPPLY OF SERVICES
1. Transfer
(a) Any transfer of the title in goods is a supply of goods.
(b) Any transfer of right in goods or of undivided share in goods without the transfer of title
thereof, is a supply of services.
(c) Any transfer of title in goods under an agreement which stipulates that property in goods
would pass at a future date upon payment of full consideration as agreed, is a supply of
goods.
2. Land and Building
(a) Any lease, tenancy, easement, licence to occupy land is a supply of services.
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(b) Any lease or letting out of the building including a commercial, industrial or residential
complex for business or commerce, either wholly or partly, is a supply of services.
3. Treatment or process
Any treatment or process which is being applied to another person’s goods is a supply of
services.
4. Transfer of business assets
(a) Where goods forming part of the assets of a business are transferred or disposed of by or
under the directions of the person carrying on the business so as no longer to form part of
those assets, whether or not for a consideration, such transfer or disposal is a supply of
goods by the person.
(b) Where, by or under the direction of a person carrying on a business, goods held or used
for the purposes of the business are put to any private use or are used, or made available to
any person for use, for any purpose other than a purpose of the business, whether or not for
a consideration, the usage or making available of such goods is a supply of services.
(c) Where any person ceases to be a taxable person, any goods forming part of the assets of
any business carried on by him shall be deemed to be supplied by him in the course or
furtherance of his business immediately before he ceases to be a taxable person, unless—
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to a taxable
person.
5. The following shall be treated as “supply of service”
(a) renting of immovable property;
(b) construction of a complex, building, civil structure or a part thereof, including a complex
or building intended for sale to a buyer, wholly or partly, except where the entire
consideration has been received after issuance of completion certificate, where required, by
the competent authority or after its first occupation, whichever is earlier.
Explanation.- For the purposes of this clause-
(1) the expression "competent authority" means the Government or any authority
authorized to issue completion certificate under any law for the time being in force
and in case of non-requirement of such certificate from such authority, from any of
the following, namely:–
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(i) an architect registered with the Council of Architecture constituted under the
Architects Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or
development or planning authority;
(2) the expression "construction" includes additions, alterations, replacements or
remodelling of any existing civil structure;
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d)development, design, programming, customization, adaptation, up gradation,
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;
(f) transfer of the right to use any goods for any purpose (whether or not for a specified
period) for cash, deferred payment or other valuable consideration; and
6. Composite Supply
The following supplies shall be treated as supply of services
(a) works contracts defined in section 2(119)
(b) supply, by way of or as part of any service or in any other manner whatsoever, of
goods, being food or any other article for human consumption or any drink (other
than alcoholic liquor for human consumption), where such supply or service is for
cash, deferred payment or other valuable consideration.
7. Supply of Goods
The following shall be treated as supply of goods, namely -
supply of goods by any unincorporated association or body of persons to a member thereof
for cash, deferred payment or other valuable consideration.
Annexure - III
SCHEDULE – III :ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
1. Services by an employee to the 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.
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3. (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.
4. Services of funeral, burial, crematorium or mortuary including transportation of the
deceased.
5. Sale of land and, subject to clause (b) paragraph 5 of Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and gambling.
7. Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption;
(b) Supply of goods by the consignee to any other person, by endorsement of documents
of title to the goods, after the goods have been dispatched from the port of origin
located outside India but before clearance for home consumption.
Explanation 1 - For the purposes of paragraph 2, the term "Court" includes District Court,
High Court and Supreme Court.
Explanation 2.–For the purposes of paragraph 8, the expression “warehoused goods” shall
have the same meaning as assigned to it in the Customs Act, 1962.
It is now well settled legal position that below are the components which enter into the
concept of a tax:
1. The character of the imposition known by its nature which prescribes the taxable
event attracting the levy,
2. Person on whom the levy is imposed and who is obliged to pay the tax
3. The rate of tax
4. Measure/ value to which the rate would be applied for computing the tax liability.
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If any of the components are not clearly and definitely ascertainable, it is difficult to say that
the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme
defining any of those components of the levy would be fatal to its validity
The above position is flown from the unvarying series of Hon’ble Supreme court rulingsand
well recognized lawfully and explicitly in Central and State legislation as well.
Under GST, the four components are clearly specified which are discussed herein below:
Taxable event - CGST/SGST
CGST and SGST are payable on all intra-State supply of goods or service.Intra-State
supplies are explained in the IGST law. As per section 8 of IGST Law, intra-State supply of
goods or services means any supply of goods and /or services where location of supplier
and place of supply are in the same state. The meaning excludes supplies to SEZ units and
import transactions. The taxable event and other aspects are as follow:
• There has to be a taxable event to trigger liability to pay tax. In the case of GST, the
taxable event is supply of goods/services.
• Section 7 of the GST law defines ‘supply’.
• Law has provisions to determine place of supply, time of supply to facilitate levy
and collection which are discussed in the relevant chapters.
• According to section 9, the charging section, a tax called the Central/State Goods
and Services Tax (CGST/SGST) on all intra-State supplies of goods and/or services
shall be levied and collected in the manner prescribed.
• Section also makes it clear that tax would be levied and collected on the value
determined under section 15.
• Tax would be levied and collected at the rates notified by the Central or State
Government.
• There is a ceiling to the rate which is 20% of the value for each CGST & SGST
respectively. However, presently the maximum rate of tax imposed by each of them
are only 14%
• As of now there is no provision to levy tax on the basis of quantity, volume etc.
popularly known as ‘specific rate’.
• The section also provides that rate would be determined on the basis of
recommendations of GST council.
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Taxable event – IGST
IGST is payable on all inter-State supplies of goods or services. Inter-State supplies are
explained in the IGST law. The taxable event and other aspects relating to IGST are as
follow:
• Section 5 of the IGST Act, 2017 is the charging section.
• A tax called the Integrated Goods and Services Tax (IGST) shall be levied on all
supplies of goods/and or service made during the course of inter-State trade or
commerce.
• Section also makes it clear that tax would be levied and collected on the value
determined under section 15 of the CGST Act, 2017.
• Tax would be levied and collected at the rates notified by the Central or State
Government.
• There is a ceiling to the rate which is 40% of the value. However presently the rate of
tax is fixed at maximum of 28%.
• The section also provides that rate would be determined on the basis of
recommendations of GST council and collected in the manner prescribed.
• Import of goods or services are treated as inter-state supplies. IGST on imported
goods would be levied and collected in accordance with the provisions of section 3
of Customs Tariff Act, 1975 at the point where customs duties are charged.
• As of now there is no provision to levy tax on the basis of quantity, volume etc.
popularly known as ‘specific rate’.
• Provisions relating to reverse charge and electronic commerce operator are similar to
the provisions in the CGST law and are applicable for levy and collection of IGST on
inter-state supplies of goods or services.
• Tax has to be paid by every taxable person in accordance with the provisions of the
Act.
Taxable person
According to section 9(1) of CGST Act, tax has to be paid by every taxable person. The
expression ‘Taxable person’ has been explained in section 2(107) of the CGST Act. Taxable
person means a person who is registered or liable to be registered as per section 22 or 24 of
the CGST Act.
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A person or an establishment of a person, who has obtained or is required to obtain more
than one registration, whether in one State or more than one State, he shall, in respect of
each such establishment/registration, be treated as distinct person for the purposes of GST.
This provision makes it obligatory for a person who has branches/offices in different states
liable to pay GST on supplies made to each other.
Reverse charge
• Section 9 (3) of GST law provides that Central/State Government may specify categories
of supply of goods /or services, the tax on which is payable on reverse charge basis on
the recommendations of GST council.
• Section 9 (4) provides payment of tax by the recipient on all the supplies taken from the
unregistered vendors, whether goods or services. However,the provision was
suspended from 13.10.2017. wouldFor the period 1st July 2017 to 12.10.2017, there was
exemption for supplies upto Rs. 5000/- per day from unregistered suppliers. Presently,
the levy is applicable only for notified category of persons and goods/ services as may
be notified. Similarly,Section 5(4) of IGST Act 2017 also provided for such payment
under reverse charge which later on was suspended.
• In such cases of reverse charge, the tax has to be paid by the recipient of goods or
services. All the provisions of CGST Act shall apply to such person as if he is the person
liable for paying the tax in relation to the supply of such goods or services.
• It has to be noted that the concept of paying taxes under reverse charge existed earlier in
the case of VAT as purchase tax and in the case of central excise levy on manufacture of
goods like molasses; As regards services, this concept existed and partial reverse charge
taxation was also in vogue.
Readers may please refer the chapter on ‘reverse charge’ for further discussion.
Electronic Commerce Operator – [ECO]
• Sub-section 5 of section 9 gives powers to GST council to recommend specific
categories of services the tax on which shall be paid by the electronic commerce
operator if such services are supplied through it. Currently, Government has
notified the
o Services of Passenger transportation by cab/taxi/motor cycle
o Accommodation services
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wherein tax shall be paid by the electronic commerce operator.
• Section 2(45) of the CGST Act ‘Electronic commerce operator’ means any person
who owns, operates or manages digital or electronic facility or platform for
electronic commerce.
• Section 2(44) of the CGST Act ‘Electronic commerce’ means supply of goods or
services or both including digital products over digital or electronic network.
• The Central or a State Government may issue notification thereafter and ECO would
be treated as the person liable for paying the tax on such services.
• The ECO has to ensure that it is represented by a person in India if it does not have
an office.
Other two components namely rate of tax and valuation was discussed in subsequent
chapters.
Collection of tax at source
Sections 52 of CGST Act provide for tax collection at source, this provision is made
operative w.e.f. 01.10.2018. This is a new concept brought in from Income tax Act.
• Section 52 makes it obligatory for every electronic commerce operator not being an
agent, to collect an amount calculated at the rate of one percent of the aggregate
value of taxable supplies made through it where the consideration with respect to
such supplies is to be collected by the operator.
• Naturally goods/services where ECO is required to pay the tax are excluded from
this requirement.
• Amount collected in a month has to be paid to the government within 10 days from
the end of the month.
• ECO has to file a return.
• Supplier can take credit of tax paid by ECO.
Detailed discussion on this is provided in separate chapter subsequently.
Deduction of tax at source
Section 52 provides that the Central or a State Government may mandate
(a) a department or establishment of the Central or State Government, or
(b) Local authority, or
(c) Governmental agencies, or
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(d) such persons or category of persons as may be notified, by the Central or a State
Government on the recommendations of the Council
to deduct tax at the rate of one percent from the payment made or credited to the supplier.
Deduction has to be made in respect of goods and/or services where the total value of such
supply, under a contract, exceeds five lakh rupees (excluding taxes). GST council
recommendation and notification of goods and/or services would also be necessary. By
virtue of the said powers Central Government has issued notification effective from 01st
October 2018 wherein the TDS provisions is made applicable and also have notified the
persons and category of persons who is required to deduct tax. Detailed discussion on this
is provided in separate chapter subsequently.
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Chapter 3: Place of Supply of Goods & Services
Introduction
In any taxation law, the territory where the taxable activity has taken place determines the
applicability of tax levy on any given activity. For example, in case of sale of goods, inter-
State sales attracted CST whereas, intra-State supplies attracted local VAT levied by State
government.
Services being intangible, it would have been difficult to identify when services are said to
be provided in taxable territory especially in case of transactions with foreign parties, say
export or import of services. The Place of Provision of Services Rules (POPS) 2012, was
introduced post negative list in service tax regime to determine the location of services
provided in case of various categories of services with certain deeming fictions. Most of the
provisions of POPS 2012 have been considered in Section 13 of IGST Act 2017 for
determining the place of supply in case of import and export transactions of services.
GST is two tier structure wherein CGST and SGST shall be levied on all intra-state supplies
(within the state) and IGST shall be levied on all inter-state supplies (between/outside the
state). It is important to ascertain the place of supply for each transaction to determine the
type of tax payable, to determine if a transaction amounts to import or export as per GST
provisions which would have impact on taxability.
Goods being tangible, the determination of their place of supply, based on the consumption
principle, is not difficult. Generally, the place of delivery of goods becomes the place of
supply. However, the services being intangible in nature, it is not easy to determine the
exact place where services are acquired, enjoyed and consumed. In respect of certain
categories of services, the place of supply is determined with reference to a proxy.
A distinction has been made between B2B (Business to Business) & B2C (Business to
Consumer) transactions in case of services, as B2B transactions are wash transactions since
the ITC is availed by the registered person (recipient) and no real revenue accrues to the
Government.Separate provisions for the supply of goods and services have been made for
the determination of their place of supply. Separate provisions for the determination of the
place of supply in respect of domestic supplies and cross border supplies have been framed.
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Internationally, the place of supply for a B2B transaction is normally the place of recipient.
This is to ensure that tax cascading does not happen and taxes do not stick to the export of
services making such service uncompetitive.
In India, the entries which are similar to service tax in GST would have had a number of
clarifications and case law developments which would be useful as reference material.
Where the definition is not similar, one may tend to ignore them.
Place of Supply of Goods
Section 10and 11 of the IGST Act provides various provisions to enable determination of
place of supply in case supply of goods.
a) Where the supply involves movement of goods, the place of supply of goods shall be the
location of the goods at the time at which the movement of goods terminates for delivery
to the recipient. Movement could be by the supplier or the recipient or by any other
person.
Ex: In case of branch transfers from Bangalore unit to Mumbai unit, the place of supply would be
Mumbai where the movement of goods terminates for delivery.
b) Where the goods are delivered by the supplier to a recipient or any other person, on the
direction of a third person say agent, before or during movement of goods, it shall be
deemed that the said third person has received the goods and the place of supply of such
goods shall be the principal place of business of such third person. This provision could
be applicable on bill to ship to transactions.
Ex: Mr A billing to Mr. B for supplying goods to Mr. C. In such case, location of Mr. B shall be
the place of supply for Mr. A and Location of Mr. C shall be the place of supply for Mr. B.
c) Where supply does not involve movement of goods, the place of supply shall be the
location of goods at the time of delivery to the recipient.
Ex: Sale of books at book shop.
d) Where the goods are assembled, or installed at site, the place of supply shall be the place
of such installation or assembly. Ex: Supply of Air conditioner with installation.
e) Where the goods are supplied on a board conveyance, such as vessel, an aircraft, a train,
or a motor vehicle, the place of supply shall be the location at which goods are taken on
board. This is similar to that of currently existing provision in state VAT laws.
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Ex: Soft drink bottles boarded to Chennai to Delhi train at Chennai. Foods may be
supplied to passengers at Solapur. The place of supply would still be Chennai where the
goods have boarded.
f) In case, the place of supply cannot be determined by any of the provisions discussed so
far, the same shall be identified in the manner to be prescribed by Central government
on the recommendation of GST council.
g) In case of import of goods, the place of supply shall be the location of importer and the
place of supply shall be location outside India when the goods are exported from India.
This would ensure the concept of destination-based taxation wherein the export of goods
are not taxed and at the same time import transactions would be subject to GST and the
importer would be made liable to pay IGST on such import transactions.
Place of supply of Services
Section 12 and 13 of the IGST Act provides various provisions to enable determination of
place of supply in case supply of services. Section 12 provides for place of supply provisions
when both supplier of service and the recipient are located in India (taxable territory)
whereas, either of the supplier or recipient are located outside India, then the provisions are
governed by Section 13 of the GST Act.
General Rule
The principle is kept similar to that of erstwhile service tax provisions wherein the location
of recipient would be the location of service in default cases generally in B2B transactions
(i.e. the cases where no specific provision is provided under GST law to determine POS).
However, following differences could be observed:
a) Where both supplier and recipient are located in India, the place of supply of service
would be:
• The location of registered person when the service supplied to persons registered
under the GST. Ex: Tax Consultancy services by a CA to a company registered under
GST,
• The location of recipient of supply where supply is made to un-registered
persons and the address exists on records of the supplier of service. Ex: Renting of
furniture services provided to individuals Reg. under GST,
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• The location of supplier of service in all other cases (i.e.in case where the supply
made to persons not registered under GST and also their address does not exist
on the records)Ex: mobile repair services provided to individuals.
b) Where either of the supplier or recipient located outside India, the place of supply of
services would be:
• The location of recipient of services. Ex: Management consultancy services provided
by a person located in India to a person located in US.
• In cases where recipient location is not available in the ordinary course of
business, then the location of the supplier. Ex: Tour operator services provided to a
foreigner from India, the place of supply would be India.
Determination of Location of service provider and recipient:
The definition of location of recipient of service and location of supplier of service provided
under GST law is similar to that of earlier service tax provisions. i.e. when the registration is
obtained, then the location of such registered premise or else the fixed establishment which
is most directly concerned with the supply. In absence of those, the location of usual place of
residence shall be considered as location of service provider/ receiver as the case may be.
Place of business includes a place from where business is ordinarily carried on including
warehouse, a godown, a place where books of accounts are maintained or a place where
taxable person is engaged through agent.
Fixed establishment means place other than the place of business which is characterised by a
sufficient degree of permanence and suitable structure in terms of human and technical
resources to supply services, or to receiver and use services for its own needs.
Services relating to immovable property
a) Where both supplier and recipient are located in India:
In case of services provided directly in relation to an immovable property, the POPS shall be
the place where the immovable property is located or intended to be located. The following
categories of services could be covered in this provision:
• 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,
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• Services by way of lodging accommodation by a hotel, inn, guest house, homestay,
club or campsite, by whatever name called and including a house boat or any other
vessel,
• Services by way of accommodation in any immovable property for organizing any
marriage or reception or matters related therewith, official, social, cultural, religious
or business function including services provided in relation to such function at such
property.
Further, in case of all the services ancillary to the above listed services relating to immovable
property/boat/vessel, location of such immovable property/boat/vessel would be the POS.
Ex: Catering services provided along with letting out a banquet hall shall also be considered as
provided in the location of such banquet hall.
However, when the immovable property or boat or vessel is located outside India, the place
of supply shall be the location of the recipient. This proviso expands the levy to even
properties located outside India when both recipient and provider of service are located in
India.
In case the immovable property is located in more than one state, the POS would be based
on proportionate value as per terms of the contract.
b) Where either of the supplier or recipient located outside India:
The place of supply of services supplied directly in relation to an immovable property, shall
be the place where the immovable property is located or intended to be located.
This includes services supplied in this regard by experts and estate agents, supply of hotel
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 architects or interior decorators.
Services based on performance
a) Where location of both supplier and recipient is in India:
In case of following services, the place of provision of service would be deemed to be the
location where such services are performed / held:
• Restaurant and catering services, personal grooming, fitness, beauty treatment, health
services including cosmetic and plastic surgery.
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• Training and performance appraisal to a person other than a registered person.
In case of training and performance services provided to a person registered under GST,
then the place of supply would be the location of such registered person.
b) Where location either of the supplier or recipient is outside India:
In case of Services provided in respect of goods that are required to be made physically
available to the provider of services in order to provide such service, the POS would be the
location of performance of service.
It provides that, when such services are provided from a remote location by way of
electronic means, the place of supply shall be the location where goods are situated at the
time of supply of service.
This provision would not be applicable in the case of a service supplied in respect of goods
that are temporarily imported into India for repairs, or any other process or treatment and
are exported after repairs without being put to any further use in India. In such cases, the
default rule being the location of service recipient shall be the place of supply.
Where both supplier and recipient are in India, the services provided in respect of goods
that shall be physically made available to service provider (Ex: Motor car repair services),
are not covered in GST under performance-based services. Therefore, the place of supply in
case of such services would be under general rule as discussed earlier.
Further, also in case of services provided to individuals which requires the physical
presence (of recipient /on behalf) for provision of services, the POS shall the place of
performance of service. Ex: Health related services.
Services relating to events
a) Where location of both supplier and recipient is in India:
In case of services provided by way of admission to of cultural, artistic, sporting, scientific,
educational or entertainment event or amusement park or any other place and services to
ancillary to such admission, the POS would be where the event is actually held or where the
park or such other place is located.
In case of organization of an event (cultural, artistic, sporting, scientific, educational or
entertainment events) and its ancillary services including assigning of sponsorship of such
events, the place of supply would be location of recipient when such services are provided
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to persons registered under GST. If not, the place where events are actually held shall be the
Place of supply.
Ex: Organising a seminar on GST for a company who is registered under GST, the POS would be the
location of company and not the place where seminar is held.
In addition to above, following points needs to be kept in mind:
• In case if the event is held outside India, the POS shall be the location of recipient, if
neither of provider nor recipient are located outside India.
• In case the event is held in more than one State, the POS would be based on
proportionate value as per terms of the contract for each State.
b) Where location either of the supplier or recipient is outside India:
The place of supply of services supplied by way of admission to, or organization of, a
cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration,
conference, fair, exhibition, or similar events, and of services ancillary to such admission,
shall be the place where the event is actually held.
Services by way of transportation of goods
The place of supply provision for transportation of goods shall include even mail and
courier services and there is no separate provision for GTA provided unlike in earlier service
tax provisions.
When services by way transportation of goods provided to a person registered under GST,
then the location of such recipient shall be the place of supply. If such services are provided
to unregistered person, then the place of supply would be the place where goods are handed
over for transportation.
Ex: Courier services provided by Blue Dart to Infosys, the location of Infosys would the POS. If same
is provided to a person not registered under GST, then the POS shall be the location where goods are
handed over to blue dart. If the same service is provided to individual who is not registered, then the
location where the goods are given to Blue Dart by such individual would be the POS.
When either a supplier or recipient is located outside India, the POS in case of services of
transportation of goods other than by way of mail or courier would be the place of
destination of goods.
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Even in case where both service recipient and provider are located in India, if the goods are
meant for transportation outside India, then the POS would be destination of such goods.
Services by way of transportation of passengers
The place of supply would be the boarding point of passenger who is not registered under
GST. As far as service provided to registered persons are concerned the Place of Supply
would be the location of such recipient.
Further, 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 the manner specified in general rule.
Ex: Monthly pass issued by a travel agency with no restriction on boarding point in the city.
The return journey shall be treated as a separate journey even if the right to passage for
onward and return journey is issued at the same time.
Where either of the supplier or recipient is located outside India, the place of supply in
respect of a passenger transportation service shall be the place where the passenger embarks
on the conveyance for a continuous journey.
Services provided on board a conveyance
The place of supply of services on board a conveyance such as vessel, aircraft, train or motor
vehicle, shall be the location of the first scheduled point of departure of that conveyance for
the journey.
Ex: Foods/movie /games services provided on Bangalore – Mumbai - Bangkok flight, the POS would
be Bangalore i.e. services deemed to be provided in taxable territory.
Telecommunication services
There was no specific provision specifying place of provision of service rule in the current
indirect tax law. Under GST, the place of supply of telecommunication services including
data transfer, broadcasting, cable and direct to home television services to any person shall
be as follows:
S.
No
Nature of telecommunication
Service
Place of Supply
1 Services by way of fixed location where the telecommunication line,
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telecommunication line, leased
circuits, internet leased circuit,
cable or dish antenna.
leased circuit or cable connection or dish
antenna is installed.
2 Mobile connection for
telecommunication and internet
services provided on post-paid
basis
the location of billing address of the recipient of
services on record of the supplier of services
3 mobile connection for
telecommunication, internet
service and direct to home
television services are provided
on prepayment through a
voucher or any other means
i) Through selling agent or a re-seller or a
distributor of SIM card or re-charge voucher -
address of the selling agent as per the record of
the supplier
ii) by any person to the final subscriber - the
location where such pre-payment is received or
such vouchers are sold.
Note: If such pre-paid service is availed through
electronic mode, POS would be the location of
the recipient as per the supplier’s records.
4 in other cases not covered in (2)
and (3) above
Address of the recipient as per records of the
supplier of the service
However, where address of the recipient is not available in the supplier record, the place of
supply shall be the supplier’s location. Further, where the leased circuit is installed in more
than one State, the place of supply would be based on proportionate value arrived as per
contract terms.
Banking and other financial services
In case of banking and other financial services including stock broking services to any
person, place of supply shall be the location of the recipient (need not be account holder) of
services on the records of the supplier of services. However, if the location of the recipient is
not on the records, the place of supply shall be location of the supplier.
Ex: merchant banking services, financial leasing services, net banking services etc.
Online information and database access or retrieval services
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When either of the supplier or recipient is located outside India, the place of supply would
be the location of service recipient. Further deeming fiction is inserted to determine the
location of service recipient in order to expand the scope of GST.
Subscriptions to online books/journals, download of digital content etc could be examples
for online info and database access or retrieval services.
Person receiving such services shall be deemed to be located in the taxable territory if any
two of the following non-contradictory conditions are satisfied:
• The location of address presented by the recipient of service via internet is in taxable
territory;
• The credit card or debit card or any other card by which the recipient of service
settles payment has been issued in the taxable territory,
• The billing address of recipient of service is in the taxable territory,
• The internet protocol address of the device used by the recipient of service is in the
taxable territory,
• The bank of recipient of service in which the account used for payment is maintained
is in the taxable territory,
• The country code of the subscriber identity module (SIM) card used by the recipient
of service is of taxable territory,
• The location of the fixed land line through which the service is received by the
recipient is in taxable territory.
No specific provision in place of supply provisions as far as both supplier and recipient of
online info and database access or retrieval services are located in India and hence, general
provision would be applicable.
Insurance services
When the insurance services are provided to registered person, the place of supply would be
the location of such registered person, or else, the location of recipient as per the supplier’s
records would be the place of supply.
Advertisement services to Government
In case of advertisement services to the Central Govt, a State Govt, a statutory body or a
local authority meant for identifiable states, the place of supply of shall be taken as located
in each of such States on proportionate basis in terms of contract.
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In absence of any specific terms of contract, the value attributable to different States/Union
territories for the said advertisement services shall be determined in accordance with Rule 3
of the Integrated Goods and Service Tax Amendment Rules, 2017. [Notification No. 12/2017
– Integrated Tax dated 15.11.2017]
Order of application of rules
Currently, the place of provision of service rules provides order of application of rules when
a service could be fit into more than one rule. However, the place of supply provisions
under GST does not provide any such methodology which could lead to different
interpretation by industry and departments in their own interest.
Miscellaneous provisions where either of the supplier or recipient is located outside
India
a) In case services based on performance, immovable property or the services relating to
events, is supplied at more than one location, including a location in taxable territory, its
place of supply shall be the location in the taxable territory where the greatest
proportion of the service is provided.
b) Further, when the above-mentioned services are provided in more than one state, the
place of supply shall be in proportion to the value of services provided as per the terms
of the contract.
c) In case of services provided by financial institutions, intermediary services and services
consisting of hiring of means of transports up to a period of one month, the place of
supply would be the location of supplier of service.
d) The Central Government shall have the power to notify any description of service in
which the place of supply shall be the place of effective use and enjoyment of a service in
order to prevent double taxation or non-taxation of the supply of a service, or for the
uniform application of rules.
Whenever the place of supply is to be determined in terms of the contract or agreement
entered in this regard and in the absence of such contract or agreement, place of supply shall
be determined on such other reasonable basis as may be prescribed in this behalf.
Avoidance of double taxation: Section 13(13)
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In order to prevent double taxation or non-taxation of the supply of a service, or for the
uniform application of rules, the Government shall have the power to notify any description
of services or circumstances in which the place of supply shall be the place of effective use
and enjoyment of a service.
Precaution to be taken while determining place of supply of goods and or services
• One should carefully go through the agreements and terms to ascertain the POS in terms
of IGST provisions including type of tax payable.
• The taxability of export and import transactions to be ascertained considering the POS.
• It is also essential to ensure that the conditions specified in Sec 2(5) and 2(6) of IGST Act
are fulfilled for treating the goods or services as export. In other words, it is not enough
if the place of supply is outside India.
• Ascertain if benefits claim associated with export (Zero rated supply) in the form of
refunds of input tax credit when goods or services exported without payment of GST or
refund of tax paid on export with payment of GST.
• The billing and sales correspondences can also indicate the real nature of the transaction.
It has been observed that at times the explanation, billing as well as the agreement are
surprisingly all different.
• A careful analysis of reimbursement of expenses with group or associated enterprises in
foreign countries is required.
• Due care to be taken in cases where the performancebased criterion applies in order to
determine the status as to Import or Export of service as often the cost of non-compliance
could be high.
• Intimating the department about the stand taken by the entity with respect to taxation in
case of contentious matters is very essential which could help the entity to curtail the
demand along with interest and penalty on extended limitation period.
Conclusion
The scope and applicability of any law depends majorly on its charging section also called as
levy. Though the other provisions set out in the act cannot override the charging section, but
certainly could elaborate the meaning and scope of levy. Similarly, in case of GST, though
the levy is on supply, the place of supply provisions would influence the levy to a larger
extent especially in case of import and export of goods and/or services. Even in case of
domestic transactions, the POS would be the backbone while determining whether supply is
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an inter-State or intra-State supply. Hence, logical interpretation, contracts which are clear
on the services being provided and timely representations to Government in case of
unfairness would be critical.
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Chapter 4: Time of Supply of Goods & Services
Background:
In order to calculate and discharge tax liability, it is important to know the date on which the
charging event has occurred, popularly known as ‘tax collectionevent’. Article 265 of the
Constitution of India states that ‘No tax shall be levied or collected except by authority of law’. Not
only the levy of tax but collection of tax isalso prominently important.
The pre-GST indirect tax laws provided for different point of time for collection and
payment of taxes. If ‘removal’ of goods from place of removal triggered payment of excise
duty under excise laws, the liability to pay VAT/CST arose on ‘sale’ of goods. Under
Customs laws, import duty is to be paid at the time the goods arrive at the Indian Customs
Station and Bill of Entry for home consumption is filed. Similarly, in case of services, as per
the Point of Taxation Rules, 2011, the liability to pay service tax arose on issue of invoice or
on receipt of payment or completion of service as defined in the rules.
Under GST law, the time of supply provisions, in relation to goods as well as services,
defines the point of time at which the liability to pay GST arises. Different provisions have
been enunciated for goods and for services. Thus, in order to decide the time of supply, it is
imperative that one correctly classifies the underlying supply as a supply of ‘goods’ or a
supply of ‘services’ as per the GST laws.
TIME OF SUPPLY OF GOODS – IN NORMAL SCENARIO:
If advance money is received and above supply shall be deemed to have been made to the
extent it is covered by the invoice or, as the case may be, the payment. In the year 2017, vide
notification no.40/2017-CT dated 13.10.2017, there was amendment made to specify that
CGST – CHAPTER IV- SECTION 12 - Time of supply of goods
EARLIER of date on which
• Supplier issues invoice OR
• Last date on which required to issue
invoice as per Section 31(1)
Supplier receives payment
i.e. Earlier of :
a) Payment entered in the books of accounts
b) Payment credited to bank account
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registered persons having aggregate turnover less than Rs 1.5 crores (on PAN India basis)
need not pay on advance received and shall pay tax on issuance of invoice. Further,
notification no. 66/2017-Central Tax dated 15th Nov 2017 was issued amending notification
no.40/2017-CT providing relief to all registered tax payers from payment of GST on advance
received. Advances amount received for services would continue to be taxed based on
receipts.
Issue of invoice The last date for issuing invoice as per Section 31 of the GST Law can be summarized as
follows:
Section Scenario Invoice shall be issued:
31 (1) Taxable goods supplied by
registered taxable person
Before or at the time of:
a) Removal of goods for supply OR
b) Delivery / making available to recipient, as the
case may be
31(4) Continuous supply of goods Before or at the time each successive statement of
accounts issued or each successive payment received
31(7) Goods sent or taken on
approval or sale or return basis
Before or at the time
a) of supply OR
b) 6 months from date of removal, whichever
earlier
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TIME OF SUPPLY OF GOODS – IN SPECIAL CASES:
IN CASE OF PAYMENT UNDER REVERSE CHARGE BASIS
In case where the tax is liable to be paid on reverse charge basis, the time of supply shall be
as follows:
IN CASE OF SUPPLY OF VOUCHERS:
A voucher has been defined in the CGST Act as an instrument where there is an obligation
to accept it as consideration or part consideration for a supply of goods or services or both,
and where the goods or services or both to be supplied or the identities of their potential
suppliers are either indicated on the instrument itself or in related documentation, including
the terms and conditions of use of such instrument. Vouchers are commonly used in the
Indian economy. A shopkeeper may issue vouchers for a specific supply i.e. supply which is
identifiable at the time of issuance of voucher. In trade parlance, these are known as single
purpose vouchers. For example, vouchers for pressure cookers or television or for spa or
haircut. Similarly, a voucher can be a general-purpose voucher which can be used for
multiple purposes.
For example, a Rs. 1000/- voucher issued by Shopper’s Stop store can be used for buying
any product or service at any Shopper’s Stop store. The time of supply is different in case of
single purpose voucher and in the case of general-purpose voucher. Time of supply in the
Where not possible to determine the time of supply under above, time of supply shall be the
date of entry in the books of accounts of the recipient of supply.
CGST – CHAPTER IV- SECTION 12 - Time of supply of goods
EARLIER of date on which
Date of receipt of goods
Date on which payment made
i.e. Earlier of :
a) payment entered in the books of
accounts of recipient
b) payment debited in bank account
Date immediately
following 30 days
from issue of invoice
by supplier
Where supply identifiable on issue of
voucher - date of issue of voucher
In other cases - date of redemption of voucher
Time of supply of goods - vouchers
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case of single purpose voucher i.e. case where supply is identifiable at the time of issuance of
voucher is the date of issue of voucher. However, in all other cases of supply of vouchers,
the time of supply is the date of redemption of voucher.
RESIDUARY PROVISION:
Where time of supply of goods cannot be determined under any of the provisions above, the
same shall be determined as follows:
Time of Supply of Services – In Normal Scenario:
Particulars Time of Supply of services shall be
A. Where invoice issued within the time
limit for issuing tax invoice (Note 1)
Earlier of
a) Date of issue of invoice by supplier
b) Date of receipt of payment (See Note
2 below)
B. Where invoicenot issued within the time
limit for issuing tax invoice (Note 1)
Earlier of
a) Date of provision of service
b) Date of receipt of payment (See Note
2 below)
C. Where A or B do not apply Date on which recipient shows the receipt of
services in his books of accounts
If the supplier of taxable goods receives an amount uptoRs.1,000 in excess of the amount
indicated in the tax invoice, the time of supply to the extent of such excess amount (optional
for supplier) shallbe the date of issue of invoice in respect of such excess amount.
NOTE 1: Time limit for issuing tax invoice:
A. Before / after provision of service but within 30 days (45 days for insurer/ banking)
B. In case of Insurer, Banking, NBFC, telecom operator
Where periodical return to be filed - date
on which such return to be filed
In other cases - date on which tax paid
Time of supply of goods - residuary provision
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I.If taxable supply of services between distinct persons,
II.In case of ‘distinct persons’ eg branches located in 2 different states:
• Before / at the time the supplier records the taxable supplies of services made in his
books of accounts or
• before expiry of the quarter during which supply was made
• Other cases: Issue within 45 days
NOTE 2:Date of receipt of payment – is earlier of:
a) Date on which payment entered in books of account of supplier
b) Date on which payment credited to his bank a/c
The supply shall be deemed to have been made to the extent it is covered by the invoice or,
as the case may be, the payment.The last date for issuing invoice as per Section 31 of the GST
law can be summarized as follows:
Section Scenario Invoice shall be issued:
31 (2) Taxable services supplied by
registered taxable person
Before or after the provision of service but within 30 days
(45 days in case of banking services) from date of provision
of service
31 (5) Continuous supply of
services
(a) Where due date as per
contract ascertainable
On or before due date of payment
(b) Where due date as per
contract not ascertainable
Before or at the time supplier receives the payment
(c) Payment linked to
completion of event
On or before the date of completion of that event
31 (6) Cessation of supply before
completion
At the time supply ceases and to extent of supply made
before cessation
Time of Supply of Services – In special cases:
In case of payment under reverse charge basis
In case where the tax is liable to be paid on reverse charge basis, the time of supply shall be
as follows:
CGST – CHAPTER IV- SECTION 13 - Time of supply of services
EARLIER of date on which
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In case of associated enterprises, where supplier of service is located outside India, the time
of supply shall be as follows:
In case of supply of vouchers:
Residuary Provision:
Where time of supply of services cannot be determined under any of the provisions above,
the same shall be determined as follows:
Time of supply of goods or services – In case of change in rate
Where any supply of goods or services takes place during the period when there is a change
in the rate of tax, the below provisions would be applicable:
Where not possible to determine the time of supply under above, time of supply shall be the
date of entry in the books of accounts of the recipient of supply.
Date on which payment made
i.e. Earlier of:
a) payment entered in the books of
accounts of recipient
b) payment debited in bank account
Date immediately
following 60 days
from issue of invoice
by supplier
CGST – CHAPTER IV- SECTION 13
Time of supply of services- Associated enterprises
EARLIER of date on which
Date of entry in books of account of
recipient Date of payment
Where supply identifiable on issue of
voucher - date of issue of voucher
In other cases - date of redemption of voucher
Time of supply of services - vouchers
Where periodical return to be filed - date
on which such return to be filed
In other cases - date on which tax paid
Time of supply of services - residuary provision
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Goods / Service
supplied
Date of
invoice (DOI)
Date of receipt
of payment
(DOP)
Rate applicable
Before change in rate After After DOI or DOP –earlier of both
Before After DOI
After Before DOP
Afterchange in rate Before After DOP
Before Before DOI or DOP – earlier of both
After Before DOI
Where credit in the bank account is after 4 working days from the date of change in the rate
of tax, ‘date of receipt of payment’ shall be the date of credit in the bank account.
