Goods and Service Tax | Basics

 GST applicable from: 1 July 2017

 Pre-GST: There were multiple taxes like excise, VAT, CST etc. Now, we have just one: GST.
 Earlier taxes are not completely eliminated, but have a very limited application today.

 Basic Flow of Transaction: How GST works as Value Added Tax?

1,000 Value 1,000 Cost 1,500 Cost

+ 180 GST + 500 Profit + 300 Profit
1,180 Total + 270 GST + 324 GST
Manufacturer Wholesaler Retailer Consumer
1,770 Total 2,124 Total

2 Approaches to calculate GST earning of Gov

Approach No. 1: Stage wise collection of GST Approach No. 2: Gov. in reality earns tax
 Manufacturer: ₹ 180 revenue when the recipient doesn’t claim ITC.
 Wholesaler: ₹ 270 - ₹ 180 (ITC) = ₹ 90 That happens only when the supply reaches
 Retailer: ₹ 324 - ₹ 270 (ITC) = ₹ 54 the final consumer.
 Total GST = 180 + 90 + 54 = ₹ 324 GST by Consumer = ₹ 324

In India we follow this approach as practically, we can’t implement Approach No. 2 due to large number of buyers
and sellers across the country. Gov. cannot monitor all the transactions in Approach No. 2.

 Applicability of GST: Entire India (incl. J&K)

 Taxable Event in GST? “Supply” | Pre- GST: multiple taxable events existed like “manufacture” for
excise, “sale of goods” for VAT etc.

 Two Basic Types of Transactions in GST: Inter State and Intra State
o When Location of Supplier and Place of Supply in one State/UT: Intra State
 Tax Applicable: CGST + SGST/UTGST
o When Location of Supplier and Place of Supply in different States/UT: Inter State
 Tax Applicable: IGST

 Some Imp Aspects of the Constitution of India

 Article 366(1A): “goods and services tax” means any tax on supply of goods, or services or both
except taxes on the supply of the alcoholic liquor for human consumption.
 GST Amendments via: The Constitution (101st) Amendment Act, 2016 [122nd Amendment Bill]
 Power to Government to Legislate on “GST”: Article 246A
 Non-Taxable Supplies: Currently, there are 3 “goods” which are outside the scope of GST.
1) 5 petroleum products (ch. 2): to be included in the ambit of GST from a later date
2) Alcoholic Liquor for Human Consumption
3) Undenatured ENA (Extra Neutral Alcohol) used for manufacturing Alcoholic Liquor for Human
Consumption

 Two Special Cases

o Tobacco: GST levied, as well as Central Excise Duty
o Opium/Narco Drugs: GST levied, as well as State Excise Duty

 Who pays GST to the Government?

RCM: Reverse Charge Mechanism
Teaching Service
RCM is when Recipient pays GST to the
Government instead of the Supplier.
Supplier Recipient
₹ 900 ₹ 5,000 + ₹ 900 (GST) Reasons for RCM?
GST  Prevent Tax Evasion
 Levy GST in unorganised sector
Gov
 Better tax compliance
FCM: Forward Charge Mechanism

 Basic Timeline [Source: ICAI SM]

 Who Earns GST Revenue?

 GST is a dual model based tax: Both Centre and State earn their share of taxes.
 Which State earns? The state in which Place of Supply falls. GST is a destination based tax.
 Intra Transaction: CGST goes to Centre; SGST goes to State.
 Inter Transaction: IGST is collected by CG, but a Share of it is given to the relevant SG.
 When ITC is taken and used to pay output liability: Such amount shall be transferred by Government
to that account which is paid via ITC.
 Eg. CGST Credit utilized to pay IGST. Such amt. to be transferred from CGST Account → IGST.

 Apportionment of IGST paid on supplies where ITC can’t be availed due to any reason
 Amount equivalent to CGST portion shall be apportioned to the CG;
 Balance amount of IGST to the State where such supply takes place (to CG if it’s a UT)

What if Place of Supply can’t be determined separately?

 The balance amount shall be apportioned to each of the States/CG (UT) in proportion to the total
supplies made by such taxable person to each of such States/UT in a FY.
If the taxable person making such supplies is not identifiable: The said balance amount shall be
apportioned to all the States and CG in proportion to the amount collected as SGST/UTGST by the
respective State/CG during the immediately preceding FY.

 Apportionment of IGST in respect of B2B supplies where ITC is taken

For time being- 50% to the CG and 50% to the SGs on ad-hoc basis. Then adjustment as per above.

GST Rates
 Post GST 2.0 Amendments, we primarily have 0%, 5%, 18% (standard rate) and 40% (demerit rate)
 Earlier, there was a “compensation cess” which was levied on luxury and sin items. It is now removed,
and instead the 40% rate is applied on those supplies like: betting, casino, pan masala etc.

CGST Definitions
In this Act, unless the context otherwise requires,-
 2(6) aggregate turnover [ATO] means the aggregate value of
o all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on
reverse charge basis),
o exempt supplies,
o exports of goods or services or both and
o inter-State supplies of persons having the same PAN,
to be computed on all India basis but excludes GST and cess;
 Turnover in State [2(112)] just like ATO; but it is calculated w.r.t “from a state or UT”.

 Use of ATO: check liability to register, eligibility under composition levy; QRMP etc.
 Use of T/o in State: for tax payments

 2(19) capital goods means goods, the value of which is capitalised in the books of the person
claiming the ITC and which are used or intended to be used in course or furtherance of business;

 2(20) casual taxable person (CTP) means

 a person who occasionally undertakes transactions involving supply of goods or services or both
 in the course or furtherance of business, whether as principal, agent or in any other capacity,
 in a State or a Union territory where he has no fixed place of business;

 2(77) non-resident taxable person [NRTP] means any person who occasionally undertakes
transactions involving supply of goods or services or both, whether as principal or agent or in any
other capacity, but who has no fixed place of business or residence in India;

 2(50) fixed establishment means a place (other than the registered place of business) which is
characterised by a sufficient degree of permanence and suitable structure in terms of human
and technical resources to supply services, or to receive and use services for its own needs;

 2(102A) specified actionable claim means the actionable claim involved in or by way of [HC BLOG]
 horse racing | casinos | betting | lottery | online money gaming | gambling

 2(56) India means

 the territory of India as referred to in article 1 of the Constitution [land] + Airspace
 its territorial waters + Airspace, seabed and sub-soil underlying such waters
 continental shelf, exclusive economic zone or any other referred maritime zone

 2(78) "non-taxable supply means a supply of goods or

services or both which is not leviable to tax under this
Act or under the IGST Act;

 2(79) non-taxable territory means the territory which

is outside the taxable territory;
 2(69) local authority means-
(a) a "Panchayat" as defined in clause (d) of article 243 of the Constitution;
(b) a "Municipality" as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled
to/entrusted by CG/SG with control or management of a municipal fund or local fund;

“municipal fund” or “local fund”: means any fund under the control or management of an authority of
a local self-government established for discharging civic functions in relation to “a Metropolitan or
Municipal area” or “Panchayat area” and vested by law with the powers to levy, collect and
appropriate any tax, duty, toll, cess or fee, by whatever name called;

(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;

(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J] of the Constitution; or
(g) a Regional Council constituted under article 371A of the Constitution;

Clarification Note: Is Delhi Development Authority a Local Authority? NO!

 2(70) location of the recipient of services means,-

(a) where a supply is received at a place of business (POB) for which the registration has been
obtained, the location of such place of business;
(b) where a supply is received at a place other than the POB for which registration is obtained (a
fixed establishment elsewhere), the location of such fixed establishment;
(c) where a supply is received at > one establishment, whether the POB or fixed establishment, the
location of the establishment most directly concerned with receipt of supply;
(d) in absence of such places, the location of the usual place of residence of the recipient;

 Note: 2(71) “location of the supplier of services” is just like above, mutatis mutandis.

 2(80A) online gaming means offering of a game on the internet or an electronic network and
includes online money gaming;

 2(80B) online money gaming means online gaming in which players pay or deposit money or money's
worth, including virtual digital assets, in the expectation of winning money or money's worth,
including virtual digital assets, in any event including game, scheme, competition or any other activity
or process,
whether or not its outcome or performance is based on skill, chance or both and whether the same
is permissible or otherwise under any other law for the time being in force;
 2(82) output tax in relation to a taxable person, means the tax chargeable under this Act on
taxable supply of goods or services or both made by him or by his agent
 but excludes tax payable by him on reverse charge basis;

 2(84) person includes individual, HUF, Co. firm, LLP, AOP, LA, CG/SG, trust, artificial person
 2(85) place of business includes-

(a) a place from where business is ordinarily carried on, and includes a warehouse, a godown or any
other place where a taxable person stores his goods, supplies or receives goods/services/both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever name called;

 2(92) quarter shall mean a period comprising three consecutive calendar months, ending on the
last day of March, June, September and December of a calendar year;

 2(105) supplier in relation to any goods or services or both, shall mean the person supplying the
said goods or services or both and shall include an agent acting as such on behalf of such supplier;

Deeming Proviso w.r.t Specified Actionable Claims: Provided that

o a person who organises or arranges, directly or indirectly, supply of specified actionable claims,
including a person who owns, operates or manages digital or electronic platform for such supply,
o shall be deemed to be a supplier of such actionable claims, whether such actionable claims are
supplied by him or through him and whether consideration in money or money's worth, including
virtual digital assets, for supply of such actionable claims is paid or conveyed to him or through
him or placed at his disposal in any manner, and
o all the provisions of this Act shall apply to such supplier of specified actionable claims,
o as if he is the supplier liable to pay the tax in relation to the supply of such actionable claims;

 2(94) registered person means a person who is registered u/s 25 but does not include a person
having a Unique Identity Number;
 2(107) taxable person means a person who is registered or liable to be registered u/s 22 or 24;

 2(103) State includes a Union territory with Legislature → Delhi | Puducherry | J & K
 2(114) Union territory means the territory of-
 the Andaman and Nicobar Islands; Lakshadweep; Dadra and Nagar Haveli and Daman and Diu;
Ladakh; Chandigarh; and Other territory.

