Unit 3 and 4 (Key topics)

GST – Goods and Services Tax

Concept of GST
The Constitution 101st Amendment Act, 2016
- Need for Constitutional Amendment
- Historical Perspective
- Important amendments under “ The Constitution 101st Amendment Act,
2016”
- GST Council
Need and Benefits of GST
Impact of GST on GDP
Salient features of GST
- Dual Model of GST ( CGST/SGST) and Destination based model
- IGST and its Features
- Goods and Services Tax ( Compensation to states), Act 2017
- Acts and rules passed for implementation of GST.
UTGST and its Features

Scope of Supply under GST

Time and value of supply

Determination of Nature and Place of Supply

Levy and Collection of GST

Input Tax Credit

GSTN

Registration in GST

GST Exemption: List of Goods & Services Exempt Under GST

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 CONCEPT OF GST

GST is known as the Goods and Services Tax. It is an indirect tax which has
replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc.
The Goods and Service Tax Act was passed in the Parliament on 29th March 2017
and came into effect on 1st July 2017.

In other words, Goods and Service Tax (GST) is levied on the supply of goods and
services. Goods and Services Tax Law in India is a comprehensive, multi-stage,
destination-based tax that is levied on every value addition. GST is a single domestic
indirect tax law for the entire country.

Objectives of GST

 To achieve the ideology of ‘One Nation, One Tax’

GST has replaced multiple indirect taxes, which were existing under the previous
tax regime. The advantage of having one single tax means every state follows the
same rate for a particular product or service. Tax administration is easier with the
Central Government deciding the rates and policies. Common laws can be
introduced, such as e-way bills for goods transport and e-invoicing for transaction
reporting. Tax compliance is also better as taxpayers are not bogged down with
multiple return forms and deadlines. Overall, it’s a unified system of indirect tax
compliance.

 To subsume a majority of the indirect taxes in India

India had several erstwhile indirect taxes such as service tax, Value Added Tax
(VAT), Central Excise, etc., which used to be levied at multiple supply chain stages.
Some taxes were governed by the states and some by the Centre. There was no
unified and centralised tax on both goods and services. Hence, GST was introduced.
Under GST, all the major indirect taxes were subsumed into one. It has greatly
reduced the compliance burden on taxpayers and eased tax administration for the
government.

 To eliminate the cascading effect of taxes

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 One of the primary objectives of GST was to remove the cascading effect of taxes.
Previously, due to different indirect tax laws, taxpayers could not set off the tax
credits of one tax against the other. For example, the excise duties paid during
manufacture could not be set off against the VAT payable during the sale. This
led to a cascading effect of taxes. Under GST, the tax levy is only on the net value
added at each stage of the supply chain. This has helped eliminate the cascading
effect of taxes and contributed to the seamless flow of input tax credits across
both goods and services.

 To curb tax evasion

GST laws in India are far more stringent compared to any of the erstwhile indirect
tax laws. Under GST, taxpayers can claim an input tax credit only on invoices
uploaded by their respective suppliers. This way, the chances of claiming input tax
credits on fake invoices are minimal. The introduction of e-invoicing has further
reinforced this objective. Also, due to GST being a nationwide tax and having a
centralised surveillance system, the clampdown on defaulters is quicker and far
more efficient. Hence, GST has curbed tax evasion and minimised tax fraud from
taking place to a large extent.

 To increase the taxpayer base

GST has helped in widening the tax base in India. Previously, each of the tax laws
had a different threshold limit for registration based on turnover. As GST is a
consolidated tax levied on both goods and services both, it has increased tax-
registered businesses. Besides, the stricter laws surrounding input tax credits have
helped bring certain unorganised sectors under the tax net. For example, the
construction industry in India.

 Online procedures for ease of doing business

Previously, taxpayers faced a lot of hardships dealing with different tax authorities
under each tax law. Besides, while return filing was online, most of the assessment
and refund procedures took place offline. Now, GST procedures are carried out
almost entirely online. Everything is done with a click of a button, from registration
to return filing to refunds to e-way bill generation. It has contributed to the overall
ease of doing business in India and simplified taxpayer compliance to a massive

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extent. The government also plans to introduce a centralised portal soon for all
indirect tax compliance such as e-invoicing, e-way bills and GST return filing.

 An improved logistics and distribution system

A single indirect tax system reduces the need for multiple documentation for the
supply of goods. GST minimises transportation cycle times, improves supply chain
and turnaround time, and leads to warehouse consolidation, among other benefits.
With the e-way bill system under GST, the removal of interstate checkpoints is most
beneficial to the sector in improving transit and destination efficiency. Ultimately, it
helps in cutting down the high logistics and warehousing costs.

 To promote competitive pricing and increase consumption

Introducing GST has also led to an increase in consumption and indirect tax
revenues. Due to the cascading effect of taxes under the previous regime, the prices
of goods in India were higher than in global markets. Even between states, the lower
VAT rates in certain states led to an imbalance of purchases in these states. Having
uniform GST rates have contributed to overall competitive pricing across India and
on the global front. This has hence increased consumption and led to higher
revenues, which has been another important objective achieved.

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Advantages Of GST

GST has mainly removed the cascading effect on the sale of goods and services.
Removal of the cascading effect has impacted the cost of goods. Since the GST
regime eliminates the tax on tax, the cost of goods decreases.

Also, GST is mainly technologically driven. All the activities like registration, return
filing, application for refund and response to notice needs to be done online on the
GST portal, which accelerates the processes.

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 THE CONSTITUTION 101ST AMENDMENT ACT, 2016

Need for Constitutional Amendment

Existing Constitutional provisions had given separate powers to the Centre and the
States to impose various taxes. Whereas the Centre had levied excise duty on all
goods produced or manufactured in India, the States had levied Value Added Tax on
the Intra-State of sale of goods.

In the case of inter-State sales, the Centre had the power to tax was collected and
retained entirely by the States. levy the Central Sales Tax, but the Services were
exclusively taxed by the Centre in the form of service tax.

Besides, there were State specific levies like entry tax, octroi, luxury tax,
entertainment tax, lottery and betting tax, local taxes levied by Panchayats, etc.

With respect to goods imported from outside the country into India, Centre levied
basic customs duty and additional duties of customs.

Introduction of the GST required amendment in the Constitution so as to enable

integration of

- the central excise duty including additional duties of customs on imports,

- service tax
- State VAT
- and certain State specific taxes

levied by the Centre and States into a comprehensive Goods and Services Tax and to
empower both Centre and the States to levy and collect it.

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Historical Perspective

Important amendments under “The Constitution 101st Amendment Act, 2016”

In order to suitably implement the GST legislation, this Act resulted in the insertion,
deletion and amendment of certain Articles of the Constitution. The following
matters were dealt with as a result of these changes:
 The delineation of powers to levy and make laws with respect to GST
 The applicability and scope of the GST law
 The manner of apportionment of revenue from GST among Centre and States
 The constitution, powers and duties of the GST Council
 The discontinuation of existing taxes to give way for GST

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  The manner of providing compensation to States for loss of revenue on
account of the introduction of GST
Article 246A: Special Provision for GST
This Article was newly inserted to give power to the Parliament and the respective
State/Union Legislatures to make laws on GST respectively imposed by each of
them. However, the Parliament of India is given the exclusive power to make laws
with respect to inter-state supplies. The IGST Act deals with inter-state supplies.
Thus, the power to make laws under the IGST Act will rest exclusively with the
Parliament. Further, the article excludes the following products from the scope of
GST until a date recommended by the GST Council:
 Petroleum Crude
 High-Speed Diesel
 Motor Spirit
 Natural Gas
 Aviation Turbine Fuel
Article 269A: Levy and Collection of GST for Inter-State Supply
While Article 246A gives the Parliament the exclusive power to make laws with
respect to inter-state supplies, the manner of distribution of revenue from such
supplies between the Centre and the State is covered in Article 269A. It allows the
GST Council to frame rules in this regard. Import of goods or services will also be
called as inter-state supplies. This gives the Central Government the power to levy
IGST on import transactions. Import of goods was subject to Countervailing Duty
(CVD) in the earlier scheme of taxation. IGST levy helps a taxpayer to avail the credit
of IGST paid on import along the supply chain, which was not possible before.
Article 279A: GST Council
This Article gives power to the President to constitute a joint forum of the Centre
and States called the GST Council. The GST Council is an apex member committee
to modify, reconcile or to procure any law or regulation based on the context of
Goods and Services Tax in India.
Article 286: Restrictions on Tax Imposition
This was an existing article which restricted states from passing any law that
allowed them to collect tax on sale or purchase of goods either outside the state or
in the case of import transactions. It was further amended to restrict the passing of
any laws in case of services too. Further, the term ‘supply’ replaces ‘sale or
purchase’.
Article 366: Addition of Important definitions
Article 366 was an existing article amended to include the following definitions:

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  Goods and Services Tax means the tax on supply of goods, services or both. It
is important to note that the supply of alcoholic liquor for human
consumption is excluded from the purview of GST.
 Services refer to anything other than goods.
 State includes Union Territory with legislature.
Compensation to States under GST
This Act also contains a provision to provide for relief to states on account of the
revenue loss to the states arising due to the implementation of GST. It has a validity
period of five years. The Goods and Services Tax (Compensation to States) Act, 2017
was born as a result.
What does the Seventh Schedule State?
The Seventh Schedule to Article 246 contains three lists, which contain the matters
under which the Union and the State Governments have the authority to make
laws.
List – I: Union List
It contains the matters with respect to which the Parliament (Central Government)
have the exclusive right to make laws.
List – II: State List
It contains the matters in respect of which the state government has the exclusive
right to make laws.
List – III: Concurrent List
It contains the mattes in respect of which both the Central and State Governments
have the power to make laws. The relevant entries in this list were adjusted in such
a way as to provide for the following:
 To continue the levy of excise duty by the Centre on manufacture/production
of five petroleum products namely: petroleum crude, high-speed diesel, motor
spirit, natural gas, and aviation turbine fuel. In addition to the above, excise
duty is also levied on tobacco and tobacco products. As a result, tobacco and
tobacco products are subject to both excise duty and GST.
 The power to levy taxes on the five petroleum products was given to the states
too.
 Entertainment tax was abolished except where it is levied by local bodies.

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 GST COUNCIL (ART 279 A)

Goods & Services Tax Council (GST Council) is a constitutional body for making
recommendations to the Union and State Government on issues related to Goods and
Service Tax.

Background of the Goods and Services Tax Council

The 101st Amendment Act of 2016 paved the way for the introduction of a new tax regime
(i.e. goods and services tax – GST) in the country. The smooth and efficient administration
of this tax requires cooperation and coordination between the centre and the states.

In order to facilitate this consultation process, the amendment provided for the
establishment of a GST Council.

The amendment inserted a new Article 279-A in the Constitution of India. This article
empowered the President to constitute a GST Council by an order.

Accordingly, the President issued the order in 2016 and constituted the Council. The
Secretariat of the Council is located in New Delhi. The Union Revenue Secretary acts as the
ex-officio Secretary to the Council.

Vision and Mission of the GST Council

While discharging its functions, the Council is to be guided by the need for a harmonised
structure of GST and the development of a harmonised national market for goods and
services.

Further, the Council has to determine the procedure in the performance of its functions.

The vision and mission of the Council are as follows:

Vision: To establish the highest standards of the cooperative federation in the functioning of
the Council, which is the first constitutional federal body vested with powers to take all
major decisions relating to GST.

Mission: Evolving by a process of wider consultation, a GST structure, which is information

technology driven and user friendly.

Constitution

The president shall, within 60 days from the date of Commencement of the Amendment Act,
by order constitute a council to be called GST Council.

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Composition of the Goods and Services Tax Council

The Council is a joint forum of the centre and the states and consists of the following
members:

1. The Union Finance Minister as the Chairperson

2. The Union Minister of State in-charge of Revenue or Finance

3. The Minister in-charge of Finance or Taxation or any other Minister nominated by

each state government

The members of the Council from the states have to choose one amongst themselves to be
the Vice-Chairperson of the Council. They can also decide his term.

The Union Cabinet also decided to include the Chairperson of the Central Board of Excise
and Customs (CBEC) as a permanent invitee (non-voting) to all proceedings of the Council.

Working of the GST Council

The decisions of the Council are taken at its meetings. One-half of the total numbers of
members of the Council is the quorum for conducting a meeting. Every decision of the
Council is to be taken by a majority of not less than three-fourths of the weighted votes of
the members present and voting at the meeting.

The decision is taken in accordance with the following principles:

(i) The vote of the central government shall have a weightage of one-third of the total votes
cast in the meeting.

(ii) The votes of all the state governments combined shall have a weightage of two-thirds of
the total votes cast in that meeting.

Any act or proceeding of the Council will not become invalid on the following grounds.

(i) Any vacancy or deficit in the constitution of the Council

(ii) Any defect in the appointment of a person as a member of the Council

(iii) Any procedural irregularity of the Council not affecting the merits of the case.

Functions of the Goods and Services Tax Council

The Council is required to make recommendations to the centre and the states on the
following matters:

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 1. The taxes, cesses and surcharges levied by the centre, the states and the local bodies
that would be merged in GST.

2. The goods and services that may be subjected to GST or exempted from GST.

3. Model GST Laws, principles of levy, apportionment of GST levied on supplies in the
course of inter-state trade or commerce and the principles that govern the place of
supply.

4. The threshold limit of turnover below which goods and services may be exempted
from GST.

5. The rates include floor rates with bands of GST.

6. Any special rate or rates for a specified period to raise additional resources during
any natural calamity or disaster.