It is to be noted that the above provisions would override the time of supply covered under
Section 12 or 13 of the GST Law(Mentioned above).
Date of receipt of payment shall be date on which payment is entered in books of account of
supplier or date on which payment credited to his bank account whichever is earlier.
Date of receipt of payment in case of change in rate of tax
Normally the date of receipt of payment is the date of credit in the bank account of the
recipient of payment or the date on which the payment is entered into his books of account,
whichever is earlier. However, in cases of change in rate of tax, the date of receipt of
payment is the date of credit in the bank account if such credit is after four working days
from the date of change in rate of tax.
Time of supply of goods or services related to an addition in the value of supply by way
of interest, late fees or penalty
Time of supply related to an addition in the value of supply by way of interest, late fee or
penalty for delayed payment of any consideration shall be the date on which supplier
receives such addition in value.
For example, a supplier receives consideration in the month of September instead of due
date of July and for such delay he is eligible to receive an interest amount of Rs. 1000/-.
Then the time of supply for such excess amount would be the date of receipt of such interest.
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Chapter 5: Classification and exemptions with examples
Background:
In order to determine the applicable rate of tax in respect of a particular item, understanding
the positioning of that item under a particular head or sub-head is essential. The positioning
of an item in the appropriate heading/sub-heading is called classification. In Central Excise
classification disputes, which were numerous in 1990s disappeared when majority of
products in one category were taxed equally and rates were reduced. Now with some
categories having GST rates such as 3%, 5%, 12%,18% and 28% and followed by the various
exemptions, concessional rates, registration exemption, composition rates. It is expected that
similar classification issues would arise and continue.
The list of rates applicable to goods and services, exemptions, extent and activities under
reverse charge under GST regime are in place. The Harmonised System of Nomenclature is
to be followed to classify the goods or services, which ensures that the classification
anywhere in the world matches that in India.
Rate of GST and Threshold exemption limit:
Notification No.01/2017 has been issued under Central Tax (Rates) and Integrated Tax
(Rates) containing the GST rate schedule for different products based on their HSN
classifications.
Rates for Goods:
The broad list of GST rate as per the given schedule is as follows:
• 5 per cent. in respect of goods specified in Schedule I,
• 12 per cent. in respect of goods specified in Schedule II,
• 18 per cent. in respect of goods specified in Schedule III,
• 28 per cent. in respect of goods specified in Schedule IV,
• 3 per cent. in respect of goods specified in Schedule V,
• 0.25 per cent. in respect of goods specified in Schedule VI
Rates for Services:
Notification No. 11/2017 -Central Tax (Rates) and 08/2017- Integrated tax (Rates) has been
issued to specify the rates which are broadly listed as follows:
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• 5 per cent - Rent a cab, job work relating to textiles, Restaurant service, Print Media
advertisement etc.,
• 12 per cent – Certain Government construction contracts, Accommodation where
tariff is between Rs.1000 to Rs.2500/-(Declared Tariff), Business class air travel etc.,
• 18 per cent - General Rate – all services not covered in other rates including
construction,
• 28 per cent -Luxurious hotels, Gambling, etc.,
wouldRates under Composition:
• In case of Manufacturers: 1% of turnover in the State or UT.
• In case of Traders: 1% of taxable supplies of goods (exempt supplies not included in
calculation of tax payable) of turnover in the state or UT.
• In case of Suppliers of food and beverages service (Restaurant etc.): 5% of turnover in
the state or UT.
• In case of other services, 6% could be opted by service providers who have aggregate
turnover lesser than Rs.50 lakh in previous financial year.
As seen from the above, GST law has prescribed different rates on different goods/services
and also provided provisions like time of supply, place of supply is different for goods and
service respectively. Owing to this, the classification as goods or services is required to be
done. Even after classifying it as goods/services, further step is arriving the rate of tax as the
rates are different among goods or services. Therefore, the classification which had been
fairly standardized under Central Excise has again got complicated and more refroms and
fitment amendments are expected in the coming years. It has and would further lead to
more disputes and heartburns for the 100 lakh unorganised assessees.
Presently in the manner in which the rates are announced the following aspects seems to
have been followed:
a. The rate table is given under five different rates, i.e. 5%, 12%, 18% & 28%. It is
further based on HSN coding system chapter wise (which is 98 chapters at two
digit level). It is relevant to note that each chapter would have headings which is
further coded with another two digits, making it four digit.
Eg: Under chapter 08, heading 01 and 02 is given for reference as under:
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b. As far as the manner in which the rate table is given, in each chapter particular
rate column is identified with particular rate wherein they have mentioned that
all goods not specified elsewhere.
c. While looking at the said rate table, one has to first refer to Customs tariff
schedule and classify their product first upto 8 digit.
d. The presumption in the rate table published is that unless specifically covered
separately, all the goods covered under one heading (i.e. four digit) are all falling
under same rate. Therefore, before going into rate table one has to classify the
goods under specific tariff entry upto 8 digit and identify the four digit coding
and then look into rate table to identify the rate.
Composite Vs Mixed supply under GST
Under GST, it is setout that the tax liability on a composite or a mixed supply shall be
determined in the following manner —
a. 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;
b. a mixed supply comprising two or more supplies shall be treated as supply of
that particular supply which attracts the highest rate of tax.
For this we need to understand what is composite and what is mixed supply, which is
discussed below.
Composite Supply:
In terms of Section 2(30) “composite supply” means a supply made by a taxable person to a
recipient comprising two or more taxable supplies of goods or services, 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;
Tariff Item
Description of goods Unit Rate of
duty
(1)
(2) (3) (4)
0801 Coconuts, Brazil nuts and cashew nuts, fresh or dried,
whether or not shelled or peeled
0802 Other nuts, fresh or dried, whether or not shelled or peeled
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Composite supply comprising of two or more supplies, one of which is principal supply
shall be treated as supply of such principal supply.
If each supply is distinct then it could be said to be a non composite supply.
Examplecouldbe when one goes to buy gifts/ garments etc. Each purchase is liable to
different rates.
Bundled Services
Under service tax law, there was a concept of bundled service. When more than one type of
service is provided in combination with each other in ordinary course of business, then such
services to be treated based on essential character. Example, accommodation in hotel along
with breakfast. Essential nature of service is that of hotel accommodation service and to be
taxed at rate applicable to hotel accommodation service.
When more than one kind of service are not naturally bundled in the ordinary course of
business, it was to be treated as provision of the single service which resulted in highest
liability of service tax. Example, renting done for residential purpose along with renting for
commercial purpose used as office. The residential dwelling used as residence was
exempted from service tax and renting for office use is taxable as in GST today. The entire
service was to be taxed at highest rate of service tax of 15 % & GST of 18% applicable to
renting for official use.
Section 2(90) of the CGST Act, 2017, defines “Principal supply” means the supply of goods
or services which constitutes the predominant element of a composite supply and to which
any other supply forming part of that composite supply is ancillary.
Eg: Where goods such as fans are supplied and installation done at buyer place, the supply
of fan and installation of fan is a composite supply wherein the supply of fan is the principal
supply to be taxed at the GST rate which is applicable to fan.
Supply of software on CD and license to use same, could be liable to GST at rate applicable
to software license [treated as service under GST] if agreement is for licensing of software.
Factors to be considered to determine composite supply
a) Identify whether transaction consist of more than one supply of goods or service or
both.
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b) Check whether combination of goods or service or both are naturally bundled in the
ordinary course of business.
c) Identify the principal supply among the supplies made.
d) Check it is single priced or item-wise priced is immaterial.
Mixed Supply:
In terms of Section 2(74) “mixed supply” means two or more individual supplies of goods or
services, or any combination thereof, made in conjunction with each other by a taxable
person for a single price where such supply does not constitute a composite supply;
Mixed supply comprising two or more supplies shall be treated as supply of particular
supply which attracts highest rate of tax. It shall not be a mixed supply if these items are
supplied separately
Examples: A supply consisting of cakes and fresh fruits in single box, for a single price is a
mixed supply. In such case where cakes are taxable and fruits exempted, each of these items
can be supplied separately and is not dependent on any other. When supplied together,
taxed at GST rate applicable to cakes which has higher rate of GST.
Supply consisting of taxable coaching class and exempted residential dwelling, could be
taxed at highest rate applicable to coaching class when single price is charged.
Importance of correct classification
Correct classification assumes greater importance as tax liability essentially depends on
effective rate of tax. An improper classification could have serious effect on business and
relation with customer. Some of the possible ill effects of improper classification are as
under:
a. There could be additional liability at later stage after incorrectly classifying and
the taxable person could be saddled with huge demand from department and
customer not woulding to pay.
b. Customer eligible for ITC creditwoulding to pay tax [when received
invoice/debit note within filing of next year Sept return] but not woulding to pay
interest and penalty.
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c. Missed out correct exemptions which were available if correct classification was
done
d. Transaction cost added by litigation.
e. Non claim of unconditional exemption could result in denial of input tax credits
on inputs.
f. Customers may not repeat business due to lower confidence on compliance.
Classification of goods under GST
The rules of interpretation which are essential for classification is adopted from customs
Tariff which is fairly developed in terms of judicial precedents. The suggested method to
arrive at the proper classification could be as under:
I. Understanding of Business / Dictionary / Technological changes: It is important to
understand the nature of business, to determine the classification of the activities which
are being taken by the entity by referring to:
i. Entity’s website
ii. Technical Write-up
iii. Scientific / Technical terms / standards (Eg: Pharmacopia)
iv. Description of products given by sales and marketing team of entity–
especially the positioning of the goods/services,
v. Competitors classification
vi. Dictionary / Wikipedia:
II. Classification based on HSN: HSN is an international practice of adopting a uniform
classification which facilitates a common understanding of products across countries.
HSN is a multi-purpose 8 digit product coding system for classifying goods. The HSN
could be a good guide for confirming the understanding when in doubt. The Supreme
Court in case of CCE v. Wood Craft Products Ltd. 1995 (77) E.L.T. 23has held that HSN can
be resorted to in case of ambiguity in classifying goods. The Honorable Supreme Court
in the case of Phil Corporation Ltd 2008 (223) ELT 9 (SC) has held that HSN is a safe guide
for classification.
III. Rules for Interpretation
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The rate notification specifically provides that the rules for the interpretation of the First
Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter
Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply
to the interpretation of GST rates as well which is generally known as General Interpretative
Rules. Central Excise Tariff Act provides a similar set of six rules to act as an instrument for
classification. These are used to determine applicable tax rate and coverage in exemption.
The classification should be first tested in the light of Rule 1 and if it is not possible, recourse
is taken to rule 2, 3 and 4 in that same order in which the rules are set out.
1. Rule 1: Provides that the titles of sections, chapters and sub-chapters are provided
for ease of reference and determination of where the goods would fall and would be
dependent on the relevant section and chapter notes contained in the Tariff.
Example: The heading of Chapter 84 refers to nuclear reactors, machinery etc. but
even a hand pump falls under chapter 84.
Where the Notes are silent, classification would be as per Note 2, 3, 4 and 5 of the
Interpretative Rules. It would therefore be noted that Note 2, 3, 4 and 5 would have
to be resorted to only if the Chapter does not contain any guide to classify the
particular product.
In the case of Salora International Ltd Vs CCE 2012 (284) E.L.T. 3 (S.C.) held that
Tariff entries along with relevant Section and Chapter Notes, have to be resorted to
first to see whether clear picture emerges. Only in absence of such a picture
emerging, Interpretative Rules can be resorted to.
2. Rule 2(a): Provides that if the incomplete or unfinished goods have the essential
characteristics of the complete or finished goods, then such goods would be
classified in the same heading as the complete goods. Complete or finished goods
would cover goods removed in unassembled or disassembled form. For instance a
cycle removed in CKD condition is a ‘cycle’ or railway coaches removed without
seats would still be railway coaches.
3. Rule 2(b): Provides that any reference in a heading to a substance shall include
mixtures or combinations of that material with other materials. Any reference to the
goods of a given material or substance shall be taken to include a reference to goods
consisting of such material or substance. However, classification would be according
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to Rule 3 in such cases, where the subject goods consists of more than one material
or substance.
4. Rule 3: Provides that for the purposes of sub-rule (b) of rule 2 or where goods are
prima facie classifiable under two headings, the following shall be done sequentially:
a. Specific description would have to be adopted in place of a general description.
Example: Steering wheel of a car is part of motor vehicle as it is more specific.
This was held by the Supreme Court in Moorco India Ltd. v. CC, 1994 (74) E.L.T.
003 (S.C).
b. When two or more headings each refer to part only of the materials or
substances contained in mixed or composite goods or to part only of the items in
a set, those headings are to be regarded as equally specific in relation to those
goods, even if one of them gives a more complete description of the goods. In
such instances, classification has to be determined in terms of rule 3(b) or rule
3(c)
c. Mixtures, composite goods consisting of different materials shall be classified as
if they consist of that material or part which gives them their essential character.
Ex: Concrete mix mainly consists of cement, further small proportions of stone,
water and chemicals, in terms of rule 3, the classification of concrete mix is made
under articles of stone, plaster, cement as concrete mix consists mainly of
cement.
d. Issue of essential character of subject matter in question as given in Rule 3(b)
resorted to only if identification under Rule 3(a) providing for preference to
more specific heading, is impossible. CCE VsJOCIL Ltd 2011 (263) E.L.T. 9 (S.C.)
e. When goods cannot be classified in a or b above, they shall be classified under
that heading which occurs last in the numerical order among those which
equally merit consideration.
5. Rule 4: Provides that where goods cannot be classified using the above principles,
they would be classified under the head appropriate to the goods to which they are
most akin.
6. Rule 5: In respect of packing material which are specially designed or fitted to
contain a specific article and given with the articles for which they are intended,
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shall follow the classification of the items which are packed. Ex: Camera cases,
mobile cases, musical instrument case etc. such packing material if not used with the
article for which it is intended for may have low or no utility. However, this rule
should not be adopted when packing material itself gives the essential character as a
whole.
The packing materials and containers cleared or presented along with the goods are
classifiable with the goods, however this provision would not be applicable when
such packing material are intended for its repetitive use. Ex: Glass bottles are meant
for repetitive use and therefore cannot be classified along with soft drink.
7. Rule 6: While ascertaining the classification of goods in the sub-heading of a heading
it should be determined according to the terms of those sub-headings and any
related Sub-heading notes and, mutatis mutandis the above principles of
classification on the understanding that only sub-headings at the same level are
comparable. For the purposes of this rule, the relative Chapter and Section Notes
apply, unless the context otherwise requires a different interpretation.
IV. Other Rules for Interpretation – Non-statutory Principles evolved out of Judicial
decisions
Apart from the above statutory principles of classification, the Courts have evolved certain
non-statutory principles. But it must be understood that statutory principles would have
precedence over non-statutory principles. Some of the non-statutory principles for
classification are:
a. Classification as per ISI/ Pharmacopeia etc: In case of technology or complex
chemical/ pharmaceutical products the reliance of the standard specified
reference books can be done. However, for common products this may not be
relevant.
b. Trade parlance theory: This is used when the words are not defined under the
law and words are not used in scientific or technical sense in the tariff. Trade
parlance means the meaning as commonly understood by the people dealing
commercially with the subject goods or the commercial recognition that is given
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to a commodity. This aspect is at times ignored by the revenue departmental
officials leading to litigation. This could be obtained from evidences led by the
client whose product is being classified as well as how the product is classified
by trade associations.
c. The terms in Tariff heading or sub-heading using commercial words to be
interpreted as per trade understanding. In case of usage of strictly technical or
scientific words, the approach should be different as held in Chemical and Fibres
of India Ltd. v UOI [1997 (89) ELT 633 (SC)]
d. Function or use: This principle is used when the definition in the statute is absent
and articles are identified with their utility, primary use, design, shape etc. This
refers to the primary function of the subject goods in the minds of the consumers
of such goods.
e. Break up or constituent material: Under this theory, the essential character of the
product can be derived from the raw material that make up the goods.
f. Expert opinion: Sometimes classification involving technical questions are
decided after obtaining an opinion of experts and the opinion of the expert
would not carry weight when they are contrary to another expert’s opinion.
g. Dictionary meaning: This principle can be adopted when the meaning given in
the statute is overlapping, for finding out the trade understanding.
h. Decided case laws of High Courts and Supreme Court and advance rulings:
Such decisions where classification of goods was determined are also given
weightage to arrive at the classification of goods.
V. Other factors for determining classification of goods
a. Raw materials classifications and rates: It is essential to know the classification of
raw materials and percentage of credit available and taken. When there is doubt
on applicability of lower vs higher tax rate, advisable to pay at higher tax rate
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especially when the tax paid on inputs/raw materials is high leading to credit
accumulation. The credit can be used to pay the output tax at higher rate.
b. Customer usage and credit whether available: It is important to know what
percentage of customer taking the credit. When there is doubt on applicability of
lower vs higher tax rate, then could err on side of caution and pay at higher rate
especially when customer being B2B is in position to avail credit. Care should be
taken when deciding between payment Vs. exemption of taxes. This is because
opting to pay taxes when there is absolute exemption could lead to litigations for
the tax payers including denial of ITC on procurements.
c. New technology products may require understanding the technological
advances.
Services, classification could involve the following:
a. Terms of agreement: The terms of agreement could be critical to find out what is
the nature of the service.
b. Classification of independent service: When service is independent service, then
same to be classified in specific category.
c. Bifurcation of combined service: Examine whether the combined service can be
bifurcated as per agreement/contract of service. Example: Exempted residential
dwelling combined with taxable coaching class. When there is separate
consideration for each service, could claim exemption for value of residential
dwelling with payment of tax on coaching class which is not exempted from tax.
d. Essential character: When combined service cannot be broken up, then classify
based on essential character. Example: When some incidental logistics support
service, such as post shipment tracking from US to India is done by commission
agent engaged in enabling sale of goods of principal to Indian customers, the
essential character is that of intermediary service, whose place of supply is India
and liable to tax.
What would go wrong if GST classification done wrongly:
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1. If classified under lesser rate (say 5%) in lieu actual rate (say 18%), may result in
non-recoverability of taxes from customers and assessee may have to pay tax
along with interest from his pocket which can be fatal for the business. If needs
to be recovered, then debit note to be issued for differential tax collection which
could enable the customer for taking ITC. However, debit note to be issued by
the due date of filing GST return for September of subsequent year to enable the
customer to take ITC. Else it would be a cost.
2. If goods or service is classified as exempted inadvertently even though it is
taxable, may result in non-recoverability of taxes from customers and assessee
may have to pay tax along with interest from his pocket which can be fatal for
the business.
3. Where higher tax is charged, assessee may have to suffer with decrease in orders
and cost of re-establishing with the customers, the damage of credibility with
customers.
4. FTP benefits such as MEIS, duty drawback and incentives could be lost due to
wrong classification.
5. Non-payment of compensation Cess, if any, applicable on specified goods and or
services which may result in penal proceedings.
6. Could lead to unnecessary litigations and cost.
Care to be taken by professionals while classifying goods and services and claiming
exemptions
a. Entry has to be read in plain and simple terms. Do not make any assumptions
and presumptions.
b. The coverage of an entry has to be construed strictly.
c. Even when the assessee claims coverage in any concessional rate of
tax/exemption, the professional has to have skeptical view that the benefit may
not be available. Then come to conclusion by following principles as set out
above.
d. For availing benefits under an exemption notification, the conditions have to be
strictly complied with and met.
e. Exemption Notification should be read literally and the same to be construed
liberally if once it is found that notification is applicable to the assessee.
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f. When more than one exemption is available, assessee can opt for that
notification which is more beneficial.
It has to be ensured that the classification of goods and services is done carefully. The
danger of wrong classification is that the exemption is claimed/tax is paid at lower rate of
say 5% against applicable 28%, which if comes to light at later point could wipe out the
entire business.
When in doubt of the classification, confirmation in writing may be sought from the revenue
by communicating by RPAD / by speed post
This is done to ensure that there are no sustainable demands of tax under GST citing wrong
classification and consequently wrong tax rates being applied and paid on the goods and or
services under GST regime.
Exemptions under GST
Power to grant exemption from tax
Section 11 of CGST Act and section 6 of IGST Act (Both have similar provisions) explain the
powers of the Central and State Governments to grant exemption from payment of CGST
and SGST in respect of taxable goods or services or both
a. Exemption should be in public interest;
b. Exemption should be granted issuing a notification which shall be laid on the table of
the Parliament;
c. Exemption has to be granted on the recommendation from the GST Council;
d. Exemption granted may be for any goods and / or services;
e. Exemption can be absolute or conditional;
f. Exemption can be for whole or any part of the tax leviable;
g. Exemption takes effect from the date of notification or from a date specified in the
notification subsequent to the date of notification;
Mandatory availment of exemption
It is mandatory to avail an absolute exemption exempting the goodsor services or both from
the whole of the tax leviable thereon in view of the explanation. However, in case the
exemption is condition based, such exemption would not be mandatory. Mandatory
exemption has been provided to avoid any person paying the tax on exempted supplies and
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thereby encash higher input tax credit. However, this explanation would add to cascading of
taxes.
Exemption by special order on a case to case basis
The Government has been given powers to issue a special order on a case-to-case basis.
Conditions are:
a. Exemption should be in public interest;
b. Exemption has to be granted based on the recommendation of the GST Council;
c. Exemption granted may be for any taxable goods and / or services;
d. Such order can be issued under circumstances of exceptional nature specified in the
order.
Powers to insert explanation after issue of notification or special order.
Notification can be with effect from the date of issue or any date subsequent thereto as may
be specified in the said notification. This means that no retrospective notification can be
issued. Sub-section 3 of the section, empowers Central or the State government to insert
explanation for the purpose of clarifying the scope or applicability of any notification issued
under sub-section (1) or order issued under sub-section (2).
According to the sub-section,
a. Such an explanation can be inserted at any time within one year of issue of the
notification;
b. Explanation has to be inserted by issue of a notification or a special order as the case
may be;
c. The explanation shall have effect as if it had always been the part of first such
notification or order, as the case may be;
Effective date of notification
The effective date of the notification or the special order would be the date which is so
mentioned in the notification or special order. However, if no date is mentioned therein,
a. It would be date of its issue for publication in the official gazette;
b. Date on which it is made available on the official website of the Government
Department.
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Sometimes the exemption notification may be given retrospectively from the earlier date.
Unless explicitly mentioned in the notification, the effect of notification is always
prospective only.
Details relating to availability of exemption
Exemption to small scale supplies of goods or services or both has been made available in
the GST law in Section 22 of the CGST Act, 2017 which provides the non-requirement of
being a taxable person instead of issue of exemption notification. The provisions relating to
registration in the GST law are inter alia applicable to IGST.
According to section 22 and 24 of the CGST Act, persons liable to be registered are:
a. Every supplier shall be liable to be registered under this Act from/in the State from
where he makes a taxable supply of goods or services or both if his aggregate
turnover in a financial year exceeds twenty lakh rupees;
However, where such person makes taxable supplies from the special category states
viz. Assam, Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim,
Tripura, Uttarakhand, Himachal Pradesh, Jammu and Kashmir if his aggregate
turnover in a financial year exceeds ten lakh rupees.
• The aggregate turnover shall include all supplies made by the taxable person,
whether on his own account or made on behalf of all his principals.
• The supply of goods, after completion of job-work, by a registered job worker
shall be treated as the supply of goods by the “principal” referred to in section
143, and the value of such goods shall not be included in the aggregate
turnover of the registered job worker.
• Aggregate turnover means the aggregate value of all taxable supplies made by
the taxable supplies, whether on his own account or on behalf of his principals.
The limit is increased to Rs.40 lakh in case of suppliers engaged only in supply of goods.
b. The following persons shall not be liable to registration and hence are not liable to
pay tax
• any person engaged exclusively in the business of supplying goods and/or
services that are not liable to tax or are wholly exempt from tax under this Act;
• an agriculturist, to the extent of the supply of produce cultivated out of land.
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Following categories of persons shall be required to be registered under this Act
irrespective of the threshold turnover of 20 lakhs & 10 Lakhs as the case may be and
hence would be taxable persons. Such persons need not pay tax only if the goods or
services or both are exempt or the category to which they belong to is not liable to
payment of tax.
(i) persons making any inter-state taxable supply (however for the Service providers
even though they are providing the inter supply the mandatory requirement of
registration is relaxed)
(ii) casual taxable persons
(iii) persons who are required to pay tax under reverse charge;
(iv) E-commerce operator who are required to pay tax under 9(5) of the CGST Act, 2017
as notified;
(v) non-resident taxable persons;
(vi) persons who makes taxable supply of goods or services or both on behalf of other
taxable persons whether as an agent or otherwise
(vii) input service distributor, whether or not separately registered under the Act;
(viii) Persons who supply goods or services or both, other than supplies specified
undersub-section (5) of section 9, through such electronic commerce operator who is
required to collect tax at source under section 52. For the service providers
supplying the service through ECO, having annual aggregate turnover less than Rs.
20 Lakh relaxation has been granted from the requirement of mandatory
registration vide 65/2017- Central Tax dated 15.11.2017.
(ix) every electronic commerce operator
(x) 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 taxable
person
(xi) such other person or class of persons as may be notified by the Central Government
or a State Government on the recommendation of the Council.
In 22nd GST council meeting it is decided to provide exemption to GTA services provided to
unregistered person. Further Job worker supplying inter-state the job work services or
supplier supplying the handicrafts over the inter-state is also exempted from the
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requirement of registration and thereby the payment of tax. This exemption applies only
when the aggregate turnover in a year not exceeds Rs.20,00,000/-.
List of services exempted
Following are some of the exempted services under GST as per the consolidated and updated
version of the Notification No. 12/2017-Central Tax (Rate).
1. Servicesbyanentityregisteredunder section12AAoftheIncome-taxAct,
1961(43of1961)bywayofcharitable activities.
2. Servicesbywayoftransferofagoing concern,asawholeoranindependent part thereof.
3. Servicesbygovernmentalauthorityby wayofanyactivityinrelationtoany
functionentrustedtoamunicipalityunder article 243 W of theConstitution.
4. Servicesbyagovernmentalauthorityby wayofanyactivityinrelationtoany
functionentrustedtoaPanchayatunder article 243Gof the Constitution.
5. ServicesbytheCentralGovernment, StateGovernment,Unionterritoryor
localauthorityexcludingthefollowing services—
(a) servicesbytheDepartmentofPosts bywayofspeedpost,expressparcel
post,lifeinsurance,andagencyservices providedtoapersonotherthanthe
CentralGovernment,StateGovernment, Union territory;
(b) servicesinrelationtoanaircraftora vessel, inside oroutside the precincts ofa
port or an airport;
(c) transport ofgoods orpassengers; or
(d) anyservice,otherthanservices coveredunderentries(a)to(c)above, provided to
business entities.
6. Servicesbywayofpurelabourcontracts ofconstruction,erection,commissioning,
orinstallationoforiginalworkspertaining toasingleresidentialunitotherwisethan as
apart of a residential complex.
7. Servicesbywayofrentingofresidential dwellingfor use asresidence.
8. Services byaperson bywayof-
a) conduct of anyreligious ceremony;
b) rentingofprecinctsofareligious placemeantforgeneralpublic,ownedor
managedbyanentityregisteredasa charitableorreligioustrustundersection
12AAoftheIncome-taxAct,1961 (hereinafterreferredtoastheIncome-tax
Act)oratrustoraninstitutionregistered undersubclause(v)ofclause(23C)of
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section10oftheIncome-taxActora bodyoranauthoritycoveredunderclause
(23BBA)ofsection10ofthesaid Income-tax Act:
Providedthatnothingcontainedinentry (b)of this exemption shall applyto,-
i. rentingofroomswherechargesare one thousand rupees or more per
day;
ii. rentingofpremises,communityhalls,
kalyanmandapamoropenarea,andthe
likewherechargesaretenthousand rupeesor more per day;
iii. rentingofshopsorotherspacesfor
businessorcommercewherechargesare ten thousand rupees or
moreper month.
9. Services by a hotel, inn, guest house, club or campsite, by whatever name called,
for residential or lodging purposes, having value of supply of a unit of
accommodation below one thousand rupees per day or equivalent
10. Transportofpassengers,withorwithout accompanied belongings, by–
a) air,embarkingfromorterminatingin anairportlocatedinthestateof
ArunachalPradesh,Assam,Manipur,
Meghalaya,Mizoram,Nagaland,Sikkim,
orTripuraoratBagdogralocatedinWest Bengal;
b) non-airconditionedcontractcarriage otherthanradiotaxi,fortransportationof
passengers,excludingtourism,conducted tour, charter or hire; or
c) stage carriage other than air-conditioned stage carriage.
11. 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:
Provided that nothing contained in this entry shall apply on or after the expiry of
a period of one year from the date of commencement of operations of the regional
connectivity scheme airport as notified by the Ministry of Civil Aviation.
12. Service of transportation of passengers, with or without accompanied belongings,
by
a) railways in a class other than—
i. first class; or
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ii. an air-conditioned coach;
b) metro, monorail or tramway;
c) inland waterways;
d) public transport, other than predominantlyfortourismpurpose,ina
vesselbetweenplaceslocatedinIndia; and
e) meteredcabsorautorickshaws (includinge-rickshaws).
13. Services by way of transportation of goods-
a) byroad except theservices of—
i. a goods transportation agency;
ii. a courier agency;
b) byinland waterways.
14. Services by way of transportation of goods by an aircraft from a place outside
India upto the customs station of clearance in India.
15. Servicesbywayoftransportationbyrail oravesselfromoneplaceinIndiato anotherof
the following goods –
a) reliefmaterialsmeantforvictimsof naturalorman-
madedisasters,calamities, accidents or mishap;
b) defenceor militaryequipments;
c) newspaperormagazinesregistered with the Registrar ofNewspapers
d) railway equipments or materials;
e) agricultural produce;
f) milk,saltandfoodgrainincluding flours, pulses and rice; and
g) organicmanure.
16. Servicesprovidedbyagoodstransport agency,bywayoftransportinagoods carriageof-
a) agricultural produce;
b) goods,whereconsiderationcharged forthetransportationofgoodsona
consignmenttransportedinasingle carriagedoesnotexceedonethousand
fivehundred rupees;
c) goods,whereconsiderationcharged fortransportationofallsuchgoodsfora
singleconsigneedoesnotexceedrupees seven hundredand fifty;
d) milk,saltandfoodgrainincluding flour, pulses and rice;
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e) organic manure;
f) newspaperormagazinesregistered with the Registrar ofNewspapers;
g) reliefmaterialsmeantforvictimsof naturalorman-madedisasters,calamities,
accidents or mishap; or
h) defenceor militaryequipments.
17. Services bywayofgivingon hire–
a) toastatetransportundertaking,a motorvehiclemeanttocarrymorethan twelve
passengers; or
b) toagoodstransportagency,ameans of transportation ofgoods.
c) motor vehicle for transport of students, faculty and staff, to a person
providing services of transportation of students, faculty and staff to an
educational institution providing services by
way of pre-school education and education upto higher secondary school or
equivalent.
18. Servicebywayofaccesstoaroadora bridgeonpayment of tollcharges.
19. Servicesbywayofloading,unloading, packing, storageor warehousingof rice.
20. Transmission or distribution of electricity by an electricity
transmission or distribution utility.
21. Services bythe Reserve Bank ofIndia
22. Services bywayof—
a) extendingdeposits,loansoradvances insofarastheconsideration is
representedbywayofinterestordiscount
(otherthaninterestinvolvedincreditcard services);
b) intersesaleorpurchaseofforeign currencyamongstbanksorauthorised
dealersofforeignexchangeoramongst banks and such dealers.
23. Servicesbyanacquiringbank,toany personinrelationtosettlementofan
amountuptotwothousandrupeesina single transaction transacted through
creditcard,debitcard,chargecardor otherpayment card service.
Explanation.—Forthepurposes ofthisentry,“acquiringbank”meansany
bankingcompany,financialinstitution includingnon-bankingfinancialcompany
oranyotherperson,whomakesthe paymenttoanypersonwhoacceptssuch card.
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24. Services by way of collection of contributionundertheAtalPension
Yojana.
25. Services by way of collection of
contributionunderanypensionschemeof the State Governments
26. Services provided by the Central
Government,StateGovernment,Union territoryor local authoritybywayof-
a) registrationrequiredunderanylawfor the time beingin force;
b) testing,calibration,safetycheckor certificationrelatingtoprotectionor
safetyofworkers,consumersorpublicat
large,includingfirelicense,required under anylaw forthe time
beingin force.
27. Services by way of collecting or providing news by an
independent journalist,PressTrustofIndiaorUnited News of India.
28. Servicesofpubliclibrariesbywayof lendingofbooks,publicationsorany
otherknowledge-enhancingcontentor material.
29. ServicesprovidedbytheGoodsand ServicesTaxNetworktotheCentral
GovernmentorStateGovernmentsor Unionterritoriesforimplementationof Goods
and Services Tax.
30. Servicesbyanorganisertoanypersonin respectofabusinessexhibitionheld
outsideIndia.
31. Servicesbywayofsponsorshipof sporting events organised-
a) byanationalsportsfederation,orits affiliated federations, where the
participating teams or individuals representanydistrict,State,zoneor
Country;
b) byAssociationofIndianUniversities, Inter-UniversitySportsBoard,School
GamesFederationofIndia,AllIndia SportsCouncilfortheDeaf,Paralympic
CommitteeofIndiaorSpecialOlympics Bharat;
c) bytheCentralCivilServicesCultural and Sports Board;
d) aspartofnationalgames,bythe IndianOlympicAssociation; or
e) underthePanchayatYuvaKreedaAur Khel Abhiyaan Scheme.
32. Carryingoutanintermediateproduction processasjobworkinrelationto
cultivationofplantsandrearingofalllife formsofanimals,excepttherearingof
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horses,forfood,fibre,fuel,rawmaterial orothersimilarproductsoragricultural
produce.
33. Servicesbywayofslaughteringof animals.
34. Servicesbywayofpre-conditioning,pre-cooling,ripening,waxing,retailpacking,
labellingoffruitsandvegetableswhich donotchangeoraltertheessential
characteristicsofthesaidfruitsor vegetables.
35. ServicesprovidedbytheNationalCentre forColdChainDevelopmentunderthe
MinistryofAgriculture,Cooperationand Farmer’sWelfarebywayofcoldchain
knowledgedissemination.
36. Servicesbyaforeigndiplomaticmission located inIndia.
37. Servicesbyaspecifiedorganisationin respect of a religious pilgrimage
facilitatedbytheMinistryofExternal Affairs,theGovernmentofIndia,under bilateral
arrangement.
38. Services provided by the Central
Government,StateGovernment,Union territoryorlocalauthoritybywayof
issuanceofpassport,visa,drivinglicence, birth certificate or death certificate.
39. Services provided by the Central
Government,StateGovernment,Union territoryorlocalauthoritybywayof
assignmentofrighttousenatural resourcestoanindividualfarmerfor
cultivationofplantsandrearingofalllife formsofanimals,excepttherearingof
horses,forfood,fibre,fuel,rawmaterial or other similar products.
40. Services provided-
a) byaneducationalinstitution toits students, faculty and staff;
aa) by an educational institution by way of conduct of entrance examination
against consideration in the form of entrance fee
b) toaneducationalinstitution,byway of,-
i. transportationofstudents,faculty and staff;
ii. catering,includinganymid-day mealsschemesponsored bytheCentral
Government,StateGovernmentor Union territory;
iii. securityorcleaningorhouse-keepingservicesperformedinsuch
educational institution;
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iv. servicesrelatingtoadmissionto, orconductofexaminationby,such
institution;
v. supply of online educational journals or periodicals.
Providedthatnothingcontainedin sub-items (i), (ii) and (iii) of
entry(b)shallapplytoaneducational institution other than an institution
providingservicesbywayofpre-school educationandeducationuptohigher
secondaryschool or equivalent.
41. Servicesprovidedtoarecognisedsports bodyby-
a) anindividualasaplayer,referee, umpire,coachorteammanagerfor
participationinasportingeventorganised bya recognized sports body;
b) another recognised sports body.
42. Servicesofassessingbodiesempanelled centrallybytheDirectorateGeneralof
Training,MinistryofSkillDevelopment and Entrepreneurship by way of
assessmentsundertheSkillDevelopment Initiative Scheme.
43. Services provided by training providers (Project implementation agencies) under
Deen Dayal Upadhyaya Grameen Kaushalya Yojana implemented by
the Ministry of Rural Development, Government of India by way of offering
skill or vocational training courses certified by the National Council for
Vocational Training.
44. Services provided to the Central
Government,StateGovernment,Union territoryadministrationunderanytraining
programmeforwhichtotalexpenditureis bornebytheCentralGovernment,State
Government, Union territory administration.
45. Servicesprovidedbythecordblood banksbywayofpreservationofstem
cellsoranyotherserviceinrelationto such preservation.
46. Services bywayof-
a) healthcareservicesbyaclinical establishment,anauthorisedmedical
practitioner orpara-medics;
b) services provided by way of transportation of a
patient in an ambulance,otherthanthosespecifiedin (a) above.
47. Servicesprovidedbyoperatorsofthe commonbio-medicalwastetreatment facilitytoa
clinical establishment byway oftreatmentordisposalofbio-medical waste orthe
processes incidental thereto.