 2(117) valid return means GSTR-3B on which self-assessed tax has been paid in full;
 Sec. 3: Officers under the Act

The Government shall, by notification, appoint the following classes of officers for the purpose of
this Act, namely:-

Field Operations DGGI

 Principal Chief Commissioners of Central Tax or Principal Directors General of Central Tax
 Chief Commissioners of Central Tax or Directors General of Central Tax
 Principal Commissioners of Central Tax or Principal Additional Directors General of Central Tax
 Commissioners of Central Tax or Additional Directors General of Central Tax
 Additional Commissioners of Central Tax or Additional Directors of Central Tax
 Joint Commissioners of Central Tax or Joint Directors of Central Tax
 Deputy Commissioners of Central Tax or Deputy Directors of Central Tax
 Assistant Commissioners of Central Tax or Assistant Directors of Central Tax
 Any other class of officers as it may deem fit:

Directorate General of GST Intelligence (DGGI) is the apex intelligence and investigative agency for
matters relating to violation of the GST, Central Excise Duty and Service Tax. DGGI has been entrusted
with the task of improving compliance of Indirect Tax laws. It’s a part of CBIC!

Sec. 4: Appointment of Officers

The Board may, in addition to the officers as may be notified by the Government under section 3,
appoint such persons as it may think fit to be the officers under this Act.

Without prejudice to the provisions of sub-section (1), the Board may, by order, authorise any
officer referred to in clauses (a) to (h) of section 3 to appoint officers of central tax below the
rank of Assistant Commissioner of central tax for the administration of this Act.

--
"The ‘CA’ before your name will make every sleepless night worth it."
 What are we going to cover?

Section 7: Supply Non Supplies: via Circular

and Notification

Various Issues and

3 Schedules, CGST
Clarifications
Sch I: Supply without consideration
Section 8: Composite
Sch II: Goods or Services?
and Mixed Supplies
Sch III: Negative List i.e. Not Supply

Applicable Definitions

 2(52) goods means every kind of movable property other than money and securities but includes
 actionable claim,
 growing crops, grass and things attached to or forming part of the land
which are agreed to be severed before supply or under a contract of supply Not Giving “Goods”
Example: We go and buy clothes from Westside. We buy “goods”.

 2(1) actionable claim same meaning as u/s 3 of the Transfer of Property Act, 1882

"actionable claim" means a claim to

 any debt, other than a debt secured by mortgage of immovable property or by hypothecation or
pledge of movable property, or
 to any beneficial interest in movable property not in the possession, either actual or constructive,
of the claimant,
 which the civil courts recognize as affording grounds for relief, whether such debt or beneficial
interest be existent, accruing, conditional or contingent;

Example: Insurance Claim; Betting; Gambling; Lottery

 2(75) money means the Indian legal tender or any foreign currency, cheque, promissory note, bill
of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic
remittance or any other instrument recognised by the RBI
 when used as a consideration to settle an obligation or
 exchange with Indian legal tender of another denomination
 but shall not include any currency that is held for its numismatic value

 2(101) securities – as per sec. 2(h) of Securities Contracts (Regulation) Act, 1956 [analysed later]
 2(102) services means anything other than goods, money and securities
 but includes activities relating to the use of money or its conversion by cash or by any other
mode, from one form, currency or denomination, to another form, currency or denomination
 for which a separate consideration is charged
Explanation: services include facilitating or arranging transactions in securities;

 Example: I am supplying you “service” of teaching IDT “Like Never Before” :)

 Example: Zerodha charges in form of commission are “services” under GST

 2(17) business includes -

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar
activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume,
frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in
the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities
of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any
local authority in which they are engaged as public authorities; [eg. Bus transport service]

Examples
 Rishabh bought a car for his personal use and after a year, sold it to Car Dekho: Not a business
 Mrs. Khurana sold her old bangles to Nahal Jewels, Karol Bagh: Not a business
View in above both examples is on the basis of Departmental FAQs/Press Release. There is another
school of thought that this is business as the definition includes term “… whether or not there is volume,
frequency, continuity or regularity of such transaction.”
 Alman Khan, a famous actor, painted some paintings and sold them. Sale of paintings: in course or
furtherance of business, since business includes vocation.
 2(30) composite supply means a supply made by a taxable person to a recipient
 consisting of two or more taxable supplies of goods or services or both, or any combination,
 which are naturally bundled and
 supplied in conjunction with each other in the ordinary course of business,
 one of which is a principal supply → predominant element;

Examples
 Goods supplied along with transport + insurance: Goods = principal supply
 Excavators hired out invariably along with operators and operators hired out only with excavator
 Mandatorily charging transportation cost of products at the time of invoicing

 2(74) mixed supply means

 two or more individual supplies of goods or services, or any combination thereof,
 made in conjunction with each other by a taxable person for a single price
 where such supply does not constitute a composite supply.
Example: Diwali hamper with variety of items like drinks, chocolates etc.

Note: Single invoice doesn’t mean it’s an either composite or a mixed supply.
Example: We get car servicing done which has repairs parts billing
as well as labour charges. Both are taxed at respective rates. ✅

Example: I buy LED TV, Washing Machine and a laptop from Croma. A
single invoice is issued indicating each item separately. Not a case of
composite or mixed supply. Individual GST rates apply. ✅

 2(31) consideration in relation to the supply of goods or services or both includes-

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to,
or for the inducement of, the supply of goods or services or both,
who’s paying? whether by the recipient or by any other person

(b) the monetary value of any act or forbearance [e.g. Non-compete], in respect of, in response to,
or for the inducement of, the supply of goods or services or both,
who’s doing or not doing something? whether by the recipient or by any other person
 but shall not include any subsidy given by the CG or a SG;

Deposit: a deposit given in respect of supply of goods or services or both shall not be considered as
payment made for such supply unless the supplier applies such deposit as consideration.
 2(49) family means,-
i. the spouse and children of the person [dependent or not], and
ii. the parents, grand-parents, brothers and sisters of the person (not spouse)
 if they are wholly or mainly dependent on the said person;

 Example: Father in Law [sasur Ji] NOT a Family

 Example: Ques says “brother has his own factory” or “sister is a well-known consultant” that means
they are not dependent on the person, hence they shall not be “family”

 2(93) recipient of supply of goods or services or both, means-

where a consideration is payable for the the person who is liable

supply of goods or services or both, to pay that consideration

Goods: the person to whom the goods are delivered or made

where no consideration
available, or to whom possession or use of the goods is given
is payable for the supply
or made available; and
Services: the person to whom the service is rendered

includes: an agent acting as such on behalf of the recipient

Example: Banku purchased my IDT class. While paying on the website, his UPI was not working. He asked his
friend Danku to pay for the time being and promised to repay later.
 In this case, Recipient of my teaching “service” is Banku since he is the person “liable” to pay the
consideration.

 2(5) agent means a person, including a factor, broker, commission agent, arhatia, del credere
agent, an auctioneer or any other mercantile agent, by whatever name called,
o who carries on the business of supply or receipt of goods or services or both
o on behalf of another;
 Sec. 7: Meaning and Scope of Supply

7(1): What is “Supply”? For the purposes of this Act - "supply" includes-

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence,
rental, lease or disposal [Parameter 1]
made or agreed to be made for a consideration by a person [exception: Sch I] [Parameter 2]
in the course or furtherance of business; [exception: 7(1)(b)] [Parameter 3]

(aa) the activities or transactions, by a person, other than an individual, to its members or
constituents or vice-versa, for cash, deferred payment or other valuable consideration.

Explanation: it is hereby clarified that, notwithstanding anything contained in any other law for
the time being in force or any judgment, decree or order of any Court, tribunal or authority, the
person and its members or constituents shall be deemed to be two separate persons and the supply
of activities or transactions inter se shall be deemed to take place from one such person to another;

(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;

7(1A): Supply of: Goods or Services? Schedule II will tell us.

7(2): Negative List i.e. NOT a supply [Schedule III]

Schedule I | Activities = Supply without Consideration

PARA 1: Permanent transfer or disposal of “business assets” where ITC has been availed

if no consideration and no ITC: supply | transferred to whom? irrelevant | “business assets”? not defined

PARA 2: Supply of goods or services or both between related persons or between distinct persons
as specified in section 25, when made in the course or furtherance of business

Exception: Provided that gifts not exceeding ₹ 50,000 in value in a FY by an employer to an

employee shall not be treated as supply of goods or services or both.

PARA 3: Supply of goods [services] –

Invoice Test

- by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal; or
- by an agent to his principal where agent undertakes to receive such goods on behalf of principal
 PARA 4: Import of services by a person
from a related person or from any of his other establishments outside India,
in the course or furtherance of business.

Let’s understand a few terms we used above

Related Persons | Section 15 [Valuation] Eg

A
Persons (including legal persons) shall be deemed to be "related persons" if-
 such persons are officers or directors of one another's businesses; 26% 30%
 such persons are legally recognised partners in business; B related C
 such persons are employer and employee;
 any person directly or indirectly owns, controls or holds 25% or more of the outstanding
voting stock or shares of both of them;
 one of them directly or indirectly controls [eg: deciding role in corporate policy] the other;
 both of them are directly or indirectly controlled by a third person;
 together they directly or indirectly control a third person; or
 they are members of the same family;
 persons who are associated in the business of one another in that one is the sole agent or
sole distributor or sole concessionaire, of the other.