7. Special provision with respect to the states of Arunachal Pradesh, Assam, Jammu
and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand.

8. Any other matter relating to GST, as the Council may decide.

In addition, the council shall also recommend the date on which the GST may be levied on
petroleum crude, high-speed diesel, petrol, natural gas and aviation turbine fuel.

The Council also has to recommend the compensation to the states for the loss of revenue
arising on account of the introduction of GST for a period of five years. Based on the
recommendation, the Parliament determines the compensation.

Adjudicatory mechanism by GST council

The Goods and Services Tax Council shall establish a mechanism to adjudicate any
dispute
(a) between the Government of India and one or more States, or
(b) between the Government of India and any State or States on one side and one or
more other States on the other side, or
(c) between two or more States,
arising out of the recommendations of the Council or implementation thereof

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 NEED FOR GST
Under the pre-GST regime, multiple taxes were being levied on the same supply
chain by the Central and State Governments. Further, tax system on goods and
services was facing the following difficulties:

Taxes levied by Central Government were not available as set off against the taxes
levied by State Governments. For example, Excise Duty was not adjustable against
VAT. Further, VAT was levied on the portion of Excise duty included in the price of
goods. Credit of CST levied by Union Government was not available. Thus, it all
became part of the cost of business

Rate of CST being different from VAT created a tax arbitrage which was exploited.

Certain taxes levied by the State Governments were not allowed as set off for
payment of other taxes levied by State Governments Different VAT laws, in force in
different parts of the country, had divided the nation into separate economic
spheres.

Tariff and non-tariff barriers such as octroi, entry tax, check posts, etc., hindered
the free flow of trade throughout the country.

In view of the aforesaid difficulties, certain taxes have been subsumed (absorbed) in
a single tax called the goods and services tax (GST) which has been levied on supply
of goods or services or both at each stage of supply chain starting from manufacture
or import and till the last retail level.

Taxes Subsumed under GST

Central Taxes subsumed in GST

- Central Excise Duty

- Additional Excise Duties (Goods of Special Importance)
- Additional Excise Duties (Textiles and E Textile Products)
- The Excise Duty levied under the Medicinal and Toiletries Preparations (Excise
Duties) Act, 1955
- Service Tax
- Additional Customs Duty, commonly T known as Countervailing Duty (CVD)
- Special Additional Duty of customs - 4% [SAD]

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- Surcharges and Cesses levied by Centre whether they are in the nature of taxes
on goods or services. This may include Cess on Rubber, Tea, coffee, National.

State Taxes subsumed in GST Items

- State VAT
- Central Sales Tax
- Entertainment and Amusement Tax (unless it is levied by the local bodies)
- Luxury Tax
- Taxes on advertisements
- Taxes on lottery, betting and gambling
- Octroi and Entry Tax
- Purchase Tax
- State cesses and Surcharges in so far as they relate to supply of goods and
serviced.

Taxes not subsumed into GST

Central Taxes

- Basic customs duty

- Research & development cess
- Export duty
- Anti-dumping duty
- Safeguard duty

State Taxes

- State excise duty

- Stamp duty
- Profession tax
- Motor vehicle tax
- Customs tariff act

So, any taxes except mentioned above that were levied by the Central
Government or the State Governments on the supply of goods or services have
been converged in GST. The tax has been levied on the following kinds of supply:

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 (1) Intra-State supply (i.e. supply of goods or services within the State or Union
Territory)

(2) Inter-State supply (i.e. supply of goods or services from one State/Union
Territory to other State/Union Territory)

Supply in the above case can be of goods or services or both.

The Indian government expected that implementing a single taxation system—

Goods and Services Tax (GST—would significantly boost the nation's Gross
Domestic Product (GDP). This uniformed tax regime has brought the Indian
economy closer to a unified market, enabling the free flow of capital and services
and facilitating easier business operations.

In this article, we talk about GST and its impact on GDP of India in more detail.
Read along!

BENEFITS OF GST

The introduction of Goods and Services Tax on the 1st of July 2017 was a very
significant step in the field of indirect tax reforms in India. It is one of the biggest
taxation reforms in the history of Indirect Taxes in India post-Independence, It is
one indirect tax for the whole nation, which has made India one unified common
market, it is a single tax on the supply of goods and services, right from the
manufacturer to the consumer.

The new legislation i.e. GST will simplify and harmonise the indirect tax regime in
the country. It is expected to reduce the cost of production and inflation in the
economy, thereby making the Indian trade and industry more competitive,
domestically as welcome, thereby making peeled that introduction of goods and
services tax will foster a common or seamless Indian market and contribute
significantly to the growth of the economy. Due to the seamless transfer of input tax
credit from one stage to another in the chain of value addition, there is an in-built
mechanism in the design of goods and services tax that would incentivize tax
compliance by taxpayers. The goods and services tax will broaden the tax base and
result in better tax compliance due to a robust information technology
infrastructure.

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Thus, the main aim of GST is to integrate state economies and boost overall growth
by creating a single, unified Indian market to make economic stronger.

(A) Benefits for business and industry

(i) Reduction in multiplicity of taxes

As already discussed above, there were many taxes levied by both Central and State
Governments on goods or services or both. Further, different VAT laws in force in
different parts of the country had divided the nation into separate economic
spheres.

GST is one indirect tax for the whole nation, which has made India one unified
common market. GST will ensure that indirect tax rates and structures are common
across the country, thereby increasing the certainty and ease of doing business.
Thus, GST would make doing business in the country tax neutral, irrespective of the
choice of place of doing business,

(ii) Removal of cascading effect of taxes

Cascading effect is when a tax on tax is levied on a product at every step of the sale.
This was caused due to overlap between multiple taxes under the pre-GST regime.
Taxes levied by Union Government were not available as set off against the taxes
levied by State Governments, such as Excise Duty was not adjustable against VAT.
Further, VAT was levied on the portion of Excise duty included in the price of goods.
Credit of CST levied by Union Government was not available. Thus, it all became
part of the cost of business which led to cascading of taxes.

By introduction of GST, there will be removal of cascading of taxes. A system of

seamless tax-credits throughout the value chain, and across boundaries of States,
would ensure that there is no cascading of taxes. This would reduce hidden costs of
doing business.

(iii) Improved competitiveness

Reduction in transaction costs of doing business would eventually lead to an

improved competitiveness for the trade and industry.

(iv) Easy compliance

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A robust and comprehensive information technology (IT) system is the foundation of
the GST regime in India. All taxpayer services such as registrations, returns,
payments, etc. are available to the taxpayers online, which makes compliance easy
and transparent.

(v) Gain to manufacturers and exporters

The subsuming of major Central and State taxes in GST, complete and
comprehensive set-off of input goods and services and phasing out of Central States
Tax (CST) would reduce the cost of locally manufactured goods and services. This
will increase the competitiveness of Indian goods and services in the international
market and give boost to Indian exports. The uniformity in tax rates and procedures
across the country will also go a long way in reducing the compliance cost.

(B) Benefits for Central and State Governments

(i) Simple and easy to administer

Multiple indirect taxes at the Central and State levels are replaced by GST. Backed
with a robust end to end IT system, GST would be simpler and easy to administer
than all other indirect taxes of the Centre and State levied so far. Further, there will
be reduction in compliance costs as there will be no requirement of multiple record
keeping

ii) Better controls on leakage

GST will result in better tax compliance due to a robust IT infrastructure. Due to the
seamless transfer of input tax credit from one stage to another in the chain of value
addition, there is an in-built mechanism in the design of GST that would incentivize
tax compliance by traders. Thus, uniform SGST and IGST rates will reduce the
incentive for tax evasion.

(iii) Higher revenue efficient

GST is expected to decrease the cost of collection of tax revenues of the Government,
and will therefore, lead to higher revenue efficiency.

(iv) Boost to Foreign Investment and "make in India" campaign

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A unified common national market will boost Foreign Investment and "Make in
India" campaign.

Besides the above, there will be boost to export/manufacturing activity, generation

of more employment, leading to reduced poverty and increased GDP growth.
Further, improvement of the overall investment climate in the country will benefit
the development of states.

(C) Benefits for the consumer

(i) Simpler tax system

Due to multiple indirect taxes being levied by the Centre and State with incomplete
or no input tax credits available at progressive stages of value addition, the cost of
most goods and services in the country were laden with many hidden taxes. Under
GST, there would be only one tax from the manufacturer to the consumer, leading to
transparency of taxes paid to the final consumer.

(ii) Reduction in prices of goods and services due to elimination of cascading

Since, there would be only one tax from the manufacturer to the consumer, the
cascading effect of the taxes will be eliminated and it will lead to reduction in prices
of goods and services.

(iii) Relief in overall tax burden

Because of efficiency gains and prevention of leakages, the overall tax burden on
most commodities will come down, which will benefit consumers.

(iv) Uniform prices throughout the country

Since the rate of Central and State goods and service tax will be same throughout
the country, the prices of goods and services shall be uniform throughout the
country.

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 GST ACT AND ITS IMPACT ON GDP

Before 2017, Indians had to bear multiple indirect taxes for various transactions,
including purchases, sales, manufacturing, retailing, and marketing. The taxes
included Value Added Tax (VAT), excise duty, service tax, central sales tax,
entertainment tax, and luxury tax.

However, the implementation of GST combined these taxes into one, while these
changes eliminated the cascading effect of indirect and double taxation, it had a
significant impact on India’s GDP. This move helped establish a more unified
market where capital and services could flow freely, thereby simplifying the
business environment.

GST was instrumental in creating new reforms across the country such as e-way
bills, and e-invoicing:

 e-Way bills were established under GST to ensure the smooth movement of
commodities across state borders. These bills allow for more efficient tracking
and monitoring of goods, decreasing tax evasion and improving compliance.

 e-Invoicing is an electronic invoicing system that tries to standardise and

automate invoice generation and reporting. It involves the digital exchange of
invoices between firms and tax authorities, thereby minimising manual
processes and reducing errors.

 While not directly related to GST, Fast Tag enables cashless transactions by
collecting toll electronically. It minimizes highway congestion, and improves
overall transportation efficiency.

 Linking of e-way bills with government portals such as VAHAN portal

involved connecting the two platforms for exchange of information on real-
time. This allows authorities to cross-check the information provided in e-way
bills against other papers and databases, increasing the effectiveness of tax
enforcement and ensuring compliance.

 Various indirect taxes were merged to make a single unified tax structure —
GST. This streamlined tax administration, decreased compliance challenges,
and minimised the cascading effect of multiple taxes, resulting in a more
efficient and transparent tax regime.

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 Digitisation of processes boosted efficiency and transparency of taxation
processes. Taxpayers could register online, eliminating the need for physical
submissions and reducing paperwork. Additionally, electronic filing of tax
returns made it more convenient for businesses to comply with tax
obligations, as they could submit returns digitally without the hassle of
manual paperwork.

But what was the impact of the GST regime on the GDP rate of India? Let’s see
how GDP fared post-GST implementation:

Year GDP

April–June 2017 5.7%

July–September 2017 6.3%

October–December 2017 7%

January–March 2018 7.7%

April–June 2018 8.2%

April–June 2022 13.5%

July–September 2022 6.3%

October–December 2022 4.4%

January–March 2023 7%

As evident, the GDP growth rate fluctuated in the initial years following the GST
implementation. The GDP growth rate continued to show positive trends post-
implementation in July 2017, and as GST rates settled and businesses adjusted
to the new tax regime, the trend continued.

However, the growth slowed in 2018 due to various variables, such as global
economic uncertainty and domestic concerns.

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 In the following quarters, the GDP fluctuated, showing both positive and negative
trends .

However, the GDP growth rate took a rebound as the economy gradually started
recovering.

Conclusion

A few studies estimate that India's GDP rate will reach around 6.4% in the year
ending March 31, 2024. However, it is projected to rebound and reach 6.7% in
FY2024. The growth will be primarily driven by private consumption and private
investment, supported by government initiatives to enhance transport
infrastructure, logistics, and the overall business environment.

SALIENT FEATURES OF GST

- Dual Model of GST ( CGST/SGST) and Destination based model

- IGST and its Features
- Goods and Services Tax ( Compensation to states), Act 2017
- Acts and rules passed for implementation of GST.