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48. Servicesbywayofpublicconveniences such as provision of facilities of
bathroom,washrooms,lavatories,urinal or toilets.
49. Servicebyanunincorporatedbodyora non-profitentityregisteredunderanylaw
forthetimebeinginforce,toitsown membersbywayofreimbursementof charges or
share of contribution–
a) asa trade union;
b) fortheprovisionofcarryingoutany activitywhichisexemptfromthelevyof
Goods and service Tax; or
c) uptoanamountoffivethousand rupeespermonthpermemberfor
sourcingofgoodsorservicesfromathird personforthecommonuseofits
membersinahousingsocietyora residential complex.
50. 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 recognized sporting event;
(c) recognized sporting event;
(d) planetarium,
where the consideration for right to admission to the events or places as referred to
in items (a), (b), (c) or (d) above is not more than Rs 500 per person.
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Chapter 6: Concept of Composition Scheme
Section 10 of CGST Act provides for a composition scheme to taxable persons. The
provisions are discussed below:
• Tax payment under this scheme is an option available to the registered taxable
person.
• Permission can be given by the proper officer of Central or State Government.
• GST council recommendation is necessary.
• Conditions and restrictions would be prescribed.
• Aggregate turnover of the taxable person in the preceding financial year should have
been less than Rs.1 crore. The limit has been increased to Rs.1.5 crore effective from
1st April 2019.
• In case of special category states, the threshold limit increased to Rs. 75 lakh from
Rs.50 lakh earlier vide notification no. 46/2017-CT dated 13.10.2017.
• The taxable person opting for the scheme would be required to pay specified amount
in lieu of tax.
• Rate of tax in the case of
o A manufacturer, 1% (0.5% of CGST & 0.5% of SGST/UTGST) of the turnover in
a State/Union territory during the year is the amount payable in lieu of tax.
o 5% (2.5% of CGST and 2.5% SGST/UTGST) of the turnover in a State/Union
territory in case of supply of food and beverages.
o In any other case other than service providers, 1% (0.5% of CGST & 0.5 of
SGST/UTGST) of the turnover in a State/Union territory during the year is the
amount payable in lieu of tax in any other case.
o In case of other service providers, option of paying 6% (3% CGST & 3% SGST)
could be opted if turnover is not exceeding Rs.50 lakh in a financial year.
• The person who opts to pay 1% being manufacturer or trader or 5% being a service
provider into supply of food or beverage could have supply of services (other
services) subject to condition that value does not exceed 10%of turnover in a State or
Union territory in the preceding financial year or five lakh rupees, whichever is
higher. This is a big relief who provides nominal services along with trading or
manufacturing goods. Tax should be paid at normal rate on such services.
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• Once permission is granted, the eligibility would be valid unless permission is
cancelled under law or the taxable person becomes ineligible.
• No such permission shall be granted to a taxable person unless all the registered
taxable persons, having the same PAN as held by the said taxable person, also opt to
pay tax under composition scheme.
• Form GST CMP-01 and GST CMP-02 has to be filed electronically for opting
composition scheme. The due date for opting is extended till 31 March 2018 vide
notification no. 45/2017-CT dated 13.10.2017.
• The composition dealer has to file quarterly return in FORM GSTR-4 before 18th of
quarter ending, for the month of July to September the due date to file the return is
15/11/2017 vide notification no. 41/2017-CT dated 13.10.2017 further the due date is
extended till 24.12.2017 vide notification no 59/2017-CT dated 15.11.2017.
• In case the composition scheme option is opted in second or third month of a quarter,
then such tax payer needs to file GSTR-4 for the period for which he has opted for
composition scheme. For previous pending period, the regular return to be filed.
• The scheme is not eligible for service providers except for suppliers of food may or
may not be as part of services (such as restaurants). There was a doubt as to
eligibility of scheme for those who are having service income by way of extending
deposits to banks for which interest is being received. An order No. 01/2017-CT
dated 13.10.2017 has been issued clarifying that such income representing interest or
discount would not be considered to decide on eligibility. As a result, such interest
income would not make the tax payer ineligible for composition scheme.
• If assessee wishes to continue under composition scheme he has to file FORM GST
ITC-03 within 60days from the commencement of the relevant financial year.
• The person who opts for composition from 01st October 2017 has to file FORM GST
ITC-03 within 180 days (w.e.f. 23.01.2018; for previous period - 90days specified)
from said date and he is not allowed to file TRAN-01.
• Further, who opted for composition scheme he has to file FORM GST CMP-03 (stock
details – Including goods purchased from unregistered person held by him on the
preceding date from which he opts for composition) within 90 days from the date of
which composition levy exercised.
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• The person/s who were eligible to opt out from the composition scheme, they were
required to file declaration in form GST ITC-01 to avail credit on input, input held in
semi-finished and input held in finished goods. The due date for filing such
declaration form is extended to 31.10.2017 and then to 30.11.2017 vide notification no.
44/2017-CT dated 13.10.2017 and notification 52/2017 CT dated 28.10.2017
respectively. Subsequently, in case of registered persons who have become eligible
during the months July 2017, August, 2017, September, 2017, October, 2017 and
November, 2017 to avail input tax credit had been allowed an extended time limit till
31.01.2018 to submit Form GST ITC-1.
Conditions and restrictions for composition levy-
(a) Casual taxable person and non-resident taxable person can’t opt for composition
scheme.
(b) Following goods should not be held in closing stock on the appointed day which
have not been purchased or procured as below when the option is exercised:
• 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,
(c) The closing stock held should not have purchased from unregistered dealer and if
it is purchased the same has to be paid under sub-section (4) of section 9. This
condition could be ineffective as Section 9(4) would not be operative till 31 March
2018 vide notification no. 38/2017-CT(R) dated 13.10.2017.
(d) The composition dealer should discharge tax under Section 9 (3).;
(e) The composition dealer is not engaged in the manufacture of following goods as
notified under clause (e) of sub-section (2) of section 10, during the preceding
financial year;
• 2105 0000 Ice cream and other edible ice, whether or not containing cocoa,
• 2106 9020 Pan masala and
• 24 - All Goods, i.e. Tobacco and manufactured tobacco substitutes
(f) The composition dealer 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;
and
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(g) The composition dealer shall mention the words “composition taxable person” on
every notice or signboard displayed at a prominent place at his principal place of
business and at every additional place or places of business.
No permission shall be granted to a taxable person-
(a) who is engaged in the supply of services (except food supply as part of
service such as restaurant); or
(b) who makes any supply of goods which are not leviable to tax under this Act;
or
(c) who makes any inter-State outward supplies of goods; or
(d) who makes any supply of goods through an electronic commerce operator
who is required to collect tax at source under section 56; or
(e) who is a manufacturer of Tariff heading 2105 0000 Ice cream and other edible
ice, whether or not containing cocoa, 2106 9020 Pan masala and 24 All Goods, i.e.
Tobacco and manufactured tobacco substitutes. Any other goods which would be
notified on the recommendation of the Council:
Other provisions
The permission granted to a registered taxable person shall stand withdrawn from the day
on which his aggregate turnover during a financial year exceeds seventy five lakh or one
crore rupees.
A taxable person permitted to avail the composition scheme shall not collect any tax from
the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
If the proper officer has reasons to believe that a taxable person was not eligible to pay tax
under composition scheme, such person shall, in addition to any tax that may be payable by
him under other provisions of this Act, be liable to a penalty and the provisions of section 66
or 67, as the case may be, shall apply. Principles of natural justice have to be followed
before proceeding with the demand and imposition of penalty.
Conclusion
We have examined basic concept of levy and composition levy under GST law. Businesses
would consolidate and be under the regular scheme so that their supplies to other
businesses are safeguarded with lesser cost of production due to credits on procurements.
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Composition would probably be only for supplies to final consumers with less credits on
procurements.
Chapter 7: Concept of Reverse Charge Mechanism
Background
In indirect taxation regime, the tax is collected and paid by the supplier of goods or services.
In certain cases, the recipient is made liable to pay tax as a recipient of supply of goods or
services. As the recipient is made liable to pay tax instead of supplier, this mechanism is
called as reverse charge mechanism.
The concept of reverse charge is not new and it was there even under service tax and VAT
law. Even under central excise law, buyer of molasses was liable to pay tax under reverse
charge. In VAT, the concept of reverse charge was applicable whenever goods were
purchased from unregistered dealer and in the service tax law few categories of services
were prescribed for paying tax under reverse charge. In the same manner even under GST,
certain categories of services or goods have been prescribed on which tax to be paid by
recipient or buyer.
Why is reverse charge needed?
In any economy, there are certain unorganized sectors where it may be difficult for
government to collect the tax from supplier. Furthermore, the cost of tax collection may
exceed corresponding revenue. But it may not be economically advisable to keep the sector
out of tax net. To overcome the challenges, the concept of reverse charge is introduced for
better tax coverage and compliance.
‘Reverse charge’ has been defined under section 2(98) of GST Law which means,
- On such category of supplies to be notified under section 9(3) or 9(4)of GST Act or
section 5(3) or 5(4) of IGST Act;
- The recipient of supply of goods or services;
- Is liable to pay tax;
- Instead of supplier of such goods or service.
This concept is set out in GST Law by virtue of Section 9(3) of GST Law which empowers the
central/state government to specify/notify such category of supply of goods or services on
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which tax is to be paid by the recipient of supply. All the provisions of GST Law would be
applicable to recipient as if he is the person liable to pay the tax.
Notification can be issued by the Government on recommendation of the council as to which
all the supplies the said reverse charge under 9(3) would be applicable. Few of the services
which are covered in GST are GTA, Legal service, Director services, sponsorship service and
import of service etc., which are similar to the earlier service tax law.
Exemption up to aggregate turnover of Rs. 20L / 10L
The recipient who is made liable to pay tax on inward supply of goods and / or services is
not eligible to avail the exemption upto 20L / 10L as prescribed in section 22 of the GST
Law.
Required to obtain registration:
The person who is made liable to pay tax under reverse charge is compulsorily required to
obtain registration under GST without any limit under GST Law.
Returns:
The person who is made liable to pay tax under reverse charge is required to file the returns
as prescribed under section 37 to 48.
Reverse charge in case of receipt of supply from unregistered person:
Prior to amendment in February 2019, Section 9(4) of CGST Act provided that
• 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 registered person on reverse charge basis
• 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.
Similarly, Section 5(4) of IGST Act provides for same requirement in case of inter-state
transactions.
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The liability under Section 9(4) of CGST / SGST Act and Section 5(4) of IGST Act has been
kept on hold till 30th of September, 2019 vide notification no. 22/2018-CT(R) dated
06.08.2018.
With effect from 1st February 2019, Section 9 (4) and Section 5(4) have been amended
wherein the Government may, on the recommendations of the Council, by notification,
specify a class of registered persons who shall, in respect of supply of specified categories of
goods or services or both received from an unregistered supplier, pay the tax on reverse
charge basis as the recipient of such supply of goods or services or both. In such cases, all the
provisions of this Act would apply to such recipient as if he is the person liable for paying
the tax in relation to such supply of goods or services or both. Notification no.7/2019 has
been issued to specify following categories of goods / services for levy under new Section
9(4) / Section 5 (4):
a) Supply of such goods and services or both [other than services by way of grant of
development rights, long term lease of land (against upfront payment in the form of
premium, salami, development charges etc.) or FSI (including additional FSI)] which
constitute the shortfall from the minimum value of goods or services or both
required to be purchased by a promoter for construction of project, in a financial year
(or part of the financial year till the date of issuance of completion certificate or first
occupation, whichever is earlier) as prescribed in notification No. 11/ 2017- Central
Tax (Rate), dated 28th June, 2017, at items (i), (ia), (ib), (ic) and (id) against serial
number 3 in the Table, published in Gazette of India vide G.S.R. No. 690, dated 28th
June, 2017, as amended.
b) Cement falling in chapter heading 2523 in the first schedule to the Customs Tariff
Act, 1975 (51 of 1975) which constitute the shortfall from the minimum value of
goods or services or both required to be purchased by a promoter for construction of
project, in a financial year (or part of the financial year till the date of issuance of
completion certificate or first occupation, whichever is earlier) as prescribed in
notification No. 11/ 2017- Central Tax (Rate), dated 28th June, 2017, at items (i), (ia),
(ib), (ic) and (id) against serial number 3 in the Table, published in Gazette of India
vide G.S.R. No. 690, dated 28th June, 2017, as amended.
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c) Capital goods falling under any chapter in the first schedule to the Customs Tariff
Act, 1975 (51 of 1975) supplied to a promoter for construction of a project on which
tax is payable or paid at the rate prescribed for items (i), (ia), (ib), (ic) and (id) against
serial number 3 in the Table, in notification No. 11/ 2017- Central Tax (Rate), dated
28th June, 2017, published in Gazette of India vide G.S.R. No. 690, dated 28th June,
2017, as amended.
In all these cases, promoter would be treated as recipient of goods or services for
discharging GST under RCM.
Procedural Requirements:
(a) Tax invoice shall be issued for such reverse charge payments and details to be
disclosed in GSTR-2 of the relevant month. However, a monthly consolidated invoice
can be issued for all such purchases above the exemption limit.
(b) Payment voucher shall be issued at the time of making payment to vendor. Option
of monthly consolidated voucher has not been provided like invoices.
(c) Rates and HSN codes of supplies received to be identified by receiver to compute
the tax payable thereon.
Compliance Aspects:
(a) Payment to be made in cash- All reverse charge GST payments to be madethrough
electronic cash ledger only. In other words, input tax credit cannot be utilised to
payoff reverse charge liability.
(b) ITC available in the same month-Subject to eligibility, input tax credit would be
available in the same month itselfunlike the service tax law where credit was usually
available in subsequent month.
Disclosure in returns-Only aggregate tax amounts of reverse charge transactions has to be
mentioned in GSTR-3B. Detailed information regarding supplier name, invoice number,
invoice date, invoice value, place of supply has to be disclosed in GSTR-2.
Point of time when liability arises in case of reverse charge mechanism
In case of goods
In case of supply of goods liable under reverse charge mechanism, the time of supply shall
be earliest of the following dates:
(a) the date of the receipt of goods, or
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(b) the of payment as entered in the books of account of the recipient, or the date on
which the payment is debited in his bank account, whichever is earlier
(c) the date immediately following thirty days from the date of issue of invoice by the
supplier.
Where it is not possible to determine the time of supply under clause (a), (b) or (c), the time
of supply shall be the date of entry in the books of account of recipient of supply.
In case of services
In case of supplies of services in respect of which tax is paid or liable to be paid on reverse
charge basis, the time of supply shall be the earlier of the following dates, namely-
(a) the date on which the payment as entered in the books of account of the
recipient, or the date on which the payment is debited in his bank account,
whichever is earlier, or
(b) the date immediately following sixty days from the date of issue of invoice by the
supplier:
Where it is not possible to determine the time of supply under clause (a) or (b), the time of
supply shall be the date of entry in the books of account of the recipient of supply. There is
further provision in case of ‘associated enterprises’ where the supplier of service is located
outside India, the time of supply shall be the date of entry in the books of account of the
recipient of supply or the date of payment, whichever is earlier.
Other relevant aspects:
For compliance under reverse charge mechanism, the following aspects are relevant:
a. Registration under GST is compulsory for tax payable under reverse charge basis
irrespective of threshold limit.
b. Composition scheme is not available for tax payable under reverse charge basis.
c. Input tax includes the tax payable under reverse charge basis. Hence, recipient of
goods and/or services is eligible to claim credit of tax paid by both supplier and also
recipient by himself.
d. If in any case where the goods and/or services are used partly for making taxable
supplies including zero-rated supplies and partly for making exempted supplies
than credit of tax payable on supplies under reverse charge for making exempted
supplies is not available to the recipient of goods and/or services.
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e. Aggregate turnover does not include the value of supplies on which tax is levied on
reverse charge basis.
f. The recipient of goods and/or services is liable to pay tax irrespective of fact whether
the supplier of goods and/or services is considered to be taxable person or not.
Other Concepts:
1. The inward supply of goods or services on which tax is made liable to be paid by the
recipient is not required to be included in computation of aggregate turnover which
could be relevant for audit, composition scheme option etc.
2. Even for payment of tax under reverse charge the concept of time of supply would
be applicable.
3. As per section 17 of GST Law wherein the recipient is made liable to pay the tax
under reverse charge, such turnover would be considered as exempted turnover in
the hands of supplier of goods or services. This would be relevant for computing
eligible ITC.
Chapter 8: Input Tax Credit - Eligibility, Procedure for availing
The earlier Cenvat credit scheme under central excise or service tax law was intended to be a
beneficial scheme to allow the supplier of taxable goods and/or services to avail Cenvat
credit, including on input services related to business. However, Cenvat credit rules were
placed several artificial restrictions on availment of input service credit on construction
[other than to persons engaged in taxable services of construction/works contract], motor
vehicles related credit and employee credit on expenses primarily incurred in relation to
business.
Any restrictions lead to break in the credit chain and consequent cascading effect, leading to
increase in costs of goods and services. There was aexpectation under GST that credit
connected to business would be allowed without any restrictions. However, restriction on
services or goods such as construction, rent-a-cab, construction expenses still continue in
GST as well.
Every registered taxable person who carries on any business at any place in India/ State,
shall be entitled to take credit of input tax admissible to him which shall be credited to the
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electronic credit ledger of such person. The amount of credit of IGST available in the
electronic credit ledger shall first be utilized towards payment of IGST and then for payment
of CGST or SGST, in any order. The amount of credit of CGST shall first be utilized towards
payment of CGST and the amount remaining, if any, towards the payment of IGST. The
input tax credit on account of CGST shall not be utilized towards payment of SGST.
Input Tax-2(62)
"Input tax" in relation to a taxable person, means the IGST, including that on import of
goods, CGST and SGST or UTGST charged on any supply of goods or services or both to
him and includes
a. IGST charged on import of goods
b. the tax payable under sub-section (3) and (4) of section 9;
c. the tax payable under sub-section (3) and (4) of section 5 of IGST Act;
d. the tax payable under sub-section (3) and (4) of section 9 of SGST Act; or
e. the tax payable under sub-section (3) and (4) of section 7 of UTIGST Act
f. but does not include the tax paid under composition levy;
Section 2(63) “input tax credit” means credit of ‘input tax’.
Section 2(17) - Business is defined in inclusive manner as under:
a) any trade, commerce, manufacture, profession, vocation, adventure, wageror any
other similar activity, whether or not it is for a pecuniary benefit,
b) any activity or transaction in connection with or incidental or ancillary to sub-clause
(a);
c) any activity or transaction in the nature of sub-clause (a), whether or not there is
volume, frequency, continuity or regularity of such transaction
d) supply or acquisition of goods including capital goods and services in connection
with commencement or closure of business;
e) provision by a club, association, society, or any such body (for subscription or any
other consideration) of the facilities or benefits to its members;
f) admission, for a consideration, of persons to any premises; and
g) services supplied by a person as the holder of an office which has been accepted by
him in the course or furtherance of his trade, profession or vocation
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h) activities of a race club including by way of totalizator or a license to book maker or
activities of a licensed book maker in such club; and
i) any activity or transactions undertaken by Central Government , a State Government
or any local authority in which they are engaged as public authorities;
Definition of Capital goods – Section 2(19)
“Capital goods” means goods, the value of which is capitalized in the books of accounts of
the person claiming input tax credit and which are used or intended to be used in the course
or furtherance of business;
Definition of Inputs - Section 2 (59)
“Input” means any goods other than capital goods used or intended to be used by a supplier
in the course or furtherance of business”.
Definition of Input service – Section 2 (60)
“Input service” means any service, used or intended to be used by a supplier in the course
or furtherance of business.
Section 16: Eligibility and conditions for taking input tax credit
(1) Every registered taxable person can avail credit of input tax charged on any supply of
goods or services to him which are used or intended to be used in the course or furtherance
of his business and the said amount shall be credited to the electronic credit ledger of such
person subject to such conditions and restrictions as may be prescribed and within the time
and manner specified.
(2) Registered person shall not be entitled to the credit of any input tax in respect of any
supply of goods or services to him unless,
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this
Act, or such other taxpaying document(s) as may be prescribed;
(b) he has received the goods or services or both;
For the purpose of this clause, if the goods are delivered by the supplier to recipient or any
other person on the direction of such registered person acting as an agent or otherwise,
before during the movement of goods either by way of transfer of documents of title to
goods or otherwise, then it shall be deemed that the registered person received the goods.
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The services are deemed to be received where the services are provided by the supplier to
any person on the direction of and on account of such registered person
(c) the tax charged in respect of such supply has been actually paid to the account of the
appropriate Government, either in cash or through utilization of input tax credit admissible
in respect of the said supply; and
(d) he has furnished the return under section 39:
Where goods received in lots: Where the goods against an invoice are received in lots or
instalments, the registered taxable person shall be entitled to take credit upon receipt of the
last lot or instalment.
When recipient has not paid amount towards supply of service/Goods + tax within 180
days:
Where a recipient fails to pay to the supplier of goods /services / both other than those
supplies on which tax payable under reverse charge basis, the amount towards the value of
supply of services along with tax payable thereon within a period of 180 days from the date
of issue of invoice by the supplier, an amount equal to the input tax credit availed by the
recipient shall be added to his output tax liability, along with interest thereon, in the manner
as may be prescribed.
Recipient shall be entitled to avail the input tax credit on payment made by him towards the
value of supplies along with tax to the supplier. For this purpose, interest paid becomes cost
to the taxpayer.
However, the payment to the supplier within 180 days condition would not be applicable
for the amount added to the taxable value under section 15(2)(b) of CGST Act, 2017. In other
words, such amount added to the taxable value would be considered as deemed to have
been paid for this provision.
(3) No claiming depreciation under IT act on capital goods: Where the registered taxable
person has claimed depreciation on the tax component of the cost of capital goods under the
provisions of the Income Tax Act, 1961, the input tax credit shall not be allowed on the said
tax component.
Eg:
Plant & machinery of Rs 10,000
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Add: Tax
Total
Less: Depreciation (10%)
+1000
11000
-1100
Total 9900
In the above example ITC cannot be availed on the tax component i.e., Rs 1000
(4) Time limit:A registered person shall not be entitled to take input tax credit in respect of
any invoice or debit note for supply of goods or services after furnishing of the return for the
month of September following the end of financial year to which such invoice or invoice
relating to such debit note pertains or furnishing of the relevant annual return, whichever is
earlier. For FY 2017-18, the time limit was extended till the due date of filing the GST returns
for the month of March 2019 as a special case.
Section 17 - Apportionment of credit and blocked credits
(1) Goods and or services used partly for business and other purpose: Where the goods
and/or services are used by the registered taxable person partly for the purpose of any
business and partly for other purposes, the amount of credit shall be restricted to so much of
the input tax as is attributable to the purposes of his business.
(2) Goods and or services used partly for taxable including zero rated supplies and partly
for exempt supplies: Where the goods and / or services are used by the registered taxable
person partly for effecting taxable supplies including zero-rated supplies under this Actor
under the IGST Act, 2016 and partly for effecting exempt supplies under the said Acts, the
amount of credit shall be restricted to so much of the input tax as is attributable to the said
taxable supplies including zero-rated supplies.
Exempt supplies shall include supplies on which recipient is liable to pay tax on reverse
charge basis, transaction in securities, sale of land and sale of building. These things would
be considered as exempted supply only for the purpose of apportionment of credits.
“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 (Section 2(47));
For this purpose, the expression ''value of exempt supply'' would not include the value of
activities or transactions specified in Schedule III, except those specified in paragraph 5 of
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the said Schedule. Therefore, by virtue of this explanation, the credits relating to high-sea
sale transactions, sale from warehouse, merchanting transactions from February 2019
onwards.
A banking company or a financial institution including a non-banking financial
company, which is engaged in supplying services by way of accepting deposits, extending
loans or advances shall have the option to either given under (2) above, or avail of, every
month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods and
input services in that monthand the rest shall lapse.
The option once exercised as above shall not be withdrawn during the remaining part of
the financial year.
Further, the tax payer is required to follow the procedure provided in Rule 42 with respect
to common inputs / input services and Rule 43 with respect to common capital goods as
prescribed in CGST Rules, 2017.
Apportionment of ITC w.r.t common inputs and input services
The apportionment of ITC arises in a situation wherein tax payer is engaged in both taxable
as well exempted supplies. Further rule 42 of CGST Rules, 2017 prescribes method to arrive
at ITC which is in proportion to the exempted supply and such ITC would be added to
Electronic Liability Register of the tax payer.
Rule 42, first requires the tax payer to bifurcate his ITC transactions in the following manner:
T: Total input tax credit involved on inputs and input services of a tax period
T1: Inputs and input services intended to be used exclusively for the purposes other than
business.
T2: Inputs and input services intended to be used exclusively for effecting exempted
supplies.
T3: Blocked credits under section 17(5) of CGST Act, 2017
C1: The amount of input tax credit credited to Electronic Credit Ledger of registered person
[T-(T1+T2+T3)]
T4:Inputs and input services intended to be used exclusively for effecting other than
exempted supplies but including Zero rated supplies.
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C2: is the common input tax credit involved in inputs and input services used for both
taxable and exempted supplies – C2 = C1-T4
D1: Amount of ITC attributable towards exempted supplies (to be added to Electronic
Liability Register of tax payer) –
D1 = (E/F)*C2
E = the aggregate value of exempt supplies during the tax period
F = the total turnover in the State of the registered person during the tax period
C2 = common ITC on inputs and input services
If case the aggregate turnover of exempted or taxable supply is not available for any tax
period, then the tax payer is required to consider the turnover of such tax period wherein
both E and F is available.
Further the computation done as above for each tax periods for CGST/SGST/IGST/UTGST
and again the said computation is required to be done at the end of the year and in case
excess ITC availed, then the same is required to be payable with interest.
Further, if there is any input and input services which are used commonly for both taxable
and exempted supplies, in such situation the tax payer is required to pay 5% of C2.
Note: Effective from 1st April 2019, certain amendments made to rule 42 with respect to
availment of credits in case of construction services. Readers are suggested to refer the
changes to the extent relevant.
Apportionment of ITC w.r.t common capital goods
Rule 43 of CGST Rules, 2017 prescribes methodology to avail the ITC on common capital
goods used for both exempted and taxable supplies. The method provided in the said rule is
as follows:
- The ITC on the common capital goods would be credited to Electronic Credit Ledger
- The life of the capital goods would be considered as 5 years.
- Total ITC on common capital goods should be divided by 60 months, Ex: Total ITC is
Rs.60,000/- is to be divided by 60 months – accordingly monthly credit would be
Rs.1000/-
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- The ITC attributable to exempted supplies is required to add to Electronic Liability
Register. I.e., Rs.1000*exempted turnover / Total turnover
- This formula is required to applied for the subsequent 60 months and each month
how much ever attributable to exempted turnover is required to be paid along with
interest.
W.e.f. 23.01.2018, for the purposes of Rule 42 and Rule 43 of the CGST Rules, 2017, the
aggregate value of ‘Exempt Supplies’ is to exclude:
- Value of supplies specified in Notfn 42/2017-Integrated Tax (Rate) dated 27.10.2017.
(Supply of Services having place of supply Nepal or Bhutan)
- the value of services by way of accepting deposits, extending loans or advances in so
far as the consideration is represented by way of interest or discount, except in case
of 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; and
- the value of supply of services by way of transportation of goods by a vessel from
the customs station of clearance in India to a place outside India.
Input tax credit shall not be available in respect of the following:
(a) Motor vehicles for transportation of persons having approved seating capacity of not
more than thirteen persons (including the driver), except when they are used further
supply of such motor vehicles; or transportation of passengers; or imparting training on
driving such motor vehicles;
(aa) vessels and aircraft except when they are used for further supply of such vessels or
aircraft; ortransportation of passengers; orimparting training on navigating such vessels;
orimparting training on flying such aircraft;for transportation of goods;
(ab) services of general insurance, servicing, repair and maintenance in so far as they relate
to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
However, the ITC in respect of such services would be available-
(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa)
are used for the purposes specified therein;
(ii) where received by a taxable person engaged-
(I) in the manufacture of such motor vehicles, vessels or aircraft; or
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(II) in the supply of general insurance services in respect of such motor vehicles,
vessels or aircraft insured by him;
(b) The following supply of goods or services or both-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic
and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to
in clause (a) or clause (aa) except when used for the purposes specified therein, life
insurance and health insurance:
The ITC in respect of such goods or services or both would be available where an
inward supply of such goods or services or both 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 center; and
(iii) travel benefits extended to employees on vacation such as leave or home travel
concession:
The input tax credit in respect of such goods or services or both shall be available, where it is
obligatory for an employer to provide the same to its employees under any law for the time
being in force.Ex: Providing canteen facility with food is the obligation of the employer in
case of factories having employees exceeding 250 numbers under Factories Act 1948.
(c) works contract services when supplied for construction of 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 received by a taxable person for construction of an immovable
property on his own account, other than plant and machinery, even when used in course or
furtherance of business;
For the purpose of the above clause, the word “construction” includes re-construction,
renovation, additions or alterations or repairs, to the extent of capitalization, to the
immovable property.
(e) goods or services on which tax has been paid under section 9;
(f) goods or services used for personal consumption;
(g) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;
and
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(h) any tax paid in terms of sections 67, 89 or 90.
(5) The Central or a State Government may, by notification issued in this behalf, prescribe
the manner in which the credit referred to in sub-sections 17(1) and (2)above may be
attributed.
‘Plant and Machinery’ means apparatus, equipment, machinery, pipelines,
telecommunication tower fixed to earth by foundation or structural support that are used for
making outward supply and includes such foundation and structural supports but excludes
a.Land, building or any other civil structures
b. Telecommunication tower
c. Pipelines laid outside the factory premises
Section 18 - Availability of credit in special circumstances
(a) Credit to person who applied and got registration within 30 days from when liable for
registration: A person who has applied for registration under the Act within 30 days from
the date on which he becomes liable to registration and has been granted such registration
shall, subject to such conditions and restrictions as may be prescribed, be entitled to take
credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock on the day immediately preceding the date from which he
becomes liable to pay tax under the provisions of this Act.
The details of the credit would be required to be submitted by way of declaration in Form
ITC-01. In case of registered persons, who have become eligible during the months of July,
August, September, October and November 2017, the due date for filing Form ITC-01 had
been extended till 31.01.2018.
(b)Voluntary registration: A person, who takes voluntary registration shall, subject to such
conditions and restrictions as may be prescribed, be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in semi-finished or finished goods held
in stock on the day immediately preceding the date of grant of registration.
(c) Person ceases to pay composition levy tax: Where any registered taxable person ceases
to pay tax under section 10, he shall, subject to such conditions and restrictions as may be
prescribed, be entitled to take credit of input tax in respect of inputs held in stock, inputs
contained in semi-finished or finished goods held in stock and on capital goods on the day
immediately preceding the date from which he becomes liable to pay composition tax.
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The credit on capital goods shall be reduced by such percentage points as may be prescribed
in this behalf
(d) When exempt supplies become taxable: Where an exempt supply of goods or services
by a registered taxable person becomes a taxable supply, such person shall, subject to such
conditions and restrictions as may be prescribed, be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in semi-finished or finished goods held
in stock relatable to such exempt supply and on capital goods exclusively used for such
exempt supply on the day immediately preceding the date from which such supply becomes
taxable.
The credit on capital goods shall be reduced by such percentage points as may be prescribed
in this behalf.
(2) A taxable person shall not be entitled to take input tax credit under sub-section (1), in
respect of any supply of goods and /or services to him after the expiry of one year from the
date of issue of tax invoice relating to such supply.
(3) Change in constitution: Where there is a change in the constitution of a registered
taxable person on account of sale, merger, demerger, amalgamation, lease or transfer of the
business with the specific provision for transfer of liabilities, the said registered taxable
person shall be allowed to transfer the input tax credit that remains unutilized in its books of
accounts to such sold, merged, demerged, amalgamated, leased or transferred business in
the manner prescribed.
(4) Switch over from normal scheme to composition scheme of paying tax: Where any
registered person who has availed of input tax credit switches over as a taxable person for
paying tax under section 10 or, where the goods and/ or services supplied by him become
exempt, he shall pay an amount, by way of debit in the electronic credit or cash ledger,
equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock and on capital goods, reduced by such
percentage points as may be prescribed, on the day immediately preceding the date of such
switch over or, as the case may be, the date of such exemption.
After payment of such amount, the balance of input tax credit, if any, lying in his electronic
credit ledger shall lapse.
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(5) The amount payable under sub-section (1) shall be calculated in such manner as may be
prescribed.
(6) In case of supply of capital goods or plant and machinery, on which input tax credit has
been taken, the registered taxable person shall pay an amount equal to the input tax credit
taken on the said capital goods or plant and machinery reduced by the percentage points as
may be specified in this behalf or the tax on the 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, the taxable
person may pay tax on the transaction value of such goods.
Taking input tax credit in respect of inputs sent for job work – Section 19
(1) The “principal” referred to in section 143 shall, subject to such conditions and
restrictions as may be prescribed, be 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 their 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 (b) of sub-section (1) of section 143 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:
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, be
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
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goods are directly sent to a job worker for job-work without their 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 their 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 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
Manner of distribution of credit by Input Service Distributor – Section 20
(1) The Input Service Distributor shall distribute, in such manner as may be prescribed, the
credit of CGST as CGST or IGST and IGST as IGST or CGST, by way of issue of a prescribed
document containing, inter alia, the amount of input tax credit being distributed or being
reduced thereafter, where the Distributor and the recipient of credit are located in different
States. (CGST ACT)
(2) The Input Service Distributor may distribute the credit subject to the following
conditions, namely:
a. the credit can be distributed against a prescribed document issued to each of the
recipients of the credit so distributed, and such document shall contain details as
may be prescribed;
b. the amount of the credit distributed shall not exceed the amount of credit available
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 only amongst such recipient(s) to whom the input service
is attributable and such distribution shall be pro rata on the basis of the turnover in
a State of such recipient, during the relevant period, to the aggregate of the turnover
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of all such recipients to whom such input service is attributable and which are
operational in the current year, during the said relevant period;
e. the credit of tax paid on input services attributable to all recipients of credit shall be
distributed amongst such recipients and such distribution shall be pro rata on the
basis of the turnover in a State 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.
Explanation 1 – For the purposes of this section, the “relevant period” shall be-
a. if the recipients of the credit have turnover in their States in the financial year
preceding the year during which credit is to be distributed, the said financial year; or
b. if some or all recipients of the credit do not have any turnover in their States in the
financial year preceding the year during which the credit is to be distributed, the last
quarter for which details of such turnover of all the recipients are available, previous
to the month during which credit is to be distributed.
Explanation 2 - For the purposes of this section, ‘recipient of credit’ means the supplier of
goods and / or services having the same PAN as that of Input Service Distributor.
Explanation 3 – For the purposes of this section, ‘turnover’ means value of turnover,
reduced by the amount of tax, duty or tax levied underentry 84 and 92A of List I of seventh
schedule and entry 51 & 54 of List II of the said schedule of the Constitution
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 21 resulting in excess distribution of credit to one or more recipients of
credit, the excess credit so distributed shall be recovered from such recipient(s) along with
interest, and the provisions of section 73 or 74, as the case may be, shall apply mutatis
mutandis for effecting such recovery.
Conclusion
The credit under GST was expected to be available as long as goods/ services used in or in
relation to business. The carrying forward of the old restrictions in the GST law means that
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to some extent the old case laws would all be revisited. In future it is expected that the
restriction on credits would be done away in slow pace.
Chapter 9: Valuation provision with examples
Introduction
Once the levy, classification and the nature of transaction is ascertained, the next process
would be to identify the value of goods or services or both on which GST is to be paid. The
value of goods or services or both is very essential and critical under GST law. In this
chapter, we have discussed the important concepts relating to GST valuation.
What is the value of taxable supply?
Section 15 of CGST Act, 2017 deals with value of goods or services or both and as per said
section ‘transaction value’ would be the value on which GST is to be discharged by the tax
payer. As per this section, transaction value is the price actually payable or paid for the
supply of goods or services or both. To consider price charged as transaction value, the
following conditions are required to be fulfilled:
1) There should be supply of goods and /or services
2) The price actually paid or payable
3) Where the supplier and the recipient are not related
4) Price is the sole consideration
The concept of valuation provided in CGST Act, 2017 would also applies to SGST, UTGST
and IGST.
Section 15 of CGST Act, 2017 also provides certain inclusions and exclusions from the ambit
of transaction value. For example, the transaction value shall not include refundable deposit,
discount allowed before or at the time of supply which are linked to such supply of goods or
services or both.
Transaction value shall INCLUDE following:
a. any taxes, duties, cesses, fees and charges levied under any law for the time being in force other
than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Service Tax
Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the
supplier;
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Comments:
The transaction value should not include the taxes, duties, cesses, fees and charges
levied under SGST/UTGST/IGST/Compensation cess. However, any other taxes paid
any other law is required to be included in the transaction value. If the vendor collects
NCCD or any other taxes other than GST, such taxes is also forms part of transactional
value.
b. any amount that the supplier is liable to pay in relation to such supply but which has been
incurred by the recipient of the supply and not included in the price actually paid or payable for
the goods or services or both;
Comments:
Any amount paid by the recipient which is the obligation of the supplier to incur such
expenses to provide his supply of goods or services or both. In other words, the
recipient engages third party for supplying certain goods or services which are essential
for the supply made by the supplier but such cost is incurred by the recipient. In this
example, the obligation to meet such expenses was on supplier but paid by the buyer.