Distinct Persons | Section 25 (Registration Chapter)

 25(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

 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 this Act.

Examples
1) Registered HO in Delhi | Registered BO in Mumbai: Distinct Persons → 25(4)
2) Registered Hotel in Delhi | Unregistered liquor shop in Mumbai: Estb of Distinct Persons → 25(5)
3) Factory in Lucknow | Showroom in Kanpur - Single Registration in UP: 25(4) ❌ 25(5) ❌
 Para 3 Analysis: Invoice Test

Sch I, Para 3 may apply Invoice Test

Principal Agent Consumer

Question: Invoice for further supply issued in whose name?

 If Principal’s Name: Invoice test not passed. Any provision of goods b/w P – A without consideration,
would not fall under the ambit of Para 3, Sch I i.e. NOT a supply
 If Agent’s Name: Any provision of goods from P to A: would fall under the ambit of Para 3, Sch I.

DCA: Del Credere Agent [Agent with guarantee of payment for the Principal via loan to recipient]

Issue 1: Whether a DCA falls under the ambit of Para 3, Sch I? Apply the same Invoice Test

Issue 2: Treatment of “interest” charged by DCA from the buyer

Case 1: Following activities involved

1. Supply of goods by supplier (Principal) to Recipient;
DCA not an agent 2. Supply of agency services by DCA
under Para 3, Sch 3. Supply of loan services by the DCA to the recipient.
I
 Loan services by DCA to Buyer is an independent supply on Principal –
Invoice Test Principal basis.
NOT PASSED
 Interest would not form part of the value of supply of goods by the
Principal to Buyer
Case 2: Following activities involved
1. Supply of goods by supplier (principal) to DCA;
DCA = Agent 2. Further supply by the DCA to the Recipient
under Para 3, Sch 3. Supply of agency services by DCA;
I 4. Supply of loan services by the DCA to the recipient

Invoice Test  Loan services by DCA to Buyer is NO MORE an independent supply and is
PASSED subsumed in the supply of goods by the DCA to Buyer.

 Interest = included in value of supply by DCA to Buyer [section 15(2)(d).

 Import of Services: 7(1)(b) + Para 4, Schedule I

For Consideration No Consideration

In the course or furtherance From Related Persons or own Other Cases

of business or not establishment in the course or
furtherance of business Not a Supply
= Supply ✔ [7(1)(b)] ❌
= Supply ✔ [Para 4, Sch I]

OIDAR Services Other Services

Further analysis in link Link with Ch 4 Exemptions: Ultimately, would be “exempt” if imported by
with Sec. 14 IGST –  CG/SG/UT/LA/GA or an Individual - in relation to any purpose other
Covered in Ch 3 POS than commerce, industry or any other business or profession; or
 an entity registered u/s 12AA/AB of the ITA for purposes of providing
charitable activities
Examples

ASA Associates received legal consultancy services from its HO located in Singapore. Services have been
rendered free of cost.
 No consideration, hence we will apply Para (4), Sch I
 ASA Associates and HO: Related Persons ✅
 In related to business: ✅
Hence, it’s a Supply

Babbu, a proprietor in Pune, availed architect services from his daughter who is based in US, with respect to
his new home in Pune.
 No consideration, hence we will apply Para (4), Sch I
 Babbu and his Daughter: Related Persons ✅
 In related to business: ❌
Hence, Not a Supply
What if it’s in relation to his office in Pune? Then, it would be a supply ✅

 Free Samples and Gifts: Not a supply as no consideration involved, unless falls under Sch I.
 Buy One-Get One Free Offer = Supply ✔ [2 goods @ price of one - treat as Composite or Mixed]
 Schedule II: Activities/Transactions to be Treated as Goods or Services?

Para Activity Types | Particulars Nature: G/S?

Any transfer of title in goods Goods

Any transfer of right in goods/ undivided share in goods Services

1. Transfer
without transfer of title thereof. [E.g. machine on rent]

Any transfer of title in goods under an agreement which Goods

stipulates that property in goods shall pass at a
future date upon payment of full consideration as
agreed [E.g. hire purchase basis; sale or return basis]

Any lease, tenancy, easement, licence to occupy land Services

2. Land and
Any lease or letting out of building including a
Building Services
commercial, industrial or residential complex for
business or commerce, wholly or partly
3. Treatment Any treatment or process which is applied to another Services
& Process person’s goods [Eg. Job work]

Goods forming part of business assets are transferred

Transfer or disposed of by directions of person carrying on Goods
4. of Business the business so as no longer form part of those assets.
Assets
Goods held/used for business are put to private use or
are made available to any person for use for any Services
purpose other than business, by/ under directions of
person carrying on the business.
Goods forming part of assets of any business carried
on by a person who ceases to be a taxable person, shall
be deemed to be supplied by him in the course or Goods
furtherance of his business, immediately before he
ceases to be a taxable person.
Exceptions
 Business transferred as going concern to another
person [this is exempt from GST]
 Business carried on by personal representative who
is deemed to be a taxable person.
5. a) Renting of Immovable Property
b) Construction (includes additions, alterations, replacements) of
complex, building, civil structure, etc.

NOT a “supply” if the entire 100% consideration received after:

 issuance of completion certificate, where
required, by the competent authority or Earlier Services
 after its first occupation

c) Temporary transfer or permitting use or enjoyment of any IPR

d) Development, design, programming, customization, adaptation,
upgradation, enhancement, implementation of IT software
e) Agreeing to obligation [i.e. not legal obligation] to
 refrain from an act, or
 to tolerate an act or situation, or
 to do an act.
f) Transfer of right to use any goods for any purpose

6. Following Composite Supplies

 Works Contract [section 2(119)] Services
 Restaurant Services [except alcoholic for human consumption]

Non Supplies under GST

Schedule III via circular via notification

Schedule III: Activities which shall be treated Neither Supply of Goods nor Supply of Services

Para Particulars
1. Services by
 an employee (including casual employees) to the employer
 in the course of or in relation to his employment.
E.g. Any amount paid to a new employee to not join a competitor: Supply ✓
2. Services by any court or Tribunal established under any law for the time being in force.
 Court includes District Court, HC, SC
 Consumer Disputes Redressal Commissions are not Tribunals but clothed with the
same characteristics of a Tribunal: Hence, fees charged by them – No GST
3. a) functions by the Members of Parliament, Members of State Legislature, Members of
Panchayats, Members of Municipalities and Members of other local authorities;

b) duties performed by any person who holds any post in pursuance of provisions of the
Constitution in that capacity [President, PM, CJI, CAG of India etc.]; or

c) the duties performed by

 any person as a Chairperson or a Member or a Director in a body established by
the CG or a SG or LA [Eg: SBI, Central Vigilance Commission] and
 who is not deemed as an employee before the commencement of this clause.

Yeh Samjho! If any person is working as a chairperson or a member or a director in a

body not falling in above clause AND is not an employee: Sch III NA; it is supply ✓

4. Service of funeral, burial, crematorium or mortuary including transport of deceased.

5.  Sale of land and,
 Sale of building: subject to Para 5(b) of Sch II [under construction = Supply ✓]

Yeh Samjho

 What if Land is developed (levelling, drainage lines, water lines etc) and then sold?
Developed land also covered under this para. Hence, outside the scope of GST.
 Just to clarify, GST will be applicable on the developing charges.
6. Actionable Claims other than Specified actionable claims i.e. HC BLOG
 Horse Racing | Casino | betting | Lottery | Online Money Gaming | Gambling
7. Supply of goods from NTT to another NTT without such goods entering into India

Example: Mr. A bought goods from China and sold them to a party in USA. The goods
were transferred directly from China to USA, without entering into India.
8. a) In-Bond Sales: Supply of warehoused goods before clearance for home consumption;

Note: IGST levy at the time of final clearance of goods for Home Consumption.

aa) Supply of goods warehoused in a SEZ or in a Free Trade Warehousing Zone to any
person before clearance for exports or to the Domestic Tariff Area

b) High Sea Sales: Supply of goods by the consignee to any other person,
 by endorsement of documents of title to the goods, after the goods have been
dispatched from the port of origin located outside India
 but before clearance for home consumption.
 9. Co-Insurance:
 Activity of apportionment of co-insurance premium
 by the lead insurer [named as such in the contract – will underwrite the largest share, negotiate
the contract, manage the policy] to the co-insurer
 for the insurance services jointly supplied by the lead insurer and the co-insurer to
the insured in co-insurance agreements,

 subject to the condition that the lead insurer pays GST on the entire amount of
premium paid by the insured.
10. Re-Insurance:
 Services by insurer to the reinsurer
 for which ceding commission or the reinsurance commission is deducted from
reinsurance premium paid by the insurer to the reinsurer,

 subject to the condition that the GST is paid by the reinsurer on the gross
reinsurance premium payable by the insurer to the reinsurer, inclusive of the said
ceding commission or the reinsurance commission.