Features of Dual Model of GST

The significant features of Dual GST in India, are as under:

- GST has two components - Central Goods and Service Tax (CGST) and State
Goods and Service Tax (SGST)/ Union Territory Goods and Service Tax (UTGST).
- CGST is to be administered by the Central Government and SGST is to be
administered by State Governments. UTGST is to be administered by
Administrator appointed by the Central Government for the Union Territory.
- CGST has replaced existing Central Excise, Service Tax, Additional Excise Duty.
Special Additional Duty of Customs, etc, whereas SGST has replaced State VAT,
CST, Luxury Tax, Octroi and Entry Tax, Purchase Tax, etc.
- Taxable Event under GST shall be supply of goods or services or both. It is an
event the occurrence of which attracts the liability to tax. Under earlier system of
indirect taxes there were different taxable event in each of the indirect taxes.
"Manufacture" was a taxable event under Central Excise, "Transfer of property in

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 goods" under VAT/CST, and services "Provided or agreed to be provided" in
Service Tax.
- GST is based on destination based consumption tax principle. On the contrary,
erstwhile Central Sales Tax was origin based tax.
- Destination Based Taxation as the name suggests is the taxation based on
destination or consumption of the goods or services. This principle seeks to tax
the goods and services on simple theory that the goods or services should be
taxed at the place where their consumption takes place rather than the point
where their origin takes place. The entire revenue relating to the goods or
services should accrue in the jurisdiction where they are being ultimately
consumed.
Example: If A in Delhi produces the goods and sells the goods to B in Haryana,
then in such case the tax should accrue to the State of Haryana and not to the
State of Delhi.
On the other hand, Origin Based Taxation as the name suggests was the taxation
system where the tax accrued to the State from where the transaction originated.
Example: If A in Delhi produces the goods and sells the goods to B in Haryana,
then in such case the central sales tax was levied and collected in the State of
Delhi and not in the State of Haryana. The revenue in the case of origin based
taxation should accrue to the place, where the transaction originates and not to
the State where such goods or services or both are consumed.
- Under former indirect taxes, two separate legal entities were required to complete
the transaction. Whereas in GST in specified situations even self-supply is also
subject to tax. Transfer of goods from one branch of a person in a State to a
branch in other State is also subject to tax under GST.
Example: If A transfer the goods from its head office in Delhi to its branch in
Ludhiana (Punjab), it will be subject so GST.
- Supplies of goods or services or both are subject to tax under GST even if such
supplies are made without consideration.
- GST is a destination based consumption tax as discussed hereinabove. Keeping
in view the same principle in mind, concept of centralised registration which was
hitherto provided under service tax law has been dispensed with. In GST, it has
been provided that every supplier has to seek registration in all those states from

22
 where they are supplying goods or services or both. However, if all the places of
supplies are in the same State, single registration is required to be obtained.
- GST has a list of exempted goods and of exempted services.
- Some of the commodities have been kept outside the purview of GST for instance
alcoholic liquor for human consumption, five specified petroleum products
namely petroleum crude, high speed diesel, motor spirit (commonly known as
petrol), natural gas and aviation turbine fuel
- Taxes collected by Local Bodies have not been subsumed.
- States is to collect the State GST from all the registered dealers.
- Procedures for collection of Central and State GSTs/Union Territory GST is
uniform.
- There is one common tax return for both taxes, with one copy given to the
Central authority and the other to the relevant State authority electronically.
- GST returns are required to be filed online in GST Network.

(B) IGST and its Features

IGST is to be levied and collected by the Central Government on Inter-State supply

of goods and services. As per Article 269A of the Constitution, the GST on supplies
in the course of inter-State trade or commerce shall be levied and collected by the
Government of India and such tax shall be apportioned between the Union and the
State.

The following are the features of IGST

- The Central Government would administer and levy taxes on IGST.

- Seller/service provider in the origin State is to charge IGST on Inter-state supply
of goods and/or services.
IGST=CGST+SGST/UTGST
- Inter-State Seller/service provider shall use his input CGST and input SGST for
payment of IGST, i.e., he shall pay net IGST
- Inter-State Buyer/service recipient shall avail input tax credit on the basis of tax
invoice for payment of his own IGST, CGST or SGST.
- Both, the seller/service provider and the buyer/service recipient shall report
these transactions in the respective e-returns.

23
- The exporting state will transfer the SGST portion to Central Government and
Central Government will transfer that SGST to importing State.
- Stock transfer to branch/depot in other State will also attract IGST. Where the
stock transfer is from branch in one city to a branch in another city but within
the same State, it does not attract any IGST or CGST and SGST unless each
branch is separately registered and it has separate verticals.
- IGST will be levied on Import of Basic Custom Duty plus IGST Goods and/or
Services. Therefore, Import will attract basic customs duty plus IGST.

(C) Features of Goods and Services Tax (Compensation to States) Act, 2017

The Goods and Services Tax (Compensation to States) Act, 2017 provides for a
mechanism to compensate the States on account of loss of revenue which may
arise due to implementation of the Goods and Services Tax read together with the
Constitutional (101st Amendment) Act, 2016, for a period of 5 years.
This Act, inter alia provides:
- That the base year during the transaction period shall be reckoned as the
financial year 2015-16 for the purpose of calculating compensation amount
payable to the States.
- That the revenue proposed to be compensated would consist of revenues from all
taxes that stands subsumed into the GST law, as audited by the CAG(
Comptroller Auditor general)
- For reckoning the growth rate of revenue subsumed for a State at 14% per
annum.
- Levy of a cess over and above the GST (named GST Compensation Cess) on
certain notified goods to compensate States for 5 years on account of revenue
loss suffered by them.
Notified Goods are:
 Pan Masala
 Aerated Water
 Tobacco & Tobacco Product
 Cigarettes, Cigar, Hookah
 Motor vehicle
24
  Coal, Lignite
- That the proceeds of the cess will be utilized to compensate States that warrant
payment of compensation;
- That 50% of the amount remaining unutilized in the fund at the end of the fifth
year will be transferred to the Centre and the balance 50% would be distributed
amongst the State and Union Territories in the ratio of total revenues from
SGST/UTGST of the fifth year.
- GST compensation cess (under section 8 of the Act) will be levied on all intra-
State and inter-State supplies of goods or services or both, including import of
goods;
- The Cess would not be leviable on supplies made by a person who has opted for
composition levy;
- Input tax credit on inward supplies liable to cess can be utilized only for payment
of cess on outward supplies liable to cess under the Act.

(D) Acts and Rules passed for implementation of GST

As already discussed above, many indirect taxes that were levied by the Central
Government or the State Governments at each stage of supply chain starting
from manufacture or import and till the last retail level have been absorbed in a
single tax called the goods and service tax. GST is levied on the supply of goods
or services or both. For this purpose, after making the amendments in the
Constitution of India, the following Acts have been passed by the Parliament to
give effect to the implementation of GST w.e.f. 1.7.2017:

1. The Central Goods and Services Tax Act, 2017 (CGST Act)
2. The Integrated Goods and Services Act, 2017 (IGST Act)
3. The Goods and Services Tax (Compensation to States) Act, 2017

The Central Government has also notified the following rules to implement the above
laws:

1 . Central Goods and Services Tax (CGST) Rules, 2017

2. Integrated Goods and Services Tax Rules, 2017
3. Goods and Services Tax Compensation Cess Rules, 2017

25
 UTGST AND ITS FEATURES

The UTGST Act expands the Union Territory Goods and Service Tax. UTGST, Union
Territory Goods and Services Tax, is a GST applicable on the goods and services
supply that takes place in any of the union territories of India.

The Goods and Services Tax (GST) is applied to the sale of goods or services within a
State or a UT and outside. However, when goods are moving intra-State, an SGST
(State GST) is applicable. When it comes to union territories, the SGST does not
apply. If the goods or services are supplied intra-UT, the UTGST is applied.

UTGST

The full form of UTGST is Union Territory Goods and Services Tax. The rules for
UTGST are specified under the Union Territory Goods and Services Act, 2017. While
the Act was passed by the Parliament, the President governed each UT. The President
appoints an Administrator on his behalf who, in turn, appoints commissioners and
officers to administer UTGST rules.

UTGST is a form of GST applicable when goods or services are supplied intra-UT, i.e.,
within a union territory. In these cases, SGST cannot be applied in the case of UTs
that do not have a legislature. Furthermore, besides the UTGST, the CGST (Central
GST) is also charged for such a supply of goods or services.

UTGST Act 2017

As mentioned earlier, the rules of UTGST are contained in the UTGST Act. This Act
was passed in 2017 so that the Government could lay down rules for GST in union
territories.

The UTGST Act, 2017 encompasses guidelines related to the following –

 The levying and collection of GST in the intra-UT supply of goods and services

 The power to allow exemption from the tax liability

 Transfer of the Input Tax Credit

 Recovery of pending tax

 Payment of tax

 Other transitional provisions, etc.

26
 UTGST Regions

There are nine identified union territories in India. For UTGST, only six UTs are
recognised. These six territories comprise the UTGST States, which are as follows –

 Lakshadweep

 Andaman & Nicobar Islands

 Dadra & Nagar Haveli

 Daman & Diu

 Chandigarh

 Ladakh

In the case of New Delhi and Puducherry, though they are Union Territories, they
have a legislature of their own. As such, in these States, SGST is applicable, not
UTGST. Moreover, in the case of Jammu and Kashmir, the J&K GST (Jammu &
Kashmir GST) is applicable since the UT has its own legislature.

Features of UTGST

1. When Ladakh separated from Jammu & Kashmir, it became a union territory.
However, Ladakh does not have its own legislature and is, thus, eligible for the
UTGST rules.

2. However, in the case of Jammu & Kashmir, there is separate legislation governing the
UT. As such, UTGST is not applicable. A new GST Act, the J&K GST Act, was passed,
which lays down the GST rules for Jammu & Kashmir.

3. UTGST is similar to SGST. The only difference is that UTGST is meant for territories
without a legislature while SGST is meant for States with their own legislature.

4. The UTGST rate is not fixed and might vary depending on the recommendations of
the GST Council.

5. There might be an UTGST invoice format which you would have to follow when
issuing bills.

27
UTGST Tax Rates

The GST Council is empowered with authority to make changes to the rates of GST,
including UTGST rates. The UTGST rates are similar to the SGST rates. Moreover,
the Central Government has the power and authority to recommend rate changes to
the GST Council.

The UTGST tax rates differ across different types of goods and services. There are
five slabs of UTGST rates which are as follows:

 0% (This slab includes goods and services that do not attract UTGST)

 5%

 12%

 18%

 28%

Applicability of UTGST

If any business in a union territory supplies goods or services to another business or

even an individual, an output tax liability is created on such supply. If the supply is
within the same union territory, UTGST becomes applicable, along with CGST. If the
supply is out of the union territory, then IGST would be applicable, not UTGST or
SGST.

Movement of Goods or
Applicability of GST
Services

Within the Union Territory UTGST + CGST under Section 8(1) and
8(2) of the IGST Act

From one Union Territory to IGST under Section 7(1) and 7(3) of the
another IGST Act

From a Union Territory to a IGST under Section 7(1) and 7(3) of the

28
 State or vice-versa IGST Act

How is UTGST Charged?

There are three different instances of how UTGST can be charged. These instances
and their UTGST rules are as follows:

1. UTGST Charged on a Forward Charge Basis

In the case of the intra-UT supply of goods, except the supply of alcohol meant for
human consumption, UTGST is charged. The UTGST is levied under Section 15 of
the CGST Act, 2017. The rate of UTGST would be determined by the GST Council on
the recommendation of the Central Government. UTGST would be collected in a
manner specified by the GST Council and paid by taxpayers.

The business that supplies goods or services is responsible for collecting UTGST
from the recipients of such goods and services. The business then deposits the
collected UTGST to the Government. This process of charging UTGST in the hands
of the supplier of goods or services is called charging tax on a forward charge
basis.

2. UTGST Charged on a Reverse Charge Basis

In some cases of supply, the Central Government specifies tax to be levied on a

reverse charge mechanism. Under the reverse charge mechanism, the supplier is not
liable to pay UTGST on the supplies. Instead, the recipient of the goods or services is
required to pay the applicable UTGST.

Moreover, if a supplier unregistered under GST supplies goods or services to a

registered individual or business, the liability of paying UTGST would fall on the
recipient and the reverse charge mechanism would become applicable.

3. UTGST Charged for e-commerce Operators

In the case of e-commerce operators, the UTGST rules might vary if the supply of
the goods is intra-UT and an e-commerce operator is making the supply. In such
cases, the e-commerce operator would be liable to pay UTGST.

29
 When goods are moved within the Union Territory, UTGST is applicable. However,
once the goods moved out of the UT, IGST (Integrated GST) was applicable.

Differences Between CGST, SGST, UTGST and IGST

The Central GST (CGST), State GST (SGST), Union Territory GST (UTGST) and
Integrated GST (IGST) are all different from one another. The following table shows the
difference –

Points of
CGST SGST UTGST IGST
Difference

Definition CGST is SGST is UTGST is IGST is

charged charged by charged by charged
by the the State the Central by the
Central Governmen Governmen Central
Governme t on intra- t on the Governme
nt on State intra-State nt on the
intra- supply of supply of inter-
State goods or goods or State or
supply of services in services inter-UT
goods or that within a movement
services particular union of goods
State territory or
services.
The tax
collected
under
IGST is,
then,
divided
between
the
Central

30
 Governme
nt and the
respective
State
Governme
nt in
whose
State the
goods are
consumed
.

Governing Governed Governed Governed Governed

Act by the by the by the by the
Central State Union Integrated
Goods Goods and Territory Goods
and Services Goods and and
Services Act (SGST Services Services
Act (CGST Act), 2017 Act (UTGST Act (IGST
Act), 2017 Act), 2017 Act), 2017

Applicatio Applicable Applicable Applicable Applicable

n when the when the when the when the
supplier supplier supplier supplier
and and the and the and the
recipient recipient recipient recipient
are in the are in the are in the are in
same same State same Union different
State or Territory States or
Union Union
Territory Territories

31
Taxes that CGST SGST UTGST NA
the GST replaced replaced replaced
Replaced service Sales tax, Sales tax,
tax, VAT, luxury VAT, luxury
central tax, tax,
excise purchase purchase
duty, tax, octroi, tax, octroi,
additional entertainm entertainm
customs ent tax, tax ent tax, tax
duty, on on
special gambling, gambling,
additional lottery or lottery or
duty of betting betting
customs
and the
excise
duty
applied on
medicinal
and
toiletries
preparatio
ns

Claiming Input tax Input tax Input tax Input tax

Input Tax credit can credit can credit can credit can
Credit be be claimed be claimed be
claimed against against claimed
against SGST and UTGST and against
CGST and then IGST then IGST IGST,
then IGST CGST and
SGST

32
Compositi Compositi Compositio Compositio Compositi
on on n scheme is n scheme is on
Scheme scheme is available available scheme is
available not
available

Registrati GST GST Registratio GST

on under registratio registration n for GST registratio
GST n is is required in Union n is
required if if annual Territory is mandator
annual turnover is required if y
turnover above annual irrespectiv
is above Rs.40 turnover is e of the
Rs.40 lakhs. In above annual
lakhs. In the case of Rs.40 turnover if
the case services, lakhs. In there is
of the limit is the case of an inter-
services, Rs.20 services, State or
the limit lakhs. the limit is inter-UT
is Rs.20 Moreover, Rs.20 supply of
lakhs. for special lakhs. goods or
Moreover, States, the Moreover, services
for special limit is for special
States, Rs.20 lakhs States, the
the limit over which limit is
is Rs.20 registration Rs.20 lakhs
lakhs over becomes over which
which necessary registration
registratio becomes
n becomes necessary
necessary

33
 SCOPE OF SUPPLY UNDER GST

The scope of supply under GST, is discussed below focusing on Section 7 of the
CGST Act, 2017. It examines what constitutes supply, its exceptions, and the
activities included and excluded as per the Act. Additionally, it analyzes
Schedules-I, II, and III to gain a comprehensive understanding of taxable and
non-taxable supply scenarios.