Therefore, these costs are to be included in the cost of transaction value.
c. incidental expenses, including commission and packing, charged by the supplier to the recipient
of a supply and any amount charged for anything done by the supplier in respect of the supply of
goods or services or both at the time of, or before delivery of the goods or supply of the services;
Comments:
As per this clause any costs incurred by the supplier at or before supply made is liable
to be included in the transaction value. Example: cost of transportation, packing etc.,
incurred by the supplier for supplying goods are to be included in the transaction value
of goods. Any expenditure incurred or any amount is charged from the buyer for
wherever the reason as result of supply would be includable in transactional value.
d. interest or late fee or penalty for delayed payment of any consideration for any supply; and
Comments:
In this clause, the amount recovered by the buyer/recipient in the name of interest or
late fee or penalty for delay in receipt of consideration. If such amount is recovered the
same shall be included in the value of transaction value.
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However, the question arises is the interest or penalty or late fee is collected post supply
of goods. Hence, whenever supply amount is received that would be considered as time
of supply to discharge the applicable GST on the same.
e. subsidies directly linked to the price excluding subsidies provided by the Central government and
State governments;
Explanation – for the purposes of this sub-section, the amount of subsidy shall be included in the
value of supply of the supplier who receives the subsidy.
Comment:
In this clause, the subsidies received which are directly linked with the price of supply
of goods or services or both are to be included in the transaction value. However, there
is limited exclusion provided in the inclusion towards subsidies provided by Central
and State Govt. in other words, the subsidy provided by the Central and State Govt. is
not required to be included in the transaction value.
Transaction value shall NOT INCLUDE the following:
Any discount which is given:
1) Before or at the time of the supply provided such discount has been duly recorded in the invoice
issued in respect of such supply; and
2) after the supply has been effected, if:
a) such discount is established in terms of an agreement entered into at or before the time of such
supply and specifically linked to relevant invoices; and
b) 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
As per the above referred clause, any discount which is recorded on face of the invoice and
provided at or before supply is to be reduced from the transaction value. Ex: trade discount.
If any discount is provided post supply of goods or services or both, then such discount is
required to be linked with the supply made earlier. In such a situation the discount excluded
from the transaction value, subject to that the credit note is to be raised for the same by the
supplier and recipient is required to reverse/pay the attributable ITC on such discount.
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For the purpose of claiming deduction towards discounts provided post sale for payment of
GST, agreement plays an important role. Any discounts allowed which are not as per the
terms would be ineligible for deduction benefit. Therefore, it is suggested to include a
discount clause in all agreements / purchase order / quotation / invoices without fail. This
would make a significant difference in case the customers are final consumers as they would
not be availing the credits.
In case the transaction value is not ascertainable as explained above, then reference to be
made to CGST Rules, 2017 related to valuation aspect. Let us examine in what circumstances
CGST rules w.r.t valuation is required to be referred.
- In case price is not the sole consideration, then transaction value concept fails and
accordingly CGST rules are required to be examined
- In case the supply of goods or services or both are between related party;
- In case the consideration is received partly in money and partly in kind;
- Supply between principal and agent, which is considered as deemed supply as per
schedule I
In all the above situations, one is required to examine the CGST rules relevant to valuation.
The valuation rules prescribed in the CGST Rules, 2017 are discussed in details in the
forthcoming paragraphs.
Valuation in case where consideration is not wholly in money
Rule 27 deals with the situation where consideration is not, not wholly in money, in such
case the value of the supply would be the
- The open market value of such supply.
- If case open market value is not available, then the value of supply would be the
sum total of consideration in money and equivalent money value of nonmonetary
consideration, only if such value is known at the time of supply.
- If value is not identifiable as stated above, then the valueof supply of goods or
services or both of like kind and quality.
- If not determinable in above three methods, then to be determined as per Rule 30 or
31 of CGST Rules, 2017
Value in case transaction between distinct or related persons
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This situation is addressed in Rule 28 of CGST Rules, 2017. The value of supply between
different establishments of same person or between related persons would be open market
value, or the value of supply of goods or services of like kind or quality if the open market
value is not available. However, where the recipient is eligible for full input tax credit, the
value declared in the invoice would be deemed to be open market value of such supply
Valuation of transaction between agent and principal
Rule 29 of CGST Rules, 2017 provides valuation with respect to the transaction between
agent and principal. As per the said Rule value would be the open market value or at the
option of the supplier, ninety percent of the price charged by the goods of the like kind and
quality by the recipient to his customer, not being a related person and where the goods are
intended for the further supply by recipient.
Valuation based on cost
If the valuation cannot be ascertained in the above-mentioned rules, in such situation one
should refer to Rule 30 of CGST Rules, 2017. As per the said rule the value shall be one
hundred and ten percent of the cost of production or manufacture or cost of acquisition of
such goods or cost of provision of such services.
Residual method for determination of value:
Rule 31 of CGST Rules, 2017 provides residual method in case the value cannot be
determined under any previous rules, the same shall be determined using reasonable means
consistent with the principles and general provisions of section 15 of GST Act and the
valuation rules. Further, a supplier of services may opt for this rule, disregarding the rule
for valuing supply by cost construction method.
Valuation in case of lottery, betting, gambling and horse racing
Rule 31A of CGST Rules, 2017 (inserted vide Notification no. 03/2018 – CT dated 23.01.2018)
provides the valuation to be adopted in the following specified cases:
Sr.No Scenario Valuation mechanism
A Supply of lottery
a) Lottery run by State Govts Higher of:
i) 100/112 of face value of ticket OR
ii) price as notified in the Official
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Gazette by the organising State
b) Lottery authorised by State
Govts
Higher of:
i) 100/128 of face value of ticket OR
ii) price as notified in the Official
Gazette by the organising State
B Supply of actionable claim (in
the form of chance to win in
betting, gambling or horse
racing in a race club)
100% of the face value of the bet or the
amount paid into the totalisator
Determination of value in respect of certain supplies
Rule 32 provides method of valuation for certain type of supplies, the supplies which were
under certain abatements under the earlier law is prescribed.
1. Supply of services in relation to purchase or sale of foreign currency including money
changing;
a. Currency, when exchanged from or to Indian rupees-
i. The value shall be equal to the difference in the buying rate or the selling
rate and RBI reference rate multiplied by the total of units of currency.
ii. If RBI reference rate for currency is not available the value shall be 1% of
the gross Indian rupee of the transaction.
iii. If currencies exchanged not Indian rupees the value shall be equal to 1% of
the lesser of the Indian Rupee equivalent of each currency exchanged.
2. At the option of supplier of services, the value in relation to supply of foreign currency
shall be deemed to be
(a) 1% of gross amount of currency exchanged- up to 1 lakh subject to
minimum amount of Rs. 250
(b) Rs. 1000 and ½% of gross amount of currency exchanged exceeding 1 lakh
and 10 lakh
(c) Rs. 5500 and 1/10th% of gross amount of currency exchanged for an
amount exceeding 10lakh subject to maximum of Rs. 60,000/-
Once the above option is opted shall not be withdrawn during the remaining
part of that financial year.
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3. Supply of services in relation to booking of tickets for travel by air provided by an air
travel agent, shall be deemed to be an amount calculated at the rate of 5% of basic fare
in case domestic bookings and 10% of basic fare in the case of international bookings of
passage for travel by air.
4. Value of supply of services in relation to life insurance business
(a) Gross amount charged from a policy holder reduced by the amount
allocated for investment or savings on behalf of the policy holder if such
amount is intimated to the policy holder at the time of supply of service
(b) Single premium annuity policies other than (a) 10% of single premium
charged from the policy holder
(c) In any other case 20% of premium charged from the policy holder in the
first year and 12.5% of premium charged from policy holder in subsequent
year.
5. Where a taxable supply is provided by a person dealing in buying and selling of second
hand goods i.e. used goods as such or after such minor processing which does not
change the nature of the goods and where no input tax credit has been availed on
purchase of such goods the value of supply shall be the difference between the selling
price and purchase price and where the value of such supply is negative it shall be
ignored.
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.
Further Notification No. 10/2017-CT(R;) dated 28.06.2017 wherein it is exempts the
second hand goods received by a registered person (dealing in buying and selling of
second hand goods and pays tax on margin) from unregistered person from whole of
CGST and similar notification is issued under SGST and IGST as well.
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6. The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp)
which is redeemable against a supply of goods or services or both shall be equal to the
money value of the goods or services or both redeemable against such token, voucher,
coupon, or stamp.
7. The value of taxable services provided by such class of service providers as may be
notified by the Government on the recommendations of the Council as referred to in
paragraph 2 of Schedule I between distinct persons as referred to in section 25, where
input tax credit is available, shall be deemed to be NIL.
Rule 32A: Value of supply in cases where Kerala flood cess is applicable
A new rule has been inserted to provide exclusion for considering the Kerala flood cess in
the valuation for payment of GST vide Rule 32A. Kerala flood cess proposed to be levied
from 1st August 2019 for intra-State supplies made within the State of Kerala.
Rule 33: Value of supply of services in case of pure agent
Notwithstanding anything contained in these rules, the expenditure or costs 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 conditions are satisfied, namely:-
i. the supplier acts as a pure agent of the recipient of the supply, when he makes
payment to the third party on authorization by such recipient;
ii. 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
iii. 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.
For the purposes of this rule, “pure agent” means a person who -
a) 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
procured or supplied as pure agent of the recipient of supply;
c) does not use for his own interest such goods or services so procured; and
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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 .
Example: 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
Rate of exchange of currency, other than Indian rupees, for determination of value:
Transactions undertaken in foreign currency must be translated into Indian Rupees. The rate
of exchange for the determination of the value of taxable goods shall be rate of exchange as
notified by the Board under section 14 of the Customs Act, 1962 for the date of time of
supply of such goods in terms of section 12 of the Act this amendment made vide
notification no. 17/2017-Central Tax dated 27.07.2017.
The rate of exchange for determination of value of taxable services shall be the applicable
rate of exchange determined as per the generally accepted accounting principles for the date
of time of supply of such services in terms of section 13 of the Act.
Value of supply inclusive of GST taxes:
Where the value of supply is inclusive of integrated tax or, as the case may be, central tax,
State tax, Union territory tax, the tax amount shall be determined in the following manner,
namely,-
Tax amount= (Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST,
SGST or UTGST) ÷ (100+ sum of tax rates, as applicable, in %)
ILLUSTRATION
Machine India Ltd is engaged in the manufacture of machines. It has supplied one machine
to Mr Z & co at a price of 8,50,000 (excluding taxes). Cash discount at 2% on the price of
machinery is allowed to Z & co. Further, following additional amounts are being charged
from Z & co:
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Sl
no
Particulars Amount
1 Expenses pertaining to installation and erection of the
machine at Z & Co premises(machine was permanently
fixed to earth)
30,000
2 Packing charges 12,500
3 Design and engineering charges 4,000
4 Pre-Delivery inspection charges( charged by machine
India Ltd)
1,000
5 Bought accessories supplied with the machine 8,000
M/s Z &co supplied materials worth 10,000 free of charge to machine India ltd for being
used in production of the machine.
Determine the value of the machine for the purpose for valuation under proposed GST Law
Answer:
Computation of the value:
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Particulars AMOUNT NOTE
Price of the machine 8,50,000 -
Installation and erection
expenses
30,000 1
Packing charges 12,500 2
Design and engineering
charges
4,000 3
Pre-Delivery inspection
charges( charged by machine
India L-td)
1,000 4
Bought accessories supplied
with the machine
8,000 5
Materials supplied by Z&co 10,000 6
Total 9,15,500
Less: cash discount@ 2% (18,310) 7
Transaction value 8,97,190
Notes:
1. As per sec 15(2), inclusions as per GST Law
2. As per sec 15(2)(3), incidental expenses as per GST Law
3. As per sec 15(2)(3), incidental expenses as per GST Law
4. As per sec 15(1), price charged by the supplier.
5. As per sec 15(1), price charged by the supplier.
6. As per sec 15(2)b, amount the supplier is liable to pay, but paid by the recipient on
behalf of the supplier.
As per sec 15(3)(b)(i), assuming it is declared in the invoice.
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Chapter 10:Stock transfer, Job work
What is stock transfer?
Stock transfer has not been defined in the GST law. In the common parlance, it is transfer of
goods from one place of business to another place of business of the same assessee. The
place of business may be branch offices, depots or warehouses. Further, the place of
businesses could be in the same State or different States. When goods are transferred to
branches, depots or warehouses generally consideration is not charged.
GST impact on stock transfers
In terms of section 9 of the GST law, GST is levied on all intra-State supplies of goods.
Section 7 of GST law defines ‘supply’ which includes all forms of supply of goods and/or
services 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.
However, supplies specified in Schedule I even made or agreed to be made without
consideration would be treated as supply and GST would apply.
Supply of goods or services between related persons, or between distinct person as specified
in section 10, when made in the course or furtherance of business is specified in Schedule I
of GST Law. This implies that supply of goods or services between related or distinct
persons even if made without consideration would be liable to GST.
A person shall be treated as distinct persons in respect of each registration obtained by him
whether within one State or more than one State. Hence, supplies made to another
registered unit of the same person are taxable in GST though there is no explicit
consideration. However, if the unit is located within a state and have obtained single
registration, GST would not be applicable unless separate registrations have been obtained
within same state for different business verticals. In other words, if stock transfer is
madebetween two distinct GSTN (GST Registration Number), only then GST would be
applicable,in all other cases GST would not apply.
This can be understood with the help of below diagramatical presentation of stock transfer:
GST applicable
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Pune Factory Delhi Godown
Bangalore Factory Mumbai Godown
Valuation in case of stock transfer
GST is payable on transaction value as determined under section 15 of the GST law or rules
made thereunder. In case of stock transfer, where recipient unit is eligible to avail full credit,
GST can be paid on transaction value by supplier unit.
Credits to the recipient unit
It is important to note that though the tax has been levied on stock transfer but in most of the
cases it would be revenue neutral as recipient unit would be entitled to claim the credit of
GST charged by supplier unit. The impact would be mainly around increase in cash flow.
Electronic Way Bill (E-Way Bill)
Under GST law, the tax invoice would be considered as major document for every purpose
like availment of input credit, for movement of goods etc. Although invoice is available for
movement of goods, government has introduced a concept of E-Way bill which needs to be
generated and carried during the movement of goods.
Document to be used for stock transfer
Under GST law, stock transfer is considered as deemed supply between two distinct
persons. Accordingly, while transferring the stock one should use invoice with value as per
rule 28 of CGST Rule, 2017 along with E-way bill.
E-way bill would be used in the following cases
➢ Supply
➢ Continues supply
➢ Goods sent for job work
➢ Stock transfer within state
➢ Sale on approval etc.,
GST
applicable GST not applicable
(
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Inter-state movement of rigs, tools and spares, and all goods on wheels [like cranes] between
distinct persons as specified in section 25(4) of the Central Goods and Services Tax Act, 2017
would not be treated as supply of goods. The same has been clarified vide Circular No.
21/21/2017-GST dated 22.11.2017.
In GST, the concept of having godowns or branches needs a relook especially in cases where
it was done to enable the customers to claim the local VAT credit and avoid cost of CST
which was not creditable.
Job-Work
The manufacturing industries now a days stick to their core competencies and get most jobs
done on outsourced basis. Sending of raw materials/semi-finished materials for some
manufacturing process or for completion as per the directions of principal manufacturer is
known as job work. The industries who undertake the work of job work should be aware of
the provisions under GST, so that can be compliant and not face demands of levy or excess
availment of credit.
Even the principal manufacturer should be aware of the provisions applicable for job work
not only for the purpose of enabling them to plan their processes effectively but also to cut
manufacturing costs. The job work concept available without payment of central excise duty
under Notification 214/86 has been continued under GST.
Meaning of Job work under GST
Section 2(68)-“job work” means
• any treatment or process undertaken
• by a person
• on goods
• belonging to another registered taxable person.
• Any person who does such job work would be considered as “Job Worker”.
In CCR it only covers processing on goods supplied to job worker. The above definition is
different from existing definition in CCR as it now specifies job work on goods of registered
taxable person.
Place of business:
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2(85) “place of business” includes:
(a) a place from where the business is ordinarily carried on, and includes
▪ a warehouse,
▪ a godown, or
▪ any other place where a taxable person stores his goods, provides or receives
goods and/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.
Job Work under GST
❖ Under GST, levy gets attracted on supply of goods.
❖ Therefore, normally the taxable person [who is called as principal] for job work
would have to pay applicable GST at time of supply of materials dispatched for job
work. The job worker would avail credit of tax paid by principal. Later the job
worker would clear job worked goods on payment of GST. Principal would avail
credit of GST charged by job worker and discharge GST on supply of final processed
goods.
❖ Under section 143the Principal could send material without payment of taxes and
discharge GST on the final goods which have resulted out of processing of job
worked goods received back from the job worker, subject to following prescribed
procedure in this regard.
❖ The job worker can receive the goods directly from the raw material/ component
supplier. If the goods are sent by the principle to the job worker, such goods need to
be sent under the challan which may be issued by the principal or job worker while
sending goods to another job worker.
❖ However, while sending the goods from one job worker to another job worker the
job worker needs to endorse the challan issued by the principal.
❖ The principal would engage in further processing resulting into final product. The
final product would be supplied on payment of applicable GST by the principal.
❖ Job worked goods could be sent directly from job worker premises to customer of the
principal.
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❖ The responsibility for accounting of materials and payment of tax on job worked
goods lies with the principal. Job worker would pay GST only on the processing
charges.
❖ The procedure for job work has been prescribed in Section 143and given below.
Section 143 is as under:
(1) A registered taxable person (hereinafter referred to as the “principal”) may, under
intimation and subject to such conditions as may be prescribed, send any inputs and/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, and/or capital goods, other
than moulds and dies, jigs and fixtures, or tools, within 1 year and 3 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, and/or capital goods,
other than moulds and dies, jigs and fixtures, or tools, within 1 year and 3years, 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:
The “principal” shall not supply the goods from the place of business of a job worker in
terms of clause (b) unless the said “principal” declares the place of business of the job-
worker as his additional place of business except in a case-
➢ where the job worker is registered under section 25; or
➢ where the “principal” is engaged in the supply of such goods as may be
notified by the Commissioner in this behalf.
(2) The responsibility for accountability of the inputs and/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 clause(a) of sub-section (1) or are
not supplied from the place of business of the job worker in accordance with clause (b) of
sub-section (1) within a period of 1 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.
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(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 clause(a) of sub-section
(1) or are not supplied from the place of business of the job worker in accordance with clause
(b) of sub-section (1) within a period of 3years of their 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.
(5) 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.
❖ Job work &Credit:
➢ The supplier of materials [principal] can avail credit of input tax on inputs and
capital goods sent to a job-worker for job-work.
➢ Such credit availment shall be subject to such conditions and restrictions
prescribed
➢ Credit can be availed on inputs/capital goods even if directly sent to a job
worker for job work.
➢ In such a case, the period of 1 year / 3 years shall be counted from the date of
receipt of the inputs/Capital goods by the job worker.
➢ If the inputs/capital goods are not received back within 1 year/ 3 years
respectively of being sent to job worker premises, then it is deemed as supply on
the day when the said inputs/Capital goods were sent out. The limit could be
further extended by the commissioner by 1 year in case of inputs and 2 years in
case of capital goods.
➢ Example: “A” a manufacturer located in Delhi sent inputs to Z who is a job
worker registered under section 25 of GST Actand located in Kolkata for job
work. If A receives back inputs which are being sent out for job work within 1
year from the date on which they are being sent, then it shall not be treated as
supply. If not received back within 1 year then it would be treated as inter-state
supply.
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Chapter 11: Import and Export of goods & Service
Background:
In every taxation law, exports are exempt from the payment of taxes and duties inorder to
make the export of goods or services competitive in the international market. This is based
on the globally recognized concept that taxes cannot be exported. International trade also
has to consider ironing out of the differences between countries.
Export of goods under GST
Section 2(5) of IGST law: “Export of goods” with its grammatical variations and cognate
expressions, means taking goods out of India to a place outside India;
Analysis:
a) The concept of export of goods under GST is similar to concept of export of goods
under Central Excise and Customs law also.
b) Export would not be liable to tax under GST law subject to conditions.
c) There is no requirement for receipt of foreign exchange currency in case of export of
goods.
d) Input credit related to export of goods can be availed and also can go for refund
either on inputs tax credits or IGST paid on export of goods (like rebate under
Central Excise) to the extent credit utilized for exports, also refund can be claimed on
deemed exports.
Goods:
a) Section 2(52) of GST law: “Goods’’ means every kind of movable property other
than money and securities but includes actionable claim, growing crops, grass and
things attached to or forming part of the land which are agreed to be severed before
supply or under the contract of supply;
b) Deemed Exports: As per Section 2(39) the concept of “deemed exports” has been
discussed insection 147. Thegovernment, on the recommendations of the council,
notify certain supplies of goods as deemed exports, where goods supplied does not
leave India and consideration for such supply is received either in Indian Rupees or
in any Convertible Foreign Exchange, if such goods are manufactured in India.
Export of Service under GST:
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As per Section 2(6) of the IGST Act 2017, the supply of any service shall be treated as “export
of service” when-
a) the supplier of service is located in India,
b) the recipient of service is located outside India,
c) the place of supply of service is outside India,
d) the payment for such service has been received by the supplier of service in
convertible foreign exchange or in Indian rupees wherever permitted by the
Reserve Bank of India, and
e) the supplier of service and recipient of service are not merely establishments
of a distinct person in accordance with Explanation 1 in section 8
Explanation: For the purposes of clause (e),
(i) a person has an establishment in India and any of his other establishment outside
India
(ii) an establishment in a state or Union territory and any other establishments
outside that state; or
(iii) an establishment in a state or Union territory and any other establishment being a
business vertical registered within a same state or Union Territory
shall be treated as establishments of distinct persons.
Analysis:
a) If any one of the conditions for export of service, is not fulfilled, then the
transaction shall not be treated as export of service, and such transaction would be
taxable to GST, either CGST& SGST/ IGST depending upon the place of supply.
b) The supplier of service shall avail the input credit related to export of service and
go for refund on input tax credit or refund on IGST paid on exports of services.
Concept of location of supplier and recipient of service:
Section 2(15) of IGST Act “location of supplier of services” means:
(i) where a supply is made from a place of business for which registration has been obtained,
the location of such place of business;
(ii) where a supply is made from a place other than the place of business for which
registration has been obtained, a fixed establishment elsewhere, the location of such fixed
establishment;
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(iii) where a supply is made from more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly concerned
with the provision of the supply; and
(iv) in absence of such places, the location of the usual place of residence of the supplier
Example:
Sl. No.
Scenario
Place of Location of
Service Provider
1 Supply of consulting services from Bangalore location of
CA firm
Bangalore
2 Supply of consulting services made from Hyderabad
location of CA firm
Hyderabad
3 Where consulting services assignment obtained by
Gurgaon location of multi-location CA firm, but part of
consulting services provided from Vizag [where a
supply is made from more than one establishment]
Gurgaon[the location
most directly concerned
with the provision of the
supply]
Section 2(14) of IGST Act “location of recipient of services” means:
(i) where a supply is received at a place of business for which registration has been obtained,
the location of such place of business;
(ii) where a supply is received at a place other than the place of business for which
registration has been obtained, a fixed establishment elsewhere, the location of such fixed
establishment;
(iii) where a supply is received at more than one establishment, whether the place of
business or fixed establishment, the location of the establishment most directly concerned
with the receipt of the supply; and
(iv) in absence of such places, the location of the usual place of residence of the recipient;
General Points:
➢ As per Section 2(23) of IGST Act, definition of Zero Rated Supply assigned in
section 16.
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➢ It has been clarified that the Export shall be treated as “Zero Rated Supply” and
credit related to same can be availed and claim refund of the same..
Section 16 of the IGST Act 2017, contains the provisions relating to zero-rated supplies:
➔ “Zero rated supply” means any of the following supplies of goods or services,
namely –
(a) export of goods or services or both or
(b) supply of goods or services to a SEZ developer or an SEZ unit.
➔ Subject to provisions of section 17(5) of CGST Act credit of input tax may be
availed for making zero-rated supplies, notwithstanding that such supply may
be an exempt supply.
➔ A registered person making zero rated shall be eligible to claim refund under
one of the following two options, namely –
(a) a registered person may supply goods or services under bondor letter of undertaking,
subject to such conditions, safeguards and procedure as prescribed in notification 37/2017
and circular 8/2017 in this regard, without payment of IGST and claim refund of unutilized
input tax credit in accordance with provisions of section 54 of the CGST Act, 2017 read with
rules made thereunder;
(b) a registered person may supply goods or services, subject to such conditions, safeguards
and procedure as may be prescribed in this regard, on payment of IGST and claim refund of
IGST paid on goods or services supplied in accordance with provisions of section 54 of the
CGST Act, 2017 read with rules made thereunder.
Procedure for export without payment of IGST-
Government has issued circular 8/2017 to address the concerns of exporters and simply the
procedures in respect of exports without payment of IGST. Following are salient features in
respect of letter of undertaking vide circular 8/2017-
(a) Eligibility: All registered persons who intends to supply goods/services without
payment of IGST has to execute LUT instead of Bond. However, persons who has
been prosecuted for any offence under GST law where amount of GST exceeds 250
lakhs shall not be eligible for this benefit.
(b) Procedure: Letter of undertaking needs to be furnished to jurisdictional AC/DC on
letter head of the registered person in format prescribed in RFD-11. Self-declaration
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by the exporter to the effect that he has not been prosecuted also needs to be
submitted. Letter of undertaking shall be valid for whole financial year in which it
issued.
(c) Bond with bank guarantee: Registered person who has been prosecuted under GST
for any offence where amount of GST exceeds 250 lakhs would be required to issue
bond with bank guarantee in case he wishes to export goods/services without
payment of IGST. The quantum of bank guarantee would be 15% of the bond
amount.
(d) Supplies to SEZ unit/developer: Such supplies are considered as Zero rated supplies
u/s 16 of IGST Act. Registered persons can supply goods/services to SEZ
unit/developer without payment of IGST by issuing letter of undertaking/bond.
(e) Merchant exports:The government has issued notification 41/2017- Integrated Tax
(Rate) dated 23rd October 2017 and 40/2017 – Central Tax (Rate) dated 23rd October
2017 to benefit merchant exporters. The IGST notification prescribes that supply to
merchant exporter in case of inter-State is 0.1% and CGST notification prescribes
0.05% CGST and 0.05% SGST.
The following procedures to be followed for charging concessional rate:
1. Registered supplier supplies the goods on a tax invoice.
2. Registered recipient export the goods within a period of ninety days from the
date of issue of tax invoice by the registered supplier.
3. Recipient shall indicate the GSTIN and tax invoice number of the registered
supplier in the shipping bill or bill of export.
4. Recipient shall registered with Export promotion Council or a commodity Board
recognised by Dept of commerce.
5. Recipient shall place an order on registered supplier for procuring goods at
concessional rate.
a. Copy of Order shall be submitted to jurisdictional tax officer of the
registered supplier.
6. Recipient shall move the goods from place of registered supplier
a. Directly to the port, Inland container deport, Airport or Land customs
station from where the goods are exported.
b. To registered warehouse from where the said goods shall be move to the
port Inland container deport, Airport or Land customs station.
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7. Registered recipient after export of goods shall provide copy of shipping bill or
bill of export containing details of GSTIN and tax invoice of the registered
supplier.
a. 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
If Goods are not exported within a period of ninety days from the date of issue of
tax invoice the supplier shall not be eligible for deemed export benefit.
Aggregate supplies
1. Registered recipient intends to aggregate supplies from multiple registered suppliers
and then export,
a. Goods shall move from registered supplier premised to registered warehouse
b. After aggregation, the registered recipient shall move the goods to the port.
2. In the above case recipient should endorse receipt goods on the tax invoice and also
obtain acknowledgment of receipt of goods in the registered warehouse from the
warehouse operator.
a. Endorsed tax invoice and acknowledgment shall be provided to the
registered supplier and jurisdictional tax officer of such supplier.
3. Registered recipient after export of goods shall provide copy of shipping bill or bill
of export containing details of GSTIN and tax invoice of the registered supplier.
a. 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
If Goods are not exported within a period of ninety days from the date of issue of
tax invoice the supplier shall not be eligible for deemed export benefit.
Further, Government has enabled deemed export option for supplies to EOU / EHTP / STP
/ BTP units in terms of Notification No. 48/2017-Central Tax dated 18.10.2017, the following
procedure and safeguards are prescribed –
1. The recipient EOU / EHTP / STP / BTP unit shall give prior intimation in a
prescribed proforma in "Form–A" (appended herewith) bearing a running serial
number containing the goods to be procured, as pre-approved by the Development
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Commissioner and the details of the supplier before such deemed export supplies
are made. The said intimation shall be given to –
• The registered supplier;
• The jurisdictional GST officer in charge of such registered
supplier; and
• Its jurisdictional GST officer.
2. The registered supplier thereafter would supply goods under tax invoice to the
recipient EOU / EHTP / STP / BTP unit.
3. On receipt of such supplies, the EOU / EHTP / STP / BTP unit shall endorse the
tax invoice and send a copy of the endorsed tax invoice to –
➢ the registered supplier;
➢ the jurisdictional GST officer in charge of such registered supplier;
and its jurisdictional GST officer.
4. The endorsed tax invoice would be considered as proof of deemed
export supplies by the registered person to EOU / EHTP / STP / BTP unit.
5. The recipient EOU / EHTP / STP / BTP unit shall maintain records of such
deemed export supplies in digital form, based upon data elements contained in
"Form-B" (appended herewith). The software for maintenance of digital records shall
incorporate the feature of audit trail. While the data elements contained in the Form-
B are mandatory, the recipient units would be free to add or continue with any
additional data fields, as per their commercial requirements. All recipient units are
required to enter data accurately and immediately upon the goods being received in,
utilized by or removed from the said unit. The digital records should be kept
updated, accurate, complete and available at the said unit at all times for verification
by the proper officer, whenever required.
A digital copy of Form – B containing transactions for the month, shall be provided to the
jurisdictional GST officer, each month (by the 10th of month) in a CD or Pen drive, as
convenient to the said unit.
The above procedure and safeguards are in addition to the terms and conditions to be
adhered to by a EOU / EHTP / STP / BTP unit in terms of the Foreign Trade Policy, 2015-20
and the duty exemption notification being availed by such unit.
The Supplier can go for refund of tax charged to recipient in the Tax invoice subject to
production of following conditions:-
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a) Re-warehousing certificate from the buyer of the goods that the goods have
been received in their factory.
b) Undertaking from the buyer that they have not availed the Credit on these
goods.
c) Undertaking from the buyer that they would not go for refund of GST on this
tax invoice.
Conclusion:
GST shall not be charged on goods/services exported from India. In case the supply of
goods qualifies as export out of India as per the Place of Supply Rules the transaction shall
be treated as “zero-rated supply”.The supplier shall be allowed to export the goods/services
without charging any tax and can avail the CGST/SGST and IGST credits paid on inputs
and input services. If he is unable to utilize the credit then he can go for refund of credits as
per section 54 of Central GST Act, 2016
In a nutshell, imports and exports are going to be covered in IGST. Exports would be zero
rated and refund of ITC shall be allowed. IGST as well as Basic Custom Duty, shall be
leviable on imports of goods and or services.
Chapter 12:Maintenance of Books and records, e-way bills;
Documentation
Introduction:
In recent decades, maintenance of books of accounts has become very important. Initially the
books of accounts were maintained manually, in the present tax regime the same is
preferred to be maintained in computerized system. In the GST model, every transaction is
to be recorded in online and even the records are generally maintained in computerized
system.
Accounts and Records:
Section 35 of the GST law deals with accounts and records. As per said section, every
registered person shall keep and maintain his books of accounts at his principal place of
business (as mentioned in the certificate of registration).
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In case the taxable person has more than one place of business as mentioned in certificate of
registration, then accounts related to each place of business should be maintained in
respective places.
In the said section option to keep and maintain such accounts, records and other particulars
in electronic form is also provided. Accordingly, under GST regime the registered person
has the option to maintain the records in the electronic form.
If the registered person has not maintained the books of accounts properly, then the
commissioner recording the reason in writing permit such person to maintain accounts in
such manner as may be prescribed.
Audit of books of accounts
According to Section 35(5) read with Rule 80(3), if the registered person’saggregate turnover
crosses prescribed limit of Rs.2 crore, then he shall get his accounts audited by a chartered
accountant or a cost accountant and such audited report along with annual return and a
reconciliation statement, reconciling the value of supplies declared in the return furnished
for the year with the audited annual financial statement is to be submitted to proper officer
under GST.
Period of retention of accounts:
The registered person is required to maintain books of accounts for a period of 72 months
from the date of filing of annual return for the year pertaining to such accounts and records.
In other words, the books of accounts are required to be maintained for a period of 6 years
from the date of filing of Annual return, it means totally the accounts need to be maintained
for 7.5 years of time.
In case of any pending appeal or revision or any other proceeding before Appellant
authority or tribunal or court, then the registered person shall maintain books of accounts
for one year after disposal of such case.
Records to be maintained by a registered person:
In terms of section 35 of the GST, the taxable person should keep the books for the following
transactions:
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1. Production or manufacture of goods
2. Inward and outward supply of goods/service,
3. Stock of goods,
4. Input tax credit availed,
5. Output tax payable and paid,
6. Such other particulars as may be prescribed (refer Rule 56 to Rule 58 of CGST Rules)
Apart from the above, the following list may also require to be maintained for other
purposes:
1. Records for receipt of goods and services from registered person
2. Records for receipt of goods and services from non-registered person + applicability
of reverse charge (if any).
3. Import of goods bill of entry and other related documents.
4. Returns, payment challans, debit note and credit notes.
5. Financial statements.
6. Electronic records.
7. Bank statements and pay-in slips
8. Records for manner of computation of GST liability.
9. Records for availment and utilisation of credit.
10. Daily sales record along with sales invoices.
11. GST reconciliation statement.
12. Electronic records of:-
a. tax liability register
b. credit register
c. cash ledger
13. Agreements.
14. Job work register.
15. Security Register.
Why record keeping is important?
Record keeping would help the registered person to face any kind of departmental audit or
objections. Further, they would be providing proper clarification and supporting for their
actions, if records are kept properly.
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Apart from the above, record keeping is important for better internal control and also it
helps in running the business smoothly.
The record keeping would also help the registered person in preparation of budget and
planning or restructuring of any of the transactions. The MIS reports prepared based on the
records maintained would help the management in taking purpose decisions.
Further the record keeping is compulsory as per as the records mentioned in the section 35
of the GST law.
In the GST regime each and every activity is to be done through online and hence record
keeping is essential and more important is avoiding any kind of crush of data etc.,
In recent decades, maintenance of records has been shifted from system of manual recording
to system of maintaining records in computerised mechanism.
There are many advantages as well as disadvantages in maintenance of records in
computers.
E-Way Bill
Introduction:
After introduction of GST for quick and easy movement of goods, check posts across the
country abolished. However, to have a check on movement of goods, concept of E-way bill
introduced all over country.Earlier each State had different document to be carried on
movement of goods. In GST a uniform E-way bill concept has been introduced.
Movement of goods
Movement of goods happens when goods is moved from one place to another.When the
goods are being moved the person in charge of the conveyance shall carry the invoice raised
by the supplier to the recipient.The person so in charge shall carry bill of supply in case
where GST is not applicable.The person so in charge shall carry delivery challan in case
where there is merely the movement of goods and supply /payment of goods does not
happen immediately.
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Along with the above stated documents the person in charge shall carry another document
as termed in Rule 138A of CGST Rules, 2017 called E-Way bill.
Documents and devices to be carried by a person-in-charge of a conveyance
The person-in-charge of a conveyance shall carry—
a. the invoice or bill of supply or delivery challan, as the case may be; and
b. a copy of the e-way bill or the e-way bill number, either physically or mapped to
a Radio Frequency Identification Device embedded on to the conveyance in such
manner as may be notified by the Commissioner [rule 138A(1) of CGST Rules]
Commissioner may, by notification, require a class of transporters to obtain a unique Radio
Frequency Identification Device and get the said device embedded on to the conveyance and
map the e-way bill to the RFID prior to the movement of goods. Presently, in Uttar Pradesh,
the system of RFID has been introduced.
Why E-Way Bill is required?
Required under Section 68 of CGST Act:
- To carry with him such documents and such devices as may be prescribed;
- Documents carried shall be validated in such manner as may be prescribed;
- Produce document/ device for verification on interception of vehicle.
Under GST, removal of physical barriers by states has speeded up the movement of goods.
To ensure that goods are not clandestinely removed & sold.
Individual e-way bill system is causing undue hardship in the Inter-State movement of
goods - bringing in an early all India system of e-way Bill has become a necessity.
Requirements for generating of e-way bill
Registered person who causes movement of goods of consignment value exceeding
Rs.50,000/-
i. in relation to a supply; or
ii. for reasons other than supply; or
iii. due to inward supply from an unregistered person,
shall, before commencement of such movement,
i. Furnish information relating to the said goods as specified in
ii. Part A of form GST EWB-01, electronically along with such other information on the
common portal.