Share: Eg 30%
i.e. ₹ 3 Lacs Co - Insurance
Not a Supply

Client

Lead Insurer Premium E.g. ₹ 10 Lacs

10L x 18% = GST

Gov

Insurance Re - insurance

Premium ₹ 10 Lacs Insurer

Re-Insurer

Premium Share: ₹ 4 Lacs 40%

ICICI spent some money say ₹ 1 Lac to earn the Less: Ceding Comm ₹ 40K
premium of ₹ 10 Lacs. So, proportionate share is to Net Payment ₹ 3.6 Lacs 4L x 18%
be shared by TATA as well: This is NOT SUPPLY = GST

Gov.
Total GST Involved: 10L x 18% + 4L x 18% = ₹ 2,52,000
 Non-Supplies Notified vide Notification

1) Services by way of any activity in relation to a function entrusted

 to a Panchayat under Article 243G of the Constitution
 to a Municipality under Article 243W of the Constitution

2) Grant of Alcoholic Liquor License by the State Government against consideration

Non-Supplies vide Circular

Inter-State movement of various modes of conveyance: Between Distinct Persons

A Ltd Conveyance: Train | Buses | Trucks | Vessels | Aircrafts | Trailer A Ltd

State A State B
Carrying goods/ passengers | or | for Repairs Maintenance

 shall be treated ‘neither as a supply of goods or supply of service’. Hence, no IGST.

 except in cases where such movement is for further supply of the same conveyance.

 Note: Applicable GST shall be leviable on repairs and maintenance expense

 Above circular shall mutatis mutandis apply to inter-State movement of rigs, tools and spares, and
all goods on wheels like cranes.

Supply | Sec. 7 Summary

Includes
7(1)(a) Excludes
1. Goods or Services
2. For Consideration 7(2)
3. In course/furtherance of business 1. Negative List: Sch III
2. Circular
7(1)(aa) 3. Notification
Society/Club ↔ Members 7(1A)
7(1)(b) Supply of “Goods” or “Services”?
Import of Services for Consideration – whether Schedule II
or not in course/furtherance of business
7(1)(c)
Supply w/o consideration | Schedule I
 Sec. 8: Composite and Mixed Supplies

The tax liability shall be determined in the following manner, namely:-

(a) a composite supply comprising two or more supplies, one of which is a principal supply,
 shall be treated as a supply of such principal supply; and
(b) a mixed supply comprising two or more supplies
 shall be treated as a supply of that particular supply which attracts the highest rate of tax

TV [Rate 18%] sold with TV Stand [Rate 5%]: Total consideration to be charged @ 18%
Hamper of Dry Fruits [Rate 18%] + Soft Drinks [Rate 40%] + Chocolates [5%]: Total Consideration charge @ 40%

Various Analysis, Conclusions and Clarifications

Analysis of Consideration

1: Donations received by charitable institutions from individual donors, without quid pro quo
No GST if:
1. Gift or donation is made to a charitable organization; and
2. Payment has the character of gift or donation; and
3. Purpose is philanthropic i.e. no commercial gain involved; no advertisement; no reference of
business activity

Example: I donated ₹ 1,00,000 to a trust. They mentioned it under my name i.e. “Siddhesh Valimbe”. This is not
a consideration. If they mention “CA Siddhesh, IDT Faculty”: It’s a consideration. ✅

2: Art works sent by artists to galleries for exhibition

Gallery

 This is not a “supply” as no consideration flows from the gallery to the artist.
Majnu Bhai  If the art work is sold in the exhibition, then it would constitute “supply”.

3: No Claim Bonus NCB (Insurance)

Situation: If no claim is lodged during the year, Insurance Co offers NCB in form of “Premium
Reduction”. Can it be considered = consideration for supply by Insured to Insurance Co. for
agreeing to obligation to refrain from lodging insurance claim?
 Not a Supply. The customer/ insured procures insurance policy to indemnify himself from any loss/
injury as per the terms of the policy and is not under any contractual obligation not to claim insurance
claim during any period covered under the policy, in lieu of NCB.

4. Salvage/Wreck Value earmarked in claim assessment of damage caused to Motor Vehicle

Situation: In case a claim is made by an insurer for damage of the motor vehicle,
while settling said claim, where the general insurance companies, as per the pre-
decided terms of the insurance contract

deduct the value of salvage/wreckage of the do not deduct and pay the full amount of claim,
MV as deductibles from the claim amount paid
 the salvage becomes the property of the
 the salvage remains the property of insured insurance company and
 insurance companies are not liable to  the company will be obligated to discharge
discharge GST liability on the same. GST on supply of salvage to salvage buyer.

Warranty Replacement | Goods, Parts, Services

Warranty: Goods/services provided without consideration

Scenario I: Original Equipment Manufacturer offering it

 No consideration, hence no GST. If additional consideration is charged? GST applicable ✓
 Any ITC reversal requirement by the manufacturer? No, since it’s not an Exempt Supply

Scenario II: Distributor is involved, who gives this warranty on behalf of the Manufacturer

Issue 1: Dealing b/w Distributor and Consumer

No consideration, hence no GST. If additional consideration is charged, GST shall be applicable.

Issue 2: Dealing b/w Distributor and Manufacturer - - - 4 possible situations

Situation 1: Distributor replaces the goods using his own stock  GST Payable
or by purchasing from a third party; and charges the  No ITC Reversal by
manufacturer by issuing Tax Invoice: Distributor
 Situation 2: Distributor raises a requisition to the Mfr. who No GST; No ITC reversal by
then provides the said goods to the Distributor who in turn Manufacturer w.r.t replaced
provides to the customer; no separate consideration: goods

Situation 3: Distributor replaces the goods out of his stock and No GST on replenishment. No
then raises requisition to the Manufacturer, who then provides ITC reversal by Manufacturer
goods through delivery challan, without any separate w.r.t replaced goods
consideration

Situation 4: Distributor replaces the goods out of supply GST adjustment by Mfr. if
already received by him from the Mfr. and Mfr. issues a credit Distributor reverses ITC
note w.r.t replaced goods subject to sec. 34(2)

Issue 3: Services provided Free of Cost by Distributor; but Charges Manufacturer for it
 It’s a supply by Distributor to Manufacturer. Manufacturer can claim ITC on it.

Scenario III: Extended Warranty

When is this extended warranty availed by the Customer?

 Any time after Original Supply: Treated as supply of services distinct from the original supply;
GST shall be applicable ✓
 At the time of Original Supply
 Composite Supply
 Principal Supply = Supply of Goods
 if extended warranty availed from supplier other than supplier of goods? Tax Separately

Preferential Location Charges [Residential/Commercial Properties]

 Allowing choice of location = Integral part of supply of construction services.

 Treatment = Composite Supply; where supply of construction services is the main service and PLC
is naturally bundled with it. Apply same tax treatment as the main supply of construction service.

Share Options provided by a Company to its EE through Overseas Holding

₹₹₹ Unilever Shares as part

Cost Reimbursement of Salary HUL EE

Allotment
 GST on Shares Allotment of Shares: Not Under GST due to 2 Reasons
1) GST is not leviable on the compensation paid to the employee by the employer as the purchase
or sale of securities/shares, in itself, is neither a supply of goods nor a supply of services.
2) Moreover, the share options are a part of remuneration of the employee by the employer as per
terms of employment and is covered under Para 1 of Schedule III of the CGST Act.

 Reimbursement on “Cost basis” by Indian Subsidiary = Import of Services? No. No GST.

What if some mark up is charged/additional fee is charged from the Domestic Subsidiary? Then it
shall be considered as “consideration” for supply of services of arranging the transaction of shares.
 domestic subsidiary company will pay GST under RCM, as it’s then an import of service.

Cost Petroleum | Profit Petroleum

license/lease to explore/mine the petroleum crude and/or natural gas

Gov.
Oil Exploration and share in Profit ₹₹₹
Production Contractor
Situation: As per these Production Sharing Contracts, the contractor is at first entitled to recover
the contract cost i.e. expenses incurred in exploration, development, production and payment of
royalty involved in the extraction of oil/gas from the total sale proceeds and thereafter, he is
expected to share with the Government the profit from his venture [known as profit petroleum].

 Cost Petroleum: The value of petroleum which the contractor is entitled to for cost recovery.
 GST Treatment: Not a consideration, and thus not taxable per se, as the contractors carry
exploration and production of petroleum for themselves and not as a service to Government.

 Profit Petroleum: Total Value of Petroleum - Cost Petroleum [part sharing with government]
 GST Treatment: It’s a consideration for Government against grant of license, but = exempt.

Financial Transactions: Taxability of Various Instruments

 CP (Commercial Paper) and CD (Certificate of Deposit) = Money [nature of promissory notes]

 Derivatives = Securities [as per section 2(h)(ia) of the SCRA]. Hence, not liable to GST. ❌
 Two common forms of Derivatives: Futures and Forwards
GST Depends on manner of settlement
1) No Delivery | Net Settlement = Security, and hence no GST
2) Actual Delivery | No Settlement = Normal Supply of Goods. Liable to GST ✓
 Secured Debt: Sale, purchase, acquisition or assignment of a secured debt is not a transaction in
money. It is in nature of DERIVATIVE; hence = Security- NO GST
 Transactions in Instruments: Such as interest rate swaps, and foreign exchange swaps would be
excluded from the definition of ‘supply’ since such instruments are derivatives, being securities,
based on contracts of difference- NO GST
 Any other Services Charges/Documentation Fee: GST ✅

Securities Lending Scheme

Lender Deposit Security SEBI Approved Intermediary Lend Borrower

 Securities are neither goods, nor services. Therefore, a transaction in securities which involves
disposal of securities is not a supply in GST and hence not taxable.
 Does SLS Involve Disposal of Securities? No; The SLS doesn’t treat lending of securities as
disposal of securities and therefore is not excluded from the definition of services.

Conclusions
 Lending Fees charged from borrowers: It is a Consideration and hence taxable under GST
 Activities of intermediary facilitating borrowing/lending of securities for Commission: Taxable
 Who will pay GST? Borrower shall pay - RCM applies!