Section 7 of the CGST Act defines supply as a taxable transaction involving the
provision of goods or services or both for a consideration, in the course or
furtherance of business, by a taxable person within the taxable territory.
However, certain exceptions apply, such as the import of services and activities
listed in Schedule-I made without consideration.

The Act includes various activities as part of supply, such as sale, transfer,
disposal, barter, and more. Import of services, even without business intentions,
falls within the purview of supply.

Additionally, Schedule-I lists activities considered supply, regardless of

consideration, including the permanent disposal of business assets and the
supply of goods between related persons.

On the other hand, Schedule-II outlines activities treated as supply of goods or

services, like the transfer of title or right in goods, lease of land and buildings,
and treatment or processing of goods.

Detailed Analysis of Scope of Supply under Section 7 of CGST Act, 2017 is

as follows:-

As per Section 7 of the CGST Act, Supply includes, “Taxable supply of goods or
services or both, made by a taxable person, within taxable territory, in the course
or furtherance of business, for a consideration.”

Activities Included in Supply under Section 7(1):

Section 7(1) of the CGST Act elaborates on the activities included as supply
under GST:

1. All Forms of Supply of Goods or Services or Both: This encompasses a wide

range of activities, such as sale, transfer, disposal, barter, exchange, license, lease,

34
or rental made or agreed to be made for a consideration. These activities, when
conducted in the course or furtherance of business, fall within the scope of supply.

2. Import of Services for a Consideration: Irrespective of whether or not in the

course or furtherance of business, the import of services is treated as supply under
GST.

3. Activities Specified under Schedule-I: Certain activities listed in Schedule-I are

considered supply, even if conducted without any consideration. These activities
include permanent disposal of business assets, supply between related persons or
distinct persons, and others.

Schedule-I of CGST Act 2017: Schedule-I gives a comprehensive list of activities

treated as supply, even if made or agreed to be made without consideration. The
list of such activities is given below:

i. Permanent disposal of business assets on which ITC is availed.

ii. Supply of goods or services between related persons, or distinct persons (as
per section 25), made in the course or furtherance of business.

Definition of related persons as per Section 25 (4): A person who has obtained or
required to obtain more than one registration, whether in one state/union territory or
more than one state/union territory, shall be treated as a distinct person in respect of
each such registration.

Definition of distinct person as per Section 25(5): Where a person, who has obtained or
is required to obtain registration in a State or UT in respect of an establishment, has
an establishment in another State or Union Territory, then such establishments shall
be treated as establishments of distinct persons for the purposes of this Act.

Exception – Goods not exceeding Rs. 50.000 in a financial year, from an employer to
his employee shall not be treated as a supply of goods or services.

iii. Supply of goods by a principal to his agent, where the agent undertakes to
supply such goods on behalf of the principal.
iv. Supply of goods by an agent to his principal, where the agent undertakes to
receive such goods on behalf of the principal.
v. Import of services by a person from a related person or any of his
establishments outside India, in the course or furtherance of business.

35
 4. Activities Specified under Schedule-II: Schedule-II classifies activities that
are treated either as supply of goods or supply of services. These activities
include the transfer of title or right in goods, lease of land and buildings,
treatment or process of goods, and more.

Schedule-II of CGST Act 2017: This schedule gives a comprehensive list of

activities which are either treated as supply of goods or supply of services. The list
of such activities is given below:

A. Title or right in goods:

- Transfer of title in goods is treated as supply of goods;
- Transfer of right in goods or undivided share in goods without transfer of the
title thereof is treated as supply of services;
- Transfer of title in goods by an agreement, which stipulated that the property in
goods shall pass on a future date upon discharge of full consideration as
agreed, is treated as supply of goods.
B. Land & Building:
- Lease, tenancy, easement or license to occupy land, is supply of services.
- Lease or tenancy of building (commercial/residential) either wholly or partly, for
business purpose, is supply of services.
C. Treatment or process of goods:
- Treatment or process applied to goods of another person is a supply of services.
D. Transfer of Business assets:
- Transfer or disposal of goods forming part of assets of a business, by or under
direction of the person carrying on the business, so as no longer to form part of
those assets, whether or not with a consideration, is a supply of goods;
- Goods held or used for business purposes, when put to a private use or made
available to any person for a use other than business, either by or under
direction of the person carrying on the business, is treated as a supply of
services;
- If a person ceases to be a taxable person, goods forming part of his business
assets shall be deemed to be supplied in course or furtherance of business
(supply of goods), immediately before he ceases as a taxable person, unless the
business is transferred to another person as a going concern, or his personal
representative deemed as a taxable person.

36
E. Supply of Services:
- Renting of an immovable property;
- Construction of a building, complex, civil structure, including those intended
for sale either wholly or partly, unless the entire consideration received after
getting completion certificate if required or its first occupation, whichever is
earlier;
- Temporary transfer or permitting the use of an intellectual property right;
- Development, design, programming, customization, adaptation, up-gradation,
enhancement or implementation of IT software;
- Agreeing to the obligation to refrain from an act, or to tolerate an act/situation,
or to do an act;
- Transfer of right to use any goods for any purpose (whether or not for a
specified period) for cash or deferred payment or any other consideration.
F. Composite Supply of services:
- Works contract as defined under clause 119 of section 2 of CGST Act;
- Supply, by way of or as part of a service or any other manner whatsoever, of
goods, being food or any other article for human consumption or drinks other
than alcoholic liquor for human consumption, whether for cash or deferred
payment or any other consideration.

Activities Excluded from Supply under Section 7(2):

Section 7(2) of the CGST Act specifies activities that are excluded from the
definition of supply:

1. Activities Specified under Schedule-III: Schedule-III lists activities that are not
considered supply under GST. These activities include services provided by
employees to employers in the course of employment, services by courts or
tribunals, and functions performed by Members of parliament, Members of State
legislator, and Members of local authorities.

2. Activities Undertaken by Government Authorities: Activities carried out by the

Central government, State government, Union territory, or Local authority in
their capacity as public authorities are not treated as supply for GST purposes,
as per the government’s notifications on recommendations of the council.

37
 Schedule III of CGST Act 2017:

Schedule III gives a comprehensive list of activities not treated as supply. List of
such activities is given below:

1. Services by an employee to the employer in the course of or in relation to his

employment.
2. Services by a court or tribunal.
3. Functions performed by the Members of parliament, Members of State
legislator, Members of Municipalities, Members of Panchayats or Members of
any local authorities.
4. Duties performed by any person who holds any post in pursuance of any
provisions under the constitution in that capacity.
5. Duties performed by any person as a chairperson or a member or director in
a body, established by the central government or state government or local
authority and who is not deemed as an employee before commencement of
this clause.
6. Services of funeral, burial, crematorium, or mortuary including
transportation of the deceased.
7. Sale of land and subject to clause b of paragraph 5 of schedule II, sale of
building.
8. Actionable claims, other than lottery, betting and gambling.
9. Supply of goods from a non-taxable territory to another non-taxable
territory, without entering into India.
10. Supply of goods by the consignee to any other person, by endorsement
of documents to title of goods, after the goods being dispatched from the
port of origin outside India but before clearance for home consumption.
11. Supply of warehoused goods to a person before clearance for home
consumption.

Conclusion:

Supply is the main deciding factor on which taxation of a transaction under GST
system is based. If a transaction is treated as a ‘supply’, then only the question of
taxing the transaction arises. So ‘supply’ is the most crucial factor under GST
system and it is the taxable event on happening of which the charge of GST is
38
determined. Supply holds the greatest significance and shall be an important event
in determining the taxability of all transaction whether commercial or otherwise.
Therefore, determining whether or not a transaction falls under the scope of supply,
is most important to decide the GST applicability of the transaction.

Time and Value of Supply

Under GST, 3 types of taxes can be charged in the invoice SGST and CGST in case
of an intra-state transaction and IGST in case of an interstate transaction. But,
deciding whether a particular transaction is inter or intrastate is not an easy task.

Think about an online training where customers are sitting in different parts of the
world. Say in case, hotel services, where the receiver may have an office in another
state and may be visiting the hotel only temporarily, or where goods are sold on a
train journey passing through different states.

To help address some of these situations, the IGST act lays down certain rules
which define whether a transaction is inter or intrastate. These rules are called the
place of supply rules.

Why are time place and value of supply important?

 Time of supply means the point in time when goods/services are considered
supplied’. When the seller knows the ‘time’, it helps him identify due date for
payment of taxes. ( Section 12 and 13 of CGST Act)

 Value of supply is important because GST is calculated on the value of the

sale. If the value is calculated incorrectly, then the amount of GST charged is
also incorrect. ( Section 15 of CGST Act)

Time of Supply

Time of supply means the point in time when goods/services are considered
supplied’. When the seller knows the ‘time’, it helps him identify due date for
payment of taxes.

CGST/SGST or IGST must be paid at the time of supply. Goods and services
have a separate basis to identify their time of supply. To understand them in
detail-

39
Time of Supply of Goods (Sec 12 of CGST Act)

Time of supply of goods is earliest of:

1. Date of issue of invoice

2. Last date on which invoice should have been issued

3. Date of receipt of advance/ payment*.

For example:

Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th
January. The payment was received on 31st January. The goods were supplied
on 20th January.

*Note: GST is not applicable to advances under GST. GST in Advance is payable
at the time of issue of the invoice. Notification No. 66/2017 – Central Tax issued
on 15.11.2017

Let us analyze and arrive at the time of supply in this case.

Time of supply is earliest of –

 Date of issue of invoice – 15th January

 Last date on which invoice should have been issued – 20th January.

Thus the time of supply is 15th January.

What will happen if, in the same example an advance of Rs 50,000 is received by
Mr. X on 1st January?

The time of supply for the advance of Rs 50,000 will be 1st January (since the
date of receipt of advance is before the invoice is issued). For the balance Rs
50,000, the time of supply will be 15th January.

Time of Supply for Services (Sec 13 of CGST Act)

Time of supply of services is earliest of:

 Date of issue of invoice

 Date of receipt of advance/ payment.

 Date of provision of services (if invoice is not issued within prescribed period)

40
Let us understand this using an example:

Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was
issued on 20th January and the payment for the same was received on 1st
February.

In the present case, we need to 1st check if the invoice was issued within the
prescribed time. The prescribed time is 30 days from the date of supply i.e. 31st
January. The invoice was issued on 20th January. This means that the invoice
was issued within a prescribed time limit.

The time of supply will be earliest of –

 Date of issue of invoice – 20th January

 Date of payment = 1st February

This means that the time of supply of services will be 20th January.

Time of Supply under Reverse Charge

In case of reverse charge the time of supply for service receiver is earliest of:

 Date of payment*

 30 days from date of issue of invoice for goods (60 days for services)

*w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only
to services. Notification No. 66/2017 – Central Tax

For example:

M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th
January. The invoice was raised on 1st February. M/s ABC Pvt Ltd made the
payment on 1st May.

The time of supply, in this case, will be earliest of –

 Date of payment = 1st May

 60 days from date of date of invoice – 2nd April

Thus, the time of supply of services is 2nd April.

Value of Supply of Goods or Services

41
 It is significant to determine the value of supply of goods and services to levy Tax
and Section 15 related to valuation applies to valuation of supply of CGST,
SGST/UTGST and IGST, in other words, it is common for all taxes and also
common for goods and services. The value of supply is also important for the
purpose of registration of taxable person and computation of tax liability. The
rule 27 to 35 CGST Rules, 2017 is applicable for the valuation and same is also
covered under this chapter.

Value of taxable supply- (Section 15)

Transaction Value:

The value of a supply of goods or services or both shall be:

- the transaction value,

- which is the price actually paid or payable for the said supply of goods or services
or both
- where the supplier and the recipient of the supply are not related and
- the price is the sole consideration for the supply.

Inclusion- in Transaction Value:

The value of supply shall include

(a) any taxes, duties, cesses, fees and charges levied under any law for the time
being in force other than this Act, the State Goods and Services Tax Act, the
Union Territory Goods and Services Tax Act and the Goods and Services Tax
(Compensation to States) Act, if charged separately by the supplier;

(b) any amount that:

- the supplier is liable to pay in relation to such supply but which has been
incurred by the recipient of the supply and

- not included in the price actually paid or payable for the goods or services or
both;

(c) incidental expenses, including commission and packing, charged by the

supplier to the recipient of a supply and any amount charged for anything done
by the supplier in respect of the supply of goods or services or both at the time of,
or before delivery of goods or supply of services:

42
(d) interest or late fee or penalty for delayed payment of any consideration for any
supply; and

(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.