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E-way bill should be generated even if value of consignment is below Rs 50,000 –
i. If sending material inter-State for job work (either by principal or job worker)
ii. For Inter-state movement of handicraft goods under exemption if turnover is below
Rs.20/10 lakhs and enjoying exemption under Notification No. 32/2017
If the goods are transported through e-commerce operator or courier agency, on an
authorisation received from the consignor, the information in part A of Form GST EWB-01
may be furnished by e-commerce operator or courier agency.
Generating an e-way bill
Registered person or transporter may at his option may generate and carry the e-way bill
even if the value of the consignment is less than Rs.50,000/-
If movement is caused by an unregistered supplier to a registered recipient, either in his
own conveyance or a hired one or through a transporter, he or the transporter may, at their
option, generate the e-way bill in FORM GST EWB-01
However, movement shall be deemed to be caused by recipient, where the recipient is
known at the time of commencement of the movement of goods.
Generating an e-way bill if transport in own vehicle or hired vehicle or by rail, vessel or
air
E-way bill to be generated whether goods are transported by consignor or the recipient as
the consignee, whether in his own conveyance or a hired one or by railways or by air or by
vessel
E-way bill to be generated in form GST EWB-01 electronically on the common portal after
furnishing information in Part B of form GST EWB-01
Where the goods are transported by railways or by air or by vessel, the information in Part
A & Part B of FORM GST EWB-01 shall be furnished by the consignor or the recipient as
consignee
Generating an e-way bill by transporter
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If e-way bill not generated and goods handed over to a transporter for transportation by
road, the registered person shall furnish information relating to transporter in Part B of form
GST EWB-01 on the common portal.
E-way bill to be generated by the transporter on the common portal on the basis of the
information furnished by the registered person in Part A of form GST EWB-01
If the consignor or the consignee has not generated form GST EWB-01 then the transporter
shall generate e-Way Bill on the basis of invoice or bill of supply or delivery challan, as the
case may be,
Multiple consignments in one conveyance - Transporter may generate a consolidated e-way
bill in FORM GST EWB-02 portal prior to movement of goods.
E-way Bill generated is valid all over India
Generation of E-way bill - Bill To ship To
Who need to raise E-way bill in case of Bill To Ship To transaction?
Three persons are involve in case of Bill To Ship To transaction,
i. A – person who actually buys the goods, but orders to deliver the goods to C – A
raised invoice on C for supply of goods
ii. B – person who actually sells the goods A and raises invoice on A, but delivers the
goods to C
iii. C – person actually received the goods.
In this situation two tax invoices are to be raised
Invoice 1 – Supplier B on A (Buyer)
Invoice 2 – Deemed supplier A on C (actual buyer)
In this situation Mr. A or B can raise the E-way bill before movement of goods
Relaxation if goods transported for a distance less than 50 Km
Start of the Journey: If distance between place of business of the consignor to the place of
business of the transporter is up to 50 km within state for further transportation, then the
supplier or the transporter may not furnish the details of conveyance in Part B.
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End of the journey: If distance between the place of business of the transporter finally to the
place of business of the consignee is up to 50 km within the state, then the details of
conveyance may not be updated in the e-way bill.
Cancellation of e-way bill
An e-way bill generated under rule 138 of CGST Rules,
a. may be cancelled electronically on the common portal;
b. within 24 hours of generation of such e-way bill;
c. In case the goods are either not to be transported or are not transported as per the
details furnished in the e-way bill, the e-way bill.
An e-way bill cannot be cancelled if it has been verified in transit in accordance with the
provisions of rule 138B
Validity of e-way bill generated
Sl.No.
Distance Validity period
1. Upto 100 Kms One day (24 hours)
2. For every 100 Kms and part thereof One additional day
Sl.No.
Distance Validity period
1. Upto 20 Kms ( Over dimensional cargo) One day (24 hours)
2. For every 20 Kms and part thereof One additional day
Commissioner may, by notification, extend the validity period of e-way bill for certain
categories of goods as may be specified therein.
Under circumstances of exceptional nature, if the goods cannot be transported within the
validity period of the e-way bill, the transporter may extend the validity period after
updating the details in part B of Form EWB-01
Period of Validity shall be counted from the time at which the e-way bill has been generated
and each day shall be counted as twenty-four hours
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Acceptance or Rejection of e-Way Bill by other party
If recipient is registered, the details of e-way bill generated against him shall be made
available on the common portal, where he shall communicate his acceptance or rejection of
e-Way bill.
Where recipient does not communicate his acceptance or rejection “within seventy-two
hours”, it shall be deemed that he has accepted the said details.
Exemption from generating E-way Bill
Rule 138(14) provides exemption from generating E-way bill:
i. The goods being transported are specified in Annexure (see below)
ii. The goods are being transported by a non-motorised conveyance;
iii. The goods are being transported from the port, airport, air cargo, complex and land
customs station to an inland container depot or a container freight station for
clearance by Customs, and
iv. In respect of movement of goods within such areas as are notified under rule
138(14)(d) of the GST Rules of the concerned State.
v. Note: Thus, each State has been delegated powers to grant exemptions from
provisions relating to e-way bill.
vi. Goods specified in notification no. 2/2017-CT(R) except De-oiled cake.
vii. Where the goods are being transported upto a distance of twenty kilometres (20
km) from the place of the business of the consignor to a weighbridge for
weighment or from the weighbridge back to the place of the business of the said
consignor subject to the condition that the movement of goods is accompanied by a
delivery challan issued in accordance with rule 55.
viii. Where empty cargo containers are being transported.
Invoice Reference Number (IRN) can be obtained by supplier electronically
A registered person (supplier) may obtain an Invoice Reference Number (IRN) from the
common portal by uploading on the portal, a tax invoice issued by him in form GST INV-1
Transporter can produce GST INV -1 for verification by the proper officer in lieu of the tax
invoice.
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Such number shall be valid for a period of thirty days from the date of uploading.
If such IRN is obtained, it is not necessary for transporter to carry physical copy of tax
invoice, unless specifically ordered.
Transporter can upload details if vehicle detained for more than 30 minutes
If a vehicle has been intercepted and detained for a period exceeding 30 minutes, the
transporter may upload the said information in FORM GST EWB-04 on the common portal
Note: It is not clear what action would be taken and by whom.
Penalty in case of detention or seizure of goods (in transit)
When owner of the goods comes forward for payment of tax and penalty:
a. Taxable goods;
i. Applicable tax + 100% of tax payable as penalty
b. Exempted goods;
i. 2% of value of goods; or
ii. Rs.25,000/-; whichever is less
When owner of the goods does not come forward for payment of tax and penalty
a. Taxable goods
i. Applicable tax + 50% of the value of goods reduced by tax amount paid as
penalty
b. Exempted goods
i. 5% of value of goods; or
ii. Rs.25,000/-; whichever is less
Documentation
Documents are essential for movement of goods and also for determining the time of supply
of goods or services or both. Hence it is important to understand the documents which are
to be carried while goods are in transit. This chapter contains the discussions on the
documents which are essential for movement of goods or provision of services or both.
The issuance of tax invoice for supply of goods or services or both is mandatory and the tax
invoice is required to be carried while goods are in movement along with E-way bill (to the
extent made applicable). The tax invoice is mandatory not only for movement of goods, even
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for the purpose of availment of input tax credit. Further the provisions of E-way bill have
been postponed and it would be introduced nationwide from a date to be notified in the
future and till such time the state law procedures would be followed in lieu of E-way bill.
How to raise a proper Invoice?
The Assessee is required to raise the tax invoice as per the provisions of section 31 of the
CGST Act, 2017 and such tax invoice shall contain the following contents:
i. Name, Address and GSTIN No of supplier of goods or service;
ii. Consecutive serial No not exceeding 16 characters, the invoice number may
contain alphabets or numerals or special characters i.e., dash or slash;
iii. Date of its issue;
iv. Details of person to whom the invoice is billed (receiver);
v. Details of person to whom the goods are shipped (consignor);
vi. If recipient is unregistered and value of the taxable supply is fifty thousand or
more, address of the recipient and address of delivery is compulsory;
vii. HSN code of Goods / Service;
viii. Description of goods or services;
ix. Quantity/Unit in case of Goods;
x. Total value of supply of goods or services or both taking into account discount
or abatement;
xi. Taxable value
xii. Rate of tax
xiii. Tax amount
xiv. Place of supply in case of inter-state trade or commerce;
xv. Whether the tax is payable on reverse charge basis; and
xvi. Signature or digital signature of the supplier of his authorised representative;
Note 1: There may be initial period of relaxation from HSN for any class of registered
persons as may be specified by way of notification. As of now, if the aggregate turnover is
less than 1.5 crores HSN is not required to be provided in the tax invoice.
Note 2: Revised invoice or debit note or credit note, shall contain the same details of tax
invoice. However, the word revised invoice shall be indicated and the reference of original
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invoice on which behalf the present revised invoice, credit note or debit note raised is
required to be mentioned.
Note 3: if any goods are transported in semi or completely knocked down condition, the
original invoice should be sent along with last consignment.
Note 4: Vide Notification n. 45/2017-Central tax dated 13.10.2017 provided the benefit to
raise invoice-cum-bill of supply in case of supply of taxable and exempted goods to single
recipient.
The format of the invoice may be as follows:
In case of exports and supply to SEZ:
The invoice shall contain the declaration “Supply meant for Export/Supply to SEZ Unit or
SEZdeveloper for authorised operations on payment of integrated tax” or “Supply meant for
export/supply to SEZunit or SEZdeveloper for authorised operations under bond or letter of
undertaking without payment of integrated tax” as the case may be and shall contain the
following details
i. Name and address of the recipient;
ii. Address of delivery; and
iii. Name of the country of destination;
Time limit for issue of invoice:
In case of supply of taxable services, the invoice shall be issued within 30 days from the date
of supply of service. In case of banking or financial institutions the invoice shall be issued
within 45 days.
In case of inter-branch billing between distinct persons of an insurer or a banking company
or a financial institution including a non-banking financial company, or a telecom operator,
or any other class of supplier of services as may be notified, may issue invoice before or at
the time when the supplier records the same in the books of account or before the expiry of
the quarter during which the supply was made.
Manner of issuing invoice:
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Bill of Supply:
A registered taxable person supplying exempted goods or services or both or paying tax
under composition scheme shall issue bill of supply instead of tax invoice.
The bill of supply shall contain the following details:-
a. name, address and GSTIN of the supplier;
b. Consecutive serial No not exceeding 16 characters, the invoice number may contain
alphabets or numerals or special characters i.e., dash or slash;
c. date of its issue;
d. name, address and GSTIN/ Unique ID Number, if registered, of the recipient;
e. HSN Code of goods or Accounting Code for services;
f. description of goods or services;
g. value of goods or services taking into account discount or abatement, if any; and
h. signature or digital signature of the supplier or his authorized representative.
Receipt Voucher:
If the assessee has received any advance payment with respect to any supply of goods or
services or both, then he shall issue a receipt voucher containing the following details:
a. name, address and GSTIN of the supplier;
Supply of goods ( 3 copies)
Original for recipient
Duplicate for transporter
Triplicate for supplier
Supply of service ( 2 copies)
Original for recipient
Duplicate for supplier
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b. Consecutive serial No not exceeding 16 characters, the invoice number may contain
alphabets or numerals or special characters i.e., dash or slash;
c. date of its issue;
d. name, address and GSTIN or UIN, if registered, of the recipient;
e. description of goods or services;
f. amount of advance taken;
g. rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
h. amount of tax charged in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
i. place of supply along with the name of State and its code, in case of a supply in the
course of inter-State trade or commerce;
j. whether the tax is payable on reverse charge basis; and
k. signature or digital signature of the supplier or his authorized representative:
Provided that where at the time of receipt of advance,
l. The rate of tax is not determinable, the tax shall be paid at the rate of eighteen per
cent;
m. The nature of supply is not determinable, the same shall be treated as inter-State
supply;
Refund voucher:
The refund voucher would be issued if no service is provided after receipt of advance
payment and on which tax is already paid. Based on this refund voucher the supplier can
claim back the tax already paid on the advance payment received. The refund voucher shall
contain the following details:-
e. name, address and GSTIN of the supplier;
f. Consecutive serial No not exceeding 16 characters, the invoice number may contain
alphabets or numerals or special characters i.e., dash or slash;
g. date of its issue;
h. name, address and GSTIN or UIN, if registered, of the recipient;
i. number and date of receipt voucher issued in accordance with provisions of sub- rule
5;
j. description of goods or services in respect of which refund is made;
k. amount of refund made;
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l. rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
m. amount of tax paid in respect of such goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
n. whether the tax is payable on reverse charge basis; and
o. signature or digital signature of the supplier or his authorized representative.
Payment voucher:
The registered person, who is liable to pay tax under section 9(3) and 9(4), shall issue a
payment voucher at the time of making advance payment to supplier. This is very important
from the point of time of supply of goods or service and for payment of taxes. The payment
voucher shall contain the following details:
a. name, address and GSTIN of the supplier;
b. Consecutive serial No not exceeding 16 characters, the invoice number may contain
alphabets or numerals or special characters i.e., dash or slash;
c. date of its issue;
d. name, address and GSTIN of the recipient;
e. description of goods or services;
f. amount paid;
g. rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
h. amount of tax payable in respect of taxable goods or services (central tax, State tax,
integrated tax, Union territory tax or cess);
i. place of supply along with the name of State and its code, in case of a supply in the
course of inter-State trade or commerce; and
j. signature or digital signature of the supplier or his authorized representative.
Tax invoice in special cases:
1. An ISD shall invoice / debit note / credit note for distribution of credit and it shall
contain the following details:
a. name, address and GSTIN of the Input Service Distributor;
b. Consecutive serial No not exceeding 16 characters, the invoice number may
contain alphabets or numerals or special characters i.e., dash or slash;
c. date of its issue;
d. name, address and GSTIN of the recipient to whom the credit is distributed;
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e. amount of the credit distributed; and
f. signature or digital signature of the Input Service Distributor or his authorized
representative:
2. W.e.f. 23.01.2018, a registered person having the same PAN and State code as an Input
Service Distributor, has been provided a mechanism to transfer accumulated credit of
common input services to its Input Service Distributor by way of issuance of an invoice
or, as the case may be, a credit or debit note containing specified details [as enlisted in
Rule 54(1A) of CGST Rules, 2017]. Value of invoice shall be the same as the value of
common services.
3. In case the supplier is a GTA supplying services in relation to transportation of goods
by road in a goods carriage, the said supplier shall issue a tax invoice or any other
document, shall contain the following details:
a. gross weight of the consignment;
b. name of the consignor and the consignee;
c. registration number of goods carriage in which the goods are transported;
d. details of goods transported;
e. details of place of origin and destination;
f. GSTIN of the person liable for paying tax whether as consignor, consignee or
goods transport agency.
The goods transported without invoice:
In the following situations the goods can be transported without issue of invoice:
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, or
d. such other supplies as may be notified by the Board.
However, delivery challan is required to be issued and the same shall contain the following
details:
a) serially numbered not exceeding sixteen characters,
b) date and number of the delivery challan,
c) name, address and GSTIN of the consigner, if registered,
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d) name, address and GSTIN or UIN of the consignee, if registered,
e) HSN code and description of goods,
f) quantity (provisional, where the exact quantity being supplied is not known),
g) taxable value,
h) 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,
i) place of supply, in case of inter-State movement, and
j) signature.
The details of the delivery challan shall be declared in the E-way.
Conclusion
It has to be ensured that importance of formats and filling is communicated to the persons
raising the invoices/documents. Further the tax invoice and others shall contain the details
as prescribed.
The receiver should obtain proper tax invoice for availing credit. Registered person needs to
ensure that the formats are built in the accounting software to ensure that appropriate
documents are raised at the appropriate time.
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Chapter 13:Payment and filing of Monthly Returns- GSTR 1,
GSTR 3B, GSTR 4 and penalties for non-compliance
Payment under GST
The tax payer registered under GST need to ascertain his liability on month on month basis
(IGST, CGST, SGST and UTGST) and deposit the same before filing the return prescribed
under section 39 of CGST, Act. The GST liability can be paid through cash or input tax
credit.
Under GST the payment process is through online and following three ledgers plays
important role,
- Electronic cash ledger
- Electronic credit ledger
- Electronic tax liability ledger
The above three ledgers of each tax payers would be maintained at common portal and also
required to be reconciled with books of accounts.
Section 49 of the CGST Act, provides provision for payment of tax, interest, penalty and
other amounts. The payments need to be made by creating a challan in PMT-06 in the GST
portal by providing the details of amount payable towards CGST/SGST/IGST/UTGST/
interest/fee/ penalty/other amounts. Such challan would be valid only for 15 days. Further
the Act provided the 4 major heads and under each major heads 5 minor heads and payment
made under each head need to adjusted against same head and cross adjustment is not
permissible.
The amount paid under section 49 shall be credited to the electronic cash ledger of such tax
payer.
In case there is any balance in the electronic cash ledger or credit ledger after payment of
amount payable under the Act or rules may apply for refund of such balance in accordance
with provisions of section 54 of the Act.
The manner of maintaining electronic cash and credit ledgers are prescribed in the CGST
Rules, 2017
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Electronic Cash Ledger
As per rule 87 of the CGST Rules, 2017 the electronic cash ledger shall be maintained in
FORM GST PMT-05 for each registered taxable person on the Common Portal (GSTN
server). The cash deposit made by the tax payer towards payment of tax, interest, penalty,
fee or any other amount would be credited in the cash ledger and such cash ledger would be
debited as and when the amount is utilized to discharge respective liabilities.
The amount deducted at source or collected at source (TDS and TCS) on account of a taxable
person shall get credited to this electronic cash ledger.
The refund claimed by the tax payer would be debited in cash ledger and any rejection of
claim would be automatically credited to cash ledger.
The cash deposit can be made through any of the following modes:
i. Internet Banking through authorized banks;
ii. Credit card or Debit card after registering the same with the Common Portal;
iii. National Electronic Fund Transfer (NEFT) or Real Time Gross Settlement (RTGS)
from any bank;
iv. Over the Counter payment (OTC) through authorized banks for deposits up to ten
thousand rupees per challan per tax period, by cash, cheque or demand draft.
Restriction of Rs. 10,000/- is not applicable to Government department/ recovery
agents/officer authorised in this regard.
The cash deposited through above modes would be used for making any payment towards
tax, interest, penalty, fees or any other amount payable under the provisions of this Act or
the rules made thereunder.
If any unregistered person making payment shall obtain a temporary identification number
from the authorised officer and could deposit using Form GST PMT-5.
A Challan Identification Number (CIN) would be generated on successful credit of the
amount to the concerned government account and such CIN shall be indicated in the
challan.
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When due to any technical fault, CIN is not generated, then the assessee may represent
electronically in FORM GST PMT-07.
Electronic Credit Ledger
Any claim of input tax credit (CSGT, SGST & IGST) on supply of goods and or services shall
be credited to the electronic credit ledger maintained in Form GST PMT-02. Further, such
electronic credit ledger shall be debited on utilization for making tax payment under the
provisions of the GST Act. The input tax credit available in credit ledger can be used for
payment of output tax under CGST or IGST Act.
The manner of utilization of IGST/CGST/SGST credits lying as input tax credit in electronic
credit ledger would be as under:
a) IGST balance shall first be utilized to pay IGST liability and the balance if any
thereafter may be utilized towards payment in the order of CGST, SGST and UTGST.
b) CGST credit balance shall be utilized first towards payment of CGST liability and
balance if any could be used to pay the IGST liability.
c) SGST credit shall be utilized towards payment of SGST liability, the balance if any
thereafter could be utilised for payment of IGST.
d) UTGST credit shall be utilized towards payment of UTGST liability, the balance if
any thereafter could be utilised for payment of IGST.
e) The input tax credit on account of CGST shall not be utilized towards payment of
SGST. Similarly, the credit on account of SGST shall not be used for payment of
CGST.
Unutilized balance in Cenvat credit ledger can be claimed as refund by a registered taxable
person at the end of any tax period at the option of tax payer in case of exports or where the
credit has accumulated on account of rate of tax on inputs being higher than the rate of tax
on output supplies. The amount to the extent of the refund claim shall be debited in the said
ledger and on account of rejection; the credit shall be re-credited to the electronic credit
ledger by the proper officer by an order made in Form GST PMT-03.
A registered person shall, upon noticing any discrepancy in his electronic credit ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the
common portal in FORM GST PMT-04.
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Electronic Tax Liability Register
All liabilities of a taxable person under GST Act shall be recorded and maintained in an
electronic register called Electronic Tax Liability Register (ETLR). Rule 85 of the CGST rules
provides that the ETLR shall be maintained in Form GST PMT-01 on the Common Portal.
The electronic tax liability register of a registered taxable person shall be debited by:
(a). The amount payable towards tax, interest, late fee or any other amount payable as per
the returns filed.
(b). The amount of tax, interest, penalty or any other amount payable as determined by a
proper officer in pursuance of any proceeding under the Act.
(c). The amount of tax and interest payable as a result of mismatch of input tax credit.
(d). Any amount of interest that may accrue from time to time.
Electronic tax liability register shall be credited as and when the taxable person discharges
his liability either through Electronic Credit Ledger or Electronic Cash Ledger.
The following amounts shall be payable by debiting electronic cash ledger:-
a. The amount deducted under section 51; or
b. The amount collected under section 52; or
c. The amount payable under section 9(3) or 9(4); or
d. The amount payable under section 10; or
e. The amount payable under 5(3) or 5(4) of IGST Act; or
f. The amount payable under section 7(3) or 7(4) of UTGST Act; or
g. Any other amount payable towards interest, penalty, fee or any other amount under
this Act, IGST Act.
A Unique Identification Number (UIN) shall be generated at the common portal for each
debit or credit to the electronic cash or credit ledger, as the case may be. Further, UIN
relating to discharge of any liability shall be indicated in the corresponding entry in the
electronic tax liability register.
Interest on delay payment:
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In case the assessee fails to pay the tax or any part thereof to the Government within the
prescribed period under GST Act, he is liable to pay the same along with interest. Interest
would be computed from the day succeeding the day on which such tax was due to be paid.
Interest in case of mismatch of input tax credits:
In case the assessee claims an undue or excess input tax credit under sub-section 42(10) or
claims an undue or excess reduction in output tax liability under section 43(10), then such
excess or undue claim or such excess or undue reduction shall require to be paid along with
interest under section 50(3) of the Act.
The interest rate is as notified under Notification 13/2017 Central Tax dt.28.06.2017 is as
under
SL.No. Section Rate of interest
1. Sub-section (1) of section 50 18
2. Sub-section (3) of section 50 24
3. sub-section (12) of section 54 6
4. Section 56 6
5. Proviso to section 56 9
Returns under GST
Introduction:
Return is a statement of specified particulars relating to transactions undertaken by taxable
person during a particular period. It is a mode of communication between taxpayers and
department. There is a statutory obligation on each taxable person to furnish the return
within the prescribed due dates.
Return has been defined in section 2(86) of the GST Law, “return means any return
prescribed or otherwise required to be furnished by or under this Act or rules made
thereunder”.
A taxable person has a legal obligation:
(i) To declare his tax liability and credits availed during the period covered under
return;
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(ii) To furnish details about the taxes paid; and
(iii) To disclose such other aspects as may be applicable as per return format
(iv) File correct and complete return within stipulated time frame.
Importance of Return in GST Laws
GST is a self-assessed destination-based taxation system. The submission and processing of
return is an important link between the taxpayer & tax administration as it’s an important
tool for:
i. Compliance verification program of tax administration;
ii. To declare tax liability for a given period;
iii. Mode for transfer of information to tax administration;
iv. Providing necessary inputs for taking policy decision;
v. Management of audit and anti-evasion programs of tax administration;
vi. Finalization of the tax liabilities of the taxpayer within stipulated period of
limitation.
Who needs to file Return in GST Regime?
Every taxable person registered under the law is required to file his return. There are
different formats of return for different categories of person i.e. supplier of goods/service,
casual taxable persons, person deducting TDS, e-commerce operators, Input Service
Distributor, Non-resident taxable person etc., each categories of person has to file return in
the format as applicable to them.
Type of various Returns/Statements and its periodicity (as originally prescribed):
Each registered taxable persons may need to furnish various type of information with the
department. These may be furnished by way of statement/returns. Following is summary of
various returns/statements to be furnished under the GST law:
❖ For Regular Dealer:-
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Form No. Frequency Due Date Details to be Furnished
Form GSTR-1
Monthly 10th of succeeding month
Furnish details of outward supplies of taxable goods and/or services affected
Form
GSTR -2A
Monthly 11th of succeeding month
Auto-populated in common portal – wherein details of outward supply as furnished by supplier in GSTR-1 is communicated to recipient
Form GSTR-2
Monthly 15th of succeeding month
Details of inward supplies of taxable goods and/or services for claiming input tax credit.
From GSTR - 1A
Monthly Accept or reject by 17th of next month
The details of modification, added, corrected or deleted done in GSTR-2 by recipient is communicated to supplier.
Form GSTR-3
Monthly 20th of succeeding month
Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax
Form GSTR-3B
Monthly 20th of succeeding month
As per Rule 61(5) whenever time limit of GSTR-1 and 2 is extended return in form GSTR-3B is to be filed by the registered taxpayer.
Further for the said period GSTR-1, 2 &3 is also required to be filed and details furnished under GSTR-3B would be compared with GSTR-1, 2 & 3 filed for the said period. Any short payment is required to be paid along with interest.
Form GST ITC-04
Quarterly 25th of the month succeeding the quarter
The ITC-04 need to be submitted by the principal who sending the raw material to job worker to undertake any process on such goods.
Presently the due date for the period July 2017 to Sept 2018 is 31.12.2018 – extended vide notification no. 59/2018-CT dated 26.10.2018
Note 1: GSTR-2 and GSTR-3 is suspended for an indefinite period. Presently the taxpayer is
required to file GSTR-1 and GSTR-3B regularly.
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Note 2: The late fees for failure to furnish GSTR-1/GSTR-5/GSTR-5A has been reduced to
the amount as specified below: [Notification No 04/2018-Central Tax, Notification No
05/2018-Central Tax, Notification No 06/2018-Central Tax respectively, dated 23.01.2018]
- In case of NIL return: Rs. 10 per day
- In other case: Rs 25 per day
❖ For Composite Tax Payers
Form Type Frequency Due Date Details to be Furnished
Form GSTR-4
Quarterly 18th of succeeding month
Furnish all outward supply of goods and services. This includes auto-populated details from Form GSTR-
4A, tax payable and payment of tax.
Note 3: Form GSTR 4A shall be generated based on the details furnished by vendor of
Composite dealers. This represents inward supply of composite dealer, which may be
accepted by him with or without modification. Further presently the details in table 4A of
GSTR-4 is not required to be filled by the taxpayer.
Note 4: The late fees for failure to furnish GSTR-4 has been reduced to the amount as
specified below: [Notification No 73/2017 - Central Tax dated 29.12.2017]
- In case of NIL GSTR-4 return: Rs. 10 per day
- In other case: Rs 25 per day
❖ Foreign Non- Resident Taxpayers
Form Type Frequency Due Date Details to be Furnished
Form GSTR-5
Monthly
20th of succeeding month or within 7 days after the expiry of registration
Furnish details of imports, outward supplies, ITC availed, tax paid, and closing stock
❖ Online information and database access or retrieval services
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Form Type Frequency Due Date Details to be Furnished
Form GSTR-5A
Monthly 20th of succeeding month
Service provided from a place outside India to a person in India other than a registered person.
❖ For Input Service Distributor
Form Type Frequency Due Date Details to be Furnished
Form GSTR-6
Monthly 13th of succeeding month
Furnish the details of input credit distributed
Note 1: Form GSTR-6A shall be generated based on details furnished by vendors towards
supplies made to ISD.
Note 2: Late fees for filing of GSTR-6 by due dates reduced to Rs.25 per day vide notification
no. 7/2018-Central tax dated 23.01.2018
❖ For Tax Deductor (the provisions of TDS are in operative from 01.10.2018)
Form Type Frequency Due Date Details to be Furnished
Form GSTR-7
Monthly 10th of succeeding month Furnish the details of TDS deducted
Form GSTR-7A
Monthly
TDS certificate to be made available for download
TDS Certificate – capture details of value on which TDS is deducted and deposit on TDS deducted into appropriate Govt.
❖ For E-Commerce (the provisions of TCS are in operative from 01.10.2018)
Form Type Frequency Due Date Details to be furnished
Form GSTR-8
Monthly 10th of succeeding month
Details of supplies effected through e-commerce operator and the amount of tax collected on supplies
Note: This is in addition to GSTR-1, GSTR-2 and GSTR-3 which needs to be filed by each e-
commerce operator. GSTR-8 is intended to provide details of Tax collected by E-commerce
on the supply made through its platform.
For taxable person who opts for cancellation of GST registration
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Form Type Frequency Due Date Details to be furnished
Form GSTR-10
Once
Within 3 months from the date of cancellation order.
Details of cancellation order, effective date of cancellation, details of closing stock, Amount of tax payable on such closing stock.
Taxpayers whose registration has been cancelled by the proper officer on or before September 30, 2018, shall be required to furnish the final return in Form GSTR-10 till December 31, 2018 – notified vide notification no. 58/2018-CT dated 26.10.2018
❖ Government Departments and United Nation Bodies
Return Type
Frequency Due Date Details to be furnished
Form GSTR-11
Monthly 28th of succeeding month
Details of inward supplies to be furnished by a person having UIN
Requirement to file valid return
• Return would not be accepted if return has not been filed for earlier period: A
registered taxable shall not be allowed to furnish return for a tax period if valid
return for any previous tax period has not been furnished by him.
• Return to be filed on payment of tax (set-off of liability): Every registered taxable
person, liable to furnish return, is required to pay the tax as declared in the return to
the appropriate government not later than the last date on which he is required to
furnish such return. However, if aforesaid payment is not made to the government,
then such return would not be considered as a valid return for allowing input tax
credit in respect of supplies made by such person. Payment against the monthly tax
liability would be considered as ‘paid’ only once the liability is set-off in the GST
return against such payment/input tax credit.
• Return to be filed in case of Nil Supply also: Section 39 (8) of the CGST Act, 2017
provides that every registered taxable person shall furnish a return for every tax
period whether or not any supplies of goods and/or services have been effected
during such tax period.
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• Return not to be revised: Return once filed cannot be revised by taxable person.
However, if any omission or incorrect particulars are noticed after filing of return, he
may rectify such error in the month/quarter in which error is noticed. It is to be
noted that the last date for such rectification is September or second quarter of next
financial year or date of filing of annual return, whichever is earlier. No rectification
can be made when such discovery is noticed as a result of scrutiny, audit, inspection
or enforcement activity by the tax authorities.
How to file return
There would be a GST common portal to file return. Returns in GST System could be filed
by tax payer:
✓ by himself logging on to the GST System using his own user ID & password; or
✓ through his authorized representative using the user Id & password (allotted to the
authorized representative by the tax authorities), as chosen at the time of registration,
logging on to the GST System
Return may be filed through Tax Return Preparers (TRPs) also. It is relevant to note that the
government has approved some GSPs. Access could be made to GSTN by using the
products developed by GSPs.
The return can be filed through online or offline tool provided by the GSTN. Further there
are four methods in filling the data in offline tool, the same is provided below:
- Manual entry of invoice data in the respective tables in offline tool
- Import of all table data from excel sheet provided along with offline tool
- Copy past from the excel sheet to offline tool, this process need to done for each table
of Form GSTR-1.
- Import of data from CSV file provided along with offline tool, even this need to be
done table basis.
After uploading the data into offline tool, assessee needs to verify and generate JSON file.
Once the JSON file is generated the same need to be uploaded after login into common
portal.
If any errors identified, then error report would be provided in common portal and such
error report can be opened in offline tool.
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Steps for return filling
Step-1:- The taxpayer would upload the final Form GSTR-1 return form either directly
through data entry at the GST Common Portal or by uploading the file containing the said
Form GSTR-1 return form through Apps by 10th day of month succeeding the month during
which supplies has been made. The increase / decrease (in supply invoices) would be
allowed, only on the basis of the details uploaded by the counter-party purchaser in Form
GSTR-2, which shall be communicated to supplier in Form GSTR-1A. In other words, the
supplier would not be allowed to include any missing invoices on his own after 10th day of
the month.
It is expected that GSTN may facilitate periodic (may be daily, weekly etc.) upload of such
information to minimize last minute load on the system. GSTN would facilitate offline
preparation of Form GSTR-1.
Furnishing details of outward supplies (as per original due dates)
Who Every registered person (Supplier)
When 10th of following month
Where Form GSTR 1
What Invoice wise details of all - Consolidated details of all -
1. Inter-state supplies made to
registered persons
2. Inter- state supplies made to
unregistered persons (Invoice
value more than 2.5 Lakhs)
2. State wise inter-state supplies made to
unregistered persons (Invoice value less
than 2.5 Lakhs)
3. Intra-state supplies made to
registered persons
1. Intra-state supplies made to
unregistered persons for each rate of tax
Other Points 1. The details furnished in Form GSTR 1 by the supplier shall be made
available to the recipient in,
➢ Form GSTR 4A – Compounding taxpayer
➢ Form GSTR 6A – ISD recipients
➢ Form GSTR 2A – Others
2. The said details shall be made available to the recipients only after the due
date of filing of GSTR 1
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Step-2:- GST Common Portal (GSTN) would provide information furnished by taxpayer in
the Form GSTR-2A to the recipient. Such person (recipient) is required to upload Form
GSTR-2 of based on the supply invoice details reported by the counter-party taxpayer
(supplier) received by it in Form GSTR-2A.
Step-3:- Purchasing taxpayer would accept / reject/ modify such auto-drafted provisional
Form GSTR-2A. (A taxpayer would have the option to download his provisional purchase
statement from the Portal or through Apps using Application Programming Interface (APIs)
and update / modify it off-line).
Step-4:-Purchasing taxpayer would also be able to add additional purchase invoice details in
his GSTR-2 which have not been uploaded by counter-party taxpayer (supplier) as described
in above, provided he is in possession of valid invoice issued by counter-party taxpayer and
he has actually received such supplies. All the invoices would be auto-populated in the ITC
ledger of taxpayer. The taxpayer would, however, indicate the eligibility / partial eligibility
for ITC in those cases where either he is not entitled or he is entitled for partial ITC.
Step-5:-Details furnished by recipient in Form GSTR-2 but not furnished by his counterparty
in GSTR-1 shall be communicated to the supplier in Form GSTR-1A. The supplier may
accept the changes suggested in Form GSTR-1A, fully or partially, or reject it. To the extent,
changes suggested
Furnishing details of inward supplies:
Who Every registered person (Recipient)
When 15th of following month
Where Form GSTR 2
What Invoice wise details of all
▪ Inter-state supplies received from registered or unregistered person
▪ Intra-state supplies received from registered or unregistered person
▪ Import of goods and services made
▪ Debit and credit notes, if any received from supplier
Where the recipient is able to determine the eligibility of input tax credit at
the invoice level, shall be specified by the recipient Ex: T1, T2, T3 & T4.
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Declare the quantum of ineligible input tax credit on inward supplies that
are relatable to non-taxable supplies or used for other than business
purposes and are not determined at the invoice level.
Other Points 1. The details in Form GSTR 2 shall be filled based on details contained in
Part A, B C & D of Form GSTR 2A
2. The recipient is also allowed to include details of other inward supplies
in addition to the details furnished in GSTR 2A
Step-6:-Taxpayers would finalize their Form GSTR-1 and Form GSTR-2 by using online
facility at Common Portal or using GSTN compliant off-line facility in their accounting
applications, determine the liability on their supplies, determine the amount of eligible ITC
on their purchases and then generate the net tax liability from the system for each type of
tax. Cash details as per personal ledger/ carried forward from previous tax period, ITC
carried forward from previous tax period, ITC reversal and associated Interest/Penalty,
taxes paid during the current tax period etc. would get auto-populated in the Form GSTR-3.
Who Every registered person
Excluding:
▪ Input service distributor
▪ Non-resident taxable person
▪ Compounding tax payer
▪ Person deducting tax at source
When 20th of following month
Where Form GSTR 3
What Part A On the basis of information furnished through returns in Form
GSTR 1, 2 and based on other liabilities of preceding tax periods
Part B Liability towards tax, interest, penalty, fees or any other amount
payable under the act or rules
Other Points When there is extension of time limit for furnishing details in Form GSTR 1
and 2 then monthly return shall be filed in Form GSTR 3B
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Step-7:-Taxpayers would pay the amount as shown in the draft Form GSTR-3 return
generated automatically at the Portal post finalization of activities mentioned in Step 6
above.
Step-8:-Taxpayer would debit the ITC ledger and/or cash ledger and mention the debit
entry No. in the Form GSTR-3 return and would submit the same.
Consequences of delay in filing of return: Late fee
Section 47 (1) of the CGST Act, 2017 provides that any registered taxable person who fails to
furnish the details of outward or inward supplies required under Section 37 or 38 or returns
required under Section 39 or Section 45 by the due date shall be liable to a late fee of
Rs.100/- for every day during which such failure continues subject to a maximum of
Rs.5,000/-. The late fee has been reduced to Rs. 25/- for every day and for Nil return the late
fee has been reduced to Rs. 10/- for every day.