Cash Calls [JV]

Cash Calls are raised by an operating member of the JV on other members in proportion to their
participating interests in the JV to meet the expenditure of the operations.

A) Money called upon is used to purchase a machine for use in JV: Cash calls will not be subject to
GST since the operating member is not carrying out an activity for another for consideration.
Here, the money paid = in nature of capital contribution and is therefore a transaction in money.

B) The operating member uses its own machinery: He is providing ‘service’ within the scope of ‘supply’
because here operating member is recovering the cost appropriated towards machinery & services
from other JV members in their participating interest ratio. Taxable

Moulds/Dies by OEM [Original Equipment Mfr] to CM [Component Mfr]

Moulds/Dies sent Free of Cost in course or furtherance of business

Not a Supply: Since, no consideration and none of Sch I para applies

 Perquisites by Employer to Employee
Perquisites by employer to its employees in terms of contractual agreement entered into between
the employer and employee are in lieu of services provided by employee to employer in relation to
his employment [Sch III] i.e. a contractual agreement.
 Hence, it shall not be subjected to GST.

Tenancy Rights | Pagdi System

What is Tenancy Premium?  Tenant can pay to the Owner to acquire tenancy rights.
 Owner can also pay the tenant to get the property vacated.
GST Implication The activity of transfer of tenancy right against consideration
[i.e. tenancy premium] is squarely covered under supply of service
[Para 2, Sch II] and is liable to GST.
What if such transfer is subject to Merely because of such charges, it would not preclude them from
stamp duty and registration the scope of “supply”- GST will be levied (even on trf. of rights
charges? to new tenant]

Wouldn’t it be treated as sale of Land & Building which is covered

under negative list i.e. Sch III? No.
What if Rent paid by the tenant is  Then tenancy premium paid by the tenant would be exempt.
falling under exemptions- Entry  But tenancy premium paid by the owner to tenant shall
No. 12 NN 12/2017? continue to be taxable under GST

Priority Sector Lender Certificates

Target for Priority Sector Lending = Say ₹ 100

Lending = Say ₹ 150 Sell Certificate = ₹ 10 (shortfall) Lending = ₹ 90

 Nature: PSLCs are in the nature of goods; not securities. RBI clarified this as well.
 Taxability: Taxable. ITC available as usual for the buyer bank.
 Nature of supply: Inter-State | IGST | RCM applicable

Food and Beverage @ Cinema Halls

 Sold [cinema ticket + food and beverages]: Composite Supply. Principal Element = Cinema
 Food and Beverage supplied independently: Tax as Restaurant Service
 Shares Held in Subsidiary by Holding Company: Supply of Service?

 Shares = Securities; and Securities are neither goods, nor services; hence outside the scope of
GST. This implies that the securities held by the holding company in the subsidiary company are
neither goods nor services.
 It cannot be said that a service is being provided, solely on the basis that there is a specific SAC
entry '997171', mentioning; "the services provided by holding companies, i.e. holding securities of
(or other equity interests in) companies and enterprises for the purpose of owning a controlling
interest.", unless there is a supply of services as per section 7.
 Conclusion: Therefore, the activity of holding of shares of subsidiary company by the holding
company per se cannot be treated as a supply of services, and cannot be taxed under GST.

Liquidated Damages | Compensation | Penalties

This is linked with Para 5 (e) of Sch II. Examples:

 Agreeing to the obligation to refrain from an act: Non-compete agreement
 Agreeing to the obligation to tolerate an act or a situation: Tolerating loud music in the
neighborhood
 Agreeing to the obligation to do an act: Treatment of waste generated by a factory on request
of a Residential Society nearby

Two conditions to be complied for being “supply”:

1. There must be an expressed or implied agreement or a contract i.e. to refrain or tolerate or act.
Such a contract cannot be presumed to exist just because there is a flow of money from the
other party.
2. Consideration must flow in return to this contract or agreement.

Taxability of Few Items

A. Late fee or penalty in case the buyer fails to pay the amount before a certain date
Forfeiture of amount in case of ticket for passenger transport if the passenger doesn’t show up
Termination fee or penalty in case lessee terminates the lease before a certain period
Pre-payment penalty in case loan taken from a bank is pre-paid by the borrower

 The above payments constitute consideration for supply of a facility, namely: acceptance of late
payment, early termination of lease, prepayment of loan etc. So, these payments, even if called
as “fine or penalty” are actually consideration for supply & hence liable to GST, if supply is taxable.
B. Late Payment Fee/Surcharge [Utility Bills such as electricity, water: very common to pay late]
 The facility of accepting late payments with interest or late payment fee, fine or penalty is a facility
granted by supplier naturally bundled with main supply [it shall be a composite supply].

C. Cancellation Charges [hotels, tour and travel, transport etc.]

 All the services involved are a part of composite supply. Allowing cancellation is a part of this bundle.

Cases where it’s not a consideration

Liquidated Damages  It is argued that performance is the essence of a contract, not it’s
(amount payable for breach. Liquidated damages cannot be said to be a consideration
breach of contract): received for tolerating the breach or non-performance of contract;
rather they are for not tolerating the breach of contract.

 Payment of liquidated damages is stipulated in a contract to ensure

performance and to deter non-performance, unsatisfactory
performance or delayed performance.

Conclusion: Liquidated damages are merely a flow of money from the party
who causes breach of the contract to the party who suffers loss or damage
due to such breach. Such payments do not constitute consideration for a
supply and are not taxable.

Example: Forfeiture of earnest money by Government if a successful

bidder fails to act after winning the bid; or forfeiture of earnest money
by seller for breach of contract by buyer.
Penal Charges Levied They are essentially in nature of charges for breach of terms of loan
by Banks and NBFCs contract. They are mere ‘events’ in a contract. They are to deter non-
(earlier penal compliance with loan terms. Treatment = like of Liquidated Damages;
interest was levied):
Hence: No GST on such charges.
Cheque Dishonor  There is never an implied or express offer or willingness on part of the
Fine/Penalty supplier that he would tolerate deposit of an invalid, fake or unworthy
instrument of payment against consideration in the form of cheque
dishonour fine or penalty. Supplier does not want a dishonored cheque.

 The fine or penalty that the supplier or a banker imposes is a penalty

not for tolerating the act or situation but for not tolerating, penalizing
and thereby deterring and discouraging such an act or situation.
Conclusion: This is not a consideration for any service and not taxable.
Penalty Imposed for  Laws are not framed for tolerating their violation. They stipulate
Violation of Laws penalty not for tolerating violation but for not tolerating, penalizing
and deterring such violations.

 There is no agreement between the Government and the violator

specifying that violation would be allowed or permitted against
payment of fine or penalty.

 But is such agreement even possible? There cannot be such an

agreement as violation of law is never a lawful object or consideration.

Conclusion: Fines and penalty chargeable by Government or a local

authority imposed for violation of a statute, bye-laws, rules or regulations
are not leviable to tax.
Forfeiture of salary  Purpose: To discourage non-serious candidates.
or payment of bond
 The said amounts are recovered by the employer not as a consideration
amount if the
for tolerating the act of such premature quitting of employment but
employee leaving the
as penalties for dissuading the non-serious employees from taking up
employment before
employment and to discourage and deter such a situation.
the minimum agreed
 Further, the employee does not get anything in return from the
period
employer against payment of such amounts.

Conclusion: Therefore, such amounts recovered by the employer are not

taxable as consideration for the service of agreeing to tolerate an act or
a situation.
Fixed Charges for The price charged for electricity by the power generating companies from
Power the State Electricity Boards (SEBs)/DISCOMS or by SEBs/DISCOMs
from individual customers has two components, namely,

 a minimum fixed charge (or capacity charge) and

 variable per unit charge.

 The fact that the minimum fixed charges remain the same whether
electricity is consumed or not or it is scheduled/consumed below the
contracted capacity: does not mean that minimum fixed charge is a
charge for tolerating the act of not scheduling or consuming the
minimum the contracted or available capacity or a minimum threshold.

Conclusion: Both the components of the price are charged for sale of
electricity and are thus not taxable as electricity is exempt from GST.
 Printing Industry

Firstly, these are composite supplies. Now, the question, whether such supplies constitute supply of
goods or services would be determined on the basis of what constitutes the principal supply.

 In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only
content is supplied by the recipient; while the physical inputs including paper used for printing belong
to the printer: Supply of printing = principal supply and therefore such supplies = supply of service.

 In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc.
by the printer using its physical inputs including paper to print the design, logo etc. supplied by the
recipient of goods: Printing of the content- logo etc [supplied by the recipient] is ancillary to the
principal supply of goods and therefore such supplies would constitute supply of goods.

Food to Patients
 Food to Admitted Patients:
As advised by doctors. Part of composite supply. Principal Supply: Healthcare. Not taxed separately.
 Food to OPD Patients/Visitors/Attendants: Taxed Separately

Retreading of Tyres
Question: Old tyres belong to whom?
 Supplier of Retreated Tyres: Supply of Goods
 Customer: Supply of Services

Activity of Bus Body Building

 There is a supply of goods and services.

 Thus, classification of this composite supply, as goods or service would depend upon which supply is
the principal supply- which shall depend on the basis of facts and circumstances of each case.

Treatment of Vouchers

“Transactions in Vouchers” = Supply of G or S?

Voucher = Pre Paid instrument and if recognized Other Cases: It is an “actionable claim”,
by RBI: It is “money” and money is neither goods, but not a “specified actionable claim”.
nor services Hence, due to Sch III, not a “supply”.
 GST Treatment | when Distributors/Agents involved?