Exclusion- Transaction Value of the supply shall not include any discount:

The value of the supply shall not include any discount which is given-

(a) before or at the time of the supply if such discount has been duly recorded in
the invoice issued in respect of such supply; and

(b) after the supply has been effected, if-

(i) such discount is established in terms of an agreement entered into at or before

the time of such supply and specifically linked to relevant invoices; and

(ii) 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.

Determination of Nature and Place of Supply

This chapter is on the basis of provisions of Integrated Goods and Services Tax
Act (IGST),2017, Section 7,8 and 9 of the IGST Act, 2017 covered the
determination of nature of supply.

i.e.Inter-State and Intra-State supply of goods and services and supplied in

territorial waters. GST is destination based taxation system which is going to
replace origin based taxation system. The basic principle of GST is that it should
effectively tax the consumption of such supplies at the destination. Therefore,
place of supply provision determine taxable jurisdiction where the tax should
reach, section 10 to 13 of IGST Act, 2017 also covered in this chapter. The place
of supply determines whether a transaction is intra- state or inter-state, import
or export.

43
 Inter-State Supply-(Section 7 of IGST Act)

- Treatment as a supply of goods in the course of Inter-State Trade or

Commerce:

Subject to the provisions of section 10, supply of goods, where the location of the
supplier and the place of supply are in-

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory, shall be treated as a supply of goods in the
course of inter-State trade or commerce.

- Imported goods treated as Inter-State Trade till they cross the Customs
Frontiers of India:

Supply of goods imported into the territory of India, till they cross the customs
frontiers of India, shall be treated to be a supply of goods in the course of inter-
State trade or commerce.

- Determination of Supply of Services where location of suppliers and place of

supply in two different States/Union Territories:

Subject to the provisions of section 12, supply of services, where the location of
the supplier and the place of supply are in-

(a) two different States:

(b) two different Union territories, or

(c) a State and a Union territory, shall be treated as a supply of services in the
course of inter-State trade or commerce.

- Supply of Services imported into the territory of India shall be treated as

Inter-State Trade:

Supply of services imported into the territory of India shall be treated to be a

supply of services in the course of inter-State trade or commerce.

- Supply of goods or services or both treated as Inter-State in case of supply

to outside India, SEZ Developer, SEZ Unit, and not being an Intra-State
Supply:
44
 Supply of goods or services or both,-

(a) when the supplier is located in India and the place of supply is outside India;

(b) to or by a Special Economic Zone developer or a Special Economic Zone unit,

or

(c) in the taxable territory, not being an intra-State supply and not covered
elsewhere in this section, shall be treated to be a supply of goods or services or
both in the course of inter-State trade or commerce.

Intra-State Supply-(Section-8 of IGST Act)

- Supply of goods where location of the supplier and the place of supply of
goods in the same State or Union Territory shall be treated as Intra-State
Supply:

Subject to the provisions of section 10, supply of goods where the location of the
supplier and the place of supply of goods are in the same State or same Union
territory shall be treated as intra-State supply

- Supply of Goods shall not be treated as intra-State supply in following

cases:

Provided that the following supply of goods shall not be treated as intra- State
supply, namely:-

a. supply of goods to or by a Special Economic Zone developer or a Special

Economic Zone unit;
b. goods imported into the territory of India till they cross the customs
frontiers of India; or
c. supplies made to a tourist referred to in section 15.
- Supply of services where the location of the supplier and the place of supply
of services are in the same State or same Union territory shall be treated as
intra-State supply:
Subject to the provisions of section 12, supply of services where the location of
the supplier and the place of supply of services are in the same State or same
Union territory shall be treated as intra-State supply: The intra-State supply of
services shall not include supply of services to or by a Special Economic Zone
developer or a Special Economic Zone unit.
45
- Supplies in territorial waters-(Section 9 of IGST Act)
Notwithstanding anything contained in this Act,-
(a) where the location of the supplier is in the territorial waters, the location of
such supplier, or
(b) where the place of supply is in the territorial waters, the place of supply, shall,
for the purposes of this Act, be deemed to be in the coastal State or Union
territory where the nearest point of the appropriate baseline is located

Place of supply of Goods and Services

Place of Supply of Goods (Sec 10 and 11 of IGST Act)

Usually, in case of goods, the place of supply is where the goods are delivered.

So, the place of supply of goods is the place where the ownership of goods
changes.

What if there is no movement of goods. In this case, the place of supply is the
location of goods at the time of delivery to the recipient.

For example: In case of sales in a supermarket, the place of supply is the

supermarket itself.

Place of supply in cases where goods that are assembled and installed will be the
location where the installation is done.

For example, A supplier located in Kolkata supplies machinery to the recipient in

Delhi. The machinery is installed in the factory of the recipient in Kanpur. In this
case, the place of supply of machinery will be Kanpur.

Nature of
supply/transaction Place of supply

The place where such goods are

When goods are sent from one delivered (So, that implies the place of
place to another either by the supply of goods is the place where
seller or the recipient ownership of such goods changes)

46
 The place where such goods are
located at the time of delivery to the
recipient

When there is no movement of For instance, when goods are sold in

goods, either by the seller or a showroom, the place of supply for
the recipient such goods is the showroom itself.

When the goods are assembled The place where the installation is
or installed at a site done

The place where such goods have

been on boarded

For instance, Mr Raj is travelling from

Bangalore to Delhi by air. He buys a
lunch meal for himself. In this case,
When the goods are supplied the food items are loaded into the
using a conveyance such as a plane at Bangalore. So, the place of
vessel, an aircraft, a train or any supply for the meal will be
other vehicle Bangalore.

When the goods are imported The place where the importer is
into India located

The place where the goods are

When the goods are exported exported. Exports are exempted
from India under GST

Place of Supply for Services (Sec 12 and 13 of IGST Act)

Generally, the place of supply of services is the location of the service recipient.

47
In cases where the services are provided to an unregistered dealer and their
location is not available the location of service provider will be the place of
provision of service.

Special provisions have been made to determine the place of supply for the
following services:

 Services related to immovable property

 Restaurant services

 Admission to events

 Transportation of goods and passengers

 Telecom services

 Banking, Financial and Insurance services.

In case of services related to immovable property, the location of the

property is the place of provision of services.

Example 1:

Mr.Anil from Delhi provides interior designing services to Mr. Ajay (Mumbai). The
property is located in Ooty(Tamil Nadu).

In this case, place of supply will be the location of the immovable property i.e.
Ooty, Tamil Nadu.

For understanding the place of supply for services, the following two concepts are
very important namely:

 Location of the recipient of services

 Location of the supplier of services

Let’s understand these two concepts in detail as they will form the base for
determining the place of supply in case of the supply of services:

48
 Location of the Recipient of Services

Location of Recipient of
S.No Case
Service

where a supply is received at a place of

such place of
A business for which the registration has
business
been obtained

where a supply is received at a place

other than the place of business for
B such fixed establishment
which registration has been obtained (a
fixed establishment elsewhere)

the location of the

where a supply is received at more than
establishment most
C one establishment, whether the place of
directly concerned with
business or fixed establishment
the receipt of the supply

the location of the usual

D in absence of such places place of residence of the
recipient;

Location of the provider/supplier of services

Location of Supplier
S.No Case
of Services

where a supply is made from a place of

the location of such
A business for which the registration has
place of business
been obtained

where a supply is made from a place other the location of such

B
than the place of business for which fixed establishment;

49
 registration has been obtained (a fixed
establishment elsewhere)

the location of the

where a supply is made from more than one establishment most
C establishment, whether the place of directly concerned
business or fixed establishment, with the provision of
the supply

the location of the

usual place of
D in absence of such places,
residence of the
supplier;

The transactions in terms of supply of services can be broadly categorized

as below:

Domestic Transactions

These are the transactions where both the parties i.e the supplier as well as the
recipient of service are in India. Domestic transactions can be further categorised
as below:

 Inter-State (i.e between two different states)

 Intra-State (i.e within the same state)

General Rule: In general, the place of supply for services will be the location of
the service recipient (the recipient needs to be a registered person).

In cases, where service is provided to an unregistered person, the place of supply

will be the:

 Location of the service recipient (if the address is available on record);

 Otherwise, the location of the service provider

International Transactions

50
 These are the transactions where either the service recipient or the provider is
outside India. Transactions in which both the recipient as well as a provider are
outside India are not covered here.

General Rule: The Place of supply for services treated as international

transactions shall be:

 The location of the service recipient

 In the case where the location of the service recipient is not available, the
place of supply shall be the location of the supplier.

Levy and Collection of GST under CGST Act, IGST Act and UTGST Act.

Section 9 of CGST Act/SGST Act and Section 5 of IGST Act are the Charging
Sections for the purposes of levy of GST.

CGST and SGST shall be levied on all intra-state supplies of goods and/or services
and IGST shall be levied on all inter-state supplies of goods and/or services
respectively.

Levy and Collection of GST Under CGST Act. (Section 9)

1. Levy of central goods and service tax [Section 9(1)]:

Under CGST Act, central tax called as the central goods and services tax (CGST)
shall be levied on all intra-State supplies of goods or services or both, except on the
supply of alcoholic liquor for human consumption.

It shall be levied on the value determined under section 15 and at such rates, not
exceeding 20%, as may be notified by the Government on the recommendations of
the Council and collected in such manner as may be prescribed and shall be paid by
the taxable person. [Similar rates have been prescribed under SGST/UTGST].

2. Central tax on petroleum products to be levied from the date to be notified

[Section 9(2)]:

The central tax on the supply of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel shall be levied
with effect from such date as may be notified by the Government on

51
the recommendations of the Council.

3. Tax payable on reverse charge basis [Section 9(3)]:

The Government may, on the recommendations of the Council, by notification,

specify categories of supply of goods or services or both, the tax on which shall be
paid on reverse charge basis by the recipient of such goods or services or both.

Further, all the provisions of this Act shall apply to such recipient as if he is the
person liable for paying the tax in relation to the supply of such goods or services or
both.

4. Tax payable on reverse charge if the supplies are made to a registered

person by unregistered person [Section 9(4)]:

The central tax in respect of the supply of taxable goods or services or both by a
supplier, who is not registered, to a registered person shall be paid by such person
on reverse charge basis as the recipient and all the provisions of this Act shall apply
to such recipient as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both. [Section 9(4) has been deferred till
30.6.2018]

5. Tax payable on intra-State supplies by the electronic commerce operator on

notified services [Section 9(5)]

As per section 2(45) of the CGST Act, 2017, “electronic commerce operator” means
any person who owns, operates or manages digital or electronic facility or platform
for electronic commerce.

Further, “electronic commerce” means the supply of goods or services or both,

including digital products over digital or electronic network.

Thus, Electronic Commerce Operators (ECO), like flipkart, uber, makemy-trip,

display products as well as services which are actually supplied by some other
person to the consumer, on their electronic portal. The consumers buy such
goods/services through these portals. On placing the order for a particular
product/service, the actual supplier supplies the selected product/service to the
consumer. The price/consideration for the product/service is collected by the ECO
from the consumer and passed on to the actual supplier after the deduction of

52
commission by the ECO.

The Government may, on the recommendations of the Council, by notification,

specify categories of services the tax on intra-State supplies of which shall be paid
by the electronic commerce operator (ECO), if such services are supplied through
it.

Further, all the provisions of this Act shall apply to such electronic commerce
operator (ECO) as if he is the supplier liable for paying the tax in relation to the
supply of such services.

However, where an electronic commerce operator (ECO) does not have a physical
presence in the taxable territory, any person representing such electronic commerce
operator (ECO) for any purpose in the taxable territory shall be liable to pay tax.

Where an electronic commerce operator (ECO) does not have a physical presence in
the taxable territory and also he does not have a representative in the said territory,
such electronic commerce operator shall appoint a person in the taxable territory
for the purpose of paying tax and such person shall be liable to pay tax.

The Government vide Notification No. 17/2017 CT (R) dated 28.06.2017 has notified
the following categories of services supplied through ECO for this purpose—

1. services by way of transportation of passengers by a radio-taxi, motorcab,

maxicab and motor cycle;

2. services by way of providing accommodation in hotels, inns, guest houses,

clubs, campsites or other commercial places meant for residential or lodging
purposes, except where the person supplying such service through electronic
commerce operator is liable for registration under section 22(1) of the CGST
Act.

B. Levy and Collection of GST Under IGST Act. (Section 5)

The provisions under section 5 of the IGST Act are similar to section 9 of CGST
Act except—

1. the word CGST has been substituted by IGST under IGST Act

2. under IGST Act, tax called integrated tax is to be levied on all interState

53
 supplies and on goods imported into India.

3. maximum rate under section 5(1) of the IGST Act is 40% (i.e. 20% CGST +
20% UTGST/SGST).

C. Levy and Collection of GST Under UTGST Act. (Section 7)

The provisions under section 7 of the UTGST Act are similar to section 9 of CGST
Act except—

1. the word CGST has been substituted by the word UTGST under the
UTGST Act.

2. under UTGST Act, tax called UT tax is be levied on all intra-State supplies,

3. maximum rate 7(1) of UTGST Act is 20%.

54
 Input Tax Credit (ITC) (Sec 16 to 21 of CGST Act)

Input Tax Credit (ITC)

Input Tax Credit or ITC is the tax that a business pays on a purchase and that it
can use to reduce its tax liability when it makes a sale. In other words, businesses
can reduce their tax liability by claiming credit to the extent of GST paid on
purchases. Goods and Services Tax (GST) is an integrated tax system where every
purchase by a business should be matched with a sale by another business. This
makes flow of credit across an entire supply chain a seamless process.