Section 47(2) of the CGST Act, 2017 provides that any registered taxable person who fails to
furnish the return required under Section 44 (Annual Return) by the due date shall be liable
to a late fee of Rs.100/- for every day during which such failure continues subject to
maximum of an amount calculated at a quarter percent of his aggregate turnover in the state
Return Defaulter
Where a registered taxable person fails to furnish a return under Section 39 or Section 44 or
Section 45, a notice shall be issued requiring him to furnish such return within 15 days. The
notice shall be in the Form GSTR-3A that shall be issued electronically.
Conclusion
It is expected that due to online filing of returns and statements, and consequent reduced
interaction with department, delays and other issues faced by the assesses would be
substantially reduced over a period of time. Now a new single return filing system is being
introduced on trial basis from July 2019 onwards which is expected to replace current
returns / statements such as GSTR-1 / GSTR-3B etc from October 2019. There is also
proposal for generation of invoice online on the portal which could further ease the process
of filing the return.
Chapter 14: Reconciliations and issues in returns
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Importance of reconciliation
It is essential for the tax payers to reconcile the details of outward supplies, inward supplies,
credits along with books of accounts and various statement / returns filed under the GST
law. Reconciliation statements would be helpful in filing the monthly returns, finalization of
annual accounts, filing of GST annual return and audit reconciliation statement.
wouldwould Reconciliation to be undertaken on periodical basis instead of annual
reconciliation so that any rectification can be undertaken soon.
Following formats could be useful for reconciliation between various records:
DIFFERENCES IN OUTPUT TAX LIABILITY
Particulars
AS PER RETURN AS PER BOOKS DIFFERENCE
Tax.
Val
ue
IGS
T
CG
ST
SG
ST
Tax
.
Val
ue IGST CGST
SGS
T
T
a
x
.
V
a
l
u
e
I
G
S
T
CG
ST SGST
(a) Outward
Taxable
Supplies
-
-
-
-
(b) Outward
Zero Rated
Supply (Export
with IGST)
N.
A.
N.
A. N.A.
N.A
.
-
-
N.
A. N.A.
(b) Outward Nil
Rated/Exempte
d Supplies
-
-
- -
(b) Inward
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Supplies Liable
to RCM
-
-
- -
TOTAL
-
-
-
-
-
-
-
-
-
-
-
-
DIFFERENCES IN INPUT TAX CREDIT
Particulars
AS PER
RETURN AS PER BOOKS DIFFERENCE
IGS
T
CG
ST
SG
ST
IGS
T
CG
ST SGST IGST
CG
ST
S
G
S
T
(a) ITC on
Import of
Goods/Services
N.
A.
N.
A.
N.
A. N.A.
-
N.A
.
N
.
A
.
(b) ITC on
Inward Supplies
liable to RCM
-
-
-
(C) All Other
ITC
-
-
-
TOTAL
ELIGIBLE ITC
-
-
-
-
-
-
-
-
-
Less: ITC
Reversed (If
any)
NET ELIGIBLE
ITC
-
-
-
-
-
-
-
-
-
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DIFFERENCES IN PAYMENT OF TAX LIABILITY
Particulars
AS PER
RETURN AS PER BOOKS DIFFERENCE
IGS
T
CG
ST
SG
ST
IGS
T
CG
ST SGST IGST
CG
ST
S
G
S
T
Total Tax
Liability
-
-
-
Less: Payment
through Credit
~Utilization of
IGST Input
-
-
-
~Utilization of
CGST Input
-
-
-
~Utilization of
SGST Input
-
-
-
Less: Paid
through Challan
-
-
-
Net Tax
Liability
-
-
-
-
-
-
-
-
-
GSTR 3B vis-a-vis GSTR 2A &GSTR 1
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Every month, taxable registered persons have to file a summary return GSTR 3B and report
consolidated figures for sales and purchases. They are also required to compute and pay the
taxes based on self-declaration.
Also, they are required to file GSTR-1 monthly/ quarterly based on the turnover limit and
report invoice wise detail of outward supplies.
Based on the GSTR-1 filed by suppliers, GST portal would auto-populate GSTR 2A return
for a particular recipient.
Problem arises where there exists a difference between the figures declared in the GSTR-1 by
a supplier and the corresponding summary figure declared in the GSTR-3B by him which
may result in either increase/decrease of tax liability or blocking of credit for the recipient if
the supplier has missed invoices relating to such recipient in his GSTR 1.
Reconciliation helps the tax payers in avoiding potential notices from the government and
saving from interests and penalties which may be levied later.
Format for reconciliation between GSTR-3B and GSTR-2A
Sl No Particulars CGST (Rs.)
SGST (Rs.)
IGST (Rs.)
1 ITC available as per GSTR-2A in rupees for the tax period ………….. (A)
To be added:
2 ITC availed, but invoices are not been uploaded by the supplier for a. Not filed the return b. Filed returns - but uploaded as B2C instead of B2B
3 ITC availed on import of goods
4 ITC availed on import of services
5 ITC availed on self-invoice - Section 9(3) & 9(4) if supplier has not uploaded w.r.t 9(3)
6 ITC availed as CGST & SGST, whereas uploaded by the supplier as IGST
7 ITC availed on debit notes, but not been uploaded by the supplier
Sub-total (B)
To be deducted/reduced:
8 ITC availed, on the invoices of previous tax period
9 Ineligible ITC not availed by the taxpayer
10 Restricted under section 17(5) of CGST Act, 2017
11 ITC availed as CGST & SGST, whereas uploaded
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by the supplier as IGST 12 ITC availed as per invoice, error in taxable value
uploaded by the supplier. Ex: ITC claimed as per invoice Rs.1500/- ITC uploaded by the supplier is Rs.1200/- (error in uploading taxable value)
13 Invoices uploaded by the supplier, but ITC is not availed by the taxpayer - to be availed within time limit prescribed in Section 39(9) of CGST Act, 2017
Sub-total (C)
ITC as per Books of accounts [(A)+(B)-(C)]
In addition to above, various other reconciliation could be undertaken by the tax payer
which could help in day to day compliance under GST. Few of them could be as below:
a. Reconciliation of expenses to ITC to ensure all credits availed
b. Reconciliation of E-way bills to GSTR-1 to ensure all supplies reported and
considering for discharging liability
c. Reconciliation of security registers to job work (stock register) to ensure
goods are received in time
d. Reciliation of expenses to RCM payments to ensure all liabilities discharged
e. Few others, as necessary.
Chapter 15: Filing of Annual Returns (GSTR - 9 and GSTR
– 9A)
Introduction:
The taxpayer apart from the regular GST return is also required to file Annul return as per
section 44 of CGST Act, 2017. The FORM GSTR-9/9A has been notified vide notification no.
39/2018-CT.
Every registered person is liable to file annual return except,
- Input service distributor
- Person paying tax under section 51 or section 52
- Casual taxable person
- Non-resident taxable person
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The Annual return is required to be filed on or before 31st day of December following the
end of such financial year. Presently for the period July 2017 to March 2018 the return is
required to be filed by 31.08.2019.
Type of annual returns
The type of annual return to be filed by different persons are provided below:
❖ For Regular Dealer:
Form Type Frequency Due Date Details to be Furnished
Form GSTR-9
Annually 31st December of next financial year
Annual Return – furnish the details of ITC availed and GST paid which includes local, interstate and import/exports.
❖ For Composite Tax Payers
Form Type Frequency Due Date Details to be Furnished
Form GSTR-9A
Annual 31st December of next financial year
Furnish the consolidated details of quarterly returns filed along with tax payment details.
❖ For E-Commerce (Provisions effective from 01.10.2018)
Form Type Frequency Due Date Details to be furnished
Form GSTR-9B
Annually 31st December of next financial year
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,
Note 1: CBIC has notified the new format for ‘GST Annual Return’ in Form ‘GSTR-9 (for
Other than Composition Dealers)’ and ‘GSTR-9A (for Composition Dealers)’ along with
requisite instructions, which is required to be filed by 31 Dec. 2018 for the period 1 July 2017
to 31 March 2018, vide Notification No. 39/2018 Central Tax dt. 4 Sept. 2018.
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Furnishing details of Annual return:
The details to be furnished in the annual return are as follows:
Part I – Basic information
Table 1 Financial Year ● The details could get auto populated ● Reporting of GST registration number and name of
the registered person. ● Persons with multiple registrations would be
required to submit annual return for each registration separately.
Table 2
GSTIN
Table 3A
Legal Name
Table 3B
Trade Name (if any)
Part II – Outward supplies
Table 4 provides for reporting of all supplies (i.e. outward supplies and RCM transactions)
which includes details of advances, inward and outward supplies made during the financial
year on which tax is payable.
Description Reference to fill information Instruction provided in form
A
Supplies made to un-
registered persons (B2C)
Details of supplies to all unregistered persons, consumers or supplies too registered persons who have not provided GSTIN including any omission made in GSTR-3B for the financial year may be added here unless already considered in GSTR-3B filed for April to September of subsequent year
Aggregate value of supplies made to consumers and unregistered persons on which tax has been paid shall be declared here. These would include details of supplies made through E-Commerce operators and are to be declared as net of credit notes or debit notes issued in this regard. Table 5, Table 7 along with respective amendments in Table 9 and Table 10 of FORM GSTR-1 may be used for filling up these details.
B
Supplies made to registered
persons (B2B)
Details of all B2B supplies (tax invoices issued) other than zero rated and deemed exports to be provided including any omission made in GSTR-3B for the financial year may be added here unless already considered in GSTR-3B filed for April to
Aggregate value of supplies made to registered persons (including supplies made to UINs) on which tax has been paid shall be declared here. These would include supplies made through E-Commerce operators but shall not
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Description Reference to fill information Instruction provided in form
September of subsequent year include supplies on which tax is to be paid by the recipient on reverse charge basis. Details of debit and credit notes are to be mentioned separately. Table 4A and Table 4C of Form GSTR-1 may be used for filling up these details.
C
Zero rated supply
(Export) on payment of tax (except supplies to
SEZs)
Sum of all Exports (Goods & Services) made against payment of tax excluding SEZ supplies to be provided
Aggregate value of exports (except supplies to SEZs) on which tax has been paid shall be declared here. Table 6A of FORM GSTR-1 may be used for filling up these details.
D
Supply to SEZs on
payment of tax
Sum of all SEZ supplies made against payment of tax to be provided
Aggregate value of supplies to SEZs on which tax has been paid shall be declared here. Table 6B of GSTR-1 may be used for filling up these details.
E
Deemed Exports
Sum of all deemed exports to be provided
Aggregate value of supplies in the nature of deemed exports on which tax has been paid shall be declared here. Table 6C of FORM GSTR-1 may be used for filling up these details.
F
Advances on which tax has been paid but invoice has not been issued (not covered under (A) to (E) above)
Sum of all advances which remain unadjusted (i.e. tax invoice not raised) as on the last day of the previous financial year on which tax has been paid to be provided
Details of all unadjusted advances i.e. advance has been received and tax has been paid but invoice has not been issued in the current year shall be declared here. Table 11A of FORM GSTR-1 may be used for filling up these details.
G
Inward supplies on which tax is to
Sum of all supplies on which tax has been paid under reverse charge mechanism to be
Aggregate value of all inward supplies (including advances and net of credit and debit
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Description Reference to fill information Instruction provided in form
be paid on reverse charge basis
provided notes) on which tax is to be paid by the recipient (i.e.by the person filing the annual return) on reverse charge basis. This shall include supplies received from registered persons, unregistered persons on which tax is levied on reverse charge basis. This shall also include aggregate value of all import of services. Table 3.1(d) of FORM GSTR-3B may be used for filling up these details.
H
Sub-total (A to G above)
Auto-Populated
I
Credit Notes issued in respect of transactions specified in (B) to (E) above (-)
Sum of all credit notes issued against B2B supplies with payment of tax, including zero rated supplies & deemed exports to be reported which are issued in the financial year to be provided.
Aggregate value of credit notes issued in respect of B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. Table 9B of FORM GSTR-1 may be used for filling up these details.
J
Debit Notes issued in respect of transactions specified in (B) to (E) above (+)
● Sum of all debit notes issued against B2B supplies with payment of tax, including zero rated supplies & deemed exports
●
Aggregate value of debit notes issued in respect of B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E) shall be declared here. Table 9B of FORM GSTR-1 may be used for filling up these details.
K
Supplies/tax declared through
Amendments (+)
● Sum of amendments made to all supplies with payment of tax including B to B supplies, deemed exports on payment of tax, SEZ supplies on payment of tax, direct exports on payment of tax, credit and debit notes (except
Details of amendments made to B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E), credit notes (4I), debit notes (4J) and refund vouchers shall be declared here. Table 9A and
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Description Reference to fill information Instruction provided in form
B2C supplies), which has resulted in addition in value of supplies/tax being reported
●
Table 9C of FORM GSTR-1 may be used for filling up these details.
L
Supplies/tax reduced through
Amendments (-)
● Sum of amendments made to all supplies with payment of tax including B to B supplies, deemed exports on payment of tax, SEZ supplies on payment of tax, direct exports on payment of tax, credit and debit notes (except B2C supplies), which has resulted in reduction in value of supplies/tax being reported
●
Details of amendments made to B to B supplies (4B), exports (4C), supplies to SEZs (4D) and deemed exports (4E), credit notes (4I), debit notes (4J) and refund vouchers shall be declared here. Table 9A and Table 9C of FORM GSTR-1 may be used for filling up these details.
M
Sub-total (I to L above)
Auto-Populated
N
Supplies and advances on
which tax is to be paid (H +
M) above
Auto-Populated
Table 5
Table 5 provides for reporting of all other supplies (i.e. supplies without payment of tax and exempt) made by the registered person during the financial year
This table would include the transactions classified under Category A and Category C as
mentioned in para 21.4
Description Reference to fill information
Instruction provided in form
A
Zero rated supply (Export) without payment of tax
Sum of all direct exports (Goods &Services) made without payment of tax other than SEZ
Aggregate value of exports (except supplies to SEZs) on which tax has not been paid shall be declared here. Table 6A of FORM GSTR-1 may be used for filling up these details.
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Description Reference to fill information
Instruction provided in form
supplies to be declared
B
Supply to SEZs without payment of tax
Sum of all SEZ supplies made without payment of tax
Aggregate value of supplies to SEZs on which tax has not been paid shall be declared here. Table 6B of GSTR-1 may be used for filling up these details.
C
Supplies on which tax is to be paid by the recipient on reverse charge basis
Sum of supplies made by the registered persons, where the liability to pay tax is on the recipient under reverse charge
Aggregate value of supplies made to registered persons on which tax is payable by the recipient on reverse charge basis. Details of debit and credit notes are to be mentioned separately. Table 4B of Form GSTR-1 may be used for filling up these details.
D
Exempted Sum of all exempt supplies (i.e. taxable supplies which have been exempted under a specific Notification)
Aggregate value of exempted, Nil Rated and Non-GST supplies shall be declared here. Table 8 of Form GSTR-1 may be used for filling up these details. The value of “no supply” shall also be declared here.
E
Nil Rated Sum of all supplies wherein the rate of GST is Nil/Zero
Aggregate value of exempted, Nil Rated and Non-GST supplies shall be declared here. Table 8 of FORM GSTR-1 may be used for filling up these details. The value of “no supply” shall also be declared here.
F
Non-GST Supply
Sum of all supplies which are outside the levy of GST such as supply of petrol, diesel, petroleum crude, natural gas, ATF and alcohol.
Aggregate value of exempted, Nil Rated and Non-GST supplies shall be declared here. Table 8 of FORM GSTR-1 may be used for filling up these details. The value of “no supply” shall also be declared here. Press release clarification Vide press release dated 03.07.2019, it has
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Description Reference to fill information
Instruction provided in form
been clarified that since there is some overlap between supplies that are classifiable as exempted and nil rated and since there is no tax payable on such supplies, if there is a reasonable/explainable overlap of information reported across these tables, such overlap would not be viewed adversely. The other concern raised by taxpayers is the inclusion of no supply in the category of Non-GST supplies in Table 5F. For the purposes of reporting, non-GST supplies includes supply of alcoholic liquor for human consumption, motor spirit (commonly known as petrol), high speed diesel, aviation turbine fuel, petroleum crude and natural gas and transactions specified in Schedule III of the CGST Act
G
Sub-total (A to F above)
Auto-Populated
H
Credit Notes issued in respect of transactions specified in A to F above (-)
Sum of all credit notes issued with respect to above transactions to be reported
Aggregate value of credit notes issued in respect of supplies declared in 5A,5B,5C, 5D, 5E and 5F shall be declared here. Table 9B of FORM GSTR-1 may be used for filling up these details.
I
Debit Notes issued in respect of transactions specified in A to F above (+)
Sum of all debit notes issued with respect to above transactions to be reported
Aggregate value of debit notes issued in respect of supplies declared in 5A,5B,5C, 5D, 5E and 5F shall be declared here. Table 9B of FORM GSTR-1 may be used for filling up these details.
J
Supplies declared through Amendments (+)
Sum of amendments made to all supplies without payment of tax, which has resulted in addition in value of supplies to be reported
Details of amendments made to exports (except supplies to SEZs) and supplies to SEZs on which tax has not been paid shall be declared here. Table 9A and Table 9C of FORM GSTR-1 may be used for filling up these details.
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Description Reference to fill information
Instruction provided in form
K
Supplies reduced through Amendments (-)
Sum of amendments made to all supplies without payment of tax, which has resulted in reduction in value of supplies to be reported
Details of amendments made to exports (except supplies to SEZs) and supplies to SEZs on which tax has not been paid shall be declared here. Table 9A and Table 9C of FORM GSTR-1 may be used for filling up these details.
L
Sub-Total (H to K above)
Auto-Populated
M
Turnover on which tax is
not to be paid (G + L above)
Auto-Populated
N
Total Turnover (including advances) (4N + 5M - 4G above
Auto-Populated
Total turnover including the sum of all the supplies (with additional supplies and amendments) on which tax is payable and tax is not payable shall be declared here. This shall also include amount of advances on which tax is paid but invoices have not been issued in the current year. However, this shall not include the aggregate value of inward supplies on which tax is paid by the recipient (i.e. by the person filing the annual return) on reverse charge basis.
22.1.1 Part III – Input tax credit
Table 6
Table 6 provides for reporting of gross input tax credit (ITC) availed by the registered person during the financial year
This table has to filled based on the ITC availed in GSTR-3B filed for the financial year.
Description Reference to fill information
Instruction provided in form
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Description Reference to fill information
Instruction provided in form
A
Total amount of input tax
credit availed through Form
GSTR-3B (sum total of Table 4A of Form GSTR-
3B)
Auto-Populated from Form GSTR-3B
Total input tax credit availed in Table 4A of Form GSTR-3B for the taxpayer would be auto-populated here.
B
Inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs)
Sum of ITC availed on all intra-state and inter-state (within India) procurements, where the tax has been charged by the supplier.
Aggregate value of input tax credit availed on all inward supplies except those on which tax is payable on reverse charge basis but includes supply of services received from SEZs shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs, capital goods and input services. Table 4(A)(5) of Form GSTR-3B may be used for filling up these details. This shall not include ITC which was availed, reversed and then reclaimed in the ITC ledger. This is to be declared separately under 6(H) below.
C
Inward supplies received from unregistered persons liable to reverse charge (other than B above) on which tax is paid & ITC availed
Sum of ITC availed on tax paid under reverse charge for supplies received from unregistered persons which was liable till 13.10.2017 to be reported.
Aggregate value of input tax credit availed on all inward supplies received from unregistered persons (other than import of services) on which tax is payable on reverse charge basis shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs, capital goods and input services. Table 4(A)(3) of Form GSTR-3B may be used for filling up these details.
D
Inward supplies received from registered persons liable to reverse
Sum of ITC availed on tax paid under reverse charge for supplies received from registered persons
Aggregate value of input tax credit availed on all inward supplies received from registered persons on which tax is payable on reverse charge basis shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs,
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Description Reference to fill information
Instruction provided in form
charge (other than B above) on which tax is paid and ITC availed
capital goods and input services. Table 4(A)(3) of Form GSTR-3B may be used for filling up these details.
E
Import of goods (including supplies from SEZs)
Sum of IGST credit availed on import of goods and procurements from SEZ on which IGST paid
Details of input tax credit availed on import of goods including supply of goods received from SEZs shall be declared here. It may be noted that the total ITC availed is to be classified as ITC on inputs and capital goods. Table 4(A)(1) of Form GSTR-3B may be used for filling up these details.
Press release clarification
Vide press release dated 04th June 2019, CBIC has clarified that taxpayers are advised to fill in their entire credit availed on import of goods from July 2017 to March 2019 in Table 6(E) of Form
GSTR-9 for FY 2017-18.
F
Import of services (excluding inward supplies from SEZs)
Sum of IGST paid credit availed on import of services
Details of input tax credit availed on import of services (excluding inward supplies from SEZs) shall be declared here. Table 4(A)(2) of Form GSTR-3B may be used for filling up these details.
G
Input Tax credit received from ISD
Sum of credit availed based on ISD Invoice (credit distribution)
Aggregate value of input tax credit received from input service distributor shall be declared here. Table 4(A)(4) of Form GSTR-3B may be used for filling up these details
H
Amount of ITC reclaimed (other than B above) under the provisions of the Act
Sum of ITC reclaimed (which was availed and subsequently reversed)
Section B of this table
Aggregate value of input tax credit availed, reversed and reclaimed under the provisions of the Act shall be declared here.
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Description Reference to fill information
Instruction provided in form
requires reporting of ITC availed originally
I
Sub-Total (B to H above)
Auto-Populated
J
Difference (I - A above)
Auto-Populated Ideally there should not be difference considering the fact that the total of ‘I’ above is break up of credits as per column ‘A’ which is auto populated from GSTR form 3B
The difference between the total amount of input tax credit availed through Form GSTR-3B and input tax credit declared in row B to H shall be declared here. Ideally, this amount should be zero.
K
Transition Credit
through TRAN-I
(including revisions if
any)
Transitional credits received in Electronic Credit Ledger from Form GST TRAN-I
Details of transition credit received in the electronic credit ledger on filing of Form GST TRAN-I including revision of TRAN-I (whether upwards or downwards), if any shall be declared here.
L
Transition Credit
through TRAN-II
Transitional credits received in Electronic Credit Ledger from Form GST TRAN-II
Details of transition credit received in the electronic credit ledger after filing of Form GST TRAN-II shall be declared here.
M
Any other ITC availed
but not specified
above
Details of ITC availed through Form ITC-01 (conversion from composition to regular) and Form ITC-02 (Transfer of credit due to sale, merger, amalgamation, transfer of asset etc.)
Details of ITC availed but not covered in any of heads specified under 6B to 6L above shall be declared here. Details of ITC availed through Form ITC-01 and Form ITC-02 in the financial year shall be declared here.
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Description Reference to fill information
Instruction provided in form
N
Sub-total (K to M above)
Auto-Populated
O
Total ITC availed (I + N
above)
Auto-Populated
Table 7
Table 7 provides for reporting of ITC reversed by the registered person and Ineligible credits for financial year
Description Reference to fill information
Instruction provided in form
A
As per Rule 37
Sum of ITC reversed on account of non-payment to vendor within 180 days in terms of Section 16(2) read with Rule 37 of CGST Rules to be reported.
Details of input tax credit reversed due to ineligibility or reversals required under rule 37, 39, 42 and 43 of the CGST Rules, 2017 shall be declared here. This column should also contain details of any input tax credit reversed under section 17(5) of the CGST Act, 2017 and details of ineligible transition credit claimed under Form GST TRAN-I or Form GST TRAN-II and then subsequently reversed. Table 4(B) of Form GSTR-3B may be used for filling up these details. Any ITC reversed through Form ITC -03 shall be declared in 7H.
B
As per Rule 39
Sum of ITC reversed on account of ISD Credit Notes.
C
As per Rule 42
Sum of ITC reversed on common input and input services (used for exempt supplies)
D
As per Rule 43
Sum of ITC reversed on capital goods (used partially for exempt supplies)
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Description Reference to fill information
Instruction provided in form
E
As per section 17(5)
Sum of ineligible credits under section 17(5) which have been reversed
F
Reversal of TRAN-I
credit
Details of reversal of TRAN-I credits to be provided
-
G
Reversal of TRAN-II
credit
Reversal of TRAN-II credits to be provided
-
H
Other reversals (pl.
specify)
Any other reversals such as ITC reversed on account of ITC-03 (regular scheme to composition scheme). This includes credit reversed as per Rule 44 in case of special circumstances such as conversion to exempted supply.
-
I
Total ITC Reversed (A to H above
Auto-Populated -
J
Net ITC Available for
Utilization (6O-7I)
Auto-Populated -
Table 8
Table 8 provides for a summary of ITC available as per GSTR-2A & IGST paid on import of goods and a comparison with ITC availed
Description Reference to fill information
Instruction provided in form
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Description Reference to fill information
Instruction provided in form
A
ITC as per GSTR-2A
(Table 3 & 5 thereof)
The total credit available for inwards supplies (other than imports and inwards supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 and reflected in FORM GSTR-2A (table 3 & 5 only) shall be auto-populated in this table. It may be noted that the FORM GSTR-2A generated as on the 1st May, 2019 shall be auto-populated in this table. 1 Figures in Table 8A of FORM GSTR-9 are auto-populated only for those FORM GSTR-1 which were furnished by the corresponding suppliers by the due date.
B
ITC as per sum total of
6(B) and 6(H) above
The input tax credit as declared in Table 6B and 6H shall be auto-populated here.
C
ITC on inward supplies (other than imports and inward supplies liable to reverse charge but includes services received from SEZs) received during 2017-18 but availed during April
Sum of ITC availed during the period April 2018 to March 2019, w.r.t. invoices issued by the vendor for supplies received up to 31st March 2018 to be considered
Aggregate value of input tax credit availed on all inward supplies (except those on which tax is payable on reverse charge basis but includes supply of services received from SEZs) received during July 2017 to March 2018 but credit on which was availed between April to March 2019 shall be declared here. Table 4(A)(5) of FORM GSTR-3B may be used for filling up these details.
1Notification no.31/2019-C.T dated 28th June 2019.
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Description Reference to fill information
Instruction provided in form
to March, 20191
D
Difference [A-(B+C)]
Auto-Populated Aggregate value of the input tax credit
which was available in FORM GSTR2A (table 3 & 5 only) but not availed in FORM GSTR-3B returns shall be computed based on values of 8A, 8B and 8C. However, there may be circumstances where the credit availed in FORM GSTR-3B was greater than the credit available in FORM GSTR-2A. In such cases, the value in row 8D shall be negative
E
ITC available but not
availed (out of D)
ITC reflected in Form GSTR-2A for FY 2017-18 which is eligible but not availed to be disclosed
The credit which was available and not availed in FORM GSTR-3B and the credit was not availed in FORM GSTR-3B as the same was ineligible shall be declared here. Ideally, if 8D is positive, the sum of 8E and 8F shall be equal to 8D. F
ITC available but ineligible
(out of D)
Transactions reflected in Form GSTR-2A for FY 2017-18 which is available but not eligible
G
IGST paid on import of
goods (including supplies
from SEZ)
Actual IGST paid on import of goods and procurements from SEZ shall be disclosed here
Aggregate value of IGST paid at the time of imports (including imports from SEZs) during the financial year shall be declared here.
H
IGST credit availed on import of
goods (as per 6(E) above)
Auto-Populated The input tax credit as declared in Table
6E shall be auto-populated here.
I
Difference (G-H)
Auto-Populated
1Notification no.31/2019 – C.T dated 28th June 2019.
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Description Reference to fill information
Instruction provided in form
J
ITC available but not
availed on import of
goods (Equal to I)
Auto-Populated Press release clarification
Vide press release dated 03.07.2019, it has been clarified that there is no question of lapsing of any such credit, since this credit never entered the electronic credit ledger of any taxpayer. Therefore, taxpayers need not be concerned about the values reflected in this table. This is information that the Government needs for settlement purposes
K
Total ITC to be lapsed in
current financial year
(E + F + J)
Auto-Populated The total input tax credit which shall lapse for the current financial year shall be computed in this row. There is no question of lapsing of any such credit, since this credit never entered the electronic credit ledger of any taxpayer. Therefore, taxpayers need not be concerned about the values reflected in this table. This is information that the Government needs for settlement purposes.1
22.1.2 Part IV – Details of tax paid
Table 9
Integrated Tax Details to be reported under the following heads
● Tax payable - While reporting the details, one shall also ensure that the details reported in Table 4 and any additional reversal of ITC made in Table 7 is in line with the total tax payable. The difference between the Tax payable and Tax paid would be paid through DRC-03 by the assessee.
● Paid through cash – Ensure that the amount of tax paid in cash reported in the Table 9 is matched with the actual cash payments.
● Paid through ITC - Ensure that the amount of tax paid in cash reported in the Table 9 is matched with the actual credit utilisation as per the returns
Also refer Table 6.1 of Form GSTR-3B filed
Central Tax
State Tax/UT Tax
Cess
Interest
Late Fee
1Press release issued by CBIC dated 03rd July 2019.
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Penalty
Instruction - Part IV is the actual tax paid during the financial year. Payment of tax under Table 6.1 of Form GSTR-3B may be used for filling up these details
Other
22.1.3 Part V – Transactions of previous FY disclosed in present FY April to March 2019
Description Reference to fill information
Instruction provided in form
10
Supplies/tax declared through Amendments (+)
(net of debit notes)
Outward supplies of previous FY reported in current FY – Additional invoice reported in GSTR-1 of current FY pertaining to previous FY.
Details of additions or amendments to any of the supplies already declared in the returns of the previous financial year but such amendments were furnished in Table 9A, Table 9B and Table 9C of Form GSTR-1 of April 2018 to March 2019 shall be declared here.
11
Supplies/tax reduced through
Amendments (-) (net of credit
notes)
Details of credit notes reported in current FY between April to September against supplies reported in previous FY to be provided here.
Details of additions or amendments to any of the supplies already declared in the returns of the previous financial year but such amendments were furnished in Table 9A, Table 9B and Table 9C of Form GSTR-1 of April 2018 to March 2019 shall be declared here.
12
Reversal of ITC availed during
previous financial year
ITC availed in the PFY which has been reversed in the current FY (example: Ineligible credit availed in previous FY, reversed in current FY)
Aggregate value of reversal of ITC which was availed in the previous financial year but reversed in returns filed for the months of April 2018 to March 2019 shall be declared here. Table 4(B) of Form GSTR-3B may be used for filling up these details.
13
ITC availed for the previous financial
year
ITC availed in the current FY pertaining to supplies received in the previous FY
Details of ITC for goods or services received in the previous financial year but ITC for the same was availed in returns filed for the months of April 2018 to March 2019 shall be declared here. Table 4(A) of FORM GSTR-3B may be used for filling up these details. However, any ITC which was reversed in the FY 2017-18 as per second proviso to sub-section (2) of section 16 but was reclaimed
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Description Reference to fill information
Instruction provided in form
in FY 2018-19, the details of such ITC reclaimed shall be furnished in the annual return for FY 2018-19.
Table 14
Table 14 provides for disclosing details of differential tax paid on account of declaration in table 10 & 11 above
Description Reference to fill information
Instruction provided in form
14
Details of IGST, CGST, SGST/UTGST, Cess or Interest payable and paid
Details of differential taxes paid on account of disclosure of transactions in present FY which are pertaining to previous FY for which annual return is being filed to be provided in this table.
-
22.1.4 Part VI – Other information
Table 15 – 18
Description Reference to fill information
Instruction provided in form
15
A. Total Refund claimed
B. Total Refund Sanctioned
C. Total Refund Rejected
D. Total Refund pending
E. Total Demand of Taxes
F. Total taxes paid in respect of E above
G. Total demand pending out of E above
Details of claims for FY 2017-18 could be disclosed
● Aggregate value of refunds claimed, sanctioned, rejected and pending for processing shall be declared here. Refund claimed would be the aggregate value of all the refund claims filed in the financial year and would include refunds which have been sanctioned, rejected or are pending for processing. Refund sanctioned means the aggregate value of all refund sanction orders. Refund pending would be the aggregate amount in all refund application for which acknowledgement has been received and would exclude provisional refunds received. These would not include details of non-GST refund
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Description Reference to fill information
Instruction provided in form
claims. ● Aggregate value of demands of taxes
for which an order confirming the demand has been issued by the adjudicating authority shall be declared here. Aggregate value of taxes paid out of the total value of confirmed demand as declared in 15E above shall be declared here. Aggregate value of demands pending recovery out of 15E above shall be declared here.
Table 16 provides for Information on supplies received from composition taxpayers, deemed supply under section 143 and goods sent on approval basis
Description Reference to fill information
Instruction provided in form
16
A. Supplies received from Composition taxpayers
B. Deemed supply under section 143
C. Goods sent on approval basis but not returned
-
● Aggregate value of supplies received from composition taxpayers shall be declared here. Table 5 of Form GSTR-3B may be used for filling up these details.
● Aggregate value of all deemed supplies from the principal to the job-worker in terms of sub-section (3) and sub-section (4) of section 143 of the CGST Act shall be declared here.
● Aggregate value of all deemed supplies for goods which were sent on approval basis but were not returned to the principal supplier within one eighty days of such supply shall be declared here.
Press release clarification With respect to information in table 16A, vide press release dated 03.07.2019, CBIC has stated that there has been observation that the smaller taxpayers are facing a lot of challenge in reporting information that was not being explicitly reported in their regular statement/returns (Form GSTR-1 and Form GSTR-3B). Therefore, taxpayers are advised to declare all such data /
183
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Description Reference to fill information
Instruction provided in form
details (which are not part of their regular statement/returns) to the best of their knowledge and records. This data is only for information purposes and reasonable/explainable variations in the information reported in these tables would not be viewed adversely
Table 17 and 18 provides reporting of HSN wise summary of Outward and Inward Supplies reported in the previous FY
Description Reference to fill information
Instruction provided in form
17
Outward Supplies
● HSN wise summary of outward supplies reported during the PFY including details of quantity, taxable value and taxes to be provided in this column
Summary of supplies effected and received against a particular HSN code to be reported only in this table. It would be optional for taxpayers having annual turnover up to ₹ 1.50 Cr. It would be mandatory to report HSN code at two digits level for taxpayers having annual turnover in the preceding year above ₹ 1.50 Cr but up to ₹ 5.00 Cr and at four digits' level for taxpayers having annual turnover above ₹ 5.00 Cr. UQC details to be furnished only for supply of goods. Quantity is to be reported net of returns. Table 12 of FORM GSTR1 may be used for filling up details in Table 17. It may be noted that this summary details are required to be declared only for those inward supplies which in value independently account for 10 % or more of the total value of inward supplies.
18
Inward Supplies
HSN wise summary of inward supplies reported during the PFY including details of quantity, taxable value and taxes to be provided in this column.
Summary of supplies effected and received against a particular HSN code to be reported only in this table. It would be optional for taxpayers having annual turnover upto ₹ 1.50 Cr. It would be mandatory to report HSN code at two digits level for taxpayers having annual turnover in the preceding year above ₹ 1.50 Cr but upto ₹ 5.00 Cr and at four
184
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Description Reference to fill information
Instruction provided in form
digits' level for taxpayers having annual turnover above ₹ 5.00 Cr. UQC details to be furnished only for supply of goods. Quantity is to be reported net of returns. Table 12 of FORM GSTR1 may be used for filling up details in Table 17. It may be noted that this summary details are required to be declared only for those inward supplies which in value independently account for 10 % or more of the total value of inward supplies. Press release clarification With respect to information in table 18, vide press release dated 03.07.2019, CBIC has stated that there has been observation that the smaller taxpayers are facing a lot of challenge in reporting information that was not being explicitly reported in their regular statement/returns (Form GSTR-1 and Form GSTR-3B). Therefore, taxpayers are advised to declare all such data / details (which are not part of their regular statement/returns) to the best of their knowledge and records. This data is only for information purposes and reasonable/explainable variations in the information reported in these tables would not be viewed adversely
Table 19 provides reporting of Late Fees
Description Reference to fill information
Instruction provided in form
19
Late fees payable and
paid
-
Late fee would be payable if annual return is filed after the due date.
Delay or non-filing
Non-filing of annual return could have the following consequences:
(1) Notice under section 46 could be issued to file the return within 15 days.
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(2) Late fee for delayed filing of annual return could be demanded under
section 47(2) of the Act which would be lower of Rs.100 per day during which
such failure continues or quarter percent of turnover in the state or union
territory. Equal late fee would be applicable in SGST law as well.
(3) General penalty as per section 125 of the Act could also be applicable which may
extend up to Rs.25000/- with equal penalty under SGST law as well.
Chapter 16: Applicability of TDS and TCS
Section 51 of the CGST Act, makes it mandatory for the specified category of persons to
deduct tax at specified rate on the payments made to its suppliers where the total value of
such supply exceeds Rs. 2,50,000. These provisions are applicable to the following category
of persons i.e. if the goods or services are received by the following category of persons only
then TDS would be required to be deducted by them (hereinafter referred to as the
‘deductor’) :
1. A department or establishment of the Central Govt. or State Govt;
2. Local Authority;
3. Governmental Agencies;
4. Persons notified by the Govt. which are as follows:
(a) An authority or a board or any other body,
(i) Set up by an Act of Parliament or a State Legislature; or
(ii) Established by any Government,
With 51% or more participation by way of equity or control, to carry out any function;
(b) Society established by the CG or the SG or a Local Authority under the Societies
Registration Act, 1860;
(c) Public sector undertakings.