Model 1 | Principal to Principal Basis

Sale
Agent This is a pure trading. Agents etc. earn
Issuer Trading Margin. This is not a supply of goods
Sale
or services as we discussed above.
Customer

Model 2 | Principal Agent Relationship

Agent earns commission. This

Issuer through Agent Customer is a supply of service. GST ✅

Additional Services by Agents etc. like advertising, marketing?

This is a normal supply of service. GST ✅

GST on Breakage

Is this “monetary value of any act or forbearance, in respect of, in response to, or for the
inducement of, the supply of goods or services or both, whether by the recipient or by any other
person” i.e. is this consideration?

 Since “consideration” under GST is defined in relation to the supply of goods/services/both; and
there is no underlying supply of goods and/or services in case of non-redemption of vouchers by
the customer, the amount retained for unredeemed vouchers by the voucher issuer cannot be
construed as “consideration”.
 Hence: NOT taxable.

 There is also no agreement to refrain from redemption.

 Hence, it cannot be considered that non-redemption of voucher by the redeemer tantamounts
to supply of services.

--
"You didn't come this far to only come this far."
 Purpose of the Chapter
We will cover charging section. Also, FCM RCM provisions i.e. who will pay tax - S or R?

Sec. 9: Levy and Collection of CGST [CGST Act]

9(1) CGST Charging: Subject to the provisions of sub-section (2),

 there shall be levied a tax called the CGST
 on all intra-State supplies of goods or services or both,
 except on the supply of alcoholic liquor for human consumption and un-denatured extra neutral
alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption,
 on the value determined under section 15 and
 at such rates, not exceeding 20%; and
 shall be paid by the taxable person

9(2) Petrol Products [CGPA-D]: Tax on the supply of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel: From a notified future date

9(3): RCM Provisions: Notified Goods and Services

9(4): RCM Provisions: Specified Class (Builders and Promoters)

Sec. 5: Levy and Collection of IGST [IGST Act]

Just like section 9 of the CGST Act, with following 2 differences:

 Rate: instead of 20%, it’s 40%.

 Proviso to sub-section (1): IGST on goods imported into India

o shall be levied and collected in accordance with section 3 of the Customs Tariff Act, 1975
o on the value as determined under the said Act
o at the point when BCD is levied on the said goods under section 12 of the Customs Act, 1962.

The above proviso NA in case of notified intangible goods [currently notified: Online Money Gaming]
as the goods may not be physically crossing customs frontiers i.e. tax under GST law itself.

RCM | 9(4) CGST | 5(4) IGST: Real Estate Promoters

1. Input & Input Services from Registered Persons < 80% of Total: RCM GST @ 18% on shortfall
2. Cement purchase from Unregistered Persons: GST @ 18% under RCM
3. Capital Goods Purchase from Unregistered Supplier: RCM GST @ applicable rates
 RCM | Goods | 9(3) CGST or 5(3) IGST

S. No Description of Supply of Goods Supplier Recipient

1. Cashew nuts, not shelled or peeled Agriculturist Any registered person
2. Bidi wrapper leaves (tendu) Agriculturist Any registered person
3. Tobacco leaves Agriculturist Any registered person
4. Following essential oils other than those Any unregistered person Any registered person
of citrus fruit: Namely: -
(a) Of peppermint (Mentha piperita);
(b) Of other mints:
Examples: Spearmint oil (ex-
mentha spicata), Water mint- oil
(ex- mentha aquatic), Horsemint oil (ex
mentha sylvestries), Bergament oil (ex
mentha citrate), Mentha arvensis
5. Silk yarn Any person who Any registered person
manufactures silk yarn from
S= may be Registered; may
raw silk or silk worm cocoons
be a Company: IRRELEVANT
for supply of silk yarn
6. Raw cotton Agriculturist Any registered person
7. Supply of lottery SG, Union Territory or any Lottery distributor or
local authority selling agent.
8. Used vehicles, seized and confiscated CG excluding Ministry of Any registered person
goods, old and used goods, waste and Railways (Indian Railways),
scrap SG, UT or a local authority
9. Priority Sector Lending Certificate Any Registered Person Any Registered Person
10. Metal Scrap [Ch 72-81, Sch I, CTA] Any Unregistered Person Any Registered Person

 2(7) agriculturist: means an individual or a HUF who undertakes cultivation of land-

(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or by hired labour under
personal supervision of himself or any member of family;

RCM | Services | 9(3) CGST or 5(3) IGST

Structured Thinking: First we need to analyze whether the service is taxable or

not. If it’s exempt: No Question of FCM, RCM. If it’s Taxable: check for RCM
 GTA [Goods Transport Agency] Services

Meaning of GTA: any person who-

a) Provides services in relation to transport of goods by road [i.e. includes services like
loading/unloading/packing]; and
b) Issues a consignment note [all details], by whatever name called.
but does not include: an ECO (E Commerce Operator) by/through whom- local delivery provided

First Step: Exemption Entry Check | 3 Entries [we will cover 2 now, 3rd in Ch 4]

1) Services provided by a GTA to an unregistered person, including an unregistered CTP,

 other than the following recipients, namely: -
(a) any factory registered under/governed by the Factories Act, 1948; or
(b) any Society registered under Societies Registration Act, 1860 or under any other law in India;
(c) any Co-operative Society established by or under any law for the time being in force; or
(d) any body corporate established, by or under any law for the time being in force; or
(e) any partnership firm whether registered or not under any law including association of persons;
(f) any person registered under GST;
(g) any CTP registered under GST.
Conclusion: GTA Service to balance recipients (e.g. Unregistered Individual or HUF): Exempt

2) Services by way of transportation of goods by road except the services of —

i. a GTA
ii. a courier agency [includes express cargo];
 NA to: local delivery through/by ECO

If not Exempt: Next Step → RCM Check

RCM Applicable if Recipient = Any of the above mentioned person
 In other words, wherever GTA service is taxable, RCM shall apply, unless….see below!

Two Cases where RCM Not Applicable i.e. FCM Applies

1) When Recipient of GTA Service is:

 a Department/ establishment of the CG/ SG/ UT; or
 local authority; or Governmental agencies,
which has taken GST registration only for TDS [u/s 51] not for making any taxable supply

This clause is irrelevant for now, since such case is currently exempt [Entry 21B, NN 12/2017]
2) GTA wants to pay tax under FCM:
 GTA has taken registration under the CGST Act, 2017; and
 exercised the option to pay tax on the services of GTA; and
 it has issued a tax invoice to the recipient charging CGST at the applicable rates and
 has made the prescribed declaration on such invoice issued by him.

Tax Rates
 Where GTA exercises FCM option: 18% [with ITC for GTA] or 5% [without ITC for GTA]
 RCM Rate: 5% [No ITC for GTA on his inward supplies]
 Just to clarify - regardless of the rate and FCM/RCM: Recipient is eligible for ITC

Examples se Samjhe? :) Ajao!

Entry Treatment
I took goods transport service from my friend Not a GTA as no consignment note. Exempt, since
Bablu. He didn’t issue a consignment note. it is goods transport by road other than GTA.
Formed a new company: S Valimbe Classes Pvt Taxable | under RCM
Ltd. Currently unregistered in GST. Took GTA Company shall be liable for mandatory
services on first day itself. registration u/s 24 [Ch 8].
I (unreg) took GTA services in individual capacity. Exempt
I supplied goods to SK via GTA. I am liable to pay Service is exempt since recipient of this GTA
freight of GTA. I am unregistered. SK is registered. service (i.e. me) is an unregistered individual.

Legal Services

Business Entity: any “person” carrying out business. [can be Individual, company, LLP etc]

Let’s see Exemption Entry First

Supplier Recipient

Services
1. Non-Business Entity
Arbitral Tribunal
2. Business Entity: Last Yr T/o < Registration Threshold
Legal
Senior Advocate 3. CG/SG/UT/LA/GA/GE
Services

Advocate (senior) Legal Above 3: plus one more Recipient

Firm of Advocates Services 4: An Advocate or Firm of Advocates providing Legal Services
 Which type of Recipient is left apart from above?
 Business Entity with last year turnover > Registration Threshhold
 In such case: Service is taxable and that too under RCM ✅

Legal Service: Any service provided in relation to advice, consultancy or assistance in any branch of law,
in any manner and includes representational services before any court, tribunal or authority.
Senior Advocate: Designated by SC/HC
Understand this: A person may have last year turnover > registration threshold, but may be unregistered.
Why? Maybe it’s entire supply is exempt. Or may be it’s entire supply is under RCM. On the other hand, it
is possible that it’s last year turnover < threshold, but it’s registered due to any of the mandatory
registration requirements u/s 24. You will understand this note better in Ch 8: Registration.

Examples se Samjhe? :) Ajao!

Supplier Recipient GST Treatment

Mr. Harish Salve (Senior SVC Pvt Ltd. which is incorporated in Exempt. Since, Recipient’s last year
Adv) current year turnover doesn’t cross threshold
Mr. Harish Salve (Senior Reliance Industries Ltd. Reg under GST. Tax @ RCM. If RIL was not registered, it
Adv) Last year t/o > limit will have to take mandatory reg. u/s 24
Mr. Sumukh Valimbe o Mr. Harish Salve (Senior Adv.) Exempt. Hence, no Question of
(Junior Adv) o Khaitan and Co (Legal Firm) FCM/RCM
o Another Junior Adv.

Sponsorship Services

 Supplier: Any Person other than a Body Corporate

 Recipient: Any body corporate or partnership firm located in the TT.

 Body Corporate: Same as section 2(11) of the Companies Act, 2013 i.e. Company & LLP
 If you get confused in identifying who is “supplier” and “recipient”: Just see who is receiving the money.
That person is the supplier.