Definition of “input tax” in three acts like CGST, SGST and IGST Acts

 It implies that input tax consists of IGST & CGST in CGST Act and IGST &
SGST in SGST Act.

 In the IGST Act, input tax consists of all three taxes namely, IGST, CGST and
SGST.

 Input Credit Can be set of against:

a) IGST – IGST, CGST and SGST

b) CGST – IGST & CGST

c) SGST – IGST & SGST

 It further implies that credit of all three can be used for discharging IGST
liability, whereas only credit of IGST & CGST can be taken in CGST Act and
that of IGST & SGST can be taken under SGST Act. Further the credit of
CGST & SGST cannot be cross-utilised.

Conditions for availing of ITC

Following are conditions for availing ITC,

 Taxpaying documents such as tax invoice, debit note etc.,

 Goods / service should have been received/deemed to be received by the

taxable person

 Tax charged on the invoice and should have been paid to the credit of
government.

55
  Return should have been furnished by the tax payer.

 Credit for goods against an invoice received in lots / installments can be

availed only on last lot in installment.

 The timelines for entitlement of credit against a particular invoice shall lapse
on the expiry of one year from date of issue.

At each stage of the supply chain, the buyer gets credit for the input tax paid, and
they can use it to offset the GST that needs to be paid to the Centre and State
governments.

Claiming ITC with an example

Assume that there is a seller S and he sold his goods to B. Now B who is a buyer will
be eligible to claim the input tax credit on purchases based on the invoices. So,

 Accordingly, S will upload the details of all the tax invoices issued in GSTR 1.

 All the details in accordance with the sales to B will auto-populate in GSTR
2A, and the same data will be taken when B will file GSTR 2 (i.e details of
inward supply).

 B will then accept the details that the purchase has been made and reported
by the seller accurately and subsequently the tax on purchases will be
credited to ‘Electronic Credit Ledger’ of B and he can adjust it against future
output tax liability and get the refund.

Time limits for claiming Input Tax Credit

ITC can only be claimed for tax invoices and debit notes which are less than a year
old. In any other case, the last date to claim ITC is the earlier of the following:

 Before filing valid GST returns for month of September following the end of the
financial year applicable to that invoice. For example, for an invoice issued on
June 26, 2018, ITC should be claimed by August 2018.

 Before filing a relevant annual return

 Input Tax Credit in case of Imports –

Under the GST Regime, the input tax credit of IGST and GST Compensation Cess is
available to the importer. However, the input tax credit of Basic Customs Duty
56
(BCD) would not be available. In order to avail ITC of IGST and GST Compensation
Cess, an importer has to mandatorily declare GST Registration number (GSTIN) in
the Bill of Entry. The Customs EDI system would be interconnected with the GST
portal for the validation of ITC. Bill of entry in the non-edi locations would be
digitised and used for validation of input tax credit provided by the GST portal.

Ineligible items for ITC

Though input tax credit can be claimed by a person registered under GST for most
inputs, some types of goods and services are not eligible for input tax credit claim.

 Motor Vehicles or Conveyances

Input tax credit can be claimed for motor vehicles or conveyance only when they are
used for making a further supply of such vehicles or conveyances or transportation of
passengers or imparting training or for transportation of goods. Hence, expenses
related to the normal use of motor vehicles for office purposes cannot be claimed as an
input tax credit.

 Food, Beverages and Outdoor Catering

Expenses relating to food, beverages and outdoor catering can be claimed as input tax
credit only when inward supply of goods or services or both of a particular category is
used by a registered person for making an outward taxable supply of the same
category of goods or services or both or as an element of a taxable composite or mixed
supply. Hence, regular taxpayers would not be eligible for claiming input tax credit on
expenses relating to food, beverages and catering.

 Beauty Treatment, Health Services & Cosmetic and Plastic Surgery

Beauty treatment, health services, cosmetic and plastic surgery related expenses
cannot be claimed as input except when inward supply of goods or services or both of
a particular category is used by a registered person for making an outward taxable
supply of the same category of goods or services or as an element of a taxable
composite or mixed supply.

Similarly, expenses relating to membership of a club, health and fitness centre is not
eligible for input tax credit.

 Life and Health Insurance

57
Expenses relating to rent-a-cab facilities, life or health insurance can be claimed as
input tax credit only when the Government notifies it as services which are obligatory
for an employer to provide to its employees under law. Else, to claim input tax credit,
the inward supply must have been used for making an outward taxable supply of the
same category or as part of a taxable mixed supply.

 Travel Benefits for Employees

Travel benefits extended to employees on vacation such as leave or home travel

concession cannot be claimed as input tax credit.

 Works Contract Services

Works contract services, when supplied for construction of an immovable property

(other than plant and machinery), cannot be claimed as input tax credit. However,
work contract services can be claimed as an input tax credit when it is an input
service for the further supply of works contract service.

 Construction of Immovable Property

Goods or services received by a taxable person for construction of an immovable

property (other than plant or machinery) on his own account or even when it’s used in
the course or furtherance of business cannot be claimed as input tax credit. Under
GST Act, construction includes re-construction, renovation, additions or alterations or
repairs.

 Non-Resident Taxable Person

Goods or services received by a non-resident taxable person except on goods imported

by him is not eligible for input tax credit.

 Personal Consumption

Goods or services used for personal consumption is not eligible for input tax credit.

 Lost or Stolen or Damaged Goods

Input tax credit is not available for goods lost, stolen, destroyed, written off or
disposed of by way of gift or free samples.

 Composition Supply

58
Goods or services or both on which tax has been paid under the Composition Scheme
will not be eligible for input tax credit. Also tax paid as interest, penalty or fine will not
be eligible for input tax credit.

Composition scheme is an alternative taxation levy under GST. It is an optional

scheme introduced to benefit the small taxpayers. This will save them from the
hustle of lengthy tax compliances like maintenance of detailed records, the filing of
multiple returns monthly etc. Also, the procedures in terms of the issue of invoices
etc are very minimal and simplified.

Under this scheme, a registered taxpayer would be required to pay tax(GST) on their
turnover based on the prescribed percentage. The tax rate is comparatively lower
than those prescribed for normal taxpayers.

A supplier having turnover upto Rs 1 Cr in the preceding financial year can opt for
the composition tax levy in the current year. For notified categories of states, the
limit is Rs 75 lakhs.

GSTN

GSTN stands for Goods and Service Tax Network, is a non-profit non-government
company.

It provides shared IT infrastructure and service to both central and state

governments including taxpayers and other stakeholders. The registration Front end
services, Returns, and payments to all taxpayers will be provided by GSTN. In a
nutshell, it will act as the interface between the government and the taxpayers.

Structure of GSTN

The GST System Project is one of a kind and complex IT initiative. What makes it
unique is the way it seeks, for the first time to establish a uniform interface for the
taxpayer and a common and shared IT infrastructure between the Centre and
States.

Talking about the structure of it, private players have a 51% share in the GSTN, and
the remaining is owned by the government. The authorized capital of the GSTN is

59
Rs. 10 crores (US$1.6 million), out of which the percentage divided equally between
the Central and State governments is 49%, and the remaining is with private banks.

The GSTN is headed by Dr. Ajay Bhushan Pandey (Chairman), an Indian

Administrative Service servant (1984 batch IAS), along with the CEO of GSTN, Shri
Prakash Kumar.

Key Features of the GSTN

Below listed are the prominent features of GSTN that can assist to understand what
is GST network-

 National Information Utility

The GST Network has been considered to be a trusted National Information Utility
(NIU). What this means primarily is that the network is in charge of providing
reliable, strong as well as, seamless IT infrastructure and information passing.

 GSTN Ownership

It is partially owned by the Central Government (49%) and the rest by private
players (51%) which includes Banks and Financial Institutions

 Robust Infrastructure and Complex Operations

The basic function of GSTN is to help taxpayers to register themselves, make tax
payments, and claim GST returns to generate business analytics among others.
Furthermore, the network is also responsible for calculating and settling the
Integrated GST (IGST) along with the Input Tax Credit (ITC). The GSTN thus focuses
to provide holistic solutions to difficult and exhaustive taxation solutions

 Information Security

A major share of the GST network is owned by the central government as compared
to any other individual player. Hence the major chunk of the responsibility for
confidentiality as well as the security of the information provided by the taxpayers.

The central government will handle the composition of the board, special resolutions
mechanism, shareholder’s agreement, and the agreements made between the
network and other state governments.

 Payment

60
The GSTN has provided the taxpayers with the options of payment through both
online and offline methods-

- Online: Online payment can be availed through internet banking. The RBI has
allocated certain banks (Agency Banks ) for the same purpose with authority to
collect payments made in favor of GST. The taxpayer will have to make the payment
by selecting from a list of the agency banks authorized by RBI to collect the tax.

Once selected, the taxpayer needs to login to the respective bank’s online portal and
make the payment and download the challan generated for the said payment of
GST.

- Offline: Taxpayers can also make payments through offline methods. The
government has also made the provision of payment of GST offline via “over the
counter” payments. You can directly visit the respective bank to make the payment
for GST. Bank will further notify the RBI as well as the GST portal to update all the
relevant details.

 Expenses

The user charges will be paid solely by the Central Government and the State
Governments in equal proportion (i.e. 50:50) on behalf of all users. The state share
will be then divided into individual states according to the number of taxpayers in
the state.

Functions of GSTN

The GST Network is basically the front end of the IT ecosystem for taxpayers and
thus forms a channel of communication for the government and the business
taxpayers online.

The total number of invoices processed by GSTN per month sums up to more than 2
billion and moreover, it also processes the returns for over 65 lakh taxpayers and
counting. Here are some of the major key responsibilities that the GSTN is in charge
of the following-

 Registration

61
As mentioned earlier, the GST network is an online portal that forms the interface
between the taxpayer looking to register GST under the new taxation laws and the
government.

GSTN issues the GST Identification Number to the respective taxpayer and files the
information with the respective Tax authorities once the registration has been
verified.

 Invoice Matching

Delving deeper, the Goods and Services Tax Network basically tallies the purchase
invoices with the sale invoices to check for mismatches and fixes them so that the
taxpayers can avail of the benefits of Input Tax Credit.

 Return Filing

The services of GSTN includes processing and forwarding the returns to both the
central and state tax authorities.

The best and the unique thing about GSTN is, there is a unified common return
filing for all types of GST i.e. SGST (State GST), CGST (Central GST), IGST
(Integrated GST). This, in turn, has eliminated the need for filing multiple returns.

 Taxpayer Profile Analysis

When a taxpayer wants to register for GST, all the particular details of the taxpayer
are verified, and then it is put forth to the Central as well as the state government
tax authorities for approval.

GST System is Integrated with Bank Validation

As per the latest news, the GST Network advisory stated on April 24, 2023, the bank
account validation will be required to be synced with the GST System. It would help
to ensure the accuracy of the bank details of GST taxpayers. According to the
advisory, a taxpayer is supposed to check the status of the bank account verification
on the official portal.

Some Additional Duties of GSTN

Further to managing the basic tax filing and tax returns, there are a few more
responsibilities of GSTN that come along with managing taxation, these are as
follows-
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  Calculation and settlement of IGST (Integrated GST)

 Integrating Banking Network (Agency banks) with tax payment details

 Managing Computation Engine of Input Tax Credit

 Submitting the MIS reports to the Government

REGISTRATION IN GST

Sections 22 to 30 of CGST Act deal with Registration

S. 22. Person liable for registration under GST

S. 23. Persons not liable for GST registration

S. 24. Compulsory GST registration in certain cases

S. 25. Procedure of registration under GST

S. 26. Deemed Registration

S. 27. GST Registration for Casual Taxable Person or Non-resident Taxable Person

S. 28. Amendment of GST Registration

S. 29. Cancellation of GST registration

S. 30. Revocation of cancellation of GST registration

S. 22. Person liable for registration under GST

Section 22 of the CGST Act, provides, “Every supplier shall be liable to be registered under
this Act in the State or Union territory, other than special category States, 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”

But the person makes taxable supplies of goods or services or both from any of the special
category States; he shall be liable to be registered if his aggregate turnover in a financial
year exceeds ten lakh rupees.

 Businesses and individuals who are supplying goods can claim GST
exemption if their aggregate turnover is less than INR 40 lakhs in a financial
year.

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  For the hilly and north-eastern States of India, the limit has been revised to
INR 20 lakhs.

 For businesses and individuals involved in the supply of services, the limit for
claiming GST exemption is INR 20 lakhs

 In the case of hilly and north-eastern States, if the aggregate turnover is up to

INR 10 lakhs, businesses and individuals supplying services can claim GST
exemptions.

Hilly and north-eastern States would include Arunachal Pradesh, Jammu and
Kashmir, Himachal Pradesh, Uttarakhand, Tripura, Nagaland, Sikkim,
Meghalaya, Mizoram, Assam, and Manipur.

Aggregate turnover, as per the GST Act, would include the aggregate value of all
types of taxable supplies, inter-state supplies, exempt supplies, and the goods and
services which have been exported.

The following, would, however, be deducted from the value of aggregate turnover –

 CGST, SGST, or IGST already paid by the investor

 Taxes which are payable on the basis of reverse charge mechanism

 Value of the inward supply of goods and services

 Value of non-taxable goods and services

S. 23. Persons not liable for GST registration

a) any person engaged exclusively in the business of supplying goods or services or

both that are not liable to tax or wholly exempt from tax under this Act or under
the IGST Act;

b) an agriculturist, to the extent of supply of produce out of cultivation of land.