5. The provisions of TDS shall not be applicable to authorities under the Ministry of
defence except the authorities specified in the Annexure A to notification no. 57/2018-
CT dated 23.10.2018.
The GST council had deferred the implementation of these provisions first for a year from
1st July, 2017 till 30th June, 2018. It was again put off till September 30 after the industry
expressed concerns on increased compliance burden. However, finally the Tax Deducted at
Source (TDS) provisions under GST has been notified to be effective from 1st Oct, 2018.
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The following points are noteworthy in respect of the provisions of TDS:
➢ TDS is required to be deducted by the deductor at the rate of 2% (1% CGST and 1%
SGST or 2% for IGST);
➢ 2% has to be deducted on the NET amount payable to the contractor;
➢ 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.
➢ The amount of tax deducted at source should be deposited to the Government account
by the deductor by 10th of the succeeding month.
➢ The deductor is required to file return in Form GSTR -7 on the common portal for every
month in which deduction has been made giving the details of deductions and
deductees.
➢ The deductor also has to issue a certificate to the deductee mentioning therein the
contract value, rate of deduction, amount deducted etc.
The government has issued Circular No-65/39/2018 dated 14th Sept’18 which provides for
guidelines for deductions and deposits of TDS to be made by the DDO under GST. A gist of
the circular is as under:
The amount deducted as TDS by the deductor can be deposited to the Government by
following either of the options given below:
Option I: Generation of challan for every payment made during the month;
Option II: Bunching of TDS deducted from the bills on weekly, monthly or any periodic
manner.
PROCESS INVOLVED UNDER OPTION I:
We shall proceed to discuss the process involved in Option I i.e. Generation of challan for
every payment made during the month. In this option the DDO would have to deduct as
well as deposit the TDS for each bill individually by generating a challan.
OPTION I: GENERATION OF CHALLAN FOR EVERY PAYMENT MADE DURING THE
MONTH
Login into the
portal & generate
CPIN (Challan).
Amount & tax
details to be
entered.
Select mode of
payment:
a) Neft/RTGS;
or
b) OTC
DDO to prepare bill
on PFMS/similar
payment portal for
submission to
respective payment
authorities
Is OTC
mode
selecte
dddd?
Start
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YES
NO
Abbreviations used in the above flowchart:
1) DDO – Drawing & Disbursing Officer
2) OTC – Over the Counter payment
3) PA – Payment Authority
4) AB – Authorized Banks
5) ECL – Electronic Cash Ledger
Process involved under option ii:
Option I may not be suitable for DDOs who make large number of payments in a month as
it would require them to make large number of challans during the month. Such DDOs may
DDO to mention
CPIN as RBI's A/c
No & IFSC code of
RBI
Request payment
authority to make
payment in favour of
RBI
DDO to select
bank where
payment to be
deposited
Request PA to
issue 'A' category
government
cheque in favour
of 1 of the 25 AB
Cheque to be
deposited along
with CPIN with any
branch of the AB
selected by DDO.
On Successful payment
CIN will be generated by
RBI/ AB & shared
electronically with GSTN
portal.
Amount will get
credited in ECL
of the DDO
A register to be
maintained by
DDO of all TDS
deductions
TDS Certificate
to be generated
in Form GSTR -
7A
Monthly return to
be filed in Form
GSTR -7 by
DDO
End
Off page
connector
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exercise the other option wherein the DDO would have to deduct the TDS from each bill and
account for it under the Suspense Head. However, deposit of this bunched amount from the
Suspense Head can be made on a weekly, monthly or any other periodic basis by the DDO.
We shall proceed to understand the process involved in Option II i.e. Bunching of TDS
deducted from the bills on weekly, monthly or any periodic manner.
OPTION II: BUNCHING OF TDS DEDUCTED FROM THE BILLS ON WEEKLY,
MONTHLY OR ANY PERIODIC MANNER
YES
NO
Abbreviations used in the above flowchart:
1) PA – Payment Authority
2) AB – Authorized Banks
Prepare bill
based on the
Expenditure
Sanction.
Start DDO to prepare bill
on PFMS or similar
payment portal for
submission to PA
TDS amount to be
mentioned in bill for
booking under
Suspense Head
DDO to maintain
record of TDS
booked in
suspense head
for preparing
CPIN
At periodic
intervals DDO
to deposit the
TDS amount
Login into the portal
& generate CPIN
(Challan). Amount &
tax details to be
entered.
Whether
TDS to be
deposited?
Select mode of
payment:
a) Neft/RTGS; or
b) OTC
DDO to prepare bill
for bunched TDS
amount for
submission to
respective PA
Give reference of all
bills paid earlier on
which TDS deducted
& kept in Suspense
A/c. Certified copy
of record
maintained
PA to pass bill by
clearing
suspense head.
Off page
connector
Remaining
process same as
given under
Option I above.
End
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SITUATIONS WHERE TDS IS NOT APPLICABLE:
No deduction shall be made if the location of supplier and place of supply is in state which
is different from state or union territory of registration of recipient. The statement can be
explained with the help of following situations:
a) Supplier, place of supply and recipient are in the same state. It would be intra-State
supply and TDS (Central plus State tax) shall be deducted. It would be possible for the
supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.
b) Supplier as well as the place of supply is in different states. In such cases, Integrated tax
would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be
possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash
ledger.
Note: It is pertinent to note here that notification for deducting tax at source with effect
from 1st October’ 18 has only been issued under the CGST Act, and no corresponding
notification has been released under the IGST Act. Therefore, applicability of TDS on
inter-state transactions remains under ambiguity till further clarification is received in
this regard.
c) Supplier as well as the place of supply is in State A and the recipient is located in State B.
The supply would be intra-State supply and Central tax and State tax would be levied. In
such case, transfer of TDS (Central tax + State tax of State B) to the cash ledger of the
supplier (Central tax + State tax of State A) would not be possible. In such cases, TDS
would not be required to be deducted.
CONSEQUENCES OF NOT COMPLYING WITH TDS PROVISIONS:
Sl. No. Event Consequence
1 TDS not deducted Interest (@ 18% p.a.) to be paid along with the
TDS amount; else the amount shall be
determined and recovered as per the law.
2 TDS certificate not issued or
delayed beyond the prescribed
period of five days
Late fee of Rs. 100/- per day subject to a
maximum of Rs. 5000.
3 TDS deducted but not paid to
the Government or paid later
than 10th of the succeeding
Interest (@ 18% p.a.) to be paid along with the
TDS amount; else the amount shall be
determined and recovered as per the law.
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month
4 Late filing of TDS returns Late fee of Rs. 100/- for every day during
which such failure continues, subject to a
maximum amount of five thousand rupees.
TCS: Tax Collection at Source (TCS) has similarities with TDS, as well as has distinctive features
also. TDS refers to tax which is deducted when recipient of goods or services makes some
payments under a contract etc. while TCS refers to tax which is collected by the electronic
commerce operator when a supplier supplies some goods or services through its portal and
the payment for that supply is collected by the electronic commerce operator.
There are many e-Commerce operators [hereinafter referred to as an Operator], like
Amazon, Flipkart, Jabong, etc. operating in India. These operators display / lists on their
portal, products as well as services which are actually supplied by some other person to the
consumer. The goods or services belonging to other suppliers are displayed on the portals of
the operators and consumers buy such goods/services through these portals. On placing the
order for a particular product/ services the actual supplier supplies the selected
product/services to the consumer. The price/consideration for the product/services is
collected by the Operator from the consumer and passed on to the actual supplier after
deducting his commission by the Operator. The Government has placed the responsibility
on the Operator to collect the ‘tax’ at a rate of 1% from the supplier (0.5% CGST+0.5% SGST).
This shall be done by the Operator by paying the supplier the price of the product /services,
less the tax, calculated at the rate of 1%. The said amount would be calculated on the net
value of the goods/ services supplied through the portal of the operator.
Example: Suppose a certain product is sold at Rs. 1000/- through an Operator by a seller.
The Operator would deduct tax @ 1% of the net value of Rs. 1000/- i.e. Rs. 100/-.
Let us have a look at the statutory provisions relating to TCS.
Registration:
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The ecommerce operator as well as the supplier supplying goods or services through an
operator needs to compulsorily register under GST. The threshold limit of Rs. 20 lakhs (10
lakhs for special category states) is not applicable to them. Section 24(x) of the CGST Act,
2017 makes it mandatory for every e-Commerce Operator to get registered under GST.
Similarly, section 24(ix) of the CGST Act, 2017 makes it mandatory for every person who
supplies goods/services through an Operator to get registered under GST.
Power to collect tax:
Section 52 of the CGST Act, 2017 provides for Tax Collection at source, by e-Commerce
operator in respect of the taxable supplies made through it by other suppliers, where the
consideration in respect of such supplies is collected by him.
TCS Statement: The amount of tax so collected by the TCS Mechanism under GST, operator
is required to be deposited by the 10th of the following month, during which such collection
is made. The operator is also required to furnish a monthly statement in Form GSTR-8 by the
10th of the following month. The Operator is also required to file an Annual statement in
prescribed form by the 31st of December following the end of every financial year. The
Operator can rectify errors in statements filed, if any, latest by the return to be filed for the
month of September, following the end of every financial year. The details furnished by the
operator in GSTR-8 shall be made available electronically to each of the suppliers in Part C
of FORM GSTR-2A on the Common Portal after the due date of filing of FORM GSTR-8.
Credit of tax collected: The tax collected by the operator shall be credited to the cash ledger
of the supplier who has supplied the goods/services through the Operator. The supplier can
claim credit of tax collected and reflected in the return by the Operator in his [supplier’s]
electronic cash ledger.
Matching of details of supplies: The details of the supplies, including the value of supplies,
submitted by every operator in the statements would be matched with the details of
supplies submitted by all such suppliers in their returns. If there is any discrepancy in the
value of supplies, the same would be communicated to both of them. If such discrepancy in
value is not rectified within the given time, then such amount would be added to the output
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tax liability of such suppler. The supplier would have to pay the differential amount of
output tax along with interest.
Notice to the Operator: An officer not below the rank of Deputy Commissioner can issue
notice to an Operator asking him to furnish details relating to volume of goods/ services
supplied, stock of goods lying in warehouses/ godowns, etc. The Operator is required to
furnish such details within 15 working days. In case an Operator fails to furnish the
information, besides being liable for penal action under section 122 shall also be liable for
penalty up to Rs. 25,000/- The GST Council in their 22nd meeting held on 6th October, 2017
decided that operationalization of TDS/ TCS provisions shall be postponed till 31.03.2018.
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Chapter 17: Preparation for GST Audit & Reconciliation Statement
Audit can be understood to be an independent examination of records and documents to
verify the facts and draw conclusions regarding correctness of recorded facts. In GST law,
the word ‘Audit’ has been defined to mean detailed examination of records, returns and
other documents maintained or furnished in GST Act or GST rules to verify the correctness
of turnover declared, taxes paid, refund claimed and input tax credit availed and to
assess taxable person’s compliance with provisions stipulated.
In earlier indirect tax laws, the audit by a professional was not mandatory except under state
VAT laws. Laws like central excise, service tax did not have provision for audit by
professionals like chartered accountant or cost accountant unless ordered by department in
special circumstances. However, in GST regime wherein most of the indirect taxes have been
subsumed, the mandatory audit has been introduced.
Types of audit
Audit by a professional in GST regime is mandatory only in specified cases. In other cases,
the tax payers still could opt for voluntary audit which could have certain advantages as
enumerated earlier. Audit by professionals could broadly be classified into following three
types:
I. Mandatory audit under Section 35(5)
II. Special audit under Section 66
III. Voluntary audit for management
I. Mandatory audit under Section 35(5)
Section 35(5) of CGST Act 2017 read with Rule 80(3) of CGST Rules 2017 warrants a
registered person with aggregate turnover of more than Rs.2 crore in a financial year to get
his accounts audited either by a chartered accountant or cost accountant. The registered
person is required to submit a copy of audited annual accounts and a reconciliation
statement certified by chartered or cost accountant in form GSTR-9C electronically.
Earlier the manufacturers who were paying central excise duty and the traders would have
gone through VAT audits. However, the concept is new for the service providers who were
not required to submit any audit report under earlier service tax law. Due to non-
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continuation of centralized registration concept for service providers unlike service tax,
there is a need to take separate GST registration for each state by service providers. Even the
audit reports would have to be filed for each registration separately which could increase
the cost of compliance for tax payers with multiple locations.
One issue which could arise in case of multi-location registrations is requirement of audit for
those registrations where turnover is not crossing Rs.2 crore. Even though Section 35(5)
refers to ‘turnover’ which is not defined anywhere in the law, Rule 80(3) refers to ‘aggregate
turnover’ for audit. Definition of aggregate turnover includes value of all taxable supplies,
exempt supplies, export and interstate supplies of persons having same permanent account
number computed on all India basis. Therefore, audit would be required for all registrations
irrespective of turnover if PAN India turnover is crossing the limit of Rs.2 crores. The due
date for filing GSTR-9C for a financial year is 31st December of subsequent financial year. For
FY 2017-18, the due date has been extended upto 31st August 2019.
II. Special audit under Section 66
Special audits have always been part of various indirect tax laws which existed prior to
introduction of GST. Such audits are undertaken by the professionals based on direction
from the tax department to registered persons in special circumstances such as excess credit
or wrong availment of credit or wrong valuation of goods, services.
Section 66 of CGST Act 2017 gives power to officer who is not below the rank of assistance
commissioner for directing special audit in special circumstances such as wrong valuation,
wrong credit claim. The order needs to be issued to the registered person in form GST ADT-
03. The officer can direct a registered person to get his records including books of account
examined and audited by a chartered accountant or a cost accountant. Such accountant
needs to be nominated by the Commissioner. It is pertinent to note that this audit would
have effect even if accounts of registered person have already been audited under any other
provisions such as audit under Section 65 or audit under Section 35(5).
Professional nominated for audit has to submit a report of special audit in ninety days in
form GST ADT-04. Ninety days period can be extended by another ninety days based on
application by registered person or the professional appointed with sufficient reason.
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III. Periodical voluntary audit
If the aggregate turnover is not exceeding the limit of Rs.2 crore in a financial year, the
registered person need not get the mandatory audit done by a professional. However, to
ensure better compliance and take maximum benefits available in law, he could get the
periodical voluntary audit done by a learned professional. Even where the statutory audit is
mandatory, the assessee could get the periodical audits done by the professionals to ensure
compliance and take maximum benefits under the law.
MANDATORY AUDIT
Reporting Requirement Under Audit Form GSTR-9C
The form GSTR-9C has been notified through CGST notification no.49/2018.
Part I – Basic Details
Sl
No. Particulars Instruction in the Form
1
FINANCIAL YEAR:
The financial year for which the
Reconciliation statement is being
submitted must be filled here.
The reference to current financial year
in this statement is the financial year
for which the reconciliation statement
is being filed for.
2
GSTIN:
Since, the reconciliation statement cannot
be filed at an entity level and the same
needs to be separately filed by each
registered person, therefore such
registered person is required to submit
the GSTIN in this field.
The details for the period between
July 2017 to March 2018 are to be
provided in this statement for the
financial year 2017-18. The
reconciliation statement is to be filed
for every GSTIN separately.
3A
LEGAL NAME:
Once the GSTIN is filled in by the
registered person, the legal name shall
auto-populate based on the details as
submitted in the GST common portal.
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Sl
No. Particulars Instruction in the Form
Assessee needs to re-validate the details
so auto-populated.
3B
TRADE NAME:
Once the GSTIN is filled in by the
registered person, the trade name shall
auto-populate based on the details as
submitted in the GST common portal.
Assessee needs to re-validate the details
so auto-populated.
4
ARE YOU LIABLE TO AUDIT UNDER
ANY ACT:
If the registered person is liable to audit
under any Act (other than GST Act), he
has to mention the same in this part of
the format. The audit under any other
Act may include the Companies Act,
Income Tax Act etc.
Part II
Reconciliation of turnover declared in the Audited Annual Financial Statement with
turnover declared in Annual Return
This part requires the reconciliation of turnover as declared in the books of accounts/
financial statement with the turnover as declared in the Annual Return.
Relevant Instructions in Form GSTR 9C
Part II consists of reconciliation of the annual turnover declared in the audited Annual
Financial Statement with the turnover as declared in the Annual Return furnished in FORM
GSTR-9 for this GSTIN.
It is mandatory to file all your FORM GSTR-1, FORM GSTR-3B and FORM GSTR - 9 for the
FY 2017-18 before filing this return. The details for the period between July 2017 to March
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2018 are to be provided in this statement for the financial year 2017-18. The reconciliation
statement is to be filed for every GSTIN separately.
Sl No. 5 – Reconciliation of Gross Turnover
This field requires reconciliation of the turnover on gross basis i.e. without considering any
exemptions or non-taxable or zero rated supplies.
Sl No. 5A – Turnover (Including exports) as per audited financial statements for the state/
UT (for multi-GSTIN units under same pan the turnover shall be derived from the
Audited Financial Statement)
Explanation Instructions in the Form
In this field assessee is required to
declare the turnover as per the
audited financial statements for the
respective state/ UT or the GSTIN
under the same PAN. Meaning of
the term ‘Turnover in the state’ is
defined in section 2(112) of the
CGST Act. However, in this field
Turnover as per audited financial
statements is required to be
disclosed.
The turnover as per the audited Annual Financial
Statement shall be declared here. There may be cases
where multiple GSTINs (State-wise) registrations
exist on the same PAN. This is common for
persons/entities with presence over multiple States.
Such persons/entities,would have to internally derive
their GSTIN wise turnover and declare the same here.
This shall include export turnover (if any). It may be
noted that reference to audited Annual Financial
Statement includes reference to books of accounts in
case of persons/entities having presence over
multiple States.
Details of all incomes must be disclosed
In general terms, the meaning of the term ‘turnover’ would cover the following:
● Revenues from Operations i.e. Sale of products, services and other operating
revenues;
● Interest & Dividends income;
● Royalties;
● Income from sale of investments;
● Other Direct & Indirect Incomes;
● Other miscellaneous incomes.
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In a nutshell, it can be said that summation of all the incomes as reported in the income
statement of the audited financial statements must be disclosed here whether or not such
incomes are taxable or exempted or exported etc.
Turnover as per the books of accounts to be considered in case of multiple GSTIN’s
Audited financial statements are prepared at an entity level for each PAN and the same are
not audited separately at each GSTIN level. However, the reconciliation in the GST law is
separately required for each registration number. Therefore, in order to reconcile the
differences, one has to bifurcate the audited financial statements for each GSTIN so that the
exercise of reconciliation can smoothly conducted.
Sl No. 5B – Unbilled revenue at the beginning of the Financial Year – [to be added]
Explanation Instructions in the Form
Relevant Instructions in Form GSTR 9C – Column
(5B):
Unbilled revenue which was recorded in the books of
accounts on the basis of accrual system of accounting
in the last financial year and was carried forward to
the current financial year shall be declared here. In
other words, when GST is payable during the financial
year on such revenue (which was recognized earlier),
the value of such revenue shall be declared here.
(For example, if rupees Ten Crores of unbilled revenue
existed for the financial year 2016-17, and during the
current financial year, GST was paid on rupees Four
Crores of such revenue, then value of rupees Four
Crores rupees shall be declared here)
Sl No. 5C - Unadjusted Advances at the end of the Financial year - [to be added]
Explanation Instructions in the Form
The liability to pay GST arises in accordance
with the time of supply principles under
Value of all advances for which GST has
been paid but the same has not been
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Explanation Instructions in the Form
section 12 or 13, as the case may be. The
liability arises on the earlier of receipt of
money or raising of invoice. However,
presently the tax on advances is payable only
in case of supply of services and the same is
suspended in case of supply of goods w.e.f.
15th November 2018 vide Notification
66/2017-CT Dated 15.11.2018.
Therefore, in case of any supplies on which
GST is paid on advances and the invoice for
such supply is also issued in the same
financial year, then there is no implication of
reconciliation. However, in all cases where
GST is paid on the advances and no tax
invoice is issued or tax invoice is partially
issued up to the end of the financial year,
then details of such advances need to be
reflected here.
recognized as revenue in the audited
Annual Financial Statement shall be
declared here.
Sl No. 5D - Deemed Supply under Schedule I - [to be added]
Explanation Instructions in the Form
Certain supplies are constituted as
deemed supplies under schedule I of
the GST Act whereby they are liable for
tax even if there is no consideration
involved in such transactions. These
transactions may not be recognized as
revenues in the financial statements but
since they constitute deemed supply in
GST, details of the same are disclosed in
Aggregate value of deemed supplies under
Schedule I of the CGST Act, 2017 shall be
declared here. Any deemed supply which is
already part of the turnover in the audited
Annual Financial Statement is not required to be
included here.
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Explanation Instructions in the Form
various returns filed under GST i.e.
GSTR 3B, GSTR 1 and the Annual
Return in Form GSTR 9.
Sl.No. 5E – Credit notes issued after the end of the Financial Year but reflected in the
Annual Return - [to be deducted]
Explanation Instructions in the Form
Recognition of credit notes issued after
31st march of the financial year, where
these credit notes are related to any
invoices which are considered in GSTR
1 and further GSTR 9 filed for the said
financial year. These credit notes are
issued either before or after the end of
the FY but relate to the transactions for
the previous FY and are declared in the
returns of April to September of the
subsequent FY or up to the date of
filing of annual return of previous FY
whichever is earlier and recorded at
column 11 of GSTR 9. i.e. Supplies/tax
(outwards) reduced through
Amendments or otherwise.
Aggregate value of credit notes which were issued
after 31st of March for any supply accounted in
the current financial year but such credit notes
were reflected in the annual return (GSTR-9) shall
be declared here.
Sl.No.5F – Trade Discounts Accounted for in the Audited Financial Statement but are not
permissible under GST - [to be added]
Explanation Instructions in the Form
Details of trade discounts given in the
normal course of business but which are
not permissible for reduction from the
Trade discounts which are accounted for in the
audited Annual Financial Statement but on which
GST was leviable (being not permissible) shall be
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Explanation Instructions in the Form
value of supply must be added here.
Since, assessee has already paid GST on
the same and has considered this liability
in the GSTR 1 and the same is disclosed
in the annual returns, therefore the
details of impermissible trade discounts
needs to be added here.
declared here.
Sl.no. 5G - Turnover from April 2017 to June 2017 - [to be deducted]
Explanation Instructions in the Form
GSTR 9 annual returns shall be for the
period between July 2017 to March 2018.
Therefore, in order to bring both Annual
financial statements and Annual returns
on same level, the turnover for period
July 2017 to March 2018 shall be reduced
from turnover in annual financial
statements.
Unbilled revenue which was recorded in the
books of accounts on the basis of accrual system
of accounting during the current financial year
but GST was not payable on such revenue in the
same financial year shall be declared here.
Turnover included in the audited Annual
Financial Statement for April 2017 to June 2017
shall be declared here
Sl. No. 5H - Unbilled Revenue at the end of Financial Year - [to be deducted]
Explanation Instructions in the Form
The recognition of revenue in financial
statements is as per the standards
prescribed in this regard. Once it is
probable that any future economic benefit
associated with the item of revenue
would flow to the entity and the amount
of revenue can be measured with
reliability, then having regard to the
Generally accepted accounting principles
of the organization, the revenue can be
Unbilled revenue which was recorded in the
books of accounts on the basis of accrual system
of accounting during the current financial year
but GST was not payable on such revenue in the
same financial year shall be declared here.
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Explanation Instructions in the Form
recognized.
It is possible that in case of some business
transactions all the criteria required for
recognition of revenue are satisfied in a
transaction and accordingly the revenue
is recognized in the books of accounts but
no billing or invoicing is done in respect
of such revenue item. To the contrary, as
far as GST law is concerned, the
provisions of time of supply state that the
liability in respect of supply of goods/
service shall arise upon issuance of
invoice. Further, explanation (1) to
section 12(2) of the GST Act states that
“supply” shall be deemed to have been
made to the extent it is covered by the
invoice or, as the case may be, the
payment.
Therefore, since invoice in respect of
these items shall be raised in the current
financial year (for ex: FY 18-19) whereas
revenue on the same item must have
already been recognized in the books of
accounts in the previous financial year
(for ex: FY 17-18), Since GST liability shall
be created for and paid on this
transaction only once the Tax invoice is
raised (assuming no advances received)
and accordingly the details of the same
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Explanation Instructions in the Form
would be disclosed in the Annual Returns
of FY 18-19, therefore such items of
revenues must be reduced in this field in
order to match the numbers with the
annual returns.
Sl. No.5I – Unadjusted Advances at the beginning of the Financial Year - [to be deducted]
Explanation Instructions in the Form
The liability to pay GST accrues once the
event as specified in section 12 & section 13
of the GST Act providing for time of
supply in case of goods/ services arises. In
a nutshell, GST also needs to be paid upon
receipt of advance for the supply.
However, presently the tax on advances is
payable only in case of supply of services
and the same is suspended in case of
supply of goods w.e.f. 15th November 2018
vide Notification 66/2017-CT Dated
15.11.2018.
Therefore, in case of any supplies on which
GST is paid on advances and the invoice
for such supply is also issued in the same
financial year, then there is no implication
of reconciliation. However, in all cases
where GST is paid on the advances in the
previous year and the tax invoice is issued
for the same in the subsequent year then
details of such advances must be reflected
here.
Value of all advances for which GST has not
been paid but the same has been recognized as
revenue in the audited Annual Financial
Statement shall be declared here.
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Sl. No.5J – Credit Notes Accounted for in the Audited Annual Financial Statement but are
not Permissible under GST - [to be added]
Explanation Instructions in the Form
Credit notes are issued by taxable person
with respect to a particular invoice issued
earlier where there is a short supply of goods
or services or both. When credit notes are
raised there is a reduction in the said
turnover as well as reduction in the output
tax liability. If there are any credit notes
issues and accounted in financial statements
which resulted in reduction in turnover but
not allowed for reduction in turnover as per
GST should be declared here by adding to the
turnover of financial statement.
Aggregate value of credit notes which have
been accounted for in the audited Annual
Financial Statement but were not admissible
under Section 34 of the CGST Act shall be
declared here.
Sl No. 5K – Adjustments on Account of Supply of Goods by SEZ Units to DTA Units-[to
be deducted]
Explanation Instructions in the Form
It is pertinent to note that supplies by
SEZ to DTA units is treated as import
of goods as the premises of the
authorised operations of SEZ is
deemed to the outside the taxable
territory as per the provisions of the
SEZ Act. Since, outward supply of
goods by SEZ would not be disclosed
in the annual returns and also in the
GSTR 1 and the same is recorded by
the recipient of supply as an import of
goods under the cover of the bill of
entry, in order to match the turnover of
Aggregate value of all goods supplied by SEZs to
DTA units for which the DTA units have filed bill
of entry shall be declared here.
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Explanation Instructions in the Form
the SEZ declared in its financial
statements with the Annual return, the
outward supply of goods made by SEZ
needs to be deducted from here.
Sl. No. 5L – Turnover for the period under Composition Scheme - [to be deducted]
Explanation Instructions in the Form
Turnover pertaining to composition
scheme any must be declared and
deducted in this.
There may be cases where registered persons
might have opted out of the composition
scheme during the current financial year. Their
turnover as per the audited Annual Financial
Statement would include turnover both as
composition taxpayer as well as normal
taxpayer. Therefore, the turnover for which
GST was paid under the composition scheme
shall be declared here.
Sl. No. 5M – Adjustments in turnover under Section 15 and Rules thereunder - [to be
added/deducted]
Explanation Instructions in the Form
Section 15 of the CGST Act states that the
supply of goods must be valued at the
transaction value in all situations where
price is the sole consideration for the
supply and the supplier and receiver are
not related to each other. However, in
certain situations, it is provided that the
supply has to be valued in accordance with
the mechanism as provided in the rules for
valuation on the basis of Open Market
value or based on the value of similar
There may be cases where the taxable value and
the invoice value differ due to valuation
principles under section 15 of the CGST
Act, 2017 and rules thereunder. Therefore, any
difference between the turnover reported in the
Annual Return (GSTR 9) and turnover reported
in the audited Annual Financial Statement due
to difference in valuation of supplies shall be
declared here.
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Explanation Instructions in the Form
goods or on the basis of cost of provision of
goods/ services etc. as under:
● Transactions between related persons;
● Transactions between distinct persons;
● Supplies involving consideration in
non-monetary form etc.
Since, in these cases the value at which the
revenue is recognised in the books of
accounts may not match with the one
adopted for calculating GST, the
differences on this account need to be
appropriately reported here.
Sl.No. 5N – Adjustments in turnover due to Foreign Exchange Fluctuations-[to be
added/deducted]
Explanation Instructions in the Form
Taxable person might be involved in
foreign exchange related transactions.
Which include foreign operations and
foreign currency transactions recorded in
books at transaction date but at every
balance sheet date requires items to be
reported as per AS 11 and IND AS 21 “The
Effects of Changes in Foreign Exchange
Rates”.
Monetary items such as cash, accounts
receivable, notes receivable, and
investments etc would be recorded at the
exchange rates prevailing on the date of
transaction. On the said exchange rate of
the transaction GST shall be paid and
Any difference between the turnover reported in
the Annual Return (GSTR9) and turnover
reported in the audited Annual Financial
Statement due to foreign exchange fluctuations
shall be declared here.
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Explanation Instructions in the Form
disclosed in GSTR 1 and same disclosed in
GSTR 9.
However as on the balance sheet date
changes are done based on accounting
standards which affect the turnover that is
to be shown in annual financial statements.
The turnover may be increased or
decreased, such adjustment in turnover
due the foreign exchange fluctuations shall
be declared in this entry.
Sl. No. 5O – Adjustments in turnover due to reasons not listed above - [to be
added/deducted]
Explanation Instructions in the Form
Any other turnover differences as per
annual financial statement and annual
return which are not covered must be
reported here.
Any difference between the turnover reported in
the Annual Return (GSTR9) and turnover
reported in the audited Annual Financial
Statement due to reasons not listed above shall
be declared here.
Sl.No. 5P – Annual turnover after adjustments as above-auto populated
These details would be auto-populated based on the various adjustments as done above.
Sl. No. 5Q – Turnover as declared in Annual Return (GSTR9)
Explanation Instructions in the Form
These details would be auto-populated
from Sr. No. 5N, 10 and 11 of Annual
Return (GSTR 9).
Annual turnover as declared in the Annual
Return (GSTR 9) shall be declared here. This
turnover may be derived from Sr. No. 5N, 10
and 11 of Annual Return (GSTR 9).
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Sl. No. 5 R & 6 – un-reconciled turnover (Q - P)-ATI & reasons thereof
This is the difference between the above two fields which is the open un-reconciled
turnover. Further, the reasons for the above difference needs to be manually entered into the
form explaining the same. The reasons may result in additional tax liability for the taxpayer
if there is any short payment of tax due to turnover mis-match.
Sl. No 7 – Reconciliation of Taxable Turnover
Once the reconciliation of turnover is done on gross basis which may also include certain
exempt supplies or non-taxable supplies on which no tax is paid, in order to arrive at the
reconciliation of the taxable turnover, this second level of reconciliation is required to be
performed.
Sl. No. 7A – Annual Turnover after Adjustments (from 5P)
This field shall be auto populated with the amount calculated in Table 5P. Table 5(P) is
directly considered as the base for calculating the taxable turnover. Since the total tax
liability shall be calculated based on the taxable turnover arrived, it is to be noted that all the
inputs required to arrive at this field i.e. Table 5P shall be accurately calculated and
disclosed.
Sl. No. 7B – Value of exempted, nil rated, Non-GST Supplies, No-Supply Turnover
Value of exempted, nil rated and Non-GST supplies have to be reported here. Brief
explanation of all these types of transactions is as explained below:
● Exempt Supplies: Supplies which are leviable to GST but are exempted under
section 11 or Section 6 of IGST act shall be reported here. Reference can be given
to notification 2/2017-CTR for exempted goods list, 12/2017-CTR for exempted
services.
● Nil Rated Supply: Supplies that are leviable to GST but at presently liable for tax
at Nil rated under section 9 of GST Act. Reference can be given to notification
11/2017-CTR.
● Non-GST Supply: Supplies which excluded from of levy of GST shall be
covered here.
Example: alcoholic liquor for human consumption. Petrol, ATF and natural gas
(presently not covered under the levy)
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● No-Supply: this is a new term used but indicates the supplies which are covered
by schedule III of the CGST Act.
Relevant Instructions in Form GSTR 9C – Column (7B)
Value of exempted, nil rated, non-GST and no-supply turnover shall be declared here. This
shall be reported net of credit notes, debit notes and amendments if any.
Sl. No. 7C – Zero Rated Supplies without Payment of Tax
Zero rated supply” means any of the following supplies of goods or services or namely:
(a) Export of goods or services or both; or
(b) Supply of goods or services or both to a special economic zone developer or a
special economic zone unit.
Zero rated supplies can be with payment or without payment of Tax.
(1) Zero rated supplies made with payment of GST: Already a part of taxable
turnover of annual return and thus shall not be declared here.
(2) Zero rated supply made without payment of GST: In order to arrive at the
taxable turnover, zero rated supplies made without payment of tax needs to be
reduced i.e to be declared here.
Relevant Instructions in Form GSTR 9C – Column (7C):
Value of zero rated supplies (including supplies to SEZs) on which tax is not paid shall be
declared here. This shall be reported net of credit notes, debit notes and amendments if any.
Sl. No. 7D – Supplies on which Tax is to be paid by the recipient on Reverse Charge Basis
GST needs to be paid by recipient on reverse charge basis for certain transactions liable for
tax under reverse charge as under:
(1) Section 9(3): Specified category of goods as notified from time to time eg: Raw
cotton , cashew etc
(2) Section 9(3): Specified category of services as notified from time to time eg: GTA,
advocate services, importer of services etc
(3) Section 9(4): procurement of goods or services from unregistered persons by a
registered person. Further there is exemption from reverse charge in respect of
supplies made by unregistered person not exceeding taxable supplies of
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Rs. 5,000 per day. This provision is presently deferred w.e.f 13th October 2017
and up to Sept 2019.
Since adjusted annual turnover at column 5P shall not differentiate between whether tax on
the same is forward chare or reverse charge. Thus, to arrive at taxable turnover i e taxed in
the hands of the supplier, transactions on which the customer being recipient is liable to pay
tax is reduced. The said column would have been declared at column 5C and 5H & I i.e net
of credit/debit notes.
Relevant Instructions in Form GSTR 9C – Column (7D):
Value of reverse charge supplies on which tax is to be paid by the recipient shall be declared
here. This shall be reported net of credit notes, debit notes and amendments if any.
Sl.No. 7E – Taxable turnover as per adjustments above (a-b-c-d)
This column is auto populated with taxable turnover which shall form a base for tax liability
to be computed.
Relevant Instructions in Form GSTR 9C – Column (7E)
The taxable turnover is derived as the difference between the annual turnover after
adjustments declared in Table 7A above and the sum of all supplies (exempted, non-GST,
reverse charge etc.) declared in Table 7B, 7C and 7D above.
Sl. No. 7F – Taxable Turnover as per Liability declared in Annual Return (GSTR9)
Taxable turnover at column 7E needs to be compared with the turnover (i.e Supplies and
advances on which tax is to be paid) disclosed in the annual return for differences as per
Table 4N of GSTR 9 is to be replicated here.
Relevant Instructions in Form GSTR 9C – Column (7F):
Taxable turnover as declared in Table 4N of the Annual Return (GSTR9) shall be declared
here.
Sl. No. 7G – Unreconciled Taxable Turnover (F-E)
The difference between the column 7 F and 7 E shall be auto populated in column 7G. The
reasons for the same needs to be analyzed and the same needs to be reported in table 8 of the
form. Some of the common reasons for such difference could be on account of the following:
(1) Unreconciled turnover itself at Column 5R
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(2) Incorrect disclosure in any of the column of table 5 of GSTR 9C which is
considered as the base for further adjustments.
(3) Incorrect disclosure in the annual return with respect to any turnover.
Sl. No 9 – Reconciliation of Rate wise Liability and Amount Payable thereon
This table requires breakup of the tax liability based on the various rates of taxes and based
on the nature of tax i.e. forward charge & reverse charge.
Sl. No 9L – Interest
Section 49 Of CGST act provides explanation that “other dues” means interest, penalty, fee
or any other amount payable under this Act or the rules made thereunder. Where the person
liable to pay tax fails to pay tax within the due date to pay then interest at specified rate shall
be levied on the outstanding tax payable from succeeding day of due date till the date of
actual payment.
Sl. No 9L – Late Fee
Section 47 of CGST Act provides for Levy of late fee - Any registered person who fails to
furnish the details of outward or inward supplies required under section 37 or section 38 or
returns required under section 39 or section 45 by the due date shall pay a late fee. Presently,
the late filing fee is as under:
(a) GSTR 1: Delay in filing- nil as due date for the same is extended till 31st October
2018
(b) GSTR 3B: If tax liability exists- late fee of 50/day. If Nil returns are filed then
20/Day
(c) GSTR 9: Delay in filing then late fee of Rs.100/Day with maximum fee capped.
Sl. No 9P – Total amount to be paid as per tables above
The total tax liability along with late fee, interest, penalty and other amount paid and shown
above shall be taken as total amount to be paid and auto populated here.
Relevant Instructions in Form GSTR 9C – Column (9P):
The total amount to be paid as per liability declared in Table 9A to 9O is auto populated
here.