 Example: PNG Jewellers Ltd. pays ₹ 1,00,000 to Karve Nagar RWA, to name the upcoming cricket
tournament after PNG. Since S = other than Body Corporate, and R = Body Corporate: RCM ✔
 Example: PNG Jewellers Ltd. pays ₹ 1,00,000 to Adept Solution Ltd., to name the upcoming cricket
tournament after PNG. Since S = Body Corporate: FCM ✔
 Will actually GST be levied or not? That’s a separate issue. That depends upon whether Adept
Solution Ltd. is registered under GST or not. RCM is covered u/s 24 (mandatory reg.); FCM is not.
 Services by Government i.e. [CG | SG | UT | LA]
Governmental Authority and Government Entity
Basic formation of both is same i.e. an authority or board,
o Set up by an Act of Parliament or a State Legislature; or
o Established by any Government, with 90% or more participation by way
of equity or control
Functions are different:
 Governmental Authority: to carry out any function entrusted to a Municipality under Article 243W or a
Panchayat under Article 243G of the Constitution of India.
 Governmental Entity: to carry out any function entrusted by the CG, SG, UT, or LA.

 Exemption Entry [4 & 5]: Services by Gov. Authority by way of any activity in relation to function
entrusted to Municipality or Panchayat under Article 243W or 243G of the Constitution.

Part I | 4 Services - Analysis: Exemption + RCM

1) Service by Department of Post

Entry 24C: Following four services are exempt, hence no Q of FCM/RCM
a) Post Card
P
I b) Inland Letter
B c) Book Post
O d) Ordinary Post (Weight < 10g)

Other than above 4 services: Taxable @ FCM Basis

2) Services by Indian Railways:

Two Services are Exempt [9E, 9F]

 Entry 9E: Services provided by Ministry of Railways (Indian Railways) to individuals by way of –
(a) sale of platform tickets
(b) facility of retiring rooms/waiting rooms;
(c) cloak room services;
(d) battery operated car services
 Entry 9F: Services by one zone/division under Indian Railways to another zone(s)/division(s)

Other Services? Tax @ FCM

3) w.r.t Aircraft or Vessel: inside or outside precincts of port/airport: Tax @ FCM
4) Transport: Goods or Passengers: Tax @ FCM
 Part II | Balance Services Analysis

Supplier = CG, SG, UT, LA

if S = Indian
Status of Recipient? Non Business Entity Exempt Railways: FCM

Business Entity
Service: Renting of Tax ✅ S: Others
Immovable Property RCM if R = Reg
Last Year T/o < Reg. Threshhold? Yes FCM if R = Unreg

Any Other Service Exempt

No

Is R = CG/SG/UT/LA? Yes Exempt [any service incl. renting of property]

No

Value of Service < ₹ 5,000 Yes Exempt [any service incl. renting of property]

No

All entries of exemption have expired! Tax ✅ RCM ✅

 Note: In case of continuous supply of service, limit of ₹ 5,000 to be seen for the entire FY

Property on Rent
Exemption Entry 12: Residential Dwelling
[except student residences, hostels, camps, PGs: Entry 12A]

 Supplier? Any person (incl. Government)

 Use: Residential purpose
 Recipient: Unregistered Person
 One case where R = Registered, but still exemption shall apply, if:
a) the registered person is proprietor of a proprietorship concern and rents the residential
dwelling in his personal capacity for use as his own residence; and
b) such renting is on his own account and not that of the proprietorship concern.
 Who will pay tax? If tax is applicable and R = Registered: RCM ✅ otherwise FCM [S status irrelevant]
 Exemption Entry 12A: Residential Dwelling – Camps/ PGs etc

Exempt if 2 conditions satisfied:

1. Value < ₹ 20,000 per person per month; and
2. Accommodation service is provided for a minimum 90 continuous days

 Who will pay tax? If R = Registered: RCM; Otherwise FCM

Commercial Dwelling

 Any exemption? No; so we just have to analyse RCM part.

 Who will pay tax? RCM applicable only if following situation arises:
 S = Unregistered
 R = Registered under Regular Scheme i.e. Composition Scheme
Other cases? FCM

Examples se Samjhe? :) Ajao!

If government rents immovable property to a business No. Service would be exempt in this case, as we
entity with preceding FY turnover < registration will be applying the value-based exemption
threshold, and say the value of service for whole FY is [rent for entire year < ₹ 5,000) of Services by
Rs. 3,000, will this be taxable? Government!

Residential property given on rent to Mr. Piyush (bank Exempt: Entry 12 [assuming Mr. Piyush
employee) for his family stay is liable to pay the rent]
What if in above case, the rent is liable to be paid by the GST @ RCM since Recipient is a registered
Bank where Piyush works, and Bank is registered under person and exemption of sole proprietor NA.
GST
A shop is given on rent by Mr. Aman (Registered) to Mr. GST @ FCM since Supplier is Registered
Hori Lal (Registered or Unregistered)
A shop given on rent by Mr. Aman (Unregistered) to Mr.  If Hori Lal is Reg: GST @ RCM
Hori Lal (Registered or Unregistered)  If Hori Lal is Unreg: No GST
 If Hori Lal is Reg but under composition
scheme: No GST
A residential flat is given on rent to ICICI Bank Taxable @ RCM. In residential dwelling, it
[registered under composition scheme] for stay of it’s doesn’t matter if the recipient is registered
employee under composition scheme.
A commercial dwelling is given on rent by CGto MH Exempt. We will be applying the exemption
State Government. Yearly rent is ₹ 24 Lacs. entry of “Government to Government”.
 Property on Rent | Master Summary Chart

Supplier = Non-Government

Residential Dwelling Commercial Dwelling

Purpose?  Reg → Reg: Tax | FCM

 Reg → Unreg: Tax | FCM
Commercial Residential  Unreg → Unreg: No Tax
 Unreg → Reg (composition): FCM - No Tax

Tax ✅  Unreg → Reg (regular): Tax | RCM

RCM if R is Reg. Hostels/PG etc Others
FCM if R is Unreg. Entry 12A Entry 12 Status of Recipient?

If for min 90 continuous days and rent Unregistered Registered

< ₹ 20,000 pp pm: Exempt

Otherwise: Tax | FCM (as students Exempt

Sole Proprietor Case Others
would generally be unreg.)

Exempt Tax | RCM

Supplier = Government
Residential Dwelling

Commercial Purpose
 R = Non Bus Entity or Government (CG, SG, UT, LA) or yearly rent upto ₹ 5,000: Exempt
 Any other case: Tax
 RCM if R is Reg.
 FCM if R is Unregistered

Residential Purpose | Other than Camps/PGs

 R = Unregistered: Exempt
 R = Reg but it is a Non-Bus Entity or Gov (CG, SG, UT, LA) or yearly rent upto ₹ 5,000: Exempt
 R = Reg (balance cases, apart from sole proprietor case): Tax @ RCM

Residential Purpose | Hostels/PGs

 If for min 90 continuous days and rent < ₹ 20,000 pp pm: Exempt (Entry 12A)
 If not: Still exempt since the recipient [students] would be non-business entities
Commercial Dwelling
 Recipient is Non Bus Entity or Gov (CG, SG, UT, LA) or yearly rent upto ₹ 5,000: Exempt
 Other Cases: Same analysis as we covered above in S = Non-Gov category

Note: If Supplier = Indian Railways and Service is Renting of Immovable Property → FCM

Maza Aya? :) Let’s Proceed!

TDR (Transferable Development Rights) | FSI (Floor Space Index) | Long Term [Min. 30 Y] Lease

Any Person TDR | FSI | Long Term Lease

Supplier
Promoter
(Real Estate)
First, check for Exemption: Such transfer would be exempt if the flats
constructed by the Promoter are sold before issuance of completion Tax
certificate and GST is paid on them.
Gov

Taxable if flats sold after issue of completion certificate, but taxation

shall be limited to
 1% of value in case of affordable houses
 5% of value in case of other than affordable houses

Services by a Director

Company or a body corporate

located in the TT
Services other than in personal capacity
Tax
Director
Gov

 If any service in personal capacity: FCM ✓

Eg. A director providing his services of family business to the company: FCM
 Director referred to in above RCM entry is not in “Employee” Capacity for eg. whole time director,
since an Employee would be covered by Sch III, and that won’t be a supply itself.
 Independent Director: Can never be an Employee [restriction by 149(6)- Companies Act: ID Criteria]
 Services by a Insurance Agent | RCM

 Supplier: Insurance Agent

 Recipient: Any person carrying on insurance business, located in the TT.

Services by a Recovery Agent | RCM

 Supplier: Recovery Agent

 Recipient: A banking company or a financial institution or a NBFC, located in the TT.
 If for example, given to a trader of goods: FCM ✔

Music Industry | RCM

 Supplier: Music composer, photographer, artist, or the like

 Service: transfer or permitting the use or enjoyment of a copyright relating to
original dramatic, musical or artistic works
 Recipient: Music company, producer or the like, located in the TT.

Author | RCM

 Supplier: Author
 Service: transfer or permitting the use or enjoyment of a copyright relating to
original literary works to a publisher.
 Recipient: Publisher located in the TT.