The Government may, on the recommendations of the Council, by notification,

specify the category of persons who may be exempted from obtaining registration.

S. 24. Compulsory GST registration in certain cases

1. Individuals registered under the Pre-GST law (Excise, VAT, Service Tax etc.)

2. Businesses with turnover above the threshold limit

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3. persons making any inter-State taxable supply;

4. casual taxable persons making taxable supply;

5. persons who are required to pay tax under reverse charge;

6. Person who supplies via e-commerce aggregator

7. Every e-commerce aggregator

8. Person supplying online information and database access or retrieval services

from a place outside India to a person in India

9. Agents of a supplier & Input service distributor

10. Any person who is seeking registration under GST shall be granted a single
registration in a State or Union territory. It means, separate registration for each
business vertical.

11. A person, though not liable to be registered under section 22 or section 24 of the
CGST Act, may get himself voluntarily and comply the all provisions of GST Act as
applicable to a registered person.

12. A person who has obtained or is required to obtain more than one registration,
whether in one State or Union territory or more than one State or Union territory
shall, in respect of each such registration, be treated as distinct persons for the
purposes of the GST Act.

13. Where a person who has obtained or is required to obtain registration in a State
or Union territory in respect of an establishment, has an establishment in another
State or Union territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of the GST Act.

S. 25. Procedure of registration under GST

(1) Every person who is liable to be registered under section 22 or section 24 shall
apply for registration in every such State or Union territory in which he is so liable
within thirty days from the date on which he becomes liable to registration, in such
manner and subject to such conditions as may be prescribed:

Provided that a casual taxable person or a non-resident taxable person shall apply
for registration at least five days prior to the commencement of business.

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Explanation.—Every person who makes a supply from the territorial waters of India
shall obtain registration in the coastal State or Union territory where the nearest
point of the appropriate baseline is located.

(2) A person seeking registration under this Act shall be granted a single registration
in a State or Union territory:

Provided that a person having multiple business verticals in a State or Union

territory may be granted a separate registration for each business vertical, subject to
such conditions as may be prescribed.

(3) A person, though not liable to be registered under section 22 or section 24 may
get himself registered voluntarily, and all provisions of this Act, as are applicable to
a registered person, shall apply to such person.

(4) A person who has obtained or is required to obtain more than one registration,
whether in one State or Union territory or more than one State or Union territory
shall, in respect of each such registration, be treated as distinct persons for the
purposes of this Act.

(5) Where a person who has obtained or is required to obtain registration in a State
or Union territory in respect of an establishment, has an establishment in another
State or Union territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of this Act.

(6) Every person shall have a Permanent Account Number issued under the
Incometax Act, 1961 in order to be eligible for grant of registration:

Provided that a person required to deduct tax under section 51 may have, in lieu of
a Permanent Account Number, a Tax Deduction and Collection Account Number
issued under the said Act in order to be eligible for grant of registration.

(7) Notwithstanding anything contained in sub-section (6), a non-resident taxable

person may be granted registration under sub-section (1) on the basis of such other
documents as may be prescribed.

(8) Where a person who is liable to be registered under this Act fails to obtain
registration, the proper officer may, without prejudice to any action which may be
taken under this Act or under any other law for the time being in force, proceed to
register such person in such manner as may be prescribed.
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(9) Notwithstanding anything contained in sub-section (1),––

(a) any specialised agency of the United Nations Organisation or any Multilateral
Financial Institution and Organisation notified under the United Nations (Privileges
and Immunities) Act, 1947, Consulate or Embassy of foreign countries; and

(b) any other person or class of persons, as may be notified by the Commissioner,
shall be granted a Unique Identity Number in such manner and for such purposes,
including refund of taxes on the notified supplies of goods or services or both received
by them, as may be prescribed.

(10) The registration or the Unique Identity Number shall be granted or rejected after
due verification in such manner and within such period as may be prescribed.

(11) A certificate of registration shall be issued in such form and with effect from
such date as may be prescribed.

(12) A registration or a Unique Identity Number shall be deemed to have been

granted after the expiry of the period prescribed under sub-section (10), if no
deficiency has been communicated to the applicant within that period.

S. 26. Deemed Registration

Once the grant of registration or issuance of the Unique Identity Number to a person or
applicant under the GST Act, and shall to be deemed to be granted or rejected within 30
days either the case may be. Registration in CGST Act will be deemed that registration
taken in SGST and IGST Acts.

S. 27. GST Registration for Casual Taxable Person or Non-resident Taxable

Person

Casual Taxable Person

Casual taxable person means a person who supplies taxable goods or services occasionally
in a taxable Territory where he does not have a fixed place of business.

A CTP has to obtain a Temporary Registration which is valid for a maximum period
of 90 days in the State from where he seeks to supply as a Casual taxable person. A
CTP is required to make the advance deposit of GST (based on an estimation of tax
liability). A CTP is not required to file an annual return as required by a normally
registered taxpayer. Apply in FORM GST REG-11 before the end of validity of
registration. An extension can be made for a further period not extending 90 days.
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The extension will be allowed only on deposit of additional tax liability for the
extended period.

Non-resident Taxable Person

A ‘non-resident taxable person’ is any person who occasionally undertakes transactions

involving the supply of goods or services, or both, whether as principal or agent or in any
other capacity, but who has no fixed place of business or residence in India. Provisions are
same as for Casual Taxable Persons. Every person who makes a supply from the territorial
waters of India shall obtain registration in the coastal state or Union territory where the
nearest point of the appropriate baseline is located.

S. 28. Amendment of GST Registration

A business owner may apply for change(s) of the following items:

1. Name of business

2. Address of the principal place of business

3. An additional place of business

4. Addition, deletion or retirement of partners or directors, Managing Committee, CEO i.e.,

people who are responsible for day to day affairs of the business

5. Mobile number or e-mail address of the authorized signatory.

If there is any error in the PAN number, the applicant will have no other choice except to file
for a fresh registration using FORM GST REG-01.

The above changes have to be intimated to the appropriate officer. The appropriate officer
may approve or refuse to approve the amendment. The appropriate officer has to issue a
notice to the trader and give him fair opportunity of being heard before refusing to approve
the amendment. Change(s) other than the above-mentioned (Points 1-5) will be amended
immediately on submitting FORM GST REG- 14 on the Common Portal.

S. 29. Cancellation of GST registration

Cancellation when Turnover is falls below Threshold limit.

Cancellation by taxpayer in other cases:

1. The business has been discontinued

2. The business has been transferred fully, amalgamated, demerged or otherwise disposed

The transferee (or the new company from amalgamation/ demerger) has to get registered.
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The transferor will cancel its registration if it ceases to exist.

4. There is a change in the constitution of the business For example, private limited
company has changed to a public limited company.
The appropriate officer may cancel registration
1. suo motu; or
2. on an application by (a) the registered taxable person; or (b) LR of the registered
taxable person in case of death of the registered taxable person

S. 30. Revocation of cancellation of GST registration

Revocation of cancellation of registration is possible only if

1. the decision to cancel the registration has been reversed and the registration is still valid;
and

2. cancellation the registration of a taxable person is suo motu cancellation.

The taxable person whose registration has been suo motu cancelled by the appropriate
officer may apply for revocation of cancellation order, within 30 days from the date of
passing the cancellation order.

The appropriate officer may, thereupon revoke the cancellation order, or refuse to do so. If
he decides to refuse to revoke the cancellation order, he has to issue a notice to the
applicant and give him a fair opportunity of being heard.

Note: Cancellation or Revocation will not affect payment of all dues amounts of tax, interest
and penalty.

GST EXEMPTION: LIST OF GOODS & SERVICES EXEMPT UNDER GST

GST Exemptions

GST exemptions are specific goods or services that are exempt from the application
of GST. In other words, there are certain goods and services that are not covered
under the ambit of GST Act. These exemptions change from time to time and vary
from country to country. The government can grant exemptions for various reasons
like alleviating the tax burden on essential goods and services or supporting specific
sectors.

Types of GST Exemptions

There are three types of GST exemptions available in India.

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  Absolute: Absolute exemptions are those exemptions that are provided on the
full amount and do not come with any conditions or restrictions, whatsoever.
A good example is the exemption on the services of RBI.

 Conditional: Conditional exemptions are those exemptions that have a certain

limit, condition, or restriction on the nature and extent of the exemption. For
example, hotel services are exempt up to a certain extent and not exempt
fully.

 Partial: Unregistered people who supply goods within the state to a registered
person are exempt from GST under reverse charge only if the aggregate value
of supply is not more than Rs.5000 per day.

List of GST Exemptions

List of GST Exemption on Goods

Here is a list of some of the most common goods which are GST exempt –

Types of goods Examples

Live animals Asses, cows, sheep, goats, poultry, etc.

Meat Fresh and frozen meat of sheep, cows, goats,

pigs, horses, etc.

Fish Fresh or frozen fish

Natural products Honey, fresh and pasteurized milk, , eggs, etc.

Live trees and plants Bulbs, roots, flowers, foliage, etc.

Vegetables Tomatoes, potatoes, onions, etc.

Fruits Bananas, grapes, apples, etc.

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Types of goods Examples

Dry fruits Cashew nuts, walnuts, etc.

Tea, coffee and spices Coffee beans, tea leaves, turmeric, ginger, etc.

Grains Wheat, rice, oats, barley, etc.

Products of the milling Flours of different types

industry

Seeds Flower seeds, oil seeds, cereal husks, etc.

Sugar Sugar, jaggery, etc.

Water Mineral water, tender coconut water, etc.

Baked goods Bread, pizza base, puffed rice, etc.

Fossil fuels Electrical energy

Drugs and pharmaceuticals Human blood, contraceptives, etc.

Fertilizers Goods and organic manure

Beauty products Bindi, kajal, kumkum, etc.

Waste Sewage sludge, municipal waste, etc.

Ornaments Plastic and glass bangles, etc.

Newsprint Judicial stamp paper, envelopes, rupee notes,

etc.

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Types of goods Examples

Printed items Printed books, newspapers, maps, etc.

Fabrics Raw silk, silkworm cocoon, khadi, etc.

Hand tools Spade, hammer, etc.

Pottery Earthen pots, clay lamps, etc.

List of GST Exemption on Services

Here is a list of some of the services which enjoy GST exemption –

Types of
services Examples

Agricultural Cultivation, supplying farm labor, harvesting, warehouse-

services related activities, renting or leading agricultural machinery,
services provided by a commission agent or the Agricultural
Produce Marketing Committee or Board for buying or selling
agriculture produce, etc.

Government Postal service, transportation of people or goods, services by a

services foreign diplomat in India, services offered by the Reserve Bank
of India, services offered to diplomats, etc.

Transportation Transportation of goods by road, rail, water, etc., payment of

services toll, transportation of passengers by air, transportation of
goods where the cost of transport is less than INR 1500, etc.

Judicial services Services offered by the arbitral tribunal, partnership firm of

advocates, senior advocates to an individual or business entity
whose aggregate turnover is up to INR 40 lakhs

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Types of
services Examples

Educational Transportation of faculty or students, mid-day meal scheme,

services examination services, services offered by IIMs, etc.

Medical services Services offered by ambulances, charities, veterinary doctors,

medical professionals, etc. does not include hair transplant or
cosmetic or plastic surgery.

Organizational Services offered by exhibition organizers for international

services business exhibitions, tour operators for foreign tourists, etc.

Other services Services offered by GSTN to the Central or State Government or

Union Territories, admission fee payable to theatres, circuses,
sports events, etc. which charge a fee up to INR 250

Though GST is applicable for all businesses and on the supply of goods and
services, the above-mentioned exemptions are available. These exemptions reduce
the GST burden and help in the socio-economic development of the country.

Exempt supply under GST

Exempt supply under GST means supplies that do not attract goods and service tax.
In these supplies, no GST is charged. Input tax credits paid on these supplies
cannot be used. These are the following three types of supply that are considered
exempt supply:-

 supplies which are chargeable to nil rate tax.

 supplies that are partially and wholly exempt from the charge of GST by the
notifications which amended section 11 of CGST and section 6 of IGST.

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  supplies which comes under the sec 2(78) of the Act. which covers the
supplies which are not taxable under the Act like alcoholic liquor for human
consumption.

GST exemption from registration

 Agriculturists

 Person who fall in the threshold exemption limit of turnover for the supply of
goods INR 20 lakh and INR 10 lakh.(in special category states)

 A person who is making NIL Rated and exempt supply of goods and services
such as fresh milk, honey, cheese, agriculture services, etc.

 The person indulged in activities that are not covered under the supply of
goods and services such as funeral services, petroleum products, etc.

 A person making supplies of those goods that are covered under reverse
charge such as tobacco leaves, cashew nuts (not shelled and peeled), etc.

GST exemption for businesses

Small and medium-scale businesses can enjoy GST exemptions if their

aggregate turnover is up to a specified limit. These limits are as follows –

 Businesses and individuals who are supplying goods can claim GST
exemption if their aggregate turnover is less than INR 40 lakhs in a financial
year.

 For the hilly and north-eastern States of India, the limit has been revised to
INR 20 lakhs.

 For businesses and individuals involved in the supply of services, the limit for
claiming GST exemption is INR 20 lakhs

 In the case of hilly and north-eastern States, if the aggregate turnover is up to

INR 10 lakhs, businesses and individuals supplying services can claim GST
exemptions.