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Sl. No 9 Q – Total amount paid as declared in the annual return
Details of tax paid as declared in returns filed during the financial year along with
differential tax paid (As at Column 14 of Annual return) on account of declaration of the
transactions for the previous FY declared in returns of April to September of current FY or
up to the date of filing of annual return of previous FY whichever is earlier shall be declared
here.
Relevant Instructions in Form GSTR 9C – Column (9Q)
The amount payable as declared in Table 9 of the Annual Return (GSTR9) shall be declared
here. It should also contain any differential tax paid on Table 10 or 11 of the Annual Return
(GSTR9).
Sl. No 9R – Un-Reconciled Payment of Amount
The difference between the column 9P and 9Q shall be auto populated in column 9R. The
reasons for the same needs to be analyzed and the same needs to be reported in table 10 of
the form. Some of the common reasons for such difference could be on account of the
following:
(1) Unreconciled turnover itself at Column 5R
(2) Incorrect disclosure in any of the column of table 5 of GSTR 9C which is
considered as the base for further adjustments.
(3) Difference of opinion on classification of goods/services and rate tax on that.
Sl. No 10 – Reasons for Un-Reconciled Payment of Amount
For each identified non-reconciliation, auditor shall provide reasons. Further, the reasons for
the above difference needs to be manually entered into the form explaining the same. The
reasons may result in additional tax liability for the taxpayer if there is any short payment of
tax due to any incorrect rate of taxes applied.
Relevant Instructions in Form GSTR 9C – Column (10)
Reasons for non-reconciliation between payable/liability declared in Table 9P above and the
amount payable in Table 9Q shall be specified here.
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Sl.No 11 – Additional amount payable but not paid (due to reasons specified under tables
6, 8 and 10 above)
Additional liability to pay tax for non-reconciliation due to various reasons specified at table
6, 8 and 10 shall be determined for each different rate of tax and shall be declared at
respective fields of table 11. To be paid through cash- these additional amounts shall be paid
through cash only even though the taxable person may have sufficient credit in electronic
credit ledger. Further these payments made in cash shall be available to any recipient (B2B)
as credits, may have to be borne by taxable person himself as it would be difficult for
business to collect such amounts from recipients. It is also to be noted that this column is for
declaration of the additional amount payable in cash and not to payment itself.
Relevant Instructions in Form GSTR 9C – Column (11)
Any amount which is payable due to reasons specified under Table 6, 8 and 10 above shall
be declared here.
22.1.4.1 Part IV – Reconciliation of net Input Tax Credit (ITC) declared in audited annual
financial statement with net ITC declared in annual return (GSTR 9)
This part requires reconciliation between the ITC declared as per audited financial
statements and ITC as declared in the Annual Return. There may arise differences in ITC as
per books of accounts and as per Annual Return due to following reasons:
(1) Credit of tax paid on Reverse Charge:
As per section 9(3) and 9(4) of the CGST Act, on the notified goods and services, tax is to be
paid on reverse charge basis. In case of such transactions, as taxable invoice is not received
from the supplier, it may so happen that the same is missed to be accounted for in the books
of accounts. However, while filing GSTR-3B the tax and credit on the said transaction is
rightly paid and credit is also availed. There is high probability of differences in ITC
occurring due to this reason.
(2) Year End Purchases:
Invoice dated 30th March’18 received by the recipient in April ‘18. Hence, ITC on these
purchases would be accounted for in the books of accounts for the year ended 31st March
‘18, However credit of tax paid would be availed in the return for the month of April’18.
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(3) Transitional Credit:
Many taxpayers have not been able to file their Tran 1 form and claim credit due to technical
glitches in the GST portal. However, these credits have been accounted by the taxpayers in
their books of accounts for the year 17-18.
(4) Ineligible Credits Claimed:
It may so happen that ineligible ITC may be availed in the books of accounts by the
taxpayer, however the same is rightly reversed while filing of form GSTR 3B, resulting into
difference between books and returns.
There may be several other reasons for differences in ITC as per Audited financial
statements and as per Annual Return. One of the fundamental features of GST is the
seamless flow of input credit across the chain (from the manufacture of goods, supplier of
service till it is consumed) and across the country. ITC is equivalent to cash for a taxpayer.
Therefore, excess availment or incorrect availment and utilization of credit has a direct
nexus with reduction in revenue for the Government. Hence, reconciliation of Input tax
credit is highly important from taxpayers as well as to government perspective.
Here, the process of reconciliation as laid out in Form 9C is to start from the ITC as per
financial statements and make necessary adjustments to reconcile with the credits disclosed
in the annual returns. In other words, assessees would have to derive the ITC as per the
audited financial statements and then the adjustments must be carried out to the said ITC to
arrive at the ITC as disclosed in the annual returns. Therefore, in the process of preparation
of Form 9C, auditor must first plot the numbers as per the audited financial statements and
then work backwards to match the same with the annual returns. Adjustment which have
already been considered between GSTR-3B and Annual Return (GSTR-9) need not be
considered here.
Sl. No 12 – Reconciliation of Net Input Tax Credit (ITC)
This field requires reconciliation of ITC on net basis i.e. after considering any reversals if
any.
Sl. No.12A - ITC availed as per audited annual financial statement for the State/ UT (for
multi-GSTIN units under same pan this should be derived from books of accounts)
In this field assessee has to enter ITC availed as per annual financial statement for the State/
UT. It is pertinent to note here that, for entities having multiple presence across the country
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and having centralized accounting, SL.NO.12A requires ITC availed separately for each of
the GSTIN i.e. for each registration the ITC as per books of accounts have to be segregated as
the same needs to be entered here, even when centralized accounting is carried out for all
the units across India.
Sl. No.12B - ITC booked in earlier financial years claimed in current financial year
In this field assessee is required to fill in information regarding ITC which is accounted for
in the books of accounts in the earlier year but the credit of which is being claimed in the
returns filed during the current financial year. As GST has been rolled out in the year 2017
itself, there would be no credit of GST which must have been accounted for by the assessee
in the year 2016 and claimed in the return during the year 2017. Therefore, practically this
field would not be required to be entered for FY 17-18 in respect of GST credits. However,
going forward from next FY 18-19 this field would be applicable.
But it is important to note here that information regarding Transitional credits, i.e. credit of
erstwhile taxes like service tax, excise duty, VAT, etc. which have been accounted for in the
FY 16-17, but the credit of which has been taken by the assessee during this FY 17-18 has to
be entered in this filed. In simple words for the current FY 17-18 a taxpayer has to enter the
amount of Transitional credit claimed by him under Form Trans -1 & Trans -2 under this
field.
Relevant Instructions in Form GSTR 9C:
Any ITC which was booked in the audited Annual Financial Statement of earlier financial
year(s) but availed in the ITC ledger in the financial year for which the reconciliation
statement is being filed for shall be declared here. This shall include transitional credit which
was booked in earlier years but availed during the Financial Year 2017-18.
Sl. No.12C - ITC booked in current financial year to be claimed in subsequent financial
year
This serial number requires the value of ITC which is accounted for in the current financial
year in the books of accounts however the credit of which is going to be claimed in the next
financial year in the GST returns.
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Sl. No.12D - ITC availed as per audited financial statements or books of account
Based on the amount declared under SL.NO.12A, 12B and 12C this field shall be auto
populated. After the aforesaid adjustments are done this field would reflect only that
amount of ITC which has been claimed in the GST returns in the current financial year
irrespective of the year in which it has been accounted for in the books of accounts. Assessee
needs to re-validate the details so auto-populated.
Relevant Instructions in Form GSTR 9C:
ITC availed as per audited Annual Financial Statement or books of accounts as derived from
values declared in Table 12A, 12B and 12C above would be auto-populated here.
Sl. No.12E – ITC claimed in the annual return (GSTR 9)
This field requires the disclosure of the amount of ITC that has been claimed by the assessee
in form GSTR 9. i.e. the aggregate of ITC claimed by the assessee in GSTR-3B filed for the
period July’17 to March’18. The required value in this field would be auto populated from
the table 7J of Form GSTR 9.
Relevant Instructions in Form GSTR 9C:
Net ITC available for utilization as declared in Table 7J of Annual Return (GSTR9) shall be
declared here.
Sl. No.12F – Un-reconciled ITC
The difference between ITC claimed as per audited financial statements and annual return
(GSTR 9) would get auto populated here. This is the un-reconciled ITC of the assessee which
may be disputed by the department and reasons for non- reconciliation would have to be
figured out by the assessee. Assessee needs to re-validate the details so auto-populated.
Sl.No.13 – reasons for Un-reconciled difference in ITC
The assessee has to provide his comments or reasons for the difference in ITC as per books
and as per Annual return derived in Sl.No.12F. Some of the reasons for differences in the
ITC can be as follows:
● Ineligible credit claimed by assessee. Eg: Credit on food & beverages, Life
insurance, etc.;
● Reverse charge payments and credit of the same;
● Import of services, IGST credit not considered;
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● Data entry errors.
Relevant Instructions in Form GSTR 9C:
Reasons for non-reconciliation of ITC as per audited Annual Financial Statement or books of
account (Table 12D) and the net ITC (Table12E) availed in the Annual Return (GSTR9) shall
be specified here.
Sl.No.14 – Reconciliation of ITC declared in the annual return (GSTR9) with ITC availed
on expenses as per audited annual financial statement or books of account
This table requires reconciliation of ITC availed on various expenses as per books of
accounts and as per Annual Return. The requirement of this table is that the assessee needs
to disclose the ITC availed under each head of expense during the year and the same needs
to be reconciled with the figures entered under Annual Return. The various expense heads
which are given under table 14 are as follows:
● Purchases
● Freight/Carriage
● Power & Fuel
● Imported goods (Including received from SEZ)
● Rent and Insurance
● Goods lost, stolen, destroyed, written off or disposed of by way of gift or free
samples
● Royalties
● Employees Cost (Salaries, wages, Bonus etc.)
● Conveyance Charges
● Bank Charges
● Entertainment charges
● Stationary Expenses (including postage, etc.)
● Repair & Maintenance
● Other Miscellaneous expenses
● Capital Goods
● Any other expenses can also be added.
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Sl. No.15 – reasons for Un-reconciled difference in ITC
The assessee has to provide his comments or reasons for the difference in ITC availed on the
various expenses as per books of account and as per Annual return derived in field 12F.
Relevant Instructions in Form GSTR 9C
Reasons for non-reconciliation between ITC availed on the various expenses declared in
Table 14R and ITC declared in Table 14S shall be specified here.
Sl. No.16 - tax payable on Un-reconciled difference In ITC (due to reasons specified in 13
and 15 above)
This field requires the assessee to calculate the tax payable on the following non-reconciled
amounts:
● Difference in Net ITC as per audited financial statements vis-à-vis ITC claimed
in Annual Return (Calculated under SL.No.12F)
● Difference in ITC availed on expenses as per audited financial statement vis-à-
vis ITC declared in Annual Return (Calculated under SL.No.14T)
The assessee is required to calculate the tax payable, interest and penalty if any in respect of
the said differences and mention these details under this serial number.
Relevant Instructions in Form GSTR 9C:
Any amount which is payable due to reasons specified in Table 13 and 15 above shall be
declared here. Towards, the end of the reconciliation statement taxpayers shall be given an
option to pay their taxes as recommended by the auditor.
Part V - Auditor’s recommendation on additional liability due to non-reconciliation
As per section 35(5) of the CGST Act read with rule 80(3) the reconciliation statement to be
submitted by the assessee needs to be duly certified by a chartered accountant or a cost
accountant. Therefore, once the reconciliation statement is drawn up by the auditor and after
noticing the non-reconciled differences in the turnover, ITC, etc. he needs to provide his
recommendations on these differences observed and the tax payable in cash thereon has to
be disclosed under this serial number.
Further the auditor shall also be required to provide his recommendation on the following:
● If there is any other amount to be paid for supplies not included in the annual
return (GSTR – 9);
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● If there is any refund which has been erroneously taken and is required to be
paid back to the Government;
● Any other outstanding demands to be settled may be recommended by the
auditor.
At the end of the form the auditor has to provide for verification stating that the information
given is true and correct to the best of his knowledge and belief and nothing has been
concealed therefrom.
PART B – CERTIFICATION
As per section 35(5) of the CGST Act read with rule 80(3) of the CGST rules, the auditor is
not only required to conduct an audit of the annual accounts of the assesse, but also he is
required to duly certify the reconciliation statement drawn under form GSTR 9C. This part
of the form provides for a format in which due certification is to be provided by the auditor.
Two formats have been prescribed by the government which are as follows:
● Format I – This format has to be adopted when the audit of the annual accounts
and the reconciliation statement is drawn up by the same auditor;
● Format II – This format has to be adopted when two different persons have been
appointed by the assessee, one for conducting the audit and the other for
drawing the reconciliation statement.
Role of professionals – Clarification through press releasee
Role of professional is not clearly brought out in the GST law and due to this there are
different views among the professionals on requirement of reporting on additional
liabilities. A press release clarification has been issued dated 3rd July 2019 with respect to
role of chartered or cost accountant in in certifying the reconciliation statement which is
reproduced below:
“There are apprehensions that the chartered accountant or cost accountant may go beyond the books
of account in their recommendations under FORM GSTR-9C. The GST Act is clear in this regard.
With respect to the reconciliation statement, their role is limited to reconciling the values declared in
annual return (FORM GSTR-9) with the audited annual accounts of the taxpayer”
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Following could be the different interpretations/ understanding which could be possible
with respect to scope of work in reconciliation:
1. Scope of auditor is to merely reconcile the number as per audited financial statement with
the annual return and provide reasons for differences due to reconciliation.
2. Scope is to legally validate the transactions contained in the books of account i.e.
taxability, ITC eligibility, rate of tax etc. including the reconciliation of numbers in financial
statement and annual return. Audit can be restricted to books of accounts.
3.Scope is to validate all transactions in books and annual return including identification,
reporting of transactions such as deemed supply, cross charge, clandestine removal, bogus
billings etc.
From the clarification issued through the press release it appears that the scope of auditor is
to reconcile the value declared in the books of account with the GSTR-9 which is discussed
in point no.1 above.
However, in view of the authors, the scope of auditor cannot be confined to merely
reconciliation as the term ‘audit’ has a wide connotation under GST Act and while signing
auditor is expected to acknowledge the declaration of details to be “true and correct”.
Though investigation is not expected from the auditor, any non-compliance which is
apparent needs to be considered by the auditor. In case of reconciliation differences in
numbers disclosed in annual return and financial statements, reasons to be ascertained. If
the reasons are related to non-payment of GST or wrong refund, wrong ITC etc., the same
may be recommended to be paid by the auditor.
The fact that the GST Audit Manual which has been released envisages assessing the tax
leakages, use of ratios, trend verification, stock verification means that they would alsobe
accountable and responsible. They need to give the report within time limits unlike in the
past.
Therefore the auditors may also have to display enhanced commitment unlike the tax audit
under Income Tax which has not led to respect from the tax administrators.
Submission of Form GSTR-9C
Having prepared all the forms at GSTIN level, they should be submitted on the common
portal. It should be ensured that all submissions are made on or before 31st December so that
the compliance can be made timely and there is no late fee for delay in furnishing the details.
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When a person fails to get his accounts audited, then he shall be liable with a penalty of
Rs.25,000/-. (Sec 125 of CGST Act, 2017)
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Chapter 18: Advance Ruling
Introduction.
The scheme of advance ruling was introduced in India in the year 1993 under Income tax to
facilitate the non-resident investor in ascertaining their tax liability under Income tax. Later
the advance Ruling scheme was extended to Central excise and Customs w.e.f 11.05.1999.
Similarly the advance Ruling was also incorporated in Service tax law w.e.f 14.05.2003.
Now in the GST era also the Advance Ruling facility is extended to the assessees who were
registered/desirous to register (i.e., unregistered) under GST.
Different aspects of Advance Ruling
Meaning and purpose of advance Ruling
Advance ruling means the decision provided by the authority of advance ruling or appellate
authority for advance ruling to the applicant related to supply of goods or services or both
which are undertaken or proposed to be undertaken by the applicant. In GST, there is an
improvement over the earlier provisions of advance ruling i.e., advance ruling can be
obtained not only for the proposed activity but also the on-going activity undertaken by the
applicant.
The main purpose of advance ruling is to provide the certainty in tax liability in advance.
Along with the above it could also reduce the litigation in future and to attract the foreign
direct investment (presently there are advance rulings which are against the provisions
which has reduced the confidence of the taxpayers in advance rulings)
Who is eligible for advance Ruling?
The person who is registered under the GST or desirous to obtain the registration under GST
can file an application before the authority for advance ruling for the activity undertaken by
them or for proposed to be undertaken.
Applicability of advance Ruling
The person can obtain advance ruling only for the questions which are specified under
section 97(2) of the CGST Act, 2017. Which are as follows
a. Requirement of registration
b. Classification of any goods or services or both
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c. Applicability of a notification issued under the GST Acts
d. Determination of the liability to pay tax on any goods or services or both
e. Determination of time and value of supply of goods or services or both
f. Admissibility of input tax credit (ITC)
g. Whether any particular thing done by the applicant with respect to any goods
or services or both amounts to or results in a supply of goods or services or
both, within the meaning of that term.
Place of supply is not covered in the above list which means the applicant cannot go for an
advance Ruling to determine the Place of supply of goods/ service or both.
Application for advance Ruling
The person who desirous to obtain advance ruling is required to file an application before
the authority for advance ruling in FORM GST ARA-01 and accompanied by a fee (Detail
procedures are covered under chapter No. 16 in procedures)
Disposal of advance Ruling decision
After filing an application before the Authority for Advance Ruling, the authority after
examining the application and records and after hearing the applicant or his authorised
representative or concerned officer, the authority either admit or reject the application.
The authority for advance ruling shall reject the application where the question raised in the
application is already pending or decided in any proceedings in the case of an applicant
under any of the provisions of this Act.
The application cannot be rejected without giving proper opportunity to appear before the
authority for advance ruling and the reasons for rejection shall be specified in the order, that
means the order should be a speaking order and should be communicated to the applicant
and concerned person.
Where the application is admitted by the authority, the authority after examining the
material aspects and after providing an opportunity to appear to applicant as well as the
concerned officer, the authority pronounces its advance ruling on the question specified in
the application in writing with duly certified and signed by the member with in ninety days
from the date of receipt of application.
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If the members of authority differs in any question on which the advance ruling is sought,
the members state the point or points on which they differ and make a reference to the
appellate authority to decide the case.
Appeal to Appellate Authority for Advance Ruling. (AAAR)
The appellate authority for advance Ruling constituted under the provisions of a
SGST/UTGST shall be deemed to be the Appellate authority in respect of that State or Union
Territory.
The applicant or the concerned officer who aggrieved by the order pronounced by the
Authority for Advance Ruling may go for appeal to the Appellate Authority for Advance
Ruling within thirty days from the date of communication of the order. However, the AAAR
having the power to condone the delay up to thirty days if they satisfied the reasons for the
delay.
The AAAR after giving opportunity to heard pass an order by confirming or modifying the
order pronounced by the AAR. The AAAR shall be passed the order within ninety days
from the date of filing an appeal.
If the members of AAAR are differs in any point/points for the decision, it shall be deemed
that no advance ruling can be issued in respect of that question.
After the advance ruling decision, the certified copy after duly signed by the member of the
AAAR shall be sent to the applicant, the concerned officer and to the AAR.
Rectification of advance ruling
The AAR or the AAAR may amend any order passed by it so as to rectify any error in the
record if such error is notified by the AAR or AAAR on its own accord, or is brought to its
notice by the concerned officer, the jurisdictional officer, the applicant or the appellate
within a period of six month from the date of the order.
However, no rectification can be done without giving opportunity of being heard if the
rectification effect of enhancing the tax liability or reducing the admissible input tax credit.
Applicability of Advance Ruling pronouncement/ decision(Binding of decision of the
AAR/AAAR) and void circumstances.
The advance ruling pronounced by the AAR/AAAR shall be binding only on the applicant
who sought for it in respect of the matter gone for advance ruling and on the concerned
officer or the jurisdictional officer in respect of the applicant.
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Where the authority finds that the advance ruling pronounced by it has been obtained by
fraud or suppression of material facts or misrepresentation of facts, it may, by order declare
such ruling to be void ab-initio. However, no order shall be passed without giving an
opportunity of being heard.
Powers of the Advance Ruling authority and its appellate authority.
The AAR/AAAR are having the following powers-
a) discovery and inspection,
b) enforcing the attendance of any person and examining him on oath,
c) issuing commissions and compelling production of books of account and
other records.
The AAR/AAAR is having all the powers of a civil court under the code of Civil Procedure,
1908.
National Appellate Authority for Advance Ruling
Advance authority rulings of one State or union territory are binding on the applicant of that
State or union territories and the jurisdictional officer. However, same is not binding on the
same person having same PAN being a distinct person as the powers of AAR’s are confined
to that State or union territory. Hence, there is a proposition in budget 2019 for constituting
National Appellate Authority and the decision given by such authority would be binding on
the all the distinct persons under the same PAN and the jurisdictional officers of different
State of the distinct persons under the same PAN.
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Chapter 19: Common Errors
Conceptual Errors:
1. What would be the impact under GST where the tax / GST clauses are not considered
while quoting for an order or planning of a large expansion/investment or drafting an
agreement or repetitive transaction.
Ans: Where there is no specific clause for charging GST on the supplies made while
quoting for an order or planning of a large expansion/investment or drafting an
agreement or repetitive transaction, the recipient of goods or services may refuse to pay
GST. In such cases, GST has to be paid by the supplier. The consideration received could
be considered as inclusive of GST, the tax computed and paid by the supplier.
2. Deduction claimed for expenses incurred as a pure agent without satisfying all the
conditions prescribed in law.
Ans:
a. Where pure agent conditions are not satisfied, the expenditure or cost incurred by
the supplier cannot be excluded from the value of supply.
b. Where the value of supply is reduced citing pure agent exemption, GST would have
been short paid to that extent.
c. Where GST is short paid but pure agent conditions not satisfied, later GST has to be
discharged along with interest at 18% for delayed payment of taxes.
3. Is it relevant to ascertain place of supply in case of receipt of services from an overseas
vendor?
Ans: Yes.Otherwise, this could lead to incorrect payment of GST where the place of
supply of service is done outside taxable territory. For instance, place of supply is
outside the taxable territory for event related services held outside India and hence GST
is not required to be paid. If POS is not ascertained, tax payer could end up paying GST.
4. What is the solution in case, no GST is charged to the customer and subsequently not
paid to Government, though goods/service is not covered under exemption
notification neither it is listed as nil rated?
Ans:
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a. Charge, collect from the customer vide tax invoice the GST at applicable rate as
specified by Govt by way of notification + interest at the rate of 18%. Debit note
could be issued for tax amount if invoice already issued.
b. Where the receiver of goods/services is not paying the GST + interest extra, it
would be a cost to the supplier.
c. Great caution has to be exercised while classifying the goods or services and
determining the applicable rate of tax under GST from time to time.
5. What would be the impact of incorrect classification of goods or services?
Ans:
a. Could lead to applying wrong rate of tax, excess / short payment, wrong claim of
exemption which further lead to additional cost in form of interests, penalties.
b. This could further result in incorrect input credit availed. An example could be in
case of rent a cab v/s leasing a car.
c. It is suggested to classify the goods/services under the correct head using
international HSN and explanatory notes, following the rules of interpretation. In
case of finding difficulty in classifying the goods/services it is suggested to take the
expert’s advice in this regard.
6. Erring in the side of caution, is it right to pay tax when the transaction is not a supply
as per definition?
Ans:
a. Where the goods or services are not covered in the scope of supply, the customer
may refuse to pay GST even if it is demanded by the supplier.
b. Another dimension is that department may demand a reversal of input tax credit as
theactivity is not covered within the scope of supply by invoking provisions of
Section 11 of CGST Act 2017.
7. What would be the implication of charging and collecting tax from customers and
keeping in a separate account and not remitting to the government?
Ans:
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a. Once the GST is collected by customers the same has to be remitted to Govt. If not
remitted GST has to be paid now along with Interest. Penalties could also be
demanded.
b. The unregistered persons and composition dealers are not required to collect taxes.
Where they have collected wrongly, it has to be remitted to the government.
8. What is the implication where the place of supply is determined incorrectly?
Ans: Where POS is notdetermined correctly, it would lead to the incorrect charging of
the type of tax or even taxing a non-taxable transaction or vice versa.
9. Registration not taken by the person making interstate taxable supplies of services.
Ans:
a. For making the inter-State supply of services,registration is not mandatory where
the aggregate turnover does not exceed Rs 20 lakhw.e.f 13.10.2017 in accordance
with notification no.10/2017-IT.
10. Considering all payments received in foreign currency as exports/zero-rated supplies
without satisfying other prescribed conditions in the law.
Ans:
a. A supply to be treated as export / zero-rated under GST, it has to satisfy all the
conditions prescribed. Only receiving the consideration in foreign currency may not
be a conclusive proof for an activity to be treated as export or zero-rated supplies.
b. Where supply did is wrongly treated as exports / zero-rated supplies, GST has to be
paid with interest for the date of default to the date of payment of applicable taxes.
11. Considering input tax credit balance to payoff liability under reverse charge.
Ans:
a. Where GST has to be paid under RCM, the recipient has to pay the applicable taxes
and he cannot utilize the input tax credit for discharging RCM liabilities.
b. GST portal does not allow such adjustment while filing returns.
12. Could ITC be claimed in the same month where taxes are paid by the recipient under
RCM?
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Ans: Such RCM credit could be availed in the same month itself as there is no restriction.
13. Discharging GST under reverse charge on services which are no longer under the list
of notified services u/s 9(3).
Ans:
a. Eg: Rent a cab or manpower services which were liable for a reverse charge under
earlier tax regime but are not notified services under GST regime. GST not required
to be paid on such services.
b. However, the recipient if already paid could avail such tax paid as credit for
discharging the outward liabilities.
14. Whether ITC could be claimed on the taxes paid under RCM on the GTA services?
Ans: It is to be noted that credit is only restricted for a provider of goods transport
agency service (if tax charged at the rate of 5% on invoice) and not for a recipient who
pays taxes under RCM.
15. Treating export of goods/services as exempted goods/services and not availing eligible
credits related to same.
Ans: Refund of taxes paid on the goods and services could be availed by the person
making the export of goods/services even when output GST is not paid on exported
goods/exported services.
16. What is the consequence under GST where the payment for the supply is not made
within 180 days from the date of invoice?
Ans: Reversal of input tax credit in cases where payment is not made to supplier within
180 days from the date of invoice.Reversal of ITC has to be made along with applicable
interest.
17. Non-payment of GST on advance received during the tax period.
Ans: GST has to be paid on advance received for services. GST need not be paid on the
advances received for the supply of goods w.e.f15th November 2017 in accordance with
notification no. 66/2017 – CT.
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18. Could tax amount be reversed for the post supply discounts?
Ans: The value of the supply shall not include any discount where:
a. At the time of giving discount, there has to be a reference in original agreement and
b. Linking with original invoices.
c. Input tax credit as is attributable to the discount on the basis of a document issued by
the supplier has been reversed by the recipient of the supply.
d. Where post supply discounts are given without any ref to the original agreement or
linking with the original invoice, the value of supply cannot be reduced for charging
GST.
19. What is the remedy for non -payment of GST in case of activities prescribed in
Schedule I of CGST Act?
Ans: For instance, the supply of services between related parties, without consideration
is often assumed by the registered supplier that it is not required to discharge GST on
same. In these cases, tax invoice to be raised, GST has to be charged collected and paid.
Delay or non-payment would attract interest.
20. What would be the solution if exporter of goods/services not claiming the refund of
duties and input tax credit which he is entitled to?
Ans: Exporter is eligible to claim a refund of duties and input tax credit which he is
entitled tobefore the expiry of two years from the relevant date. Any person claiming the
refund of the tax, interest, penalty, fees paid by him has to file form GST RFD-01
electronically through the common portal either directly or through a Facilitation Centre.
21. The implication when mixed supply could be wrongly classified as composite supply
and vice versa.
Ans:
a. Where the nature of supply is determined wrongly, the outward tax may not be
paid correctly.
b. GST on mixed supplies: The tax rates applicable in case of mixed supply would be
the rate of tax attributable to that one supply (goods, or services) which suffers the
highest rate of tax.
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c. GST on composite supplies: The tax treatment of a composite supply would be as
applicable to the principal supply.
d. Eg: GST on principal supply is 12% and the supply which attracts higher rate of tax
in case of mixed supply is 18%.
e. Where Assessee had wrongly determined the nature of supply to be composite
supply but it was a mixed supply, he has to pay the difference of tax of 6% (18%-
12%) + interest.
22. The implication of using the wrong nomenclature for classifying the goods/services?
Ans: Where the classifications of goods or services are not proper, the assessee would
end up determining the incorrect rate of tax or exemptions.
23. Credits reversed on oral instructions of departmental officers/audit parties without
validating the same with experts.
Ans: It is suggested not to reverse any creditson oral instructions until unless any
written notice/letter received from the department. Also, it is suggested to validate the
same with the experts before taking any course of action.
24. Whether GST has to be paid on all the services provided by the transporter under
RCM?
Ans: Only GTA service provided by the transporter who issues consignment note is
taxable under RCM. Other services provided by the transporters are not payable under
RCM.
25. Interstate purchases made from unregistered persons which could pose problems to
the vendor at a later stage.
Ans: It is suggested to procure goods from a registered vendor.
26. Tax not discharged on exemptions discontinued under GST which were present in the
earlier tax regime. For instance, services provided to the United Nations or a specified
international organization is no longer exempt.
Ans:
a. It is important to determine the taxability of a specific goods/services. Many
goods/services which were exempted under earlier laws may not be exempt under
GST.
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b. GST is required to be paid on such taxable supplies with applicable interest.
c. Only notified goods or services are exempt under GST.
27. Non-payment of tax in case of inter-State branch transfers.
Ans:
a. Inter-state branch transfers are treated as supply under GST even if made without
consideration in accordance with Schedule I to CGST/SGST Act, 2017.
b. Valuation to be done based on relevant GST Valuation rules.
c. GST is required to be paid on all inter-State branch transfers at an applicable rate of
tax on supply of goods or services.
d. Eligible ITC could be availed by the recipient subject to restrictions in section 17(5)
of the CGST Act, 2017.
28. Mr. X has availed the ITC on the basis of photocopies of invoice provided by Mr. Y.
What would be the GST impact?
Ans: Availing ITC on the basis of photocopies may not be held valid as one of the
condition to avail ITC is possession of tax invoice/debit note / other tax paying
document issued by the supplier.
29. Mr. A has availed only 50% of input tax credit on capital goods instead full 100%
credit.
Ans:
a. In GST there is no restriction for availing 50% of ITC on the purchase of capital
goods.
b. On satisfaction of all the conditions of availing ITC in accordance with section 16 of
the CGST Act, 2017 full ITC could be availed in the 1st year of purchase of capital
goods.
30. Availing input tax credit on supplies blocked u/s 17(5).
Ans:
a. ITC cannot be available of the list of goods and services stated in section 17(5) of the
CGST Act, 2017.
b. Where ITC is availed on the goods or services listed in section 17(5), wrongly
availed ITC has to be reversed.
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31. Availing credit when the same is restricted by rate notification.
Ans: In cases where ITC was availed on the blocked credits in section 17(5) of the CGST
Act, 2017, now it has to be reversed with interest.
Example: 5% GST on a restaurant, eating joint including mess, canteen having declared
tariff of any unit of accommodation of seven thousand five hundred rupees and above
per unit per day or equivalent- NO ITC to be taken. Notification No. 46/2017-Central
Tax (Rate) New Delhi, the 14th November 2017.
32. Claiming benefit of zero-rated supplies to SEZ (raising an invoice to SEZ without tax)
without executing a letter of undertaking or bond.
Ans:
a. Filing of LUT could be condoned by the proper officer. Where it is condoned, LUT
could be executed for the prior period.
b. Where the LUT has been executed, supplies to SEZ could be made without levying
GST and refund could be claimed for unutilized ITC.
33. Availing input tax credit merely on receipt of the invoice without actual receipt of
goods/services.
Ans: ITC could be availed only on receipt of invoice and goods. Availing ITC without
actual receipt of goods/services is not valid.
34. Non-reversal of proportionate input tax credit in respect of exempted supplies, non-
business purpose use.
Ans: It would amount to non-compliance of Rule 42 and 43 of the CGST Rules, 2017.
35. Advances for services classified as deposits in books of accounts.
Ans:
a. The liability to pay tax under GST arises at the time of supply of services.
b. The time of supply of service in case of receipt of advance is the date of receipt of
advance.
c. Where GST is not paid on receipt of advance wrongly treating it to be a deposit, it
would lead to non-payment of tax under GST.
36. Non-availment of input tax credit on bank charges.
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Ans:ITC could be availed on bank charges as there is no specific restriction on its
availment in section 17(5) of the CGST Act, 2017.
37. Non-reversal of credit in respect of goods lost, stolen, destroyed, written off or
distributed as gifts/free samples.
Ans: Where the ITC is availed and then the goods lost, stolen, destroyed, written off or
distributed as gifts/free samples, ITC has to be reversed along with interest.
Compliance procedures errors:
38. Depositing payment in the incorrect head under cash ledger.
Ans:Cash ledger is segregated into different heads wherein inter head adjustment is
not permitted in GST portal. An example could be depositing IGST instead of CGST or
penalty instead of late fees. There is a proposal to have single ledger for all types very
soon.
39. Supply of service considered as export of service/zero-rated even where receipt of
payment is not in convertible foreign exchange.
Ans: One of the conditions for export of service is receipt of payment in convertible
foreign exchange.It is to be noted that the condition of receipt in foreign exchange is
prescribed for export of services unless exempted by RBI.
40. Could a separate rate of tax be charged or no tax charged for the services ancillary to
supply of goods such as packing charges, transportation charges?
Ans: Generally, these services would form of composite supply and rate applicable on
goods supplied to be charged on such services also.
41. Where the amount is deposited in the cash ledger, would it amount to payment of
taxes?
Ans: Amount deposited in cash ledger but not debited till filing of return cannot be
considered as payment of taxes and subsequently interest is liable to be paid till the time
amount is not debited in cash ledger.
42. Non-disclosure of unregistered job worker premises as an additional place of
business.
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Ans: It is suggested to add job worker premises as an additional place of business in his
registration certificate where goods are supplied from job worker premises to the
customer.
43. The issue of invoice instead of a bill of supply for the exempted supply of
goods/services.
Ans:
a. Tax invoice to be issued for the supply of taxable goods/services.
b. Where exempted goods/services are supplied, bill of supply to be issued.
c. Where tax invoice is issued for the exempted supplies, such document would be
treated as bill of supply in accordance with the proviso to rule 49 of the CGST
Rules, 2017.
44. The absence of prescribed particulars in supplier’s invoice which could lead to denial
of credit by the department.
Ans: Care to be taken and a format to be maintained for invoice. An invoice should
contain the contents prescribed in Rule 46 of CGST Rules, 2017. However, if the said
document does not contain all the specified particulars but contains the details of the
amount of tax charged, description of goods or services, total value of supply of goods or
services or both, GSTIN of the supplier and recipient and place of supply in case of inter-
State supply, input tax credit may be availed by such registered person.
45. A clerical error such as putting an additional zero which could result in huge
differences.
Ans: Care to be taken while issuing invoice and filing returns. Where the amount is
wrongly declared in the returns, rectification could to made in subsequent month’s
returns.
System Errors:
46. How to rectify non-payment of RCM for URD procurements till 12.10.2017?
Ans:Payment of RCM for URD procurements till 12.10.2017, if not paid, to be paid now
along with interest @18% and avail ITC.
47. Whether the recipient has to pay GST @ 5% on GTA Services where the GTA has paid
5% under forward charge?
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Ans: GST @ 5% should be paid under RCM for GTA Services procured even if the
supplier has charged 5% under forward charge. Such GTA should be instructed to stop
charging 5%. Debit note could be issued for this difference by the recipient.
48. Non-filing of ITC-04 where the principal sends goods for job work.
Ans: ITC 04 should be filed for every quarter declaring the details of goods sent to JW /
received from JW or sent from one JW to another JW (details of DC) by the principal.
49. What are the other common system errors faced by the clients?
Ans:
a. Having an improper system of internal communication with the accounting,
purchase and indirect tax department in the organization.
b. No proper system to determine the place of supply, type of tax for various sales
transactions.
c. The absence of proper mechanism/checklist to determine the eligibility of input tax
credit of various purchase/procurement transactions.
d. No standard operating procedures laid down in medium and large enterprises for
better tax compliance.
50. ERP or other accounting package system of an enterprise not linked with the taxation
aspect resulting in complications during return filing, lack of control and absence of
proper reconciliation system between financial records and tax records.
Ans: Proper accounts & records and workings for the filing of returns to be maintained
electronically as well as physical manner.
51. Delay in availing input tax credit which could result in excess payment of tax in cash.
Ans: It is suggested to avail the ITC on monthly basis and utilize the same for payment
of output liability.
Hope that you had a good grounding in GST. The additional resources which could be
used by you are:
1. Compendium of Issues and Solutions – June 2019 - CCH
2. GST Audits & Certification – July 2019 - Bloomsbury
3. BGM [ April 2019] & Technical Guide to GST Audit by ICAI [
May 2019]