FCM instead of RCM

However, an author can choose to pay tax under forward charge if-

a) he has taken registration under the CGST Act and

b) filed a declaration, in the prescribed form, that he exercises the option to pay CGST on the said
service under forward charge and
c) to comply with all the provisions as they apply to a person liable for paying the tax in relation to
the supply of any goods and/or services and
d) that he shall not withdraw the said option within a period of 1 year from the date of exercising
such option;
e) he makes a declaration on the invoice issued by him in prescribed form to the publisher.
 Services “to” RBI
 Supplier: Members of Overseeing Committee constituted by RBI
 Recipient: RBI

Services by DSA [Direct Selling Agent]

 Supplier: Individual
 Recipient: a Banking Company or a NBFC [Financial Institution], located in TT

Business Correspondent [BC] | Business Facilitator [BF]

Learning Feel Factor: BC have more responsibilities and power. They are more involved in
the business. They can comply and pay tax on their own! :)

Banking Industry Combined Analysis

 Rural Area Branches:

Services by BC/BF to → Banking Company: Exempt
Services by Agent to → a BC/BF: Exempt

 Urban Area Branches

Services by BC to → Banking Company: Tax | FCM
Services by BF to → Banking Company: Tax | RCM
Services by Agent to → BC: Tax | RCM
Services by Agent to → BF: Tax | FCM

Insurance Industry Combined Analysis

 Rural Area Branches:

Services by BC/BF to → Insurance Company: Exempt
Services by Agent to → BC: Tax | RCM
Services by Agent to → BF: Tax | FCM

 Urban Area Branches:

Services by BC to → Insurance Company: Tax | FCM
Services by BF to → Insurance Company: Tax | FCM
Services by Agent to → BC: Tax | RCM
Services by Agent to → BF: Tax | FCM
 Security Services

 Supplier: Any person other than body corporate [may be reg – doesn’t matter]
 Service: by way of supply of security personnel
 Recipient: A registered person, located in the TT.

RCM NA i.e. FCM applies - when Recipient is:

1) a Department or Establishment of the CG or SG or UT; or
local authority; or
Governmental agencies;
 which has taken GST reg. under the CGST Act, 2017 only for the purpose of deducting tax under
section 51 of the said Act and not for making a taxable supply of goods or services;
2) a registered person paying tax under composition scheme

SLS (Securities Lending Scheme): Borrower shall pay GST on RCM Basis

Motor Vehicle on Rent

RCM if all 5 conditions satisfied:
1) GST Rate: @ 5% and not 18% [in FCM: S has an option of either 5% or 18%]
2) Supplier: Other than Body Corporate
3) Recipient: Body Corporate
4) MV being referred to here: designed to carry Passengers Goods
5) Cost of fuel should be included in the consideration charged.

Point to Note:
MV on Rent means MV is at disposal of the Recipient. Route/time everything as per Recipient. This is
different from “Transportation of Passengers” where route/time is as per Supplier.

IGST RCM Provisions

All the services as we covered above
Plus: One More

Import of Services
 Supplier: Any person in NTT [Non Taxable Territory]
 Recipient: Any person in the TT [Taxable Territory]
 Except NTOR [Non Taxable Online Recipient] i.e. unregistered person receiving OIDAR service

Who will pay tax in such case then? Supplier ✅ FCM ✅ [we will cover this in Sec. 14, next chap]
 Other Interlinking Aspects of RCM

 If the supplier is engaged only in RCM supplies: He does not need registration [Sec. 23]
 Can supplier take ITC on inwards supplies used for making supplies on which RCM applies? No
 If Recipient liable to pay tax under RCM: He has to take compulsory GST registration. [Sec. 24]
 Mode of RCM GST Liability: Cash only; since it’s not “output tax” for Recipient.
 ITC? Recipient can take ITC of the GST paid under RCM, as for him: It’s an inward supply.

Sec. 10: Composition Scheme

[A beneficial scheme for small tax payers. Lesser compliance burden. Avail: Goods & Services]

10(1): Option for Composition Scheme | Goods or Restaurant Service

 Notwithstanding anything to the contrary contained in this Act but subject to the provisions of
section 9(3)/(4) [so he to pay tax under RCM if applicable],
 a registered person, whose ATO in the preceding financial year did not exceed ₹ 1.5 crores,
 may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9,
 an amount of tax calculated at following rates

Manufacturer: Other than Notified Goods 1% (CGST + SGST) of T/o in the State/UT

Restaurant Service 5% (CGST + SGST) of T/o in the State/UT

Trader 1% (CGST + SGST) of T/o of Taxable Supplies

in the State/UT

Marginal Services alongside: Second Proviso to 10(1)

The person may supply services (other than restaurant), of value not exceeding: HIGHER of
 10% of turnover in a State or Union territory in the preceding FY or
 ₹ 5,00,000
Don’t Include in “T/o in State”: Interest/Discount income on loans/advances

 Example: Mr. Ramesh – Composition Dealer | Turnover in State (preceding FY) = 70,00,000
He can opt for composition levy [10(1)] & still supply services upto Rs. 7,00,000 [higher of 70L x
10% & 5 Lacs]
Suppose if Ramesh’s last year turnover includes interest income of Rs. 8,00,000
He can supply services worth: ₹ 6,20,000

 Note that: Composition Levy is to be paid on such marginal services amount!

 10(2) Conditions to be Complied:
a) save as provided in sub-section (1), he is not engaged in the supply of services;
b) he is not engaged in making any supply of services which are not leviable to tax under this Act;
c) he is not engaged in making any inter-State outward supplies of goods or services; [purchase allowed]
d) is not engaged in making any supply of services through an ECO who is required to collect tax u/s 52
e) he is not a manufacturer of notified goods; and
f) he is neither a casual taxable person nor a NRTP

Now Let’s Talk about 10(2A): For Services

[for barber, tailor etc]

 Notwithstanding anything to the contrary contained in this Act, but subject to the provisions of sub-
sections (3) and (4) of section 9,
 a registered person, not eligible to opt to pay tax under sub-section (1) and sub-section (2),
 whose ATO in the preceding FY did not exceed ₹ 50 Lacs,
 may opt to pay, in lieu of the tax payable by him under sub-section (1) of section 9,
 an amount of tax calculated = 3% + 3% [6%] of the turnover in State or turnover in UT.

Conditions: He is not
a) engaged in making any supply of goods or services which are not leviable to tax under this Act;
b) engaged in making any inter-State outward supplies of goods or services;
c) engaged in making any supply of services through an ECO who is required to collect tax u/s 52;
d) a manufacturer of such goods or supplier of such services as may be notified; and
e) a casual taxable person or a non-resident taxable person

Balance Points to be Noted: Common for 10(1) and (2A)

 “Sab Sath Jaenge”: If a person has more than 1 GSTINs (same PAN), all units have to opt for the
composition scheme. If one unit applies, deemed application by all units.

 ATO Eligibility Criteria [Goods]:

 75 Lacs [AUM – MMT - NS]: Arunachal Pradesh | Uttarakhand | Manipur | Meghalaya | Mizoram
| Tripura | Nagaland | Sikkim
 1.5 crores: All other states
ATO Eligibility Criteria [Services]: ₹ 50 Lacs for all states

 ATO Check: Can opt for composition scheme if ATO under limit in preceding FY. Can continue under
the composition scheme till the ATO doesn’t cross the limit. If crosses: Scheme Lapse!
 Tax | ITC: Person can’t charge tax, can’t take ITC. The levy is a cost for the person.

 For determining eligibility, “ATO” shall include value of supplies made from 1st April of a FY up to
the date he becomes liable for registration; but shall not include value of Interest/Discount
(exempt) of services by way of extending deposits, loans or advances.

 For determining the tax payable by a person under this section, the expression " turnover in State
or turnover in Union territory " shall not include the value of following supplies, namely:-
 supplies from the first day of April of a FY up to the date when such person becomes liable for
registration under this Act; and
 exempt supply of services provided by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount.

 Payment | Returns: 4 Quarterly CMP-08 (payment of tax) | one GSTR-4 (annual)]

 Document to be issued: Bill of Supply with a disclosure - “composition taxable person, not eligible
to collect tax on supplies”
 Disclosure at PPoB and ApoB: “composition taxable person” at a prominent place

 Composition Scheme of Goods [10(1)]: Manufacturing of following goods not permitted

 Ice cream and other edible ice,  Fly ash bricks; fly ash aggregate; Fly ash blocks
whether or not containing cocoa  Bricks of fossil meals or similar siliceous earths
 Pan masala
 Building bricks
 Tobacco and tobacco substitutes
 Aerated waters  Earthen or roofing tiles

Trading is allowed | Manufacturing not allowed

 Commencement of Composition Scheme

 New Registration: Person may apply in Part B of GST REG-01. Effective from Day-1.
 Intimation by a registered person: Person shall file an intimation on the portal prior to the
FY commencement. Scheme effective from start of next FY.

 Withdrawal from Scheme

 Cease to Satisfy Conditions: Required to file an intimation for withdrawal within 7 days of
occurrence of such event. Regular Scheme compliances from the day he ceases.
 Intentional Withdrawal: Person may withdraw intentionally by filing the prescribed application.
 Effective date of withdrawal in both above cases: Date indicated in intimation/application, but not
prior to commencement of the FY in which such intimation/application is filed.

 Denial of the Option by Tax Authorities: If a person ceases to satisfy any of the conditions of the
scheme. Further, he is required to file an intimation for withdrawal within 7 days of occurrence

Effective date of such denial shall be the date, including any retrospective date as may be determined
by the tax authorities. However, it shall not be prior to the date of contravention of GST Law.

ITC Statement
 Composition Lapse: In each of above 3 cases, such person may furnish a statement in prescribed form
containing details of stock as on the date the option is withdrawn/denied, within 30 days from the date such
option is withdrawn/denied.
 Opting for Composition by a Registered Person: GST ITC-03 to be filed within 60 days of commencement of
FY [will be discussed in Ch 7]

 If Composition Scheme availed irregularly: Penalty + Demand u/s 74A

--
"Believe in yourself a little more than the syllabus scares you."