Hilly and north-eastern States would include Arunachal Pradesh, Jammu and
Kashmir, Himachal Pradesh, Uttarakhand, Tripura, Nagaland, Sikkim,
Meghalaya, Mizoram, Assam, and Manipur.

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Aggregate turnover, as per the GST Act, would include the aggregate value of all
types of taxable supplies, inter-state supplies, exempt supplies, and the goods and
services which have been exported.

The following, would, however, be deducted from the value of aggregate turnover –

 CGST, SGST, or IGST already paid by the investor

 Taxes which are payable on the basis of reverse charge mechanism

 Value of the inward supply of goods and services

 Value of non-taxable goods and services

Reasons for exemption under GST

Under the Goods and Services Tax (GST) system in India, certain goods, services,
and transactions are exempt from GST, which means they are not subject to GST
taxation. There are various reasons for granting exemptions under GST, and these
reasons are based on policy objectives, socio-economic considerations, and
administrative simplicity. Here are some of the common reasons for granting
exemptions under GST:

 Social Welfare and Public Interest: Certain essential goods and services that
are considered essential for the welfare of society may be exempted from GST.
This includes items like basic food items (e.g., rice, wheat, milk), healthcare
services, and education services.

 Small Businesses: To reduce the compliance burden on small businesses and

promote ease of doing business, there may be exemptions or concessional
rates for businesses with lower turnover. The Composition Scheme, for
example, provides for lower GST rates for small businesses with turnover
limits.

 Export of Goods and Services: Exports are typically zero-rated under GST,
which means that while they are subject to GST, the tax rate is set at zero
percent. This ensures that exports remain competitive in international
markets and do not suffer from the burden of GST.

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  Interstate Supplies: Supplies between states (interstate supplies) of certain
specified goods and services may be exempt or taxed at a concessional rate to
promote the free movement of goods and services across state borders.

 Agriculture: Many agricultural products and related services are exempt from
GST. This is done to support the agriculture sector, which is a significant
contributor to India's economy.

 Government Services: Certain services provided by the government or local

authorities may be exempt from GST to avoid double taxation and simplify
accounting.

 Financial Services: Some financial services like banking, interest on loans,

and insurance services may be exempt or have special provisions to determine
GST liability.

 Cultural and Religious Significance: Goods and services used for cultural,
religious, or charitable purposes may be exempt to respect the cultural and
social values of the society.

 Administrative Simplicity: Exempting certain goods or services may be done

to simplify the tax system, reduce compliance costs, and make it easier for
businesses and taxpayers to understand and comply with GST rules.

 Transitional Provisions: During the transition to GST, certain exemptions or

concessional rates may be provided to facilitate the migration of businesses
and ease the impact of the new tax regime.

Difference between Exempt, Nil Rated, Zero Rated and Non-GST supplies

In the context of the Goods and Services Tax (GST) system in India, there are several
categories that describe different tax treatments for supplies (goods and services).
These categories include "Exempt," "Nil Rated," "Zero Rated," and "Non-GST
Supplies." Each category has distinct implications for the applicability of GST.
Here's a breakdown of the differences between these categories:

Exempt Supplies:

 GST Applicability: Exempt supplies are not subject to GST. This means that
no GST is charged on the value of the supply, and the supplier cannot claim

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 input tax credit (ITC) for the GST paid on inputs and services used to provide
the exempt supply.

 Examples: Certain essential goods and services, such as fresh fruits,

vegetables, milk, and healthcare services provided by a clinical establishment,
are typically exempt from GST.

Nil Rated Supplies:

 GST Applicability: Nil rated supplies are also not subject to GST, but they
differ from exempt supplies in that they are specifically taxed at a GST rate of
0%. Nil-rated supplies do not attract any GST liability on the part of the
supplier, but the supplier can claim input tax credit on GST paid for inputs
and services.

 Examples: Exports of goods and services, such as pharmaceuticals and

certain agricultural products, are often classified as nil-rated supplies.

Zero Rated Supplies:

 GST Applicability: Zero-rated supplies are similar to nil-rated supplies in

that they are taxed at a GST rate of 0%. However, zero-rated supplies
specifically refer to exports of goods and services. Suppliers of zero-rated
supplies can claim input tax credit on GST paid for inputs and services.

 Examples: Exports of goods and services to foreign countries are considered

zero-rated supplies under GST.

Non-GST Supplies:

 GST Applicability: Non-GST supplies are not subject to GST because they fall
outside the scope of GST altogether. These supplies do not involve the levy or
collection of GST, and no input tax credit is available.

 Examples: Items or transactions that are not covered by GST, such as

petroleum products (which are subject to separate state taxes), alcohol for
human consumption, and some specified goods like stamps and currency, are
considered non-GST supplies.

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GST is a single tax on the supply of goods and services, right from the manufacturer
to the consumer. Credits of input taxes paid at each stage will be available in the
subsequent stage of value addition, which makes GST essentially a tax only on
value addition at each stage.

Export of goods means Section 2 (5) “export of goods” with its grammatical
variations and cognate expressions, means taking goods out of India to a place
outside India; Export of goods will be treated as ‘zero-rated supplies.

Export of Services means Section 2(6) “export of services” means the supply of any
service when

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;

Zero Rated Supply

By zero rating, it is meant that the entire value chain of the supply is exempt from
tax. not only output is exempt from payment of tax, but there is also no bar on
taking/availing credit of taxes paid on the input for making/providing the output
supply.

Such an approach would in the true sense make the goods or services zero-rated.
All supplies need not be zero-rated.

As per the GST Law exports are meant to be zero-rated, the zero rating principle is
applied in letter and spirit for exports and supplies to SEZ.

As per section 2(4) of IGST Act, 2017 "customs frontiers of India" means the limits of
a customs area as defined in section 2 of the Customs Act 1962;

Import of goods

As per section 2(10) of IGST Act, 2017 "import of goods" with its grammatical
variations and cognate expressions, means bringing goods into India from a place
outside India;

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Import of Services

As per section 2(11) of IGST Act, 2017 "import of services" means the supply of any
service, where-

(i) the supplier of service is located outside India;

(ii) the recipient of service is located in India; and

(iii) the place of supply of service is in India.

Export Procedures

Stage 1: In this stage, the goods are transported from the exporter’s warehouses or the
location of the business to the CONTAINER FREIGHT STATION or INLAND CONTAINER
DEPOT. For transportation purposes, the exporter has to generate an e-way bill at this
stage. if the invoice is less than Rs. 50,000/- then generating an e-way bill is not required.

Stage 2: The goods so transported from the exporter’s warehouse to CFS or ICD are then
transferred to the port or airport. This transfer of goods to a port or airport is exempted
from the provision of the generation of an e-way bill.

Import Procedures

Stage 1: When the goods have arrived at port or airport HERE the goods are said to
be actually imported.

Stage 2: After the arrival of goods at the port, they remain under customs custody.

Stage 3: From the custody of the customs, the goods are further transferred for
clearance to either CFS (Container Freight Station) or ICD (Inland Courier Depot).
These kinds of transactions are exempted from generating an e-way bill for this
transaction.

Stage 4: Then these goods are further transported from CFS or ICD, either to The
bonded warehouse; or To The factories or businesses’ consumptions.

An electronic Way Bill (E-Way Bill) is a yielding mechanism wherein, through a

digital interface or software, the person moving goods uploads the relevant
information and data before the movement of goods and produces an e-way bill on
the GST portal.

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Import: The distance and validity of an e-way bill shall be calculated when the
goods are transported to the location of the business or factory from either CFS/ICD
or warehouses

Export: The distance and validity of an e-way bill shall be calculated before the
transportation of the goods from the location of the business to ICD/CFS or
warehouses as the case may be.

Place of Supply of Goods

Place of supply of goods imported into or exported from India – Place of supply of
goods imported into or exported from India will be determined in accordance with
the provisions of Section 11 of the IGST Act, 2017.

As per the provisions of Section 11, place of supply of goods shall be as follows –

Supply Type Place of Supply GST

Goods Imported into India Location of the Importer GST is charged for imports
Always
Goods Exported from India Location outside India GST on exports are eligible
for refund

Leviability of Integrated Tax on High Seas Sales Transactions

High Sea Sales is a common sales practice carried out by the actual buyer and
another buyer while the goods are on the high seas or before the goods have crossed
the customs frontiers of the specific country.

Example- If a buyer from India purchases an item from a seller in the USA and
makes a sale to another buyer in India while the item or product is still in transit, it
is called high sea sale. There is no bar on the same goods being sold to more than
one buyer while being on the high seas. The documents required to consider high
sea sales under the GST Law are Commercial Invoice, High Sale Agreement, Bill of
lading, Certificate of Origin, Import Invoice and Insurance Certificate.

Import of Services

The IGST act 2017 defines import of services as the supply of any service where the:

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The supplier of said service is located outside India

Recipient of the said service is located in India and

Place of supply of the said service is in India.

Further, the nature of the service imported, its underlying consideration and its
purpose determine if a particular import of service can be treated as supply.

Case I: Import of Service for Consideration Whether or not in the Furtherance of

Business

Say there is an import of service. Further, such an import is for consideration but
may or may not be in furtherance of business. Thus, the import of service in such a
case is considered as a supply. This implies that any import of service that takes
place without consideration is not considered as supply. It is not necessary that an
import of service in exchange of consideration is done for the furtherance of a
business.

Case II: Import of Services by a Taxable Person from a Related or Distinct Person

Say there is an import of service by a taxable person from a related or distinct

person as defined in section 25 of the CGST act, 2017. Further, such an import of
service is in furtherance of business and may or may not be undertaken for
consideration. Such an import of service is considered a supply.

Letter of Undertaking under GST

The letter of the undertaking is the document that the user provides declaring the
fulfilment of all requirements under GST. It is furnished in case of export
undertaken without paying IGST. Also, according to Notification No. 37/2017 –
Central Tax It is mandatory to furnish LUT to export goods or services or both
without paying IGST. If the exporter fails to provide the LUT, then he has to pay
IGST or provide an export bond. Earlier LUT could only be filed offline at the
concerned GST office. But to further ease the process the Government has made the
LUT filing online.

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Section 2(14) Location of Recipient of Service

Where supply is received at a place of The location of such place of business

business for which the registration has
been obtained
Where supply is received at a place other The location of such fixed establishment.
than the place of business for which
registration has been obtained (a fixed
establishment elsewhere)

Where supply is received at more than The location of the establishment most
one establishment, whether the place of directly concerned with the receipt of
business or fixed establishment supply

In absence of such places The location of the usual place of

resident of the recipient

Importance of place of supply

- Wrong classification of supply between interstate or intra-state and vice-versa

may lead to hardship to the taxpayer as per section 19 of IGST Act and section
70 of CGST Act
- Where wrong taxes have been paid on the basis of the wrong classification, a
refund will have to be claimed by the taxpayer
- The taxpayer will have to pay the correct tax along with interest for the delay on
the basis of revised/correct classification
- Also, correct determination of place of supply will help us to know the incidence
of tax. As if the place of supply is determined as a place outside India, then tax
will not have to be paid on that transaction

No GST is leviable in the below cases

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- Supply of goods from a place in a non-taxable territory to another place in the
non-taxable territory without such goods entering in India
- Supply of warehoused goods to any person before clearance for home
consumption
- Supply of goods by the consignee to any other person, by the endorsement of
document 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.

Merchant Exports under GST

A merchant exporter is a person who is involved in trading activity and exporting or

intending to export. They do not have any manufacturing units. They buy goods
from a manufacturer and then ship them to foreign customers.

Merchant exporters are compulsorily required to obtain registration under GST.

Under the GST regime, since the procedure of exports has been simplified therefore
Merchant exporters also have the option to make an export under bond/LUT, and
then the unutilized input tax credit can be claimed as a refund or to make an export
by paying off IGST and then claim a refund of the same. However, this option is only
available if the exporter has not opted for the Special Relief Scheme of buying goods
at 0.1% GST.

Merchant exports are similar to regular exports. They boost the country’s economy
by bringing in foreign currency. Therefore, the government has provided
concessional rate benefits in the case of merchant exporters, which helps them,
reduce their working capital requirements. Thus, the government has provided
special relief to merchant exporters by way of reducing the GST rate to 0.1% for
purchasing goods from domestic suppliers.

Deemed Exports

- Supply of goods by a registered person against Advance Authorization

- Supply of capital goods by a registered person against Export Promotion Capital
Goods Authorization
- Supply of goods by a registered person to Export Oriented Unit Supply of gold by
a bank or Public Sector Undertaking against Advance Authorization.

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When refunds can be rejected/ withheld?

- failed to furnish any return

- required to pay any tax, interest, or penalty
- deduct unpaid taxes, interest, penalties, late fees from the refundable amount
- the order of refund is under appeal and the grant of such refund would adversely
affect revenue in the said appeal on account of malfeasance or fraud committed

Reasons why the refund might be stuck?

- Insufficient Information
- Lack of due diligence while filing GST returns
- Error while matching the details electronically

Interest in a delayed refund

- Application for refund filed

- If the refund is not issued within 60 days of the application
- 6% p.a. Interest for the period of delay
- Refund issued after 60 days by Order of Appellate Authority / Tribunal/ court
- 9% p.a for the period of delay.

Conclusion:

The government of India is taking continuous steps to promote domestic goods

abroad through a series of measures. One such direction in the field of Taxation
is the refund of ITC accrued on such exports, so as to make such goods
competitive in the International market and thereby promote indigenous
products and thereby augmenting India’s forex reserves. Further, it is essential
that in order to claim the export benefits one must prepare adequate
documentation, as required under the GST Act.

